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"Glaring inadequacies in the regulatory and supervisory framework of the United States"

It is important to understand clearly the concept of systemic risk in the midst of an intense credit crisis that coincides with the onset of a global recession.
As Chairman Bernanke clearly suggested, the U.S. credit crisis revealed glaring inadequacies in the regulatory and supervisory framework of the United States
"Risk and Systemic Risk", John H. Makin, American Enterprise Institute, September 5, 2008

Now consider the statutory and regulatory problems referred to by Chairman Bernanke: risk management of the global financial and banking system. Banks and other financial institutions assume the role of individual traders, while central banks and regulators take on the role of hedge fund management. The incentives for banks and individual financial institutions to assume too much risk are similar to those of traders, especially in institutions deemed "too big to fail." The "Greenspan Put"--in which investors rely on the central bank's claims that it cannot identify market bubbles as they build but can contain the damage to financial markets after bubbles have burst--encourages a buildup of systemic risk.

Full text

Why Do Financial Firms Take Too Much Risk?
The principal/agent problem
John H. Makin, American Enterprise Institute, November 20, 2007