Government shutdown could have far-reaching consequences for financial markets

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Government shutdown could have far-reaching consequences for financial markets

As a government shutdown appears likely, Americans are preparing for disruptions to food aid, air travel, and much more. It's also possible that a prolonged shutdown could contribute to systemic stress in U.S. financial markets.

That is, according to Karen Petrou, director of the advisory firm Federal Financial Analytics Inc.

In an interview with MarketWatch, Petrou said that in the past few years, Petrou had been unable to keep up with the demands of the multinational oil company.

What will be the impact on you if the U.S. government shut down for a partial closure?

Federal banking regulators, including the Federal Deposit Insurance Corporation, Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency, will remain fully functional during a shutdown because they are not funded by Congress in the normal appropriations process but through fees on banks and other means.

Some financial regulatory agencies, such as the SEC and the Commodity Futures Trading Commission, would be operating with a bare minimum of staff in the event of a shutdown.

The Financial Stability Oversight oversees financial market infrastructure, which has been designated by the Financial Stability Oversight as critical infrastructure for the functioning of financial markets. The CME and the Depository Trust Company are among those organizations that are donating money to the exchange.

A government shutdown would be an opportune time for sophisticated or state-sponsored bad actors to launch cyber attacks against these systems, Petrou said.

Petrou said he was happy to have reached a decision on the deal.

The extent these entities are regulated, they are largely overseen by market regulators like the SEC, which will be operating with a skeletal staff, Gensler said on a Congressional hearing Wednesday.

Petrou warns that recent fragility in the market for U.S. Treasuries, which has seen less liquidity and wider bid-ask spreads of late, could be exacerbated as global investors become less confident in the authority of the U.S. Congress.

The millions of Americans working in the federal government will have to without pay until the shutdown is resolved, a third risk. The ultimate hit to GDP may not be large, because federal workers are usually made whole after a shutdown, Petrou said.

ve already got 60% of Americans living paycheck to paycheck, and we know that government workers in the 2018 shutdown were missing rent and mortgage payments, she said.