I will begin my lecture with a brief discussion of our project to build a comprehensive agent-based economic model to study interactions between the financial sector and the real economy.  One of our first results is that when we enable risk management of banks as specified under Basel II or III, there are endogenous oscillations of prices and leverage, with “great moderations” followed by crashes.  To investigate this we simplify the model and show that the oscillations are driven by chaotic dynamics.  We use the simplified model to search for better risk management policies, and find that within a family of “Basel-like” policies, as one moves from procyclical to countercyclical risk management, the optimum regime is in the middle, i.e. it is close to constant leverage.