The end of the Troubled Asset Relief Program (TARP)--recall that it expired on Sunday--was accompanied with a lot of feel-good encomiums. The program will likely end up a lot less costly than may imagined. It seems to have returned big institutions to good health, relatively speaking, for now anyway. And TARP paved the way in some respects for the Dodd- Frank financial reform law.

Yet there are few who think that the idea of too-big-to-fail--and its corollary moral hazard--are no longer worth discussing. Indeed, many would argue that the industry is still saddled with the threat of too-big-to-fail entities that might require a public bailout in the future. Derivatives clearinghouses could be vulnerable someday, given the massive volumes we're seeing, the New York Times notes.

"Dodd-Frank specifically provides that 'in unusual or exigent circumstances,' the Federal Reserve may provide such entities with a financial backstop, including borrowing privileges," writes the Times. That sounds like a taxpayer bailout to some.

How likely are such clearinghouses to get in trouble? It's not hard to envision a system where trading entities can't post enough capital and the market stalls. If markets are turbulent enough, perhaps many banks and trading entities will end up in this situation. If so, regulators will have a lot to grapple with.

For more:
- here's the article

Related Articles:
Derivatives trading rules coming, hedgers concerned about collateral
The FCIC vs. Goldman Sachs on derivatives
Is a new world emerging on Wall Street?
New derivatives trading rules to have broad impact