I must admit, before reading an article from Mish (a well respected, highly visible economic blogger) I was under the impression root cause was deregulation of the industry, allowing the industry to go amuck in a binge fit of greed.
That IS a true statement, but only because you can't partially de-regulate. And all governments need to provide LAW ENFORCEMENT which has been absent. What was required is to fully deregulate the financial system (recap from Mish). It is the cross of government into private that allows politics to trump market forces.
To sum, to fix the system re-architect financial eliminate government intervention.
1) Eliminate the FED
2) Get rid of any money lending, outside of government debt spending for the budget (example, rid of FHA)
3) End government (SEC) sponsorship of Moody's, Fitch, and the S&P
Basically end any formal mechanism for government to artificially change economic metrics for capitalism. I am STILL advocating the government monitoring/enforcing laws and basic regulations (such as accounting).
What we are seeing now is the exact opposite, the USA becoming socialist/communist with respect to financial forces. The next few years will be worth it, if at the end, we create the first true capitalist financial system for the next 200 years. And in the process, improve Government focus on enforcing laws.