How in hell is that a Market Failure when you have Central Planning in Monetary Policy, innumerable banking and finance regulations and an army of bureaucrats to go with it??!! This is a clear failure in govt policy, and govt supporters are failing to take responsibility!
It was market failure in that it was a systemic failure in numerous sections of the financial sector. The only fault government had in this was poor, neglected regulation to begin with, and ham-fisted management of the bank bail-outs.
The markets failed because of a set of securities and derivatives that crazy people invented and everyone bought. Everyone was tossing around mis-labeled investments that turned out to be live grenades and then when the grenades went off they found they were all tied to each other with no way out. Everyone involved should be in prison and THAT is where the government truly failed.
And the proliferation of said securities had nothing to do with the artificially low interest rates dictated by the Central Bank?
My solution is fixing the oversight. End the collusion between the US SEC and Wall St, tighten banking regs, eliminate these insane securities/derivatives, and fix a broken system. Anything else is bound to create the exact same problem (albeit possibly in a new sphere) in a few decades.
The SEC wasn't so much asleep at the wheel as it was openly trading staff with PWC and Goldman Sachs. Congress wasn't so much ignorant and clumsy as they were paid for representatives of Bear Stearns et al, and that's only going to get worse when the corrosive effects of Citizens United really happen.
How will you end collusion when the banksters are entrenched not only in the regulatory bodies but Congress itself. Have you considered that the more centralized power there is the higher the incentive for these groups to try to hijack it?
Consider: you've got a government program that does X. When created, it's funded at 80% of what subject matter experts asked for but that's all congress would give. Next election a new congress is elected that decides that government is doing a terrible job at X (despite it not having started), taxes are too high, and they hate X anyway...and halves the funding. The new program doesn't succeed.
Is this government not being able to do its job or is it because dumb fucks who believe as you do vote in people who hamstring government so that it cannot do its job? Hint: its the latter.
Assuming this analysis is correct, it only shows that government can't work. The electorate and politicians are fickle and what you've described will always happen. If program X requires that much consistency to succeed then it won't work in a democracy, maybe it might in a monarchy or dictatorship.
