Mort Zuckerman shared his wrenching trauma on MacNeil-Lehrer last night:
<http://www.pbs.org/newshour/bb/business/july-dec08/madoff_12-16.html>
MORT ZUCKERMAN: You know, I think this is the critical issue. What has happened is that you've had a whole shadow banking system, in effect, that has emerged in the last several decades.
In the 1930s, 90 percent of all financing was done through the commercial banks. Today it's less than 30 percent; 70 percent is done through these money market funds, through these hedge funds, through the investment banks, through private equity funds, et cetera, et cetera. These have all emerged.
And there's insufficient -- most of these are, by and large, unregulated. And there is insufficient regulation. We are going to have to find a way to regulate them, because they control so much of the finances of the United States and therefore so much of the economy of the United States.
This is really critical. And the difficulty is going to be that this world of finance is so sophisticated and complicated that it is very, very difficult to imagine that the federal government will be having a lot of people who are capable of understanding it, so there's going to have to be some quasi-public-private body, with people who've had experience in this world, so that they can understand the possibilities of what might go wrong and how you regulate them.
It is going to be critical going forward, because confidence is now shattered in the financial system for a lot of reasons. And that is what is going to impede the ability of this country to come out of a recession.
The confidence must be rebuilt, particularly through all of these, as we have seen, errors all the way through the financial system.