McCain did not play a major role in causing either the S&L crisis or today's crisis. But he has been on the wrong side of the debate for at least 15 years—the years he's been taking advice from
Phil Gramm.
Sometimes there's too much government regulation and sometimes too little. But banking regulations—FDIC insurance and cash-on-hand requirements—have been a fabulous success. Before banks were regulated in the Great Depression, we had seventy years of bank panics, failures, and the recessions and depressions they caused. But now we have new kinds of banks that are not well regulated—or the regulations are not well enforced.
McCain helped to block regulation of Keating's bank, the largest failure/bailout in the S&L crisis, and Phil Gramm successfully tied the hands of stock-market regulators—the Securities and Exchange Commission.
Basically, there are three sides to this problem: On the far right: Gramm-style de-regulators who want to maximize profits for the big players. On the far left: over-regulators. In the middle: those who turn to professional, non-ideological economists. They love markets, but they don't think they're perfect. In particular, financial markets need regulation. On this issue Gramm and McCain have always been on the far right. That side, has lead us to the present disaster.
