Greenspan attributes the failure to properly price the mortgage based securities as causing most of the trouble here. Basically, the risk models were wrong, so capital requirements were too low. Greenspan believes that whatever regulatory changes are made may ultimately seem minimal when compared to the changes in the marketplace landscape after having sufferred through the credit crisis.
While I agreed with much of Greenspan's observations, he lost me on this last point. History has a way of showing that greed, fraud and excess of various types persist despite calamity. Alexander Hamilton wrote in 1792 after the "first" stock market crash which was trigged when William Duer, the Assistant Secretary of the Treasury under Hamilton, used inside information to speculate on bank stocks:
Tis time, there must be a line of separation between honest Men & knaves, between respectable Stockholders and dealers in the funds, and mere unprincipled Gamblers.
After panic insued due to the actions of speculators, Hamilton intervened to make sure that the panic did not bring down sound banks. That was 1792.
We are still working toward Hamilton's line of separation in 2008. While I have the utmost respect for Greenspan, we seem not to learn our lesson. The risky models to which Greenspan referred have been met by government intervention saving the day and hoping to avoid a deeper financial calamity. If anything, history has a way of repeating itself.