Someone asked if the market also would fail Geithner's objectives for new regulations. Surely not, if we define 'to serve, protect and reward' sufficiently. But the key point is regulation is rarely effective at what it supposedly does, just think about NYSE floor traders who screwed investors for years via their monopoly control of stock market trading for decades, and the lack of competition on commission until the 1970's, all while there were these 1930's era regulations that supposedly protect the investor (the SEC acts of 1934 and 1941). Public regulation enhances the ability of insiders to fleece the public because that's what happens to regulation, insiders use the regulations as barriers to entry, and write them for that purpose. Rahm Emmanuel types, the kind who make $13MM in 3 years while out of government, make regulation work for them. Those who merely try to innovate and compete, are an annoyance for the elites who hypocritically always talk about helping the poor stiff while making sure they are lining up patronage jobs for their cronies. Fannie Mae and Freddie Mac made a fortune for political hacks for decades, always for the pretext of helping the poor and historically under served.
The Market is filled with self interested people who have to convince people their service is actually better than its alternatives and is worth the cost. Regulation is filled with self interested people who simply tell people what to do. The most uncompetitive market is nothing compared to a legal mandate.
The chief difference between the market and regulation is that under the former a man pursues his own advantage openly, frankly and honestly, whereas under the latter he does so hypocritically and under false pretenses.
All this hullabaloo about mortgages ignores the fact that this mistake will not made again in our lifetimes. It will be a different mistake. Thus, we are now hiring thousands, and writing pages of regulations, specifically targeting spilled milk. This is just a waste of time.