Surviving the Next Housing-Market Hurricane

KEY WEST – Biking along the beach here for a good sunrise view, my bicycle’s headlight illuminates signs for the hurricane evacuation route to Miami. The signs are not surprising, given the intensity of the storms that can smash into the Florida Keys. More surprising is that those signs hold important lessons for financial regulation.

The Florida Keys are much more developed than they were during, say, Ernest Hemingway’s lifetime. All along the hundred-mile archipelago, substantial hurricane protections are in place. Construction standards are higher, so that residents can wait out storms in their homes – or, at least, in local buildings. If an evacuation is required, there is the so-called overseas highway – a high-cost engineering feat that links the archipelago’s islands to one another and to the mainland.

But if the evacuation plan is not well-executed, bottlenecks along the 113-mile route could trap evacuees. If you’re stuck in traffic on that road, there is not much you can do other than wait and hope.

Today’s plans for protecting the financial system have a similar weakness.