August 9, 2014 marks twenty-five years since the signing into law of the US savings and loan (S&L) industry bailout, the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) of 1989. After FIRREA was signed into law by President George H.W. Bush, the federal government took control of 327 failed S&Ls with $147 billion in assets.
“Deregulation” Did It?
By now the S&L scandal lies deep in the Memory Hole, but at the time, the mainstream media had the greatest effect on how most Americans viewed the debacle. A quarter of a century ago the mainstream press and television media — as with the 2008 financial crisis — portrayed the debacle as the inevitable result of unfettered free markets run amok. In particular, they focused on an alleged spurt of deregulation that supposedly occurred during the “laissez- faire” Reagan administration (January 1981-January 1989). A current expositor of this view is of course Paul Krugman.
This favorite go-to of progressives is not only completely unsupported by facts but further investigation also reveals what a sham the supposedly free-market Reagan really was.
As a chart from Business Economics[1] reveals, the 1970s to 1980s wave of “deregulation” actually began in 1976 with the railroad industry under President Gerald Ford. From 1978 to 1980, President Carter signed four laws relaxing regulatory controls over the airline, railroad, trucking, and banking industries. The vaunted “free market” Reagan only signed two relaxations of controls over the busing and thrift industries.
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