After decimating the Federal Reserve's Inspector General, and exposing her for the uninformed figurehead she is, Rep. Alan Grayson continues steamrolling through the swath of executive-level stupidity on both Wall Street and in D.C., and demonstrating just how clueless those who should be in control and anticipate the next potential black swan event, really are.

At a hearing yesterday, Grayson received witness opinions from the following erudite professionals, some of whom may very well be next in line for the critical post of systemic regulator.

  • Ms. Patricia Guinn, Managing Director, Global Risk and Financial Services Business, Towers Perrin;
  • Mr. J. Robert Hunter, Director of Insurance, Consumer Federation of America;
  • Mr. Martin F. Grace, James S. Kemper Professor, Department of Risk Management and Insurance, Georgia State University
  • Mr. Scott Harrington, Alan B. Miller Professor, Wharton School, University of Pennsylvania.
  • Mr. Baird Webel, Specialist in Financial Economics, Congressional Research

The bottom line, as Scott Harrington of the Wharton School said, is that nobody has any idea how to quantify the risk of a major outlier event, but everyone will likely know it when they see it. It is absolutely terrifying that we are nowhere better off in terms of risk quantification today, than we were before the Lehman bankruptcy, and yet the administration keeps throwing money at insurance companies and AIG hoping the problem will go away. With $1.5 quadrillion of total notional derivatives in circulation, it is obvious that nobody can predict just how and when things will go wrong. But by merely printing more cash and hoping that will be sufficient is the worst possible approach to this problem.