The two firms are the industry leaders in the (once) lucrative business of providing hedge funds with financing, lending them shares for short-selling purposes, settling trades and housing fund assets.

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They have borrowed not only for their own direct purposes to build public works and housing but also for enterprises known as local-government financing vehicles, whose businesses often have a low rate of return.

WSJ: Philip Bowring: China Needs a 1997-Style Crisis

Such issues by state and local governments and authorities, many of them tax-exempt, are used for public purposes such as schools, sewers and water systems-financing projects often launched by elected officials and closely scrutinized by taxpayers.

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