Systemically important

Ever since the waning of the Industrial Era, the world economy has been making the  transition to an era in which knowledge has become an asset akin to plant, equipment and resources. Not only that, but the movement and storage of that knowledge has drawn virtually all aspects of economic life into an interdependent, and interactive, system of actors.

Because of this interdependence, we are faced with the ever-present risk that any one part of the system -- whether it be a company or an industry -- can have an adverse, or even catastrophic, effect on the whole. We need only look to the financial shenanigans at Enron, the safety short-cuts in BP's offshore drilling operation, or Union Carbide's disaster in Bhopal, India.

For any CEO, the ongoing effort to balance the drive of the various divisions and departments within his company with the priorities and objectives of the company as a whole is a central problem in leadership.

Now we have the Fed Chairman -- in effect, the CEO of our financial system -- wrestling with the aftermath of the financial crisis, and trying to identify potential threats to the system. Obviously, he doesn't have many of the usual levers available to the typical CEO -- the power to hire and fire the heads of independent financial companies, for example -- but he can command the disclosure of critical data, including such touchy matters as risk exposure and key business relationships.

A Bloomberg story this morning, based on a leaked report from the Fed's Financial Stability Oversight Council,  reports that the group has, "identified dozens of 'potential metrics' to decide which non- bank financial firms should be designated 'systemically important' and subject to Federal Reserve supervision..."

The story goes on to say:

"The council, charged with averting another financial crisis, will collect data that can be used to force firms to raise capital, increase liquidity and sell assets deemed too concentrated in any segment of the economy. Industry groups for hedge funds, mutual funds and insurance companies are lobbying to avoid being designated systemically important."

 Let the games begin.