Arnold Kling On The Financial Crisis

See The Bernank on What Caused the Bubble aat EconLog. Excerpt:

"I would argue--and nothing in the paper contradicts this--that the Basel capital accords created a worldwide monoculture in banking (they intentionally created a worldwide monoculture in bank regulation). The reduced capital requirements for AAA_rated securities created a regulatory hole through which the European and American banks drove the proverbial truck. It was not that the GSG countries dumped cheap money into the U.S. housing market. The problem was a financial sector that grew like a tumor in the U.S. and Europe, thanks to regulatory capital arbitrage that was, if anything, encouraged by the world's top banking regulators.

Going forward, the plan is to strengthen the Basel Accords so that this does not happen again. What could go wrong?"