Clearinghouse settlement failure threatened to close the Merc and cascade into widespread bankruptcy.

Evidence

If clearing failed, the Mercantile Exchange could not open. That would fuel the spreading panic that threatened to engulf America’s financial institutions in a cascade of bankruptcies. Melamed knew, that Monday night, just how important it was that clearing be completed. Frantic activity by Melamed and his colleagues throughout the night (including a 3 A.M. call to the home of the president of Morgan Stanley to tell him that his bank owed them 1 billion) achieved the transfer of 2.1 billion, but as morning approached $400 million was still owed to Continental Illinois Bank, which acted as the Merc’s agent. — Donald MacKenzie, An Engine, Not a Camera, 22

Categorization

• XREF: connects to: Clearinghouse settlement failure alone could have triggered a cascade of 1987 bankruptcies; Clearinghouse mutualization makes a single member’s failure a system-wide contagion risk.; The greatest systemic danger of 1987 came after the crash, from the clearinghouse’s solvency. — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 833

Broader Connections

• Clearinghouse settlement failure alone could have triggered a cascade of 1987 bankruptcies #corroborates (0.95)
• The greatest systemic danger of 1987 came after the crash, from the clearinghouse’s solvency. #corroborates (0.90) — Donald MacKenzie, An Engine, Not a Camera, 833
• Clearinghouse mutualization makes a single member’s failure a system-wide contagion risk. #expands (0.80)