Toro
Diamond Member
The markets were far from unregulated.
That is very true, and the regulatory architecture and government institutions are partially to blame for this mess. However, the financial system had become increasingly deregulated over the past three decades, and this deregulation was a big reason for the financial collapse.
The implosion of the financial system would not have occurred had financial institutions been well capitalized. The government, however, allowed banks to take on more and more debt under the belief that banks could better regulate themselves than the government since they knew the risks better. Countries even signed international accords allowing for this increased deregulation, culminating with Basel II. This has turned out to be disastrous, and surely will be scrapped once we are out of this mess.