Pings on the Systemic-Risk Sonar
Although Janet Yellen has her hands more than full at the moment, she has already called up an expanded version of the President’s Working Group on Financial Markets and will shortly use her powers as chair to do the same for the Financial Stability Oversight Council.  As we have noted, Ms. Yellen is a fan of both firm-specific and activity-based systemic designations.  She will thus commence a two-track process of rewriting the Trump Administration’s designation standards and, without waiting to finish that, also target a few firms and activities for near-term scrutiny.  A wide net will be cast and the fish will be judged systemic not only by traditional criteria (e.g., size), but also under a criterion neglected by the Obama Administration that comes in handy right now:  risks to equitable economic opportunity.  Some systemic fish will be whales, some are seen as sharks, some will still have hooks in their mouths after escaping long-ago designation, and more than a few haven’t yet heard the sonar.

M021221.pdf