"Something went wrong"
by way of Bloomberg and Mark Thoma's Economist's View Blog:
Federal Reserve Chairman Ben S. Bernanke said the collapse of U.S. lending will probably cause “long-lasting” damage to home prices, household wealth and borrowers’ credit scores.
“One would be forgiven for concluding that the assumed benefits of financial innovation are not all they were cracked up to be,” the Fed chairman said... “The damage from this turn in the credit cycle -- in terms of lost wealth, lost homes, and blemished credit histories -- is likely to be long-lasting.” ...
“Something went wrong,” Bernanke said. “We have come almost full circle with credit availability increasingly restricted for low- and moderate-income borrowers.” ...
Bernanke ought to have been content, but wasn't, and continued
"Regulation should not prevent innovation, rather it should ensure that innovations are sufficiently transparent and understandable to allow consumer choice to drive good market outcomes," ... "We should be wary of complexity whose principal effect is to make the product or service more difficult to understand by its intended audience."
Innovation in financial instruments is proven to be inefficient and dangerous. The products and services of the real economy is where innovation ought to be concentrated. Bernanke is so far behind the curve he is still heading north while the economy is heading south.