The Wall Street Journal: Gary Cohn says clearinghouses pose systemic risk

Bloomberg News

Gary Cohn, director of the U.S. National Economic Council

WASHINGTON—National Economic Council director Gary Cohn hit out at clearinghouses Sunday, saying the growing amount of illiquid assets parked in them raises concerns about a “new systemic problem in the system.”

“I don’t think we really understand the magnitude of continuously putting things in clearinghouses without the proper guardrails in the clearinghouse,” said Cohn, a former Goldman Sachs executive, adding the key to clearinghouses is real-time liquidation.

A clearinghouse is a place where transactions in things like foreign exchange and interest-rate derivatives can be safely recorded, monitored and settled.

“I think we have expanded the limits of clearing probably farther beyond their useful existence,” Cohn said Sunday at a Group of 30 banking seminar in Washington.

An expanded version of this story is available at WSJ.com

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