From the Falkenblog

This is an excellent summarisation of why financial regulation doesn't work as people hope it would:

Speaking of banking, it was funny when in Bernanke's testimony today, they talked about some ideas for regulating sub-prime, and Bernanke said, well, the problem loans in question can't be securitized anymore. Meaning, that mistake, subprime residential, is, like all excesses, a one-timer. Regulators are always focusing on the mistakes of the immediate past, and five years after the fact they have new legislation focused like a laser beam on, say lending to telecoms with inflated income statements. The next bust is never like the last, except in the broad sense that people expected certain collateral to stay stable, if not keep going up. But it was hotels and commercial real estate in 1990, telecom in 2001, and now residential mortgages. I guarantee the next bust will not be in telecom or residential mortgages because the experience of failure is just too fresh in the participant's minds.

If we know enough about a practice that we think we should regulate against it, it being dangerous, then no one's going to be doing it anyway as the reason we found out that it was dangerous is because people lost money doing it.

Which is why all the calls for greater regulation at the moment are valueless: just bleating that "something" must be done. That something being a great deal of effort to no benefit.

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