I am convinced that if the Fed or the government, despite all evidence
to the contrary, actually did have some ability to predict or even make
good guesses at what markets are likely to do, then it would have little
need of regulation. If the Fed chairman or Treasury secretary would have
spoken up a few years ago and stated that it is likely the housing market
is overvalued, or that a number of investment banks and insurers (and
Fannie and Freddie) are so undercapitalized that they are unlikely to
survive a steep market downturn....then investors and speculators would
probably pulled their money out sooner, resulting in a less severe downturn
since things would not have had as much time to inflate to such instability.
Alas, several years ago Bernanke and Paulson were saying that everything
was okay, that we weren't in a bubble, all problems were contained, etc.
Tough to be saved by non-omniscient gods. Have faith in God almighty instead!
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