loquitur

I'm blaming a bunch of people. But basically, my memory of what happened with the S&Ls was that the govt had a soft spot for local banks that lent people money to buy homes with. That's what S&Ls were. [What you should be thinking now is "There is nothing new under the sun."] IIRC (and this is public record, so if you really want to check you can - I don't have the patience for it right now) the accounting rules were changed to permit purchasers of S&Ls to treat goodwill as an asset for purposes of calculating capital for regulatory purposes, which of course purchasers did. Then the govt decided, well, maybe that wasn't such a good idea after all, and it changed the rules again, which suddenly left a bunch of S&Ls undercapitalized due to accounting changes. All of a sudden there is a crisis. At the same time you got some slick operators who understood that you can do some nifty things with goodwill and creative accounting. So in effect the S&L crisis was a massive case of governmental bungling, with a bit of Enron thrown in for good measure.

The case I worked on had to do with what happens if the govt seizes a bank that it had no legal right to seize - does the old owner get the bank back? a claim for damages? both? up the creek with no paddle? Stuff like that happened, and Congress never considered what might happen if the bureaucrats it was empowering abused their power - which is pretty typical of how government operates; it can't think of everything and usually doesn't. It did keep lawyers occupied, though.

Roachboy, is it your position that people don't respond to incentives? At its essence, "supply side" is just a jargon reference to the concept that incentives matter. And they really do.