What Is The Sound Of One Invisible Hand Slapping Itself Silly?

From Bear Stearns: "Too interlinked to fail" by Andrew Leonard:

On the one hand, this makes Sen. Jim Bunning's question to Federal Reserve Bank president Timothy Geithner all the more relevant.

How did we get to the point that the failure of one firm can bring us to the edge of collapse, our whole financial markets? We know the Fed and others did not do their job in regulating lending practices and supervising the risks banks were taking on, but how do you let the entire financial system become so fragile that it could not tolerate one failure?

…both the Clinton and Bush administrations and Congress accepted Wall Street's plea to let them proceed with a light regulatory hand, and accepted the argument that new derivative instruments, such as credit default swaps, would increase the stability of the overall financial system by spreading risk more broadly. We all now know how ridiculous that argument turned out to be. The invisible hand of Wall Street ended up slapping itself silly. Now we're going to need a little more socialism to clean up the mess.