The Wild, Wild West Days of Finance Are Over

In that sense, the change in the impact of financial institutions is not unlike the change in the impact from society's use of wood, coal, or gas for heat/energy to society's use of electricity: a power surge or a long outage can result in much more damage.

But just as with electricity -- which was an unreliable energy source plagued with problems at the outset -- look for public policy makers to refine the use of derivatives and leverage, and more effectively define risk parameters.

Don't misunderstand: derivatives and leverage aren't going away, it's just that in the financial reforms that ensue, their use will likely be refined so that the system does not receive these 'shocks' -- shocks that can now (incredibly) run into the trillions of dollars.

What's less certain is the intervention threshold concerning systemically-significant businesses. When does the Fed and/or the FDIC and U.S. Treasury move to takeover/liquidate/seize the operations of a private organization? When its risk exceeds agreed-to parameters? After several problematic, quarterly statements? When the Fed has incontrovertible evidence of fraud or other abuse? The exhaustive answers to these questions aren't known as of this April, but this is certain: the wild, wild, west days of finance are over.