This implies we should go back to the drawing board to improve the resilience of the financial system. But it does not mean we should go back to the past.
Innovation cannot be undone and the idea that tomorrow’s problems can be solved by yesterday’s regulation strikes me as overly simple and even dangerous, as it could constrain the possibilities for financial system to allocate capital around the world and transfer risk efficiently. While we are at the drawing board, we also need to address the issue of containing systemic risk.