This is the Cato Daily Podcast for Tuesday, March 31st, 2009.

I'm Caleb Brown.

System is the risk we all must bear for private actors decisions.

But what is it?

Would anything like a systemic risk regulator

having a better chance of controlling the beast

than the finest mines on Wall Street?

Cato Institute Senior Fellow Peter Van Dorn is editor of Regulation magazine.

He says one kind of systemic risk can be controlled to some extent and the other

kind, well that's the kind of risk we're dealing with now.

As best you can figure, what is the operational definition

of systemic risk from the perspective of Bernanke and Geithner

and these fellows?

That's an interesting question.

I mean, there are two possibilities.

One is direct what economists call counterparty contagion,

which is, I have many of my assets tied up in your bank.

And so if that bank fails, then because I have my assets in your bank.

I fail too because it's a big percentage of my net worth.

And then if someone invests in me and they're not diversified, then a high percentage of their net worth goes down,

if I go down and so on and so on.

So the metaphor used in the press is dominoes, right?

...