David Merkel submits:
Should regulation be dumb? In one sense yes, in others, no. It really depends on how well the regulators understand the risks involved, and how much they can encourage professionalism among profit center heads and risk managers. As those two increase, regulation can be smart. “Follow these detailed rules to calculate the capital you need to be solvent 99% of the time.”
But when either of those two aren’t true, dumb regulation may be in order: