Follow the money is a simple rule, and it’s one the commission should have heeded. Failing to do so led the commissioners to produce a wandering, ponderous description of things in the capital markets they don’t like.
but the view that most closely resembles my own is expressed by William Black:
In 2008, after it was useless, the Fed finally, under Congressional pressure, used its Home Ownership and Equity Protection Act authority to ban liar’s loans. If it had used its regulatory authority in a manner similar to how we used our authority in 1991 there would have been no financial crisis in the U.S. and no Great Recession.
That would not have required preternatural prescience. It would only have required that regulators do their jobs with the authority they’d already been given.
Why, then, didn’t regulators do their jobs? In my view the fault resides in that regulators’ incentives are not properly aligned and the scale of the U. S. system. Bureaucracies scale worse than linearly and the threshold size at which bureaucracies take on lives of their own, unmoored from their putative responsibilities is too easily met at the federal level.