Why? Two reasons.
First, every time we create legislation, laws and other governing to something, the problem either gets worse or creates a whole new set of issues. The problem becomes a snowball -- you can look at the examples there to see some of this.
Second, the saying that goes something like "locks keep out the curious, not thieves" is very true. Those who want to scam will always find a way and there is nothing to stop them, only try and catch them and prosecute them.
I could go on with a very lengthy post about this and sound very studious, but I think those two points in their simpler form make a lot of sense. What do you think?
1) Legislation can change things significantly and effectively. It can also merely shovel things around. Both are possible and doggedly asserting that only one effect ever happens is just ridiculous.
2) Locks keep out thieves very well a lot of the time. They may not keep out every thief, but it keeps out most of them, most of the time.
Really?
Show me a piece of legislation that hasn't shoveled things around? And show legislation that actually changed things significantly and effectively without already having legislation in place that it enhanced? Drugs? Education? Prostitution? None of those for sure. I know, gun laws? Nope, not there either.
And in regards to your response to my use of the saying "locks keep out the curious, but not thieves", you have to understand the underlying principle to completely get it. No "locks" (and we aren't talking just physical) keep out thieves, only the curious. Bernie Madoff anyone? The underlying principle to that saying ties with the really corny saying "where there is a will, there is a way". When someone really wants to do something, locks are not a deterrent, they will find a way.
Cheers to you for debating with me, really enjoy it.
When there are less regulations people take interest and make sure things work correctly. For instance, when opening a bank account most people don't do much research because they're all FDIC insured -- who cares what the bank does with your money. Without that insurance you would care.
If we removed financial regulations, the markets would radically reform and lots of small individual investors would get out -- either into mutual funds or some other managed investment.
I also don't think most consumers of banking products are able to determine the solvency of a bank. If the FDIC wasn't there, the account holders would be at greater risk even if they did care.
I don't believe markets reform themselves. The market does what is in the individual best interest, not the interest of the market.
Perhaps an individual isn't able to tell, but consumer reports would be able to.
Each individual working in their best interest reforms the market. If they believe that it is unfair, e.g. insider trading, then they will refuse to take part. Thus a market would form to cater to these individuals.