The current US system has three compounding failures: deposit insurance and too-big-to-fail (first seen in the 1983-84 Continental Illinois bailout) removed depositor discipline, leaving only prudential regulators to identify risk; those regulators fail because they outsource risk measurement to the banks themselves and to ratings agencies; and the government simultaneously subsidizes huge housing risk—so when loose 2002-2005 monetary policy (negative real Fed Funds, >1-2% departures from the Taylor rule) added cheap credit, a severe banking crisis was the predictable result.