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'Reagan did it,' but not alone - Real Clear Politics – TIME.com

'Reagan did it,' but not alone
Posted by Froma Harrop | Email This | Permalink | Email Author I hold a lifetime membership in the Paul Krugman fan club, but sometimes even The Great One gets an incomplete.
Today's column is objectionable not for what it says, but for what it doesn't. Writing of the S&L collapse of the 1980s, Krugman accurately notes:

The immediate effect of Garn-St. Germain, as I said, was to turn the thrifts from a problem into a catastrophe. The S.& L. crisis has been written out of the Reagan hagiography, but the fact is that deregulation in effect gave the industry — whose deposits were federally insured — a license to gamble with taxpayers' money, at best, or simply to loot it, at worst.

Krugman should have elaborated: At Democrats' insistence, the legislation raised coverage by federal deposit insurance to $100,000 per account from $40,000. Had that not happened, taxpayers would have been far less on the hook, and depositors would have cared where their money was being “invested.” In other words, the law of moral hazard would have greatly slowed business at the casino.
Of course, Reagan signed it.
Postscript: The recent financial crisis prompted another increase in the FDIC insurance limit, from $100,000 to $250,000.