The Obama administration and many members of Congress keep talking about how to prevent “systemic risk” from causing a financial meltdown. This is pure Left political talk for the masses and their vote.
They have absolutely no idea of systemic risk, though we have all just lived through a huge financial meltdown. No one was able to recognize such risk in the past. No one will be able to foresee it in the future, because of inept politicians in charge.
The question of what is risk simply has too many variables: The size of a financial institution under study is one. Other institutions involved with the first will add to the mix. Political implications are important because of the influence in Washington that financial institution may have, and so on.
There is a list of potential complications and considerations that make it difficult to estimate risk and mitigate it. Poor psychology that festers and attends such meddling just exaggerates the mess.
Much of the remedies of the past have been trial and error. The vast bulk have proven to be in error. Lehman Brothers and Bear Stearns are perfect examples of foul-ups by government.
Adding regulatory panels merely exaggerates the mess with more potential human error, reflective of the past.
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