Derivatives Clearinghouses Are No Magic Bullet. Really ?

See: http://online.wsj.com/article/SB10001424052748703871904575216251915383146.html

Derivatives Clearinghouses Are No Magic Bullet. Really? but not for the reason this guy gives...and he is a professor at some big Ivy league School!

I read this article with a certain sense of bemusement at the level of ignorance the author therein demonstrated. He seems to have no understanding of issues of 2-timing, N-timing in bilateral netting agreements. The issues he worries about would be addresses in centralized or interconnected hierarchical clearing system as explained in my knol and powerpoint/ youtube presentation

References:

The Holistic Theorem

http://online.wsj.com/article/SB10001424052748703871904575216251915383146.html

Unity of Purpose

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Senators Debate Fed's Role in Overseeing Systemic Risk - WSJ.com

Senators Debate Fed's Role in Overseeing Systemic Risk - WSJ.com
Reasonable debate to have. In my book BICs 4 Derivatives Volume I : Theory
(Chapter VIII, pp 192-195), I argued for a central counterparty organization as counterparty of reference on all trades which guarantees the payment of contractual agreements on both sides of a transaction.

The systemic risk overseeing entity should act as central counterparty of reference on all trades whose default may pose a systemic risk or act as a regulator and guarantor of last resort to private entities (exchanges, clearing houses,...) who play such a role.

As a guarantor of last resort, this entity may be best within FDIC; As guarantor of credibility through the power to print money, this entity may be best within the Central Bank authority. What is most important in my view is that its function be articulated as proposed above.