> But seriously, human beings, lacking omniscience, require strategies to work around their blind spots and keep moving forward.

That' a very benign interpretation of what happened, and one that is naive of the nature of financial regulation. Specifically, you can't just rename "insurance" to "derivatives contract that pays out like insurance but with unregulated capital requirements (and please ignore the word 'insurance' - it has consequences)" and expect to get away with it.

Regulations are written to apply to everything that behaves like the regulated product. The people writing CDS knew exactly what they were doing. They just assumed they were so smart they would not be left holding the bag. Which is what everyone participating in a fraudulent scheme thinks.