Circuit breakers for the financial markets

Had an opportunity to attend Dr.Reddy's lecture on the impact of the global melt down and its impact on the financial markets recently. To start with - a great lecture with his usual brand of dry humour and sharp repartees.
Some of the broad points he made were perhaps critical and prima facie appears really simple. He talked about macro economic imbalance across sectors leading to political thought process working in a particular direction. Another key point was the inability of the system to act as a check on itself, in effect where the problems in one circuit not leading to a grid collapse.
So how can or can we build circuit breakers at all?? The answer would perhaps be an yes and a no. The theory of free market with reference to the financial sector to some extent is flawed because, money unlike any other commodity can flow across economies and sectors at high speed. For instance let us take an actual product like energy. Irrespective of the limitless availability of energy, it is not possible to find uses for it (atleast in the short term). The lack of demand per se acts as a dampener for additional capacities coming into the market. Whereas in the case of money, there could be demand created, services procured and risks taken because capital is available. More the capital availability (albeit other people's capital) the less prudence gets exercised in using the same for unproductive uses. Hence while a porous and free fianncial market is in theory great, the fact that capital being available can perhaps lead to one side of the market enjoying the benefits while the system as a whole takes the risks.
So a circuit breaker for capital can perhaps only come in the form of regulation as in most such overheated situations, one has not seen the market performing this role effectively. The broad point being made by Dr.Reddy included the fact that the Indian regulators did not get over excited about asset prices which led to fairly conservative practices by the banking system as a whole.
A recent comment in one of the financial daily talks seems to indicate that the bankers are having selective amnesia with reference what happened in 2008. If this is indeed true, perhaps the woods are again crawling with the guys who are intent on overheating the system and collapsing the grid.