Tims a victim of the effect
The Dunning-Kruger effect is an example of cognitive bias in which "people reach erroneous conclusions and make unfortunate choices but their incompetence robs them of the metacognitive ability to realize it"
Unfortunately Tim;s incompetence robs him of the inability to see past his own nose and writes accordingly. Take a sound theory apply it inappropriately and then come to some conclusions.
To start, assume everyone is solely motivated by money. I know plenty of highly motivated PhD's working for charities and in academia on not big salaries. Perhaps smart people might want to join the FSA because they don't want to play Roulette in the City. There's plenty enough money there to have a comfortable life, just not as millionaires.
The prime reason for the banking collapse was the complete breakdown in trust between banking institutions. If you think someone else might be bust you aren't going to risk lending them your money. The housing bubble was caused by cheap credit from poor risk assessment. Forcing the originators to keep a portion of their loans means that they are more likely to be focussed on getting the risks assessed correctly rather than dumping it on the next sucker until the music stops. It's true the collapse came when they couldn't sell the bonds, but they would have been much keener on ensuring they were worth something if they hadn't got away with passing all the risks on before, and others are more likely to trust you've done your job if your neck is on the line. If they want to be mortgage brokers - fine. But don't expect to get the advantages of being a banker as well.
Hedge funds didn't have anything to do with the crash or the recession. No, but when they crash and burn (and several did) it's our money (via Pension funds) they lose. None of us has the time to work out the implication of staff changes at pension firms or which hedge funds they prefer which might drastically affect our future. The cost of regulatory compliance will be trivial compared to what can happen to thousands by bad investment decisions.
If Tim is right, we should obviously pay MP's a million a year to ensure we get the "right people" to do the intelligent things. I look forward to him standing for Parliament with that kind of platform.
As for the IT angle, the self cert ban is on self cert without proof. Maybe contractors will have to pay themselves a realistic salary and not tax dodge via dividends. That way they can get their mortgage, as they'll have lots of nice payslips.