The biggest problem is now worse than ever

Wednesday, June 8, 2011
By Paul Martin

Containing (or Restraining) Systemic Risk The Need to Not Fail on ‘Too Big to Fail’

By Richard W. Fisher
Fed Res Bank of Dallas

…. I confess that in matters of monetary policy and regulation, I am often in the minority. This does not make me the least bit uncomfortable. The majority opinion is not always right; indeed, my experience as an investor has biased me to conclude that more often than not, the consensus view is the wrong view, even among the most erudite. Exhibit A of the fallibility of consensus thinking is the herd mentality among supposedly sophisticated financiers as well as theoretical economists who believe in efficient-markets theory and other nonsense themes that led us into the recent financial crisis. I happen to believe that Margaret Thatcher, the former British prime minister, was right when she said, “You cannot lead from the crowd.”[1] There is a role for contrarians, not just in the investment arena, but also at the highest level of policymaking; at a minimum, it is important to question and challenge consensus views, even when they are formed by the most credentialed individuals.

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