“Some did and some didn’t”? In other words, by your own admissions, there were banks (and other institutions) not following regulations. In other words, the financial system was improperly regulated. That sounds like a HUGE problem to me.
Yes, regulation isn’t just about imposing new legal restrictions; it’s also about effectively enforcing the restrictions that are already in place. But clearly, whether it was that we didn’t have enough legal restrictions or that the existing restrictions weren’t properly enforced, or both, the regulation was inadequate.
More freedom to break laws, more freedom to take unwise risks with other people’s money, more freedom to make up financial instruments that few people understand so it will be harder to evaluate risks…
Anybody who wants unlimited “freedom to succeed and freedom to fail” with their own money can find it at the blackjack tables in Vegas. Nobody’s entitled to put other people at unacceptable levels of risk just to increase their own freedom. The national financial system serves important economic functions for the country (and the world) as a whole, and individuals shouldn’t be allowed to over-rev it to the danger point just so they can increase their freedom to gamble.
IdahoMauleMan, I interpreted erislover as meaning that basic economic theories about market regulation have not changed as a result of this meltdown. Some pro-deregulation economists may have misread the financial situation and failed to see the bust coming (and if you don’t know who they are, economist Dean Baker will be happy to tell you), but it wasn’t as though they were disagreeing about fundamental laws of economics.
That said, there do seem to be some economic theories (e.g., “rational choice theory”) that tend to advocate deregulation more than others (e.g, “behavioral economics”), and I think the current meltdown might prod some economists in the former camp to modify their views somewhat. But as erislover says, we’re not likely to see any road-to-Damascus moments here among serious economists, because none of what is happening violates the fundamentals of mainstream economic theory. All economists always agreed that badly regulated markets could suffer serious boom and bust cycles; they just disagreed about to what extent and in what ways US financial markets might be badly regulated.