Is regulation of credit derivative markets the answer to prevent future Financial instability?

It is directed by many knowledgeable with the present situation of Financial instability all over the world, that the unregulated areas of credit derivatives need be bought under regulatory purvey. But when we look at the origin of the problem we see that it started with President Clinton in 1993 appointing Linda Achtenberg as the Housing and Urban Development(HUD) Secretary. She was voicing prior to this appointment for Housing for the poor and marginalized 

She came in and started regulating Banks to lend to the poor more. To stop discriminatory practices if any in differentiating poor borrowers from well endowed to afford loans. She infact expected Banks to loosen their lending standards. Non compliance by Banks evoked strict retribution from Federal Government, by way of blocking growth strategies of Banks by way of not giving permission to open branches or in merger deals. So the Banks complied loosening their lending standards when things were going fine in US before 1993.

 Then the Glass Stegall act was repealed making it possible for Banks to also undertake Investment Banking. This catalyzed the new policy of loose credit standards and they started lending to people whose credit history was suspect and who couldn’t afford mortgage payment.

 Now it is known that these sort of credit derivatives like CDO’s, MBO’s were in existence from early days like 1967. Then they came up with the CDS lately which even those who don’t have backing or interest in the underlying assets can participate in.

 The question is if the lending standards were not loosened and kept at earlier levels of strict compliance of credit checks, could the present instability or Turmoil could have erupted? Is it that we should regulate this Derivative Markets or whether we should put the wheel back to prior 1993 days when lending standards were more strict and risk free?

 It looks it is not the folly of the Freemarket that created the present situation rather the Socialistic interference of tampering with the exchanges. Adam Smith predicted that if one trucks goods and services and creating exchanges without tampering with it can create uninterrupted markets. I feel it was the flouting of this tampering criterion that created the present turmoil and not the regulatory factor.