No risk can be managed if it isn’t first measured. Geithner’s comments are consistent with a correct view that financial innovation has outstripped regulatory capacity to measure risks across the market spectrum. In the Fed, SEC, FDIC, and OCC, paper and pen are the common tools of the trade. At the NYSE and NASDAQ alone computers process 2 billion transactions per day.

Our current regulatory infrastructure is simply outpaced by the scale and speed of financial processing, and in that gap greed, fraud, and incremental errors and omissions will creep until the system overloads and we witness an enormous crash.

The meltdown isn’t a symptom of the failure of capitalism or dark forces at the fringe. It is simply a normal consequence of human self-interest unmonitored and unchecked.

Read my blog for some ideas on how we in IBM are proposing to prevent this from happening again.