The financial and banking sector are regulated up the ying yang. Problem number one.
Problem number two is the regulators don’t do their job anyway, or at best selectively regulate (eg., why isn’t Corzine behind bars, while Madoff is rotting in prison?).
Problem number three is the Fed. If interest rates were at market levels there would be no need to overdo it on the derivatives or other interbank trading.
Krugman has rocks in his head.
Ping