When markets crash someone or something must be at fault - heads must roll, structures reformed, the rules rewritten.
So it is with one of the most spectacular crashes - and recoveries - in history, namely last month's 998-point plunge of the Dow Jones Industrial Average in less than 10 minutes, followed by a 612 point recovery in 13 minutes, and a slower recovery from there on.
A further battering
Confidence in US financial systems has already taken a battering given the role played by subprime in the international crisis as well as the various related shenanigans on Wall Street. Politicians have not been slow to make their careers off the back of the reprisals.
Hence, once again, the critics and doomsayers were quick to attribute the crash variously to the bewildering speed of modern markets and the advent of high-frequency trading; to the contemporary market structure fragmented among established exchanges and new electronic trading platforms; and - if all else fails - to those perennial whipping boys, rogue trading and market stitch-ups.
Fools rush in
A full understanding of what went wrong is not yet available but caution is needed before jumping to conclusions. There are two issues here that deserve more attention, the first being the timing of the meltdown.
This extraordinary market event did not take place on an ordinary day - quite the contrary in fact. Not only did May 6 mark the unprecedented bail out of Greece, following an overlong period of hesitation, delay and social unrest. It also marked the most closely contested UK election for 18 years against a backdrop of extreme fiscal stress. It is little wonder the US markets were in a state of extreme agitation, amid a confluence of several exceptional events that is unlikely to be repeated any time soon.
The second issue relates to the speed at which the markets righted themselves. Market-watchers have rightly balked at the shocking speed with which the index fell. But put it another way: the most precipitous market decline in history was righted almost as fast as it occurred. What does this say about US equities markets? Surely, if anything, it underlines the markets' unparalleled capacity, when experiencing extreme disruption, for self-correction?
The US equity markets are not beyond reproach, as this incident amply proves. But it must also be understood in its fullest context and the reprisals meted out accordingly: with tremendous care and restraint.
