Having adequate financial supervision and regulation is essential to prevent a financial crisis from occurring, such as the one that took place in the period 2007-2009. To understand the role that financial regulation and oversight played in causing this crisis, it is necessary to examine the events that preceded it. This essay will briefly examine the events that occurred in the US economy before and during the crisis, in order to establish the weakness of regulation and oversight. First, financial innovation in the mortgage market has allowed households to be assigned a numerical number, determining the likelihood of them being able to repay their loans. Computers enabled securitization, considered one of the main causes of the financial crisis. This also allowed banks to offer subprime mortgages to borrowers who otherwise would not have been eligible for the loan. The result is the creation of mortgage-backed securities. This financial innovation in the mortgage market is important, as weak regulation and supervision of these loans, combined with the greed of intermediaries, leads to a financial crisis. The mortgage...