Profits Are Privatized. Losses Are Socialized.

The ideology of deregulation really took root when Reagan came into office, 30-plus years ago. The concept that all problems stemmed from big government interference was king, and the idea that the free market should be completely unleashed to work its magic--ruled the day. Yes, survival of the fittest! The end of lazy people. Ownership society. On and on...

A funny thing happened on the way to that free market utopia, though. It turns out that maybe a few regulatory measures should have been saved. Too bad it wasn't this one:

The Glass-Steagall Act, also known as the Banking Act of 1933 (48 Stat. 162), was passed by Congress in 1933 and prohibits commercial banks from engaging in the investment business.

It was enacted as an emergency response to the failure of nearly 5,000 banks during the Great Depression. The act was originally part of President franklin d. roosevelt's New Deal program and became a permanent measure in 1945. It gave tighter regulation of national banks to the Federal Reserve System; prohibited bank sales of Securities; and created the Federal Deposit Insurance Corporation (FDIC), which insures bank deposits with a pool of money appropriated from banks.

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The expansion of commercial banks into securities underwriting was substantial until the 1929 Stock Market crash and the subsequent Depression. In 1930, the Bank of the United States failed, reportedly because of activities of its security affiliates that created artificial conditions in the market. In 1933, all of the banks throughout the country were closed for a four-day period, and 4,000 banks closed permanently.

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As a result of the bank closings and the already devastated economy, public confidence in the U.S. financial structure was low. In order to restore the banking public's confidence that banks would follow reasonable banking practices, Congress created the Glass-Steagall Act.

Sounds like a great idea! What happened?

[The] Gramm-Leach-Bilely Act of 1999 repealed the Glass-Steagall Act's restrictions on bank and securities-firm affiliations. It also amended the Bank Holding Company Act to permit affiliations among financial services companies, including banks, securities firms and insurance companies. The new law sought financial modernization by removing the very barriers that Glass-Steagall had erected.

So, they basically undid everything--and allowed banks, securities firms and insurance companies to sell the same products again--and brought all that risk of bank failure right back into play. And what do we have now? Failing banks, failing Freddies, and failing Fannies--just like the good ol' days.

But as long as these huge organizations are making a profit, they get to keep all the profits. When they fail? Well, you and I pick up the tab. Call it Corporate Socialism, from the Real News Network: