Even more important, however, the financial industry wants to avoid serious regulation; it wants to be left free to engage in the same behavior that created this crisis. It’s worth remembering that between the 1930s and the 1980s, there weren’t any really big financial bailouts, because strong regulation kept most banks out of trouble. It was only with Reagan-era deregulation that big bank disasters re-emerged. In fact, relative to the size of the economy, the taxpayer costs of the savings and loan disaster, which unfolded in the Reagan years, were much higher than anything likely to happen under President Obama.The key piece of banking deregulation Krugman is referring to was the Depository Institutions Deregulation And Monetary Control Act of 1980 (or MCA) which was signed into law by Jimmy Carter. This was a first-rate piece of legislation which dramatically improved efficiency in the banking system - rationalizing pricing of services, eliminating interest rate ceilings, and reducing reserve requirements, among other things. The MCA is a great accomplishment of the Carter Administration, along with airline deregulation for example. Why Reagan is viewed as the Great Deregulator and Carter is given no credit I have no idea.
Now, the savings and loan crisis was not directly a product of the MCA. The MCA permitted savings and loans to get into lending activity that was formerly prohibited, but the key problem was that the savings and loan regulators did not do their jobs. The savings and loan crisis was a classic case in moral hazard - savings and loans took too much risk given deposit insurance. Savings and loan regulators had the power to limit risk, but they did not do it. Get it straight, Paul!