Since its earliest days, the United States has suffered periodic financial crises.

It would be reassuring to think that the Obama administration's financial "reforms" -- or, indeed, any conceivable alternative -- would prevent these collapses for all time. Dream on.

Every financial crisis originates in a failure of imagination. It's not that, before the crisis, no one foresees problems, "excesses" and losses. There are usually warnings. But what's routinely overlooked are the fatal interconnections that transform problems into panic.

The current crisis did not occur merely because "subprime" mortgages experienced unexpectedly large losses or even because many of these loans were "securitized" in complex bonds, argues Yale economist Gary Gorton. The crux of the matter, he says, was the failure of the "repo" market. The term comes from "repurchase agreements" -- short-term loans (usually overnight) that require the borrower to pledge collateral (usually bonds) in return for cash; the collateral is then "repurchased" by repayment of the loan.

No one knows the size of the repo market; Gorton thinks perhaps $10 trillion at any moment. Banks relied heavily on repo loans, which were routinely renewed. But when doubts arose about banks' subprime securities, the repo market panicked. Loans vanished or became costlier. Deprived of credit, Bear Stearns and Lehman Brothers failed; other institutions were vulnerable.

In a crisis, government is the last bulwark against a complete financial collapse. That's the main justification for regulation. Just because all crises can't be prevented doesn't mean that some can't. Though complex, the Obama plan would essentially broaden regulation in three ways.

First, it would empower the Federal Reserve to designate some financial institutions (presumably, the likes of Citigroup and Goldman Sachs) as so important that their failure would "pose a threat to financial stability." These institutions would face stiffer capital requirements -- capital being mainly shareholders' investment. More capital would provide a larger buffer against losses and a crisis.

Second, it would create a Consumer Financial Protection Agency to police unethical lending practices and to ensure that loan documents for mortgages, auto loans and other types of consumer credit are understandable.

Third, it would change some rules of financial markets. For example, financial firms issuing securitized bonds -- bundles of mortgages, auto loans and other credits -- would be required to hold 5 percent of the bonds themselves. Because they would have to keep some bonds, it's argued, sellers would scrutinize the underlying loans more carefully.

Though these proposals sound sensible, they have potential drawbacks. Writing in the Wall Street Journal, Peter Wallison of the American Enterprise Institute argued that the very largest financial institutions would become the protected and pampered wards of the state.

Consumer regulation sounds great. But if the protections are cumbersome and expensive, lenders will compensate by raising interest rates or lending only to the safest borrowers, and consumer credit will, paradoxically, become costlier.

Up to a point, some retrenchment of the financial sector is healthy. It absorbed too much of America's talent while pursuing strategies that, in hindsight, misallocated the nation's investment capital. But there are perils to overregulation. It could dampen the normal risk-taking required for solid economic expansion.

Regulation isn't a panacea against future crises. The idea of "enlightened regulators" who are vastly more perceptive than the bankers, traders and money managers they regulate is fiction. Even in early 2007, when the problems of subprime mortgages had emerged, few regulators or economists foresaw a wider financial meltdown. They didn't see the impending chain reaction. The problem wasn't a lack of regulation; it was a lack of imagination.

So the next crisis could come from anywhere -- perhaps the follies of government, not finance. Between now and 2019, the U.S. federal debt could rise to $11 trillion, projects the Congressional Budget Office. U.S. Treasury bonds are the bedrock of the global financial system; they're considered safe and reliable. What if a glut of bonds causes investors to lose faith? Good question.

• Robert J. Samuelson writes for the Washington Post Writers Group.