Listen to a politician after a financial bubble and you see a sharp finger pointing at someone, usually anyone appointed by a member of the opposite political party or the denizens working on Wall Street.
Then you get a solution. More regulation, to see to it that the regulators catch the next bubble before it starts. Nip it in the bud, so to speak.
It cannot be done, except in fantasy political circles. Bubbles are hard to recognize in advance. They are only easy to recognize in retrospect, as the residential housing bubble. Then, Congress went out of its way to do what amounted to nothing as a future preventative.
There was actually legislation introduced years ago to reduce Fannae Mae and Freddie Mac leverage. That would have definitely reduced the fuel that fed the fire under the recent financial bubble in housing. And it was turned down by politicos who thought the country did not want to squelch the boom that supposedly was giving the lower classes the opportunity to own homes. As it turned out, homes they could hardly afford.
So all talk about regulating bubbles is mere political. It has followed each bubble we have ever had.
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