The financial crisis serves as a testimony to the failure of the market to adequately correct itself. Over the past few decades the movement to deregulate and set free big business has proven to have flawed models and elusive benefits beyond the elite owners, managers and stakeholders. The promise of more choice and lower prices has not been fulfilled. And what's clear is that it is still not an effective policy to have foxes watch over hen houses.

The inability to see how what benefits shreholders may adversely affect customers and the market is illustrated by comments from leading executives like John S. Reed who appologized for co-engineering and presiding over the creation of Citigroup in 1988. In a rare interview Mr. Reed exclaimed when asked about why he previously supported positions and policies he now derides, “When you’re running a company, you do what you think is right for the stockholders. Right now I’m looking at this as a citizen.” Mr Reed also said it was wrong for lawmakers to repeal the Glass- Steagall Act in 1999 which prohibited banks that provided customer services (accounts and loans) from being part of banks that dealt with securities (stocks, bonds, derivatives, etc.).

Another major issue at cause is the complicity between government and business. The Fed failed to do its job of oversight and regulating the industry. And to further cloud the already bleak landscape, the guy who presided over the mistakes was just reappointed and named "Man-Of-The-Year" by Time magazine.

Click here to listen to Richard L. Schmalensee of the Massachusetts Institute of Technology interview John S. Reed, the former Chairman of the New York Stock Exchange and the former CEO and Chairman of Citigroup, about causes of the financial crisis, what could have been done, and what he believes are key components of regulatory reform.

There are plenty of credible calls for reform of the financial services industry from key luminaries including former Fed Chairman Paul Volker. Sony Kapoor poses clear and concise recommendations for reform of the financial industry. But little is being done to date.

Listen to the John S. Reed interview at its original location.