Innovation in the Financial Sector

"Our framework for financial regulation is riddled with gaps, weaknesses and jurisdictional overlaps, and suffers from an outdated conception of financial risk. In recent years, the pace of innovation in the financial sector has outstripped the pace of regulatory modernization, leaving entire markets and market participants largely unregulated." - Timothy Geithner, Secretary of the Treasury


If the above quote doesn't scare people into questioning what was going on in an industry most of us know little about then crawl back under your rock.  The idea that there has been ANY innovation in the financial sector should have been a warning sign to some regulator or body somewhere.  If there was "innovation" in the tax sector then the IRS damn well better be getting on it, tracking down and understanding what's going on in order to fix whatever hole broke open.  But here somehow the "financial regulation" is admittedly broken and has been so for years yet no action was taken until it all crumbled simultaneously.  At first I didn't think it was really the governments fault.  I chalked most of the current situation up to greed, both of homeowners overstretching, consumers overpurchasing, lenders being overly risky, and corporations overly compensating.  Now I'm starting to think that maybe the fault should rest squarely on the head of a government who is the only entity sizable enough to detect and monitor this situation yet let the people it should be designed to protect be let down.