Johnn Cochrane makes the case that bank regulators are not up to the job.

The last generation of smart MBAs got around capital requirements by pooling risky assets into “AAA” securities that had lower risk weights, and then putting those securities in special-purpose vehicles with off-balance-sheet credit guarantees. Voilà! Same risk, no capital. I can’t wait to see what they come up with this time. Diligently following risk weights, European banks built capital ratios by selling good loans and keeping “risk-free” sovereign debt.

Read the whole thing. Pointer from Kevin D. Williamson, who writes,

if it’s conspiracy kookery to suggest that Wall Street likes having access to easy money at concessionary rates, bailouts, and the privilege of being too big too fail, then the grassy knolls are going to get awfully crowded.

They will get even more crowded to the extent that it becomes clear that U.S. taxpayers, via the Fed and the IMF, are engaged in another bailout.