The Obama administration and Congress keep talking about how they want to prevent “systemic risk” from causing the next financial meltdown.
Their only problem: They have absolutely no definition 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.
The question of what is risk has too many variables: The size of the financial institution under study is one. Other institutions involved will add to the mix. Political implications, and so on, down a list of potential complications are other considerations.
Much of the remedies of the past have been simply trial and error. The vast bulk have proven to be in error. Lehman Brothers and Bear Stearns are perfect examples of foul-ups.
Adding regulatory panels and czars merely exaggerates the mess with more potential human error of the past.
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