It should be no surprise that when MF Global failed, the market reaction was a virtual yawn. We have been told so often that the failure of a large nonbank financial institution will cause a systemic breakdown that some otherwise sensible people have come to believe it.
The underlying idea - that financial institutions are "interconnected" and the failure of one will drag down others - is not implausible. But like so much else that underlies the Dodd-Frank Act, it was accepted as true - and acted upon - without much evidence, or even much thought.
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