Paulson "systematic risk"

How can he make such a statement? “What we are working on now is an approach to deal with the systemic risk and the stresses in our capital markets,” Paulson said. I didn’t realize that buying up worthless, illiquid, assets that came about because of banks taking on too much risk- fit into the category of “dealing with systematic risk”. how is this representative of systematic risk in any possibile way?

It cant be diversified away anymore?

Well, in case you haven’t noticed the world of finance has been flipped upside down in the last week or so. The world has lost trust in equities, banking, money market funds, government, etc. I’d call that systemic