For example, while the government does not receive all transaction data regarding accountholders at commercial banks, the Bank Secrecy Act requires that commercial banks report suspicious activity to the government. Depending on its design, CBDC accounts could give the Federal Reserve access to a vast amount of information regarding the financial transactions and trading patterns of CBDC accountholders.
That is, when agents’ risk appetite goes up, they agree to fewer covenants, accept more-implicit subordination, and so forth, and high-yield issuance responds accordingly, hence its predictive power. A second implication of the institutions view is what one might call the “tip of the iceberg” caveat.