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Treasury Secretary Yellen to restart hedge fund oversight panel as part of financial reform goals

Treasury Secretary Yellen to Restart Hedge Fund Oversight Panel

April 5, 2021:-Treasury Secretary Janet Yellen laid out a three-pronged plan on Wednesday to address what she described as ongoing threats to the nation’s financial system. Those threats include both disruptions that occurred early in the Covid-19 pandemic and more recent developments regarding hedge fund.

Presiding over the Financial Stability Oversight Council, which she now leads but was once a member, Yellen said last year’s market disruptions at the onset of the Covid-19 pandemic could have been worse.

“If not for the swift action of the Federal Reserve, Treasury, Congress and others, those stresses may have led to an even greater economic contraction,” she said. “Indeed, we are digging out of a deep hole now, but we should be mindful that the hole could easily have been deeper.”

The meeting comes just days after family office Archegos was at the center of a market disruption related to margin calls. Credit Suisse and Nomura warned they would take substantial hits, and ViacomCBS and Discovery’s shares got slammed.

A summary from the committee’s executive session said the panel “discussed recent market developments related to hedge fund activities,” though the readout did not mention Archegos specifically.

“The pandemic showed that leverage of some hedge funds could amplify stresses, too,” Yellen said.

“This council used to have a hedge fund working group, and as of today, we have one again. We’re establishing the working group so that we can better share data, identify risks and work to strengthen our financial system,” he added.

On the climate change issue, Yellen reiterated concerns that she has shared on the subject and have been voiced by several Fed officials. The central bank has recently established a pair of committees that will examine what big banks should brace against climate-related events.

“It’s an existential threat to our environment, and it poses a tremendous risk to our country’s financial stability,” Yellen said.

Other issues she expects FSOC to address including cyber threats, the growing use of non-banks for corporate credit, and the increasing presence of digital currencies.

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