Bear Stearns failure had triggered obligations from those who had written CDS protection against a Bear default, the counterparties who were covered by this protection would have been relieved of a loss they would otherwise have suffered. The total amount of risk in the market is the same; it is just held by different institutions. To be sure, the unwinding in the Bear Stearns case would have been complicated, but that is a reason to set up a clearing house for swaps, not to regulate investment banks.

Moreover, unlike commercial banks, investment banks are unlikely candidates ever to cause systemic risk. Investment banks collateralise their borrowings. If they fail, their creditors can usually sell the collateral to make themselves whole. In contrast, the failure of a large commercial bank leaves its depositors and other creditors without funds until it is resolved.