Monday, September 15, 2008


sometimes huge financial institutions just fail in rapid succession like so many dominoes.

We need to shift our focus on regulation from a fruitless search for 100% safety to accepting risk, and trying to make the markets more robust to withstand it. The government should encourage, rather than discourage, multiple sources of information and analysis. It should pay more attention to outlying risks. And it should have systems in place to wind down the inevitable failures, rather than letting the outcome depend on how Hank Paulson is feeling this morning.
Megan is right. We shouldn't discourage load bearing pillars of our nation's economic system from taking massive risks that end up costing their shareholders and the American taxpayer and the economy billions, we should plan ahead as to how to bail them out when making it newly legal for them to take such huge risks with other people's money. So what if it's risky for a major investment bank to put all its liquid holdings in lottery tickets, telling them not to is interfering with the free market and its apparent desire to implode.

1 comment:

Anonymous said...

Megan's really out of it today. I almost (I said almost) feel sorry for her, the self-styled econoblogger. This should be her day to shine. She should own this story--it's right down her alley, what with New York investment banking and New York financiers involved, not to mention Bernacke and the Fed, billions or dollars, financial intrigue, it's all here. After all, how often do you have two major financial players go broke on the same day (and a third possibly on the way)? This is headline news around the world. Megan should have been nonstop blogging since Saturday, when the news started breaking. But instead she gives us a couple of really, really crappy and pointless posts about how free markets are great and they shouldn't be over-regulated but you need some regulation just as long as it's the kind that Megan proposes.

If I were her editor (if she has an editor) I'd fire her sorry "econoblogging" ass in a New York minute.