Credit market people and their regulators have been so preoccupied with defusing the more visible unexploded bombs in Wall Street that the more serious long-term structural problems have been put off for later attention. Much later attention, in the case of those structural problems that could cause career or biography damage for senior policy people.

The epicentre of all the problems is the financial system’s dependence on over-the-counter derivative contracts, which made possible all the other bubbles that have been revealed and that will be revealed in the near future. I believe that it will be necessary to carefully dismantle most of this jerry-built structure, and replace the bank-to-bank-to-dealer- to-dealer contract structure with central clearing houses for risk instruments.