[nickff]

I don't think regulations can get rid of systemic risk, but maybe that's because of how I see systemic risk issues. Most of those huge market corrections seem to be due to massive mistakes made simultaneously by a lot of people. The 2006 crisis is a great example, where investors thought real estate markets in different states were independent of each other, which turned out to be incorrect.

[maxmax]

The real estate bubble and the financial crisis in 2008 that followed was due to oversight failure, pure and simple. Rather than address that failure, the government bailed out everyone.

It wasn't magic.

[nickff]

The regulators were relying on the same assumption (of uncorrelated real estate markets state-by-state) by the credit ratings agencies.

The investors, ratings agencies, and regulators all believed in the same incorrect assumption. If that assumption had been correct, the crisis would never have happened.