It won't be zombies next time

Yes, a blog post! Believe me, I'm shocked too. Though this year has been surprisingly good, given the economic situation, it's had me working on several larger, multi-month projects. That's taken me out of the day-to-day news flow to some extent.

But I did notice this, and it's well worth passing on. Atlantic Business Channel editor Daniel Indiviglio has broken down the recently released proposal on financial regulation and systemic risk. How do regulators deal with institutions that are too big too fail? Indiviglio's analysis is long -- I've linked to the last of eight parts, which summarizes -- but readable for those of us who aren't economic policy wonks.

At the same time, I can't help but think of an old story in which an adventurer complains that he knows all about zombies now, so of course it won't be zombies that attack him next time. Booms and busts appear to be inherent in markets, dating back at least to the 17th century Dutch tulip mania. The desire to build bigger and bigger institutions and accumulate more and more assets is as old as humanity. Any regulatory scheme that preserves the essential dynamism of markets is likely to contain the seeds of its own failure. The critical question may not be whether it will work, but what will contain the damage when it fails.