Wick Sloane ’76 writes on the financial crisis.

Do any of us really how close we are to finding even our checking accounts empty or inaccessible? The press must ask this.

Acres of press coverage of the financial crisis continue to focus only on financial risk, not operational risk. Financial risk is whether a share in Company X worth $100 today will be worth $150 or $75 tomorrow. Operational risk is whether, if we sell the share for $100 today, we will ever receive the $100. Operational risk is whether the capital markets can complete the transactions required for our employer to have cash to meet the payroll and to complete the electronic funds transfer of our paycheck so that on payday we can put our debit card into the gas pump for a few gallons of $4 gasoline on the way home.

Call this crisis, for example, Hurricane Katrina. The financial risk is the severity of the storm. The operational risk is whether the levees will hold back the water. A financial transit system of staggering complexity moves the money through the global markets to our checking account to the gas pump and back again. How is this system doing in the hurricane?

Follow Wick down the rabbit hole for more. Anyone who really wants to hedge this sort of risk ought to have a cache of emergency supplies (cash, food, water, rifle, et cetera) in his house. My take? Sounds like the sort of crazy talk that you hear at a market bottom. Then again, I never thought that Lehman would go bankrupt . . .

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