Paul Krugman has made a lot of hay recently about free-market ideology and the financial deregulation initiatives that occurred during the early 1980s, which I have covered in a paper that is being co-authored by Amit Shah, one of my Frostburg State colleagues, and me. I presented the paper today at a conference, and am making it available for anyone who wishes to read it.
The paper conducts some casual empiricism about whether or not Krugman's "Reagan Did It" contention is correct. To make a long story short, we simply don't find the frenzy of conservative ideology in passage of either the Depository Institutions Deregulation and Monetary Control Act (DIDMCA) of 1980 or the Garn-St. Germaine Act of 1982. Both bills had many Democratic co-sponsors and in both situations, Democrats controlled the House of Representatives.
Our larger point is that these laws, for better or worse, were passed because conditions had changed in finance in which banks and S&Ls were in serious financial trouble, and Congress realized that much of the trouble was due to the regulatory structures that shackled those institutions. Unfortunately, Congress also build moral hazard into the equation and a number of other perverse incentives which led to a number of problems later.
Because I don't know how to download a pdf file to this blog, I will send a pdf copy to anyone who requests it. My email is firstname.lastname@example.org.