WASHINGTON (Reuters) -U.S. Treasury Secretary Janet Yellen is facing pressure from Democrats to revive tougher scrutiny of hedge funds and other large pools of capital as she heads her first meeting of the premier grouping of U.S. financial regulators on Wednesday. The meltdown of leveraged hedge fund Archegos Capital Management this week, which inflicted losses on Credit Suisse, Nomura and other intermediaries, gives the Financial Stability Oversight Council fresh evidence to review. The council, led by Treasury and including heads of the Fed, the Securities and Exchange Commission and other major financial regulators, is scheduled to meet at 3 p.m. EDT (1900 GMT) to privately discuss hedge fund activity and the performance of open-end mutual funds during the coronavirus pandemic. It also will hold a rare public session to discuss financial system risks from climate change for the first time. Archegos’ failure to meet margin calls is the third significant market episode in the space of a year involving faltering hedge funds or open-end mutual funds. Thus far, the damage from the Archegos incident has been limited to a handful of stocks, including ViaComCBS Inc and Discovery Inc, but concerns are rising that trillions of dollars in government coronavirus aid will fuel more market risk-taking. “Archegos is a potential canary in the coal mine because this came out of nowhere,” said Gregg Gelzinis, associate director of economic policy at the left-leaning Center for American Progress in Washington. “Is there another fund that’s larger, that’s more leveraged with the same characteristics that could prove to be a more systemic event? That’s the major concern right now.” FSOC BACKTRACKED UNDER MNUCHIN Former Treasury Secretary Jack Lew used the FSOC from 2014 to 2016 to focus on risks posed by hedge funds and asset managers, forming a working group here to study their use of leverage. Yellen, an FSOC member as Fed chair, backed these initiatives. The fund leverage working group was abandoned by President Donald Trump’s Treasury secretary, Steven Mnuchin. The FSOC also weakened rules on the designation of nonbank financial institutions as systemically important. Senate Banking Committee Chairman Sherrod Brown supports reconvening the FSOC hedge fund working group, his office said in an emailed statement, adding that nonbank institutions have grown “larger and riskier” during the past four years. “Senator Brown welcomes increased scrutiny of our entire financial system by FSOC, including private funds,” his office said. The Treasury declined to comment further on the agenda for Wednesday’s meeting, which was issued last week, before news of the Archegos downfall broke. Yellen said at her confirmation hearing in January that she still thought that studying leverage was worth pursuing, citing the market problem experienced last March. “This is an activities-based approach that FSOC is pursuing and I thought that was the right approach and I would want to look again at some of those approaches,” Yellen said. Last week, Senator Elizabeth Warren, a Democrat and long-time critic of Wall Street, pressed Yellen on whether she would designate BlackRock Inc and other big asset managers as systemically important financial institutions. Yellen said it was “important to look very carefully” at the risks posed by these firms, but again backed scrutiny of market activities over company-based designations. Mark Sobel, a former Treasury and International Monetary Fund official, said that Yellen, as FSOC chair, needs to make clear to regulators what “activities-based” supervision they should apply to hedge funds and asset managers. Yellen “needs to use the bully pulpit of the FSOC to drill down on these issues and compel the relevant regulatory authorities to act,” Sobel added.