The oil spill in the area off New Orleans is the result of a lack of regulation and Federal inspection for safety. Most other developed nations require new safety equipment to control blowouts. The oil crisis in the Gulf right now is the result of a blow out of oil and gas produced by an explosion due to poor operations control by both BP, Haliburton who was responsible for the cement containment structure at the well head (http://www.nzherald.co.nz/world/news/article.cfm?c_id=2&objectid=10642264) and the owner of the oil rig (http://business.timesonline.co.uk/tol/business/industry_sectors/natural_resources/article7114087.ec
e). BP is no stranger to maintenance problems (http://news.mongabay.com/2010/0501-gulf_oil_kozloff.html). Like BP the financial crisis was the result of a lack of regulation (http://www.dailykos.com/story/2010/4/26/860689/-Close-the-Casino:-Tax-Bank-Profits-at-80).
An article by Richard Beales’ in the Financial Times in 2007 on capital markets informed us that the boom was continuing for derivatives and other hedging devices. This was supported by Paul Davies article in the Financial Times on the at the same time characterizing this demand as hindering investor’s ability to discriminate, suggesting that it could lead to a bubble. These two articles described a disquieting trend in investing and the nature of risk. While movement of investors into new devices designed supposedly to reduce risk by producing diversity in its spread (like CLOs), ultimately the average banking customer, and taxpayer ended up shouldering the cost.
In 1999 economist Kevin Dowd expressed concern in a Cato Institute Briefing Paper that the action of the Federal Reserve to save investors in the Long-Term Capital Management debacle was "misguided and unnecessary." While I disagree with his assertion that it was not necessary and that LTCM would have survived, I agree that it was misguided. The Feds action saved LTCM’s shareholders and managers money, but it did so on the backs of other investors and especially the taxpayer. The freedom of the financial industry to introduce new products without regulation is akin to the ability of BP to introduce new drilling technology into sensitive environments. In the end the taxpayer pays. Congress needs to introduce controls on the financial industry and regulate industries like oil and gas.