I couldn’t agree with Toomey’s sentiments more, but this should be true of any equity or leveraging debt in the financial system. If undue risk is taken, those who fail should be punished and not bailed out — this should apply universally to anyone taking beyond a risk-free return in the financial system. This is why they are earning such a return. Otherwise it is like playing roulette knowing that there are five numbers that will never show up. It isn’t fair to the entire system of participants.

To further the point, if an institution representing a “systemic risk” has failed, that means that regulators have been asleep or the rules of the entire system just don’t work. As we have seen multiple times in the past two decades, having a pedigree doesn’t mean you don’t make stupid decisions chasing above average returns.

“Senator Pat Toomey of Pennsylvania, a crypto champion and a ranking member of the banking committee who is drafting stablecoin legislation, said he also hoped Congress would act fast. But he added that he did not believe that algorithmic stablecoins, like UST, needed regulation because they are not tied to assets like cash, held in banks. “It does not seem to me that this introduces systemic risk,” he said. As for those who lost money, Toomey said, “It should be up to consumers — and by the way, failure should be an option.”