You say a lot of things... let me take them a few at a time: On arbitrage - I don't consider this financial crisis to have much to do with arbitrage. I am not

You say a lot of things... let me take them a few at a time: On arbitrage - I don't consider this financial crisis to have much to do with arbitrage. I am not sure you understand what arbitrage is; it isn't ANY money-making activity. It's when a middleman exploits transient differences in prices in markets. In any case, I never said arbitrage was evil. However, if the arbiter makes his money by exploiting an externality, then someone is losing. This is simply a notable side-effect. On incentives - I don't buy the line that regulation caused that many warped incentives. Maybe some, but not all. And this would have happened WITHOUT the regs that might have caused some of the incentive anyway. None of the tax policies shifted behavior that significantly. Being able to deduct mortgage interest does differentially favor homeowners, but it doesn't affect the risks involved in becoming a homeowner. At worst it artificially inflates home prices. On Glass-Steagall - I don't know it well, but one very useful effect of it was to compartmentalize risk. As anyone on HN should know; isolating risks in independent buckets drastically reduces the chance of major bad things happening. It's the sheer scale of the crisis that makes it bad; most of this stuff was ultimately pushed by a small handful of banks at the top. It also separated different types of investing which prevented oligopoly situations and group-think from having as big of an effect on the market. It put different companies on opposites sides of investments rather than the same side and probably had the effect of improving real-world due diligence. But I am just WAG'ing here on this one. On bailout - I don't think taxpayers should be subsidizing bond or equity holders in any of these financial companies. Not sure where you got that idea, not from me. On regulation - it's not ironic at all. You are presenting logical fallacy. Just because reg A is stupid doesn't mean regs B-Z are. They are unrelated. I am all for regs that help prevent massive market failures or allow massive externalities to persist over time. In the end, the citizens pay for it in taxes and instability. It is true that more regs would probably dampen some of the GDP upside, but IMHO that's a fine tradeoff compared to the economic havoc of massive recessions.