So, first Federal Reserve Chairman Ben Bernanke calls for some sort or über regulator to manage systemic risk, and it sounds to me like he wants to make the Federal Reserve the “One Ring to Rule Them All,” and then he flat out says that, “would not be allowed to fail.

This sounds an awful lot like what Alan Greenspan said, and did when was running the Fed, and bailing out any reckless speculators that crashed (see Long Term Capital Management).

If there is a lesson here about the Federal Reserve, it is that while its opacity and lack of response to political pressure may be necessary to tighten down on an economy when there is a serious inflation problem, it makes it spectacularly unsuited to anything else, because you never know when it will be run by some frothing at the mouth Ayn Rand acolyte who will run the economy into the ground.