The Obama administration and many liberals keep talking about preventing “systemic risk” from causing another financial meltdown. This is pure political talk for the mass vote.
They have absolutely no idea of systemic risk, though we have all just lived through a huge financial crises. No one was able to recognize such risk in the past. No one will be able to foresee one in the future, because of inept politicians.
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 institutions 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 were examples of foul-ups by government.
The Dodd-Frank Act has exaggerated the problem with more potential human error. ( See the Earl J. Weinreb NewsHole® comments.)
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