"In one breath the author complains that the failure of the market is due to lax regulation and corrupt officials, while in the next he calls for further deregulation and less government oversight."

I think the point was that regulation and officials provide false comfort, as they will be captured by the interests they regulate. Removing those regulations and officials will at least remove the false security the "lax regulation and corrupt officials" provided.

The author isn't only talking about the regulators being corrupt or incompetent. He's also talking about market participants like Madoff and Lehman Brothers.

Removing regulation will not suddenly turn the bankers into honest people, as the author seems to think.

"Better than multiplying rules, financial accounting should be governed by the traditional principle that one has an affirmative duty to present the true condition fairly and accurately—not withstanding what any rule might otherwise allow."

He's suggesting that we take away the regulations and just ask the bankers to be honest. Maybe I'm just cynical, but I don't think that's going to work.

I referenced this in my post. This spirit of deregulation has aided the revolving door culture which has grown up over the past 30 years. At any rate, I wouldn't propose disbanding a police force because it was filled with corrupt cops.

You are confusing your political viewpoints with the actual points the article made.

EDIT: It's sad to see that political discussions even on HN are dominated by the usual misrepresentations of arguments and viewpoints and voting behaviour based on political viewpoints, as is common on e.g. reddit.

The burden is on you to show that you actually did not misrepresent the author's points. You say the author complains about lax regulation leading to market failure. On the contrary, the author complains about too much static regulation, as any static rule just leads to it being circumvented. He proposes e.g. financial accounting rules based on general principles and duties.

Also, where are your sources for the fact that the SEC is or was at any time supposedly devoid of material funding?

Oh and speaking of crony capitalism:

Mr. O'Driscoll is a senior fellow at the Cato Institute. He has been a vice president at Citigroup and a vice president at the Federal Reserve Bank of Dallas.

Perhaps Mr. O'Driscoll, a prime example of what he claims (to his credit) is wrong with the American economy, should take his own advice and quit the think tank.

I think his point was about bad incentives, not necessarily bad people. As Cato is neither a regulator, not a regulatee, I'm not sure why his employment there would make any difference.

The influence government policy and are part of the revolving door system he claims is the problem.

This is just not true. The "revolving door"-system generally refers to the problem that private firms (the regulated) employ people who formerly worked for the regulator, thereby incentivizing regulators to regulate in favor of private firms so as to maximize their job prospects after their government term has ended. While it is true that candidates for governmental positons get temp positions at think tanks, think tanks themselves are neither regulated nor get paid by regulated firms to lobby the regulators to propose beneficial (to the regulated) regulations. So neither Cato nor AEI nor Brookings are part of the revolving door system.