Regulators say there is a simple fix: Allow more clearinghouses to deposit their cash at the Fed. Only a few have been designated “systemically important,” which means they are allowed to do so. But smaller clearinghouses rely on commercial banks, where deposit insurance covers only up to $250,000. If a bank collapses, those clearinghouses may not be covered or may have problems accessing their cash.
In March, Rostin Behnam, chair of the C.F.T.C., urged Congress to expand clearinghouse access to the central bank, but a 2021 bill that would have done this never gained traction.
Sheila Bair, a former F.D.I.C. chair, points to a related risk: There is also a “lack of good resolution planning when a clearinghouse fails,” she told DealBook. The C.F.A. Institute’s Systemic Risk Council, which she founded, has warned that clearinghouses could quickly flip from “being risk absorbers to being systemic-risk transmitters and amplifiers,” and are “one of the biggest gaps” in the system.
HERE’S WHAT’S HAPPENING
Janet Yellen reportedly lobbies C.E.O.s on the debt ceiling. The Treasury secretary has been calling corporate leaders to warn them about the “catastrophic” consequences of letting the U.S. default on its debt, according to Reuters. It’s the latest effort to drum up support for President Biden as he prepares to discuss the debt limit with Speaker Kevin McCarthy and other congressional leaders on Tuesday.
Chinese authorities raid another consulting firm’s offices. Capvision Partners joined the Mintz Group and Bain & Company in having its employees questioned or detained, amid what Beijing says is an effort to stop the theft of sensitive corporate information. That crackdown is further undercutting foreign companies’ willingness to do business in China, according to experts.