In the case of the CRA's, the regulation that was there created such a high barrier to entry so as to prevent new entrants in the market, and the regulation also required them to be used. It's not that the standards weren't heavy enough at all, it's that the standards created market distortion through their presence, turning the conventional role of the CRA on it's head, and removing competative pressure which in turn should hold up standards. If the CRA's had been doing their job correctly, the latter part of what you describe would never have occured, because people wouldn't have bought the products had they been given accurate ratings.
Short term profit is not an inevitable consequence of the free market, companies want to survive and prosper, driving themselves into bankruptcy doesn't serve the people who work for the company or the shareholders.
That the fate of the largest economy on earth has an effect on the rest of the world? That the economy moves in cycles?
What do you think the government can do to regulate out recession? Seriously?
Securities aren't a new thing, allowing the addition of residential mortgages is, relatively speaking, but again, the CRA's should have been accurately rating the risks.
What examples of self-regulation do you offer? The economy of Hong Kong is generally considered the most lassez-faire economy in the developed world, but they don't tend to experience this kind of problem.
You have, so far, only really offered examples of regulated economies failing, and tried to blame the market. The only thing all the economies have had in common is government interference.
Or it could have meant we now had the capacity to borrow sensibly to stimulate the economy, rather than having to borrow recklessly.
