Reply #71: Yeah, but it wasn't legal for a long while, then it was

[TayTay]

Part of this discussion, as it has unfolded on the talk shows and even on the very excellent Jon Stewart show, is disingenuous. It is human nature to want to make money. We build laws to put a fence around the natural self-interest that human nature gives us.

Banks were regulated after The Great Depression and fences were constructed to keep them in their specific pens. The Great Depression passed, the world changed. Many, many people genuinely believed that depressions were no longer possible. (Even Paul Krugman has written that he fell prey to this belief. Paul Krugman! ) The world became a more interconnected place where money could travel all over the world with the click of a mouse at a computer. The old rules were deemed irrelevant to this new reality. The pens we had caged financial institutions in were no longer needed. Let them all out, they will all act in their own enlightened self-interest and the results will be increased wealth and prosperity for all.

It didn't work out that way. Glass-Steagall was a Depression era reform that strictly dictated what banks could and could not do. It was a good law for those days. The principles behind it are sold for our day, but they did need updating for the electronic world of today. Instead, we threw out the rules, trusted that all the players would act honorably and waited for the party and the money.

The essential flaw of the free market folks is that they believe that the financial players would act honorably and that they would never destroy their own institutions in pursuit of personal gain. They did destroy vast quantities of wealth in pursuit of personal gain and those actions often destroyed the very institutions they worked for. Reagan era conservatism, which is the philosophy that lead to all this, was essentially wrong in it's key assessment. They believed in a utopia that would come about because of the virtuous lead of business folks. Basic human nature, with it's mix of good and evil, disallows any and all utopias. You cannot engineer a perfect world; there are too many humans around to mess it up. (We are not perfectable. We will never be perfectable. All utopias are doomed to failure. We will always need laws and regulations. That is a simple truth.)