Ask HN: What good are exotic financial instruments?

It seems that a lot of the reasons behind the economic issues that the United States and the rest of world has experienced is a result of exotic financial instruments created to increase complexity and thereby hide the underlying fundamental asset information. A side effect seems to be creating paper wealth that has absolutely no basis in reality, instilling a false sense of security of increasing gains until the scheme unravels.

As a result, I'm left to wonder why these instruments are not regulated in a manner similar to that of nuclear power plants, guns, or other such potentially dangerous inventions.

Is there a benefit that exotic financial instruments offer that I'm unaware of?

Otherwise, why is the US government not actively ensuring that these instruments are not allowed unless they are deemed to be a valuable financial tool?

The only reasons I can see are 1) Anyone with the domain knowledge to police these instruments are either in on the racket or get a cut for looking the other way. 2) There is actually a positive, valuable contribution that exotic financial instruments provide that I'm unaware of.

It seems that solving this problem would lead to some serious economic stability.

Any further insights would be much appreciated!