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While Democrats wrote new oversight requirements for private funds into the 2010 Dodd-Frank Act, they exempted family funds from the law altogether. The House Financial Services Committee chairwoman, Maxine Waters, proposed draft legislation requiring family funds managing more than $750 million to be subject to Dodd-Frank’s regulations. In the Senate, a bill soon to be reintroduced by Tammy Baldwin, a Wisconsin Democrat, will also impose greater disclosure requirements on the kind of derivatives Archegos was using.

Under Gary Gensler, a tough regulator who served in the Obama administration, the S.E.C. could stiffen regulations and tighten reporting requirements for private funds. This would help regulators — and banks — identify future Archegos-size whales.

Not everyone in Washington may be taking these risks as seriously as they should. Last year, the Federal Reserve, which oversees the nation’s largest financial institutions, presciently warned that banks were giving their favorite private fund clients increased leverage. If one of those funds imploded, volatility could spike across the markets.

Yet in a news conference on April 28, Jerome Powell, the chairman of the Federal Reserve, dismissed Archegos-size risks. He defended the Fed’s failure to catch this in advance, saying, “we don’t manage [the banks’] companies for them.” But it is the Fed’s job to ensure that banks aren’t lending recklessly to funds whose blowups could reverberate back to the taxpayer-backed banking system.

One way the Fed monitors for such risks is through annual bank stress tests. In 2019, Credit Suisse failed part of its stress test because the Fed feared it couldn’t accurately project major trading losses. Instead of forcing substantial changes, it seems the Fed let them off the hook too easily: After Credit Suisse’s staggering $5.4 billion Archegos loss, it scrambled to raise $2 billion in new capital. The Fed needs to recognize its own regulatory failures and take action, not minimize the significance of the fallout.

While the banks mostly managed to sustain the losses, had they been greater, the simultaneous, forced liquidations of the same assets at the same time could have cascaded into a larger crisis — much as it did when Lehman Brothers fell in 2008. Without reforms to bring family funds out of the shadows and ensure more reporting by private money managers, and closer supervision of banks by the Federal Reserve, it will be difficult to spot and impossible to fix other large risks to the financial system.

The 2008 crisis was catastrophic because it wasn’t just one fund borrowing too much to make risky, under-regulated bets — it was every major player on Wall Street. Whether an obscure family fund survives isn’t important unless its blowup threatens to crash the banks that house people’s savings.