Manila, Philippines - The turmoil affecting the US financial system is a sign the "Reagan revolution" - the belief that less government was better for the economy - is over, a senior academic told journalists in Manila Thursday.

"What we're seeing today is what I call the end of the Reagan revolution... the ideology (where) the best form of government is the least form of government," said Kishore Mahbubani, dean of the Lee Kuan Yew School of Public Policy, in Singapore.

"We've come a full circle. We now realise that you need actually good governance and good regulations and not just let the market run the show," he said.

"If we don't have regulations we have these remarkable excesses," resulting in huge banks and institutions acquring questionable debt, he told foreign correspondents on the fringe of an Asian Development Bank conference.

He was speaking as world markets reel from the collapse of Wall Street investment banking giant Lehman Brothers this week and the bailout of insurance titan AIG on the back of the US subprime mortgage crisis.

Mahbubani told reporters it was "shocking" that trusted institutions "finally demonstrated that they didn't know what they were doing."

He singled out Lehman Brothers, ex-US Federal Reserve chairman Alan Greenspan, former US treasury secretaries Robert Rubin and Lawrence Summers and international credit rating agencies for not detecting the signs of the sub-prime crisis.

Mahbubani said the financial stresses showed the need for proper government regulation but added the crisis had also led people to question the quality of regulators.

"There was a time when you knew where the good standard of regulation was. Now, nobody's sure anymore. Everybody's asking the fundamental question: how do we regulate?"

"My sense is that nobody has the answer," he remarked.

Asian countries might be better protected from the effects of the crisis originating from the United States as many of them had adopted a "culture of prudence and savings," following the 1997 Asian financial crisis, he added.

India and China also looked less vulnerable as they had learned the dangers of excessively liberalising their capital markets from the Asian crisis, he said.