It is very difficult to be particularly brief. But the purpose of regulation is not to outlaw boom and bust, it was to stop TBTF...which it has largely done. B

It is very difficult to be particularly brief. But the purpose of regulation is not to outlaw boom and bust, it was to stop TBTF...which it has largely done. But the issue is that outlawing XYZ did absolutely nothing because there was still an economic rationale for that activity. So a lot of activity moved to PE funds, and other non-bank lenders. The exact issue is that people think in the rear view mirror: we are in a cycle of "boom and bust" with banks...my guy, banks stopped being relevant years and years ago. But the problem now is: liquidity in markets has absolutely disappeared (current liquidity in USTs is as low as the depth of 2008, this is despite the market growing 5x since then), risk has moved to non-banks, etc. All these other side-effects have now been triggered. Also, the financial instruments that "blew up" in 2008 were ones that investors were demanding. It is like blaming the guy who sells you a gun if you shoot someone, "why did you sell me this?". The reason why investors wanted these securities was because the demand for AAA securities in 03-04 was very high but the Fed drove rates down to 1% so large institutions were legally unable to meet liabilities. Obviously, there was other stuff going on but the underlying logic of things like CDO/CMOs is strong (almost every country in the world wishes they had a financial market like this, Denmark is the only other one, ironically the issue with not having securitization markets is that risk gets centralized in banks, people in the US think the 2008 bailout was crazy...countries like Germany, that have heavily centralized financial markets, have had to bail out banks three times since then). Unf, the lessons of 2008 largely haven't been learned (and this is despite the fact that the US had, by far, the best/least interventionist response).