Neither markets nor government are perfectible; the best we're going to get is ones that work pretty well most of the time. In 2005, everyone--homebuyers, bankers, regulators, legislators--was making essentially the same mistake. And while it's more comfortable to believe that this was malevolent, the more prosaic truth is probably that sometimes large groups of people get stuff badly wrong. We can't plan our way to a risk free system. The best we can do is a system that fails a little bit better.Inded. Since we can't eliminate risk, let's eliminate regulations!
Bonus in the comments: Moral hazard does not apply to bankers.