Bank of America chief Kenneth Lewis now thinks banks must separate their investment from their lending activities. How quaint. The Roosevelt administration had the same thought back in the thirties. Legislation was passed imposing strict rules on commercial bank activity, as in, "if you take deposits, you are not allowed to take risks with them."
So we had a remarkably stable banking system for decades. The only glitch occurred in the eighties, when Carter opened a door for savings and loans to engage in risky ventures that was flung wide by Reagan. The free-marketer-in-chief ordered S&Ls to regulate themselves. The result was the collapse of the savings and loans under the weight of speculation, peculation, and defalcation. At what now seems a modest price tag of a couple of hundred billion or so, the government bailed out the industry, re-regulated its activities, and all was well.
Until 1999. Clinton opened a door for commercial banks to engage in risky ventures that Bush, proudly wearing the Reagan mantle, flung wide. "Y'all regulate yer-selves" the cowboy-in-chief told the banks. The result is the collapse of the banking system under the weight of speculation, peculation, etc. Ironically, where the free-market ideologues of the Reagan administration nationalized the savings and loans without a qualm, thereby fixing the problem with celerity, the post-ideological Obamas seem paralyzed by allegiance to free-market ideology. The problem therefore is dragging on.
It's not just banking. We privatized food and agribusiness regulation and those salmonella and e-coli outbreaks just keep on coming. Drug companies pay for their own testing now with minimal FDA interference. In return we've got a slew of dangerous or useless drugs on the market, with many more to follow, and ill-effects we may be only learning about years from now. Does it ever occur to parents to wonder what decades of Ritalin use might be doing to their children? Just don’t bother asking the FDA.
We privatized the Iraq war and made Halliburton prosper at the expense of our troops and the Iraqis. Since partially privatizing the prison industry the percentage of Americans behind bars is the highest in the world. We imprison more of our people than the Russians and the Chinese. When privately owned prison camps are paying judges millions to supply them with customers, as in the case of Judge Ciavarella of Luzerne County, PA, is it any wonder?
It's all fixable. Cast off those free-market blinders and get government back into the business of governing. And get rid of Summers and Geithner and Volcker. Ideologues have become too damn expensive.