Obama says the Federal Reserve has done a 'fine job.' Has it?

Bebchuk and Spamann have identified the short-term focus of the pay packages of bank executives, and the highly levered structure of bank capital as factors leading to the current financial crisis (http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1410072). Perhaps a combination of the two could be a useful measure of systemic risk.

"It could have been worse" isn't praiseworthy, its almost the definition of mediocre. I get that the President has to support his guys if he's going to leave them in place and expect them to be effective, but I wish he could do it in a way that was less offensive to common sense.
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Also, what's so hard about defining systemic risk? It's any activity which creates singular or domino-effect fail points in the financial system. The single point failure in the last last collapse was housing prices always having to go up, before that, with the tech bubble it was ever rising stock prices. Is it really that hard to find three or four smart/competent types to look for single point failures in the financial markets and then have the Fed do something about what they say?
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It's not like there weren't people sounding off about this stuff before it all went bad. And it's not like the Fed and the other agencies didn't have enough regulatory teeth to fix it. The real problem was the incestuous relationship between Wall Street and its regulators, where people routinely went from big firm to regulator and back again. (And still are). Larry Summers is still collecting checks from Revolution Money that were funded by the very banks he's now regulating.

The Fed, with Greenspan did anticipate the crisis in 2004 and 2005: "If we fail to strengthen GSE regulation we increase the possibility of insolvency and crisis". The testimony is available at http://www.federalreserve.gov/boarddocs/testimony/2005/20050406/default.htm

The bill designed to prevent the crisis was never passed:
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aSKSoiNbnQY0

Seriously, now, it's just not that difficult. One of the most important indicators of systemic risk is excessive leverage, especially in those entities like commercial and investment banks which both lend themselves and act as high-volume conduits between and among different asset markets. Monitor leverage there, and perhaps at other big debt users like hedge funds and private equity portfolios, and you should have a good handle on trends and levels of systemic risk.

The trick will be to measure this accurately and completely, so the systemic risk monitor must be able to "see through" off-balance sheet and securitized debt schemes. This will not be easy, but it can probably be done with the right tools and regulations.

We will never be able to completely prevent meltdowns of companies, industries, or asset classes. What we should be able to do, however, is prevent or limit contagion, whereby meltdown in one sector of the markets or economy spreads widely to other sectors. High leverage, especially among financial conduit and transmission entities like banks, is the biggest factor contributing to such contagion.

Bernanke is the same expert who only last year told Congress wonderful fairytales about housing, the markets, and the economy just as the bubble was beginning its implosion.

Apply the controls available, without inventing new ones, and refrain from creating a Nation dependent on its government (through politicized cronyism) for financial success. Prosperity has no address on that road.

http://pacificgatepost.blogspot.com/2009/07/bernanke-and-super-fed-say-its-over.html

Make changes at the top and change the structure over money's controls.