EXACTLY 10 YEARS ago, the Federal Reserve gathered the heads of 14 investment banks in New York to urge them to rescue a Greenwich, Conn., hedge fund, Long-Term Capital Management. The Fed was worried that LTCM was so intertwined with Wall Street that its failure could lead to a systemic meltdown.

Few thought to challenge the need for such a rescue no matter that LTCM was privately held and employed fewer than 200 people, and that (we may presume) fewer than one in a hundred Americans had even heard of it. Nor was it considered relevant that LTCM had no connection whatsoever to the Main Street economy. Were its bond traders to cease their operations, the entire financial system could come crashing down or such was the Fed's premise. And it has echoed through our financial culture ever since.

First, the investment banks that financed LTCM bought into this fear. Though few harbored any affection for LTCM, which prior to collapsing had earned a reputation for haughtiness, the bankers were quaking in their boots. Only one of the banks objected to the Fed-organized rescue, and that was a matter of expediency more than principle.

The refusenik was Bear Stearns itself a recipient of a bailout this spring. Although its acquirer was JPMorgan Chase (JPM), once again the impetus came from Washington, which even provided standby credit. Again we heard that an institution was "too big to fail" (curiously, since Bear Stearns was never more than a second-tier institution).Then came an even bigger federal bailout or at least the guarantee of same if needed for the tottering mortgage agencies Fannie Mae and Freddie Mac.

Leave aside, for the moment, the questions of equity that are raised by the bailouts. (Many of the executives reaped tens of millions in compensation; while their losses are handed off to Washington, the gains are theirs to keep.) Nor will we dwell on the likely influence of bailouts on future investors. Each time the government cushions the market from the full effects of failure, it emboldens others to take more risk or to lend to those who do. This temptation, known as "moral hazard," has been amply documented.

But few have questioned the basic premise the notion that many of our financial institutions are truly too big to fail. The underlying theory is not, of course, that the world cannot live without Bear Stearns, but rather that if Bear failed, it could pull under other financial players to whom, through a complex array of trades and credit obligations, it is linked.

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Exponents of this view often employ the metaphor of a house of cards. Remove one card and the rest collapse. I have never not when I wrote a book about LTCM, and not now thought the metaphor was quite right.

Is the economy really so fragile, and is finance really a house of cards? A single firm certainly may implode. When Enron's books were exposed as a sham, no one would lend to it, and the company did collapse.

But the economy is composed of thousands of firms. They do not all fail at once. David Ranson, an economist at H.C. Wainwright Economics, thinks we are unduly alarmist. A better metaphor, he suggests, is a beehive.

Picture thousands of bees furiously building and when necessary, rebuilding the hive. When one bee falls, another takes its place. The bees work in association with each other, but not in a pyramid. If a section of the hive crumbles, the rest of it continues to function. Meanwhile, nature compels the remaining bees to repair the damage. With bees, the motivation seems to be collective. With capitalist human beings, the motivation is individual but the result is not dissimilar.

Of course, when a house of cards collapses, the entire structure is leveled; the restoration must start from scratch. But that isn't what happens in the U.S. economy. No sooner does an enterprise fail than others swoop in to snare either the fallen firm's assets or market share or both. This is how humans repair the hive.

A good example was the recent sale of assets by Merrill Lynch. Merrill is a seriously wounded firm. Over the past year, it has written off a staggering $46 billion in assets. Management seemed utterly incapable of renewing investors' confidence. Then in July it sold $31 billion of mortgage securities at a fire-sale price of $6.7 billion. Although Merrill had to recognize losses, investors reacted favorably. Only by drastically reducing the price of the securities was it able to induce Lone Star, a Dallas private-equity firm, to acquire them and start the cycle of risk-taking anew. Thus, the write-off cleared the slate and prepared the way for a recovery.

I understand the fear of contagious panic in financial markets. But at a price, fear gives way to opportunity. At times it will come too late to save a particular institution, most often one that is overleveraged. But the community survives. And far from resuscitating the economy, to the extent that bailouts keep prices from falling, they delay the regeneration that low prices stimulate.

The U.S. has had one truly enduring crisis of confidence: the Great Depression. It was marked by a banking collapse and loss of credit. The problem in the 1930s was not that one big bank failure triggered others, but that each bank was individually susceptible to a run since their deposits were not insured. The hive, if you will, was poorly built. This is not to say that the financial system now cannot be improved. Nor is it to say that government intervention is never warranted. But the metaphor we use to evaluate such missions is misplaced. The economy is more like an ecosystem than a stack of cards. Adaption and resilience are its hallmarks.