No one questions that risk management failed on Wall Street, but this doesn’t prove the converse, that regulators could do a better job than banks at measuring banks’ risks. I don’t mean to exonerate the bankers who knowingly discarded or discounted the risks of mortgage backed securities, but it’s quite possible that (1) banks are much better than regulators at assessing their own risks, and (2) banks nevertheless are capable of colossal failures in risk assessment.

Also, populism is dead, and with good reason. It doesn’t mean we should resign ourselves to plutocracy, but we should be encouraging our best and brightest to go into finance but realign their incentives (as Lewis/Einhorn suggest), so they don’t follow the same path as the last crop.