With what laughingly passed as “oversight” by SEC, Treasury and Fed; most of the world has belatedly factored in a risk premium. That is why the money markets have frozen-up – they do not trust the US will pay them back. Realise this: the US$ and markets are fighting for their lives right now.

dhome, sydney, australia

No regulation will mean nothing is too big to fail and no US taxpayer funded bail-outs. No regulation will warn everyone of the inherent risks of investing in US markets. I’m not too sure that foreign investors, who currently lend the US about 2 billion a day, would lend under those circumstances.

dhome, sydney, australia

It's a bit like seat belts really. The majority of people proved too stupid to use them, so it had to be made the law - because an idiot thrown from a car at 60mph could kill an innocent bystander.

Likewise, most people are too stupid to borrow sensibly, so ... well you can work out the rest.

Jon Leigh, Southern, France

Good to hear that someone in the mainstream media has it at least on the right track. People think that this is some failure of the free market - but where the hell is the 'free' bit in all this. Fannie, Freddie and the Fed - ALL BACKED BY GOVERNMENT!

Robert, london,

You got this the wrong way around.. The US government has just bailed out the mortgage industry. There is no serious discussion about regulation. In fact, financial sector regulation has been eroded for years. Banks have taken advantage, running up huge bubbles that the taxpayer must now pay for.

Alice Cook, London, UK

Well, those that applaud this article about the negative effects of regulation - do you then approve this massive government bailout that the stock market is so much loving at the moment? If the free market is such an error free miracle why are we wasting taxpayer's money saving it?

Martin, Helsinki, Finland

Most of the causes can be attributed to these financial brokers paying themselves fat salaries & bonuses which do not truly reflect their economic contribution.

ian cheese, london, uk

Too often overlooked in this mess is that the rock starting this avalance was the U.S. Federal Govt and the 1994 National Home Ownership "Strategy". We will now all pay for misguided social engineering and market meddling by our own Government.

Paul R., Columbus, USA

Rich: Wrong. If you look at the paper trail you will find that the banks made the majority of their quick profit by loaning to the poor. They received nice compensation when the loans were then passed on to Fannie Mae, as is the norm in US mortgages. They skirted regulation with faulty loans.

Juan, San Diego, USA

You don't get it Gerard. When the manufacturer, Chrysler, in the early '80s got federal loan guarantees, the CEO paid himself $1 for the year. Do we see the CEOs, and senior managers, in the finance industry offer anything in return? For example a Congressman's pay is $169,300.

Hugo van Randwyck, London, UK

No-one is saying "more regulation", people are saying "let's put regulations in place so this doesn't happen again". Is that mutually exclusive with rolling back previous acts where necessary? Is anyone saying none of the existing regulations should be dissolved?

Bob, Let's say Buenos Aires,

Free market capitalism is just unfettered human greed. If this were capable of solving all of mankind's problems, surely they would have been solved long ago. There must be a role for regulation. The trick is to get the balance right.

Roman, Chicago, USA

In the midst of the blame game let's not forget that the SEC sponsorship of Moody's, Fitch, and S&P and the payment structure of obtaining ratings created strong incentives for junk to be declared AAA treasure. A less regulated ratings system, where ratings agencies are rewarded for performance, could have prevented a lot of bad.

Wills, Provo, USA

I agree with the sentiments expressed in this article. It should be emphasised, however, that regulatory authorities must be truly independent of the entities they supervise. When the dust blows away I am sure that questions will also be asked of external auditors who signed off overvalued assets.

Peter, Pirot, Serbia

What utter rublish. First Enron accounting now the sub-prime paper chase. These wide boys know exactly what they are doing and reward themselves hansomely, then leave the losses and irrecoverable debt to be funded by the taxpayer and their noble representatives. This was anarchy and it must end.

Alberto Jorge, Perth, Australia

Yes, bad regulation is bad. But the issue is this:

First, mortgage sellers sold to high risk folk.

Then, mortgage traders sliced and sold forward and sideways the paper creating a situation where no one was able to assess the risks.

That's bound to destroy wealth for the many. Who gained?

Germaine Botterel, London,

I think there are some very valid points made in the article. I think its also necessary to point out that this financial nemesis has roots in the total hubris of the leading lights of international finance, and this misguided belief that finance is the be all and end all of economic life.

paul, Carlow, Ireland

The Anglo-Saxon version of capitalism has produced 2 bubbles (dot-com and now this) in the last 20 years not genuine wealth. The US and UK have singularly failed to create wealth with this casino version of economics - trade deficits getting progressively worse. Gambling is not investing.

Eddie Reader, birmingham, england

No no no , regulation must take place, wake up we live in a
capitalist greedy mad system. which has ruined any chance of normal credit being available to ordinary people for years to come. The top 1% have ransacked the finacial system due to planned deregulation.
Grow up face facts .

philip hammond, Adelaide, australia

Ian Stuart, USA - Those banks were acting in accordance with 1970's federal demands that banks give loans to those with poor credit. We are now seeing the repercussions.

Rich, Middlesbrough,

Short selling. Borrowing funds to speculate on a downward trend to benefit a few against the majority and to pay back a commission on a depleted capital base.

Nothing new in that, is there Gordon?

Mike L, Chippenham,

Frankly, although this point of view is interesting, the fact is that good regulation would have prevented much of the current pain.

The fact that it would also have resulted in slower growth is not necessarily bad, given the current state of the Earth.

Constant growth of anything is not good

cap, london, uk

I clicked on this article expecting to disagree with it, but I found it extremely interesting, illuminating, and well written. Thank you for one of the best articles I've read in ages.

Edd Bullen, Melbourne, Australia

I have heard of contrarian investing but only Baker could try to argue that there should be LESS regulation in the future and that Fannie and Freddie should be dismantled. Most of the subprime lending was NOT undertaken by them but by the banks.

Ian Stuart, Frederick, USA

I clicked on this article expecting to disagree with it, but I found it extremely interesting, illuminating, and well written. Oh, and entertaining. Thank you for one of the best articles I've read in ages.

Edd Bullen, Melbourne, Australia

Great article. The government should just make sure there is no fraud and let private citizens decide how much risk they want to accept.

Joseph, New York City, USA

The market is evolutionary - cutting down some species but allow new ones to grow with more vigour. This too shall pass.

The question is can we now get rid of the supidity that is mark to market asset revaluations on long term assets.

They make profit/market cycles massively overstated.

Greg, Sydney, Australia

Excellent article. Unfortunately I feel certain we are headed for more regulation with the coming Obama presidency. I wish someone in the press would also discuss the role the Community Reinvestment Act, with its implicit forcing of banks to lend to sub-prime borrowers, has had in this meltdown.

Bob, Alexandria VA, usa