On top of these systems will sit many specialised and interconnected firms, just like applications on a computing platform.
If there is no proven way to reduce the systemic risk in big and interconnected firms, why should they be allowed to exist?
In Tuscany, business life revolved around small, interconnected firms, just as it did in Wenzhou, a city so resolutely entrepreneurial that it had resisted Mao's collectivization campaign.
There was a system-wide oversight council created, composed of representatives from various financial regulators, but the council will only be overseeing the largest and most interconnected firms.
But because those firms have "no incentive to reduce the chances of such systemic losses," higher capital requirements are necessary "to make those large, interconnected firms less prone to failure".
If not, regulatory reform efforts of individual nations will be hobbled because nearly every pressing matter — cleaning up toxic assets, regulating derivatives, downsizing large and interconnected firms — has an international component.
T. Timothy Ryan, the president of the Securities Industry and Financial Markets Association, said the market crisis exposed that "there was a failure in the statutory framework for the resolution of large, interconnected firms and everyone knows that".
But TargetPoint is just one of a handful of interconnected firms in the same office suite in Alexandria, Va., working for either the Romney campaign or the super PAC Restore Our Future.
Even as we've proposed safeguards to make the failure of large and interconnected firms less likely, we've also proposed creating what's called "resolution authority" in the event that such a failure happens and poses a threat to the stability of the financial system.
