We used to think that the world of finance was governed by natural selection. Recent government actions — beyond bailouts of failed institutions — are prompting second thoughts on the subject.

Ben Bernanke is angry. As a “hedge fund attached to a stable insurance company,” AIG made “huge irresponsible bets” by exploiting the “gap in the regulatory system” and then took huge losses. This makes it a perfect case study.

As the government’s stake in Citigroup increased, fears of nationalization spread. Below we define the term “nationalization,” discuss differences between Citigroup, AIG, and Fannie Mae, and emphasize the need to preserve and enhance economic dynamism.

In addition to providing yet another testament to the pervasive lack of transparency in finance, the Bank of America/Merrill Lynch transaction has yet again demonstrated the profound disconnect between executive decisions and risk management.

The creation of some version of a “bad bank” remains an integral part of the Financial Stability Plan. Here is why re-establishing a market for toxic assets is as important as shoring up the banks’ capital.