It is not just the non-traditional banking sector or shadow banking system (hedge funds) that needs regulating. It is also the credit agencies such as Standard and Poor and Moody and Fitch, which are paid by the companies whose securities they are evaluating in lieu of the checks and balances on financial risk.

What we have had so far is spending increases, tax cuts, bank recapitalisation, purchases of risky assets and money-supply expansions:

If few modern governments are now willing to let financial market's work their way out of a panic/crisis by themselves, then there is little by way of regulation to ensure the stability of the financial system as a whole. Where is the equivalent of antitrust legislation to reduce the sort of market power and political influence the big banks now have?

What we have is a rescuing of the financial system without reforming it--what Paul Krugman calls the government’s provision of a financial backstop — an assurance that it will rescue major financial players whenever things go wrong.