<div style="margin: 1ex;"><div><img src="http://www.learning-forex.com/uploads/articles/cc259f06.jpg" align="left" alt="" border="0" height="265" hspace="" vspace="" width="400"><font size="3" face="Times New Roman">In trying to reach the moon, the US government wants to oversee the bank system in a way that would check for the kind of systemic problems that froze the credit markets in late 2008 and nearly ruined the financial industry in America.</font> <p><font size="3" face="Times New Roman">The New York Times </font><a href="http://www.nytimes.com/2010/02/18/business/18regulate.html?hp" target="_blank"><font size="3" face="Times New Roman">reports </font></a><font size="3" face="Times New Roman">“The Senate and the Obama administration are nearing agreement on forming a council of regulators, led by the Treasury secretary, to identify systemic risk to the nation’s financial system.”</font></p> <p><font size="3" face="Times New Roman">It has yet to be&nbsp;determined how the newly formed group would differentiate between risks which is “local” and that which could disrupt the entire financial system. The government’s plan&nbsp;is to&nbsp;keep an especially sharp eye on the major money center banks&nbsp;such as&nbsp;Bank of America, Citigroup, investment banks&nbsp;including&nbsp;Goldman Sachs, and Morgan Stanley.</font></p> <p><font size="3" face="Times New Roman">That may work to some extent if the new council tracks the proprietary trades and creation of derivatives, but it still raises the question of&nbsp;what kind of trading and leveraged instruments are dangerous and which are not.</font></p><hr> <p><font size="3" face="Times New Roman"> Not all derivatives produce unpredictable investment results. Forecasting which ones will; is difficult.</font></p> <p><font size="3" face="Times New Roman">The S&amp;L crisis of the 1980s and South American sovereign debt crisis of the 1970s were due to risks that fell outside trading and derivatives. It was nearly impossible to predict that Brazil, Argentina, and Mexico could threaten to default on their debt the same way that it would have been improbable that US regulators could have forecast the&nbsp;sovereign debt problems in Greece two years ago. </font></p> <p><font size="3" face="Times New Roman">In other words, systemic risk often sits well outside the&nbsp;purview and anticipation US federal regulators. The next systemic crisis in the financial and credit markets may be from an inability&nbsp;of Greece or Dubai to pay their debt obligations.</font></p> </div> </div><br>