A key question regarding the international financial crisis of 2007-08 is whether it was mainly due to market failure or government failure. Regarding the former, there were well-known issues which had already been encountered in previous business cycles, including debt deflation andthe manic-depressive nature of asset markets, which therefore had been widely investigated by economists. But there were also new experiences such as the combination of securitization and credit derivatives in the socalled"shadow banking system." The expansion of non-banking financial sectors coupled with the networking economy led to creation of various sources of new credit which were not adequately monitored by regulatory authorities, giving rise to a new type of systemic risk. As for governmentfailure, collusive inter-relations between bankers on one hand, and law makers and government officials on the other, encouraged financial deregulations and caused unprecedented excesses in the banking sector.