If this is how commodity brokerage firms operate, then our entire farming system will be impacted. Farmers, silo owners and etc use hedging as part of their risk management for growing and harvesting crops. Imagine farmers all decide to sell locally and not risk losing their life savings to commodity companies who may secretly take on high risk investments, go bankrupt and seize the farmers entire account, or grain operator loses all his grain because it is collateral for his accounts. Gov better fix this or else there will be physical consequences in our food system and supermarket in US regions that do not have many farms.
The government did fix it, but for the brokers and lenders to brokers. I guess they argued that pledged assets could easily fall significantly in value since the pledge, and so collateral’s nominal value should be greater than the cash borrowed. So, margin users: Beware!