Sen. John Cornyn (R-Tex): "As you know, the market for U.S. Treasuries is the largest in the world at $28 trillion, and it's critical for the financial stability of the United States. There's actually a proposal for an entity to clear U.S. treasury futures at the London clearing house which is overseen by the Bank of England. Some argue that the Bank of England would have control over ... a default scenario in this critical market instead of the U.S. Is this of concern to you?" Scott Bessent replied:

You raise a very important question and one that I will investigate further. I was unaware, until the past few days, of this with the new exchange. What I can tell you, as a student and professor of economic history, is that it is important for the U.S. - for the U.S. Treasuries, for us to be able to resolve any stress issues in the markets in the U.S. We saw during the Lehman Brothers bankruptcy, that much of the, many of the problems emanated from the U.K. subsidiary, so this is something that ... my inclination is that the resolution authority must lie here in the U.S., but I will get back to you in writing with an answer on this, if confirmed.

Before declaring his "inclination," Bessent thanked Senator Cornyn for bringing the matter to his attention, and during their exchange, Cornyn made it clear that the two have visited together at his office and discussed the issues. The first, obvious question is, why should American treasuries be cleared in London, through a clearing house under Bank of England's control? Who wanted this to happen, and where did such a proposal originate from?

Not an ordinary business venture
This would be a move without precedent: it has never been done either by the U.S. or any other sovereign nation. Nevertheless, Howard Lutnick, the CEO of Cantor Fitzgerald, one of the 24 U.S. primary dealers authorized to trade US government securities with the New York Fed, embarked on a project to bring the trading of U.S. Treasury futures to FMX, a new futures exchange, in competition with Chicago Mercantile Exchange - the CME Group Ltd. As Bloomberg reported, FMX partnered with LCH Limited in London, which was going to serve as the clearing agent for FMX. To spearhead the plan, Lutnick lined up the support of several major U.S. banks.