Q: What is the result of a completely free market?

A: Piracy

With no regulation and/or no enforcement of regulation, the pirates, those willing to lie, cheat and most especially steal, fleece everyone else with no consequences. And when it's clear there are no consequences, even those with some conscience will join in.

That's what got us into this financial crisis, IMHO. Start with the mortgage brokers who pressured the appraisers into inflated appraisals. Add in their lies to at least some of the borrowers, who didn't bother to read the fine print (okay, that's the stupidity of the borrowers). Then add in the fact that all those mortgages were packaged and sold and resold, so that the originators, as well as lots of middle men made money with no risk. Then add in the lack of regulation, lack of transparency, and lack of oversight on Wall Street.

The pirates looted the little guys at the individual level. Now they are so powerful that they are 'too big to fail' and they are looting the Treasury, i.e. We, the People, at the national, and in fact, international, level.

No sooner did I write this than I read at The Big Picture:

former SEC director, and he spits out the blunt truth: The current excess leverage now unwinding was the result of a purposeful SEC exemption given to five firms.

You read that right -- the events of the past year are not a mere accident, but are the results of a conscious and willful SEC decision to allow these firms to legally violate existing net capital rules that, in the past 30 years, had limited broker dealers debt-to-net capital ratio to 12-to-1.

Instead, the 2004 exemption -- given only to 5 firms -- allowed them to lever up 30 and even 40 to 1.

Who were the five that received this special exemption? You won't be surprised to learn that they were Goldman, Merrill, Lehman, Bear Stearns, and Morgan Stanley.

As Mr. Pickard points out that "The proof is in the pudding — three of the five broker-dealers have blown up."

So while the SEC runs around reinstating short selling rules, and clueless pension fund managers mindlessly point to the wrong issue, we learn that it was the SEC who was in large part responsible for the reckless leverage that led to the current crisis.