It’s human nature to avoid unpleasant tasks until they must be confronted. Yet, as U.S. authorities are demonstrating, this is no way to run a financial system — and that should be instructive to Canadian policy-makers.

The fallout from the credit crunch has led to some extraordinary actions by the U.S. Treasury, the Federal Reserve Board and the Securities and Exchange Commission in their efforts to keep an apparently fragile financial system from crumbling.

They’ve engineered the bailout of one troubled investment bank and opened the Fed’s lending to other investment banks and brokerages. The Treasury has conjured up sources of both capital and liquidity to keep afloat troubled mortgage giants Fannie Mae and Freddie Mac, while the SEC has declared war on rumours designed to drive down share prices and adopted an emergency measure to curb short-selling in a select group of major banks and brokers.

Although each of these actions is arguably justifiable in the cause of preserving stability within the financial system, this sort of seat-of-the-pants policy-making also has negative side effects, including setting troubling precedents, potentially imposing massive new obligations on taxpayers and giving rise to moral hazard.

Meanwhile, in Canada — where the market disruption has been much less acute and the damage to financial services firms far less severe — the authorities may be tempted to pat themselves smugly on the back for the relatively easy escape so far.

But the divergence between the Canadian and U.S. experiences reflects differences of degree, not of kind. In Canada, many of the same factors were at play: lending standards becoming too loose; complex, opaque structured products being contrived; inadequate disclosure; and short-sighted incentives.

The fact that we haven’t seen problems on the same scale as some U.S. and European firms is no reason to be complacent. If anything, the spectacle of U.S. authorities grasping for ways to salve their markets’ wounds should spur Canadian policy-makers to action here, too, before the next crisis hits and they have to dream up solutions on the fly.

Instead of incessantly chewing over ancient, increasingly irrelevant issues — such as bank mergers and single securities regulators — financial industry oversight should be rethought and, ultimately, rationalized.