What role did financial regulation play in this crisis?

I start by stating what I presume to be obvious: in today's democratic environment where the people expect governments to protect their savings, zero financial regulation is not an option. As FT columnist Martin Wolf shrewdly observed: ‘The public, governments feel, must be protected from banks and banks must be protected from themselves. Finance is deemed far too important to be left to the market’.

But financial regulation is not yet a science, even though much of it has been explained in economics that claims to be a science. When I first tackled the failure of deposit-taking cooperatives in Malaysia in the mid-1980s, the only book I could find of practical use in handling bank runs remained Walter Bagehot's Lombard Street. Even today, there are few books on financial regulation, and it is scarcely taught in universities. Largely, it has been learnt on the job.