Today is the 15th anniversary of the beginning of the 2008 American Financial Crisis (AFC).
The seller of a product/service knows more about it than the buyer. This is called information asymmetry. Information asymmetry leads to the collapse of the market. So to protect buyers from information symmetry (and the market from collapse) government makes some rules and enforces them. This is called regulation. In the case of complex financial products/services, even the sellers (financial companies) do not know anything about them. This is not just information asymmetry - this is information black-hole. In the case of information black-hole, government regulation is absolutely essential.
From around 1980 onwards, America's financial industry started designing more and more complex financial products/services like CDS (Credit Default Swap) and CDO (Collateralised Debt Obligation). This required stricter government regulation. But exactly the opposite happened - in a wave of excessive de-regulation, government regulation went on decreasing. Example: The 1933 Glass-Steagall Act had built a wall between commercial banking and investment banking - in 1999, America withdrew this law. The result of all this excessive de-regulation was the 2008 American Financial Crisis.
