A reason frequently given for financial market behavior in recent years is the belief that the Fed will bail out the market's mistakes.

In the wake of every bust comes the political reaction.

The GSE reform legislation now being considered by Congress should be amended to revoke the GSEs' perpetual charters and replace them with limited-life charters.

Regulatory reform will not prevent all future financial busts, but there are sensible ways to reform the mortgage finance system.

A "systemic risk adviser" independent enough to point out the systemic risks being created by the government's financial actions and policies, in addition to those of private financial actors, might be a useful institution.

There is an emerging consensus that the Fed should become a systemic risk regulator, but this is a bad idea, both because of the Fed's current mission and the nature of systemic risk.