Financial crises cause a lot of damage, and ill-conceived post-crisis measures, no matter how well-intended, can only magnify their effects. Examples abound. For instance, the Smoot-Hawley Tariff Act of 1930, a US law that erected trade barriers, is widely regarded as having added considerable strain to the world economy after the 1929 stock market crash. However, the Oscar goes to the British authorities: after the South Sea Bubble collapse (1720), they banned issuing stock certificates for more than a century.

Now enter securitisation. Granted, many transactions structured around subprime mortgages have performed disastrously. But blaming the current crisis on securitisation is ludicrous. Unfortunately, there is a real danger that a bad combination of public outrage plus politicians’ ignorance might end up producing just plain bad and counterproductive regulation.