Well, we have some decent regulators. The issue was one of regulator-shopping. You've got AIG, the world's largest insurer, under the Office of Thrift Supervision exactly because AIG bent the rules to qualify for OTS oversight.
Reading Felix Salmon et al, the solution is for one large regulator with the sophistication to match the large and diverse financial institutions, to eliminate the turf wars and jurisdiction shopping of the past. Combine the SEC and the CFTC (which, guess what, knows how to regulate derivatives), and give the new SEC sufficient enforcement powers.
Furthermore, the regulation only makes VC shops (as well as PE and hedges, which all have the same GP/LP structure) file the exact same stuff that Vanguard, Fidelity, and other mutual fund companies already file. I love how the VCs never once mention this. Probably because it sounds so reasonable.
Which will always be a problem, so you've just told us one of the mechanisms for regulatory failure.
> You've got AIG
Bzzt - AIG was not just under OTS, they were also under insurance regulation and a couple of others. And they were regulated in several countries, often in multiple ways, not to mention states. And these agencies cooperated.
AIG was pretty much a best case for regulatory success.
And now it's a conduit for payoffs to Goldman Sachs. (Yes, I know the collateral story. I'm hoping that someone will post the details so I can show how it doesn't mean what they think it does. GS should have been left holding the collateral.)
Reading Felix Salmon et al, the solution is for one large regulator with the sophistication to match the large and diverse financial institutions, to eliminate the turf wars and jurisdiction shopping of the past. Combine the SEC and the CFTC (which, guess what, knows how to regulate derivatives), and give the new SEC sufficient enforcement powers.
Furthermore, the regulation only makes VC shops (as well as PE and hedges, which all have the same GP/LP structure) file the exact same stuff that Vanguard, Fidelity, and other mutual fund companies already file. I love how the VCs never once mention this. Probably because it sounds so reasonable.