I realize my previous statement was not entirely clear about the banks. The banks are transmission mechanisms of debt into the system. They have proved riddled with self-regulation issues. When it came to setting optimal monetary levels in the market, the unregulated banks exploded like mosquitos too full of blood.
Unregulated finance, my ass.
Touching the debt supply, and thereby setting monetary levels, proves to be something that should be violently regulated from the core and the public institutions. Banks cannot have equity structures that reward their executives or you read non-sense from white dough boy below on the screen.
It follows that leverage is something that must be TIGHTLY regulated in the shadow banking system. Investment banks should see the amount of risk they can individually dump into the system regulated. They were polluters. With securitization markets shut down, they are not going anywhere either. They cannot dump their waste assets on investors any longer. Thank God for that.