- The Financial Times – ‘Economic hate crimes’ will dog next US bailout
Clearinghouses will take centre stage in a future financial crisis, writes John Dizard
Dodd-Frank and other reforms have made the outright failure of large banks much less likely. In a future crisis, clearinghouses are more likely to be the centre of financial stress. Some counterparties may have difficulty coming up with ready cash or collateral such as Treasury securities. The latter are likely to be in shorter supply. Anyway, there will be very low prices, then a Fed “bailout”, or, at the very worst, the hasty, no-Congressional-action-required takeover of a clearinghouse by the US government. Then a lot of securities prices would bounce back, and some people would make money. But who would get the political profit? The leftwing policy tribe wants the system to keep working, but will demand their pound of intrusive regulatory intervention. Democratic party politicians will campaign for more control over credit and capital allocation.