but there are ways that the markets could be fixing these problems themselves but many financial products used today have not matured enough to be "market monitored".
Mature markets mean little profit, so there will always be the incentive to create new products and profit off them before the market matures. The more complex the products, the better -- this way, it is more likely you can fleece your victims due to their own ignorance.
but newer instruments like mortgage backed securities and credit default swaps do not have such standards or openness to allow the broader market (through research or statistical/heuristic analysis) to judge the products.
Another problem here is that all the people valuating these instruments were using a bad risk estimate. This was a mistake that propagated through the financial industry because (1) as you say, the products weren't mature enough for informed analysis, (2) There was financial incentive to keep the calculated risk low, in order to be able to sell the product and remove the risk from your portfolio, and (3) there was a systemic risk that was missed, in additional to the risk of an individual instrument would fail (if one goes bad, they all go bad).
The other problem, and one that Greenspan has copped to, is that we assume entities like banks will self-regulate due to self-interest. However, the decision-makers are individuals, not entire banks. For the housing meltdown that Greenspan talked about this, individuals made decisions that profited them personally... but were risky to the banks and to the economy as a whole. Self-regulation (and/or market regulation) fails when (1) the decision-makers are not the same as the entities whose behavior we wish to regulate and/or (2) the entities in question are so large that punishment for bad behavior threatens the economy as a whole.
If you want markets to self-regulate, you need to at least tie individual compensation to long-term profitability, and you need to lower compensation to the point that loss of compensation would actually hurt the decision-makers. Someone who has already banked $200 million isn't badly impacted by loss of new income.