[trominos]

This is pretty close to not having any regulation at all.

The problem is that investors don't get "consistently burned" by companies with bad practices, they get inconsistently burned. And people are so bad at appropriately estimating and valuing really rare events that, if the burns are infrequent enough, investors will choose options that don't maximize their expected outcome. Leading, in some cases, to disaster.

Note that this wouldn't happen in an ideal market where 1) everybody's perfectly rational and 2) everybody pursues strategies of maximizing their long-term expected finances. But it happens in real life. That's one of the major problems with the financial system as it stands, and (ostensibly) a powerful argument that regulation of some sort is a good idea.

[stretchwithme]

There problem with government regulation is that people get inconsistently burned. And that seems a consistent problem with government regulation.

There were plenty of people pointing out the bad practices of Enron, Madoff, AIG, but nobody was listening.

Politically driven regulation is incented to not rock the boat. They have no brand to protect.

And when the shit hits the fan, they'll just keep pushing the ultimate consequences into the future, because they control the Fed and the Treasury and everything.

There is no accountability. No one ever gets fired.

No one's perfectly rational. But we are not perfectly irrational either.