Deregulation's effects make this a little tempting.
Deregulation of the banking system did not happen all at once. Rather, it started as most things do in politics: one little step at a time. The first of these steps was in the 1987, with the repeal of the Glass-Steagall Act of 1933. This repeal, and the deregulation that followed, eventually resulted in the collapse of the banking system in 2008.
1987--Glass-Steagall Act
The repeal of the Glass-Steagall Act in 1987 had larger ramifications than any other steps in deregulation. The act separated standard savings and loan banks from other banks, such as investment banks. In turn, it provided deposit insurance only to savings and loan banks, as these are lower-risk than investment banks and more ordinary people have money in them then have money in investment banks. Repealing this act made it possible for investment banks to be savings and loan banks and to receive to the same government protections.
Allowing banks to enter multiple banking sectors blurred the line between individuals' savings and banks' investments. An investment bank could make investments with people's savings, sometimes irresponsibly, and those investments now were guaranteed by the federal government. This led to nearly $1 trillion in bailout packages in 2008, because a combination of money from investors and depositors had to be covered by the federal government.
1988--Securitization
In 1988, securitization, or repackaging assets as a financial instrument to sell to investors, became legal. Banks were allowed to sell their mortgages to other companies, who sold shares of these "bundled" mortgages (as they would buy mortgages in bulk). If a lender sold a mortgage, it was no longer his responsibility, so he did not have the funds on hand that he would have if he had not sold the mortgage.
Mortgages were no longer being made to hold but to sell, and lending requirements became substantially more lenient. One example was the No Income/No Asset loans (NINA), which did not require proof of ability to pay back the loan. Lenders weren't interested in proof. They were not making loans with the intention of holding them and collecting interest payments, but rather for selling them to someone else.
This created a combination of bad loans and banks without the funds to back them up. It also made it difficult to tell who owed money and to whom.
2004--SEC
In 2004, the SEC passed a rule that allowed investment banks to declare their own capital, the amount of money they actually had on hand. This was to be carefully monitored by the SEC, but it was not.
The result of this deregulation was that investment banks such as Goldman Sachs essentially made up their amounts of available capital by phrasing it in financially ambiguous terms such as "deferred tax returns," which is a promise of money in the future but not cash on hand.
This led investment banks to leverage themselves at a financially irresponsible 30 to 1 percent, meaning that for every $1 they had on hand they had $30 in debt. When some of these investments collapsed, the banks did not have the ready capital to maintain their companies, which in turn caused other banks to collapse, which in turn caused the financial crisis of 2008.
