The SEC's custody proposal will have a negative impact on a broad range of financial assets (not just securities) held by advisers. The only products that are not likely to be materially impacted are those publicly traded securities that are centrally cleared. These products constitute only a limited portion of the assets managed by advisers. What will happen when advisers sell off assets because there is no way to meet the SEC's custodial requirements? The hits to the markets and to…

Ms. Bowman argues that the banking regulators already have sufficient authority to detect and respond to bad management and that adding more regulations as a response to every management and regulatory failure is not a cure to management and regulatory failures. Her remarks may be read as a response to  (see also Senator Warren ) that the Trump Administration policy was the reason for the recent bank failures as opposed to inflation and bad management.  

Ms. Bowman's…

The amount of coverage and resources that the banking regulators devoted to climate risks, while they underestimated or missed the dangers of inflation, is a significant blow to their credibility.  

In a notable recent statement, FRB Governor Waller also dismissed the risks of climate change to the banking system and stated that the banking regulators should focus on more immediate risks, such as potential large scale declines in property values.

These proposed requirements illustrate perfectly how clearing organizations can keep themselves safe during periods of market volatility, but they do so by increasing risk to the rest of the market. That is, the power of central clearing organizations to demand additional collateral in periods of market volatility is the power to drain liquidity from other market participants who are very likely to need the collateral for other transactions. The demand for more collateral by the clearing…