For a while now I have been speculating with my friends that we don't need MORE regulation over the banking industry, we need the EXISTING regulation to work well.  It seems that Warren Buffet, arguably one of the best minds in finance, might agree.  Here's a portion of the transcript of an interview he gave in late August (the emphasis is from the original transcript):

QUICK: If you imagine where things will go with Fannie and Freddie, and you
think about the regulators, where were the regulators for what was happening,
and can something like this be prevented from happening again?

Mr. BUFFETT: Well, it's really an incredible case study in regulation
because something called OFHEO was set up in 1992 by Congress, and the sole
job of OFHEO was to watch over Fannie and Freddie, someone to watch over them.
And they were there to evaluate the soundness and the accounting and all of
that. Two companies were all they had to regulate. OFHEO has over 200
employees now. They have a budget now that's $65 million a year, and all they
have to do is look at two companies. I mean, you know, I look at more than
two companies.

QUICK: Mm-hmm.

Mr. BUFFETT: And they sat there, made reports to the Congress, you can get
them on the Internet, every year. And, in fact, they reported to Sarbanes and
Oxley every year. And they went--wrote 100 page reports, and they said,
`We've looked at these people and their standards are fine and their directors
are fine and everything was fine.' And then all of a sudden you had two of the
greatest accounting misstatements in history. You had all kinds of management
malfeasance, and it all came out. And, of course, the classic thing was that
after it all came out, OFHEO wrote a 350--340 page report examining what went
wrong, and they blamed the management, they blamed the directors, they blamed
the audit committee. They didn't have a word in there about themselves, and
they're the ones that 200 people were going to work every day with just two
companies to think about. It just shows the problems of regulation.

QUICK: That sounds like an argument against regulation, though. Is that what
you're saying?

Mr. BUFFETT: It's an argument explaining--it's an argument that managing
complex financial institutions where the management wants to deceive you can
be very, very difficult. Or even when the management doesn't know what's
going on, and--just take Bear Stearns. Bear Stearns had--I read it,
anyway--750,000 derivative contracts. Now, you know, I could clone Albert
Einstein, you know, and--many, many times and have him work 12-hour days for
me and he would not be able to keep track of what's going on in an institution
like that. It's--the ones that are too big to fail may be too big to manage,
in some cases. And they're particularly difficult to manage if they're
promising Wall Street and their investors that they're going to do things that
can't be done.

In Friday's debate, Obama said he knew two years ago that the subprime mortgage bubble could burst and wreak havoc on the economy.  It's too bad McCain beat him there.  McCain, unlike Obama, took action, though it was to no avail.

Chuck Hagel of Nebraska sponsored Senate bill S190 (knowns as Federal Housing Enterprise Regulatory Reform Act of 2005), and McCain signed on as a co-sponsor.  While the full test of his speech on the senate floor on May 26, 2005, can be read here, I'll excerpt the good bits here:

"For years I have been concerned about the regulatory structure that governs Fannie Mae and Freddie Mac...If Congress does not act, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system, and the economy as a whole."

So what happened to this bill?  It sat on the shelf, with no action being taken, until it expired in January 2007.  Hagel, McCain, John Sununu and Elizabeth Dole were the only people in the Senate to support the bill, and it never even got brought out for a vote. 

Wasn't Obama elected in 2004?  He said Friday that he knew about this risky economic policy two years ago...yet the bill was sponsored in 2005 and McCain gave his speech on it in 2005.  Maybe my math is off a bit here, but shouldn't Obama have been aware of this risk three years ago?  Or was he already out on the campaign trail that day?  Only a democrat could miss the boat by over a year and brag about it during a national debate.  A day late and 700 billion dollars short - that's change you can believe in!