According to Paul Volcker, the "financial system is broken."  Furthermore, with regard to limits on the abilities of regulators, he says: “Relying on judgment all the time makes for a very heavy burden whether you are regulating an individual institution or whether you are regulating the whole market.” 

He's right on that.  If we like markets (and I think we do), then we need to recognize we can't always regulate (or, for that matter, buy) our way out of some of these messes.  I am now firmly of the mind that we should have a five-year moratorium (minimum) on financial regulation.  This goes both ways — nothing can be repealed and nothing can be added. 

I am of a mixed mind on the new financial regulations, but since they already passed, I say leave them alone and let the market adjust. Similarly, with regard to Sarbanes-Oxley, regardless of whether one likes it, it's part of the current market, and companies have adjusted to it.  So – leave it all alone. Regulators need to work with what they have, and businesses have to work with what is there.

I happen to think that we have a fairly solid system in place, but there are clearly some inherent potential pitfalls built into that system. I just think those pitfalls are primarily because the financial system is a (relatively) open market.  Markets involves people, which means that at every level (as a consumer, a seller, or a regulator) we are still, as Mr. Volcker puts it, "[r]elying on judgment all the time."  And no matter what we do, that's part of the problem.  

Unless, of course, we're living in The Matrix.  Then, who cares?

–Joshua Fershee