Macro Musings with David Beckworth · Mercatus Center at George Mason University

Sam Schulhofer-Wohl on Reforms in the Treasury Market and Developments with Central Bank Operating Systems

June 23, 2025·51 min·4 clips

Sam Schulhofer-Wohl reveals how central clearing guarantees transactions and strengthens the Treasury market's risk management.

This episode of Macro Musings features David Beckworth and Sam Schulhofer-Wohl, a senior advisor at the Dallas Fed and veteran of the Federal Reserve System. They discuss ongoing reforms in the U.S. Treasury market and developments in central bank operating systems. Schulhofer-Wohl draws on his experience with the Interagency Working Group on Treasury Market Surveillance, which includes the Treasury Department, the New York Fed, the Federal Reserve Board, the CFTC, and the SEC. The conversation references a panel moderated by Dallas Fed President Lori Logan at the Atlanta Fed's Financial Markets Conference, featuring Deidre Dunn of Citigroup, Nate Wuerffel of BNY Mellon, and Lou Crandall of ICAP. Schulhofer-Wohl outlines five work streams for Treasury market reform: market resilience, transparency, oversight of trading venues, leverage and liquidity risk, and central clearing. He explains central clearing through a Central Counterparty (CCP) that acts as the buyer to every seller and seller to every buyer, guaranteeing transactions. The SEC has mandated broader central clearing for most repo and cash Treasury transactions, with deadlines extended to the end of 2026 and mid-2027, respectively. Schulhofer-Wohl details four potential benefits of central clearing: stronger and more uniform risk management, a direct reduction in trade failures through netting chains, increased transparency for regulators and the market, and the netting of opposing transactions to free up balance sheet capacity. He references a paper by Yesha Yadav and Josh Younger that cautions against overstating netting benefits and highlights the risk concentration at CCPs. Other entities like CME, Securities Clearing Incorporated, and LCH Group have applied to become Treasury CCPs, raising questions about market fragmentation versus the benefits of competition. The discussion touches on the supplemental leverage ratio (SLR) as a potential drag on low-risk Treasury intermediation, noting proposals to adjust it. Schulhofer-Wohl frames this within the broader context of risk-based versus non-risk-based capital calculations. He also mentions other reforms, including FINRA's daily transaction reporting for on-the-run Treasuries and the Office of Financial Research's data collection on bilateral repo. The episode concludes by shifting to central bank operating systems, referencing a conference panel with Claudio Borio, Ayman Oumlil-Rousseau of the ECB, and Patricia Zobel of Guggenheim. A key insight is that central clearing is viewed not as a panacea but as one step among many to improve market resilience. Schulhofer-Wohl emphasizes that the clearest benefit is stronger, uniform risk management rather than balance sheet netting. The conversation reveals an active debate about the trade-offs between having a single CCP for efficiency and multiple CCPs for competition and resilience. The episode also highlights the complex interaction between capital regulations and liquidity requirements in shaping bank behavior. The tone is highly technical and educational, reflecting a deep dive into financial market plumbing. The style is a conversational interview between two experts who share an enthusiasm for niche policy details. This episode would deeply appeal to finance professionals, central bank watchers, and anyone interested in the granular mechanics of monetary policy implementation. Listeners seeking broad macroeconomic trends or narrative storytelling might find the highly specialized focus less engaging.

As heard by us

A steady look at Treasury market plumbing and the tradeoffs around central clearing.

This episode stays close to the mechanics that actually move rates, liquidity, and risk. Sam Schulhofer-Wohl's Fed background keeps the discussion specific, while David Beckworth gives the conversation room to work through the policy tradeoffs without turning it into a lecture.

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Why you'd press play

You want Treasury market plumbing explained without losing the monetary-policy stakes or the institutional moving parts.

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