Reading On The Toilet

The last Paul Krugman column, Reagan Did It, blames Reagan for the current financial crisis due to his signing the Garn-St. Germain Depository Institutions Act and deregulation:

Reagan-era legislative changes essentially ended New Deal restrictions on mortgage lending — restrictions that, in particular, limited the ability of families to buy homes without putting a significant amount of money down…There’s plenty of blame to go around these days. But the prime villains behind the mess we’re in were Reagan and his circle of advisers — men who forgot the lessons of America’s last great financial crisis, and condemned the rest of us to repeat it.

It takes two to tango, and many people argue that deregulation was not the problem, but institutions offering loans they shouldn’t have, individuals taking loans they shouldn’t have, and Wall Street repackaging and selling things they shouldn’t have.

The problem as I see it is that people are selfish, and most make decisions based on short term thinking.  People would like to believe that humans are inherently “moral”, and many economists posit that people’s decisions are based on rational thought.  But a quick look at the news on any day will reveal that people are motivated by their own selfish needs and desires.

The Alternative

So although the financial crisis couldn’t have occured without both deregulation AND irresponsible behavior, irresponsible behavior should be considered the normal course of human action.  We need a system of checks and balances…regulations and laws.  Otherwise we might go back to head hunting.