Clive Crook - A system overwhelmed by innovation

In an interesting article in the Financial Times, Clive Crook mulls over the long-term prospects for the financial system and for regulation of the overall economy.

Sorting out the details of the response will be messy but the principles are now clear and policy is forming around them. First, address illiquidity in the market for mortgage-backed securities. Second, inject public capital on a huge scale, drawing in new private capital at the same time. Third, revive the inter-bank market with temporary guarantees. Fourth, especially in the US, step up efforts to slow mortgage foreclosures, to relieve the distress and stop house prices undershooting.