well we also had deficits during Reagan and the economy didn’t fall apart. The difference is the Fed didn’t unleash all this cheap money to pay for it. Reagan also didn’t have these nasty incentives to profit from bad ideas (govt backed freddie mac and all the bailouts).
We also had savings and loan scandal and many banks failed after a period of lighter regulation. We do need regulatione even in a free market (not that this ever existed). This much is obvious. I think we should go back to the old days and not allow banks to get involved in investment-too much risk.