It's been more than four years since Wall Street collapsed. What's happened since then?

Banks have raised tens of billions of dollars in capital. They're less leveraged and have more liquidity than before.

Consumers have far less debt. Total debt-to-GDP has been declining for four years. 

New regulations dictate what should happen if a huge bank faces collapse, ostensibly ending bailouts (in theory, anyway).

We've made big strides in the right direction. But so much can still go wrong, and so much still is wrong. Is the financial system actually safer than it was five years ago?

I recently asked that question to former AIG (NYSE:AIG) CEO Hank Greenberg. Here's what he had to say (transcript follows):

Morgan Housel: Do you think the global financial system is safer today than it was in 2007?

Hank Greenberg: It's now so tight you can't do anything.

Morgan Housel: That's an interesting point of view. It might be as dangerous, but there's not much we can do about it?

Hank Greenberg: I think that, if you look at the regulators that we have, and had at the time, how did all this start in housing? It started with the government.

When our governor was the head of HUD, they loosened the reins. The decision by the administration was, "We want more Americans to own their homes." They dropped the qualifications for getting mortgages, and people who couldn't afford a home got a home.

Morgan Housel: The mortgages are being purchased by Fannie and Freddie, right?

Hank Greenberg: Yeah.

Morgan Housel: But a tremendous amount, virtually all of the subprime that was being done in 2005-06 was all in the private market, correct?

Hank Greenberg: Yeah.

Morgan Housel: It wasn't until 2007 that Fannie and Freddie started getting into subprime.

Hank Greenberg: No, I understand that. I understand that, but they fed on it. Once you start down that road, it became a little easier next time, to the next one, the next one, and the next one.

Then you go beyond that. The SEC, where were they when the investment banks were leveraging the capital 40 to 1? Did you hear anybody say anything?

The blame is widespread. I think if you look at some other countries -- a city-state like Singapore -- a tiny state, but very well run, and the regulators are terrific. They get paid as much as they would if they were in the private sector, or maybe more. They're intelligent, smart.

We need to change the dynamics here in the regulatory structure.