Senior Research Fellow Houman Shadab argues against assertions in George Soros' book, "The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What it Means."

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Houman Shadab, a senior research fellow in the regulatory studies  program at the Mercatus Center at George Mason University, however, said  Soros is "incorrect to interpret recent events in the financial markets as  resulting from a misplaced faith in markets. A more accurate interpretation is  that federal authorities fail to adequately appreciate the self-regulatory  mechanisms of market activities."

"The credit bubble underlying current  financial woes did not stem from innovation in financial instruments, but  primarily from the Federal Reserve intervening into credit markets to lower  interest rates in response to the recession following the dot com crash," he  told Cybercast News Service.

"The failure of financial institutions, such  as banks, to appropriately manage the risks from subprime mortgage-backed  derivatives is in part attributable to federal regulation and oversight creating  a false sense of security among market participants," Shadab said.

"By  contrast, market discipline has successfully mitigated these same risks in the  relatively unregulated hedge fund industry, which has thrived in comparison  during the credit crisis," he noted.