On flights between New York and Washington, it\u2019s said those who carry the least paper have the most power. Treasury Secretary Henry Paulson proves that adage. Following meetings with Wall Street executives, Paulson carried to lawmakers in the Capitol a master plan for solving the nation\u2019s financial crisis--now billed as the worst since the stock market crash of 1929. It fit handily into the inside of his coat pocket, outlined on three sheets of paper. The plan is long on bailouts at public expense, but short on regulations to prevent future crises. Its $700 billion tab--which could double under his request for Congress to increase the national debt limit by $1.4 trillion--surely will affect the broader economy, including the energy industry. Indeed, the financial industry crisis--largely the result of deregulation--displays frightening parallels to the beginning of the Great Depression. It raises the looming question of whether the power industry--also recently loosened from Depression era regulation with the repeal of the Public Utilities Holding Company Act--will relive history too. The utility industry suffered massive bankruptcies during the Depression. California utility share prices are down and concern about the financial viability of natural gas delivery contracts supplying California public utilities has surfaced. The financial bailout tab also will make it more difficult for the government to help finance a major transition from dependence on fossil fuels and imported oil to a green energy economy. To understand what the future may hold, look to the past. Before the Depression, banks were free to take deposits and invest them for their own accounts in risky stocks and bonds. That worked fine until the stock market crashed in 1929. At first, everybody looked up for a minute then returned to drinking their bathtub gin and dancing the Charleston. But when the market did not recover and job losses mounted, bank depositors eventually found their money had evaporated just like the irrational exuberance of last night\u2019s party upon awaking in the dawn. The same thing happened to utilities and their holding companies. During the Roaring 20s, they took ratepayer money and invested it in a host of speculative ventures aimed at high-flying returns. Often they charged exorbitant rates to finance these investments that benefited mostly the few at the top of the holding company pyramid. But when the party ended many utilities found themselves bankrupt, prompting concerns about their ability to provide continuing service. As the Depression deepened and money all but disappeared, Congress moved to wring the risk out of the economy by regulating the greed that gave rise to boom and bust cycles. For banking, it enacted the Glass-Steagall Act in 1933. Simply put, it prevented depository institutions, or commercial banks, from taking your money and investing it in just about everything except for loans for houses, cars, and businesses. These banks had to live on the spread in the interest rates between the deposits they took in and the money they lent out. They also were placed under extensive financial soundness regulations that required them to keep adequate cash reserves on hand. The coup de maitre was federal insurance on deposits, which restored confidence in the system. After these reforms were enacted, finance of more speculative activities was left to investment banks, which why regulated were not guaranteed by the federal government. For the utility industry, Congress in 1935 enacted the Public Utilities Holding Company Act. It put a stop to holding companies subsidizing their unregulated businesses with money from regulated business activities, namely providing customers with electricity, natural gas, and telephones. The laws worked and made banks and utilities what my grandmother, while enjoying a sundown Manhattan, called her \u201cblue chip\u201d stocks: profitable, stable businesses that paid regular dividends to widows and orphans and increased in share value largely in proportion to the economy\u2019s overall growth. However, by 1970 economists Ludwig von Mises, Friedrich von Hayek, and Milton Friedman at the University of Chicago began working with the American Enterprise Institute and Brookings Institution in Washington to hold seminars pushing economic deregulation. In the midst of an economy dominated by an energy crisis and stagflation, they claimed that rolling back Depression era safeguards would grow the economy again by unleashing the power of the market to stimulate innovation and investment. This would give consumers more choice, create competition, drive down prices, and lift all boats. Early efforts to deregulate came with airlines, trains, and trucks by 1980. They seemed to work. Next came the savings and loans in 1982, which turned out to be a major wrong turn after folks like Charles Keating--whom presidential candidate John McCain went to bat for with federal banking regulators--bet thrift deposit money on speculative real estate developments. The problem was that they found no market when an economic downturn gripped the nation in the late 1980s and early 1990s. Taxpayers bailed out the industry for $125 billion. Undaunted, Congress deregulated the telecommunications industry in 1996 to mixed reviews. Then in a fateful move in 1999 lawmakers repealed the Glass-Steagall Act and loosened other financial industry regulations the next year. President Bill Clinton signed the repeal, opening the way for commercial banks to begin trading in securities, insurance, and all forms of risky financial instruments. In the years to follow, commercial banks became intertwined with these higher risk investments that had been reserved for investment banks since the Depression. That is one reason why today\u2019s financial crisis poses a threat to depository institutions. In 2005--with home price appreciation the talk of smug cocktail parties and rumor spreading of a Dow 20,000--Congress went at it again, this time repealing the 1935 Public Utilities Holding Company Act. Proponents of the repeal argued it would open the way for the investment utilities need to upgrade their infrastructure and to become innovators. Congress envisioned that the Federal Energy Regulatory Commission would provide a bulwark against consumer abuse by having access to the books of utility holding companies and a stronger role in reviewing mergers involving utilities. State regulation would provide a further safeguard. Earlier this month, however, something happened that might have made my grandmother raise her eyebrows while leafing through the business pages. The California Public Utilities Commission allowed the president of Pacific Gas & Electric Corp., the holding company, to also assume the presidency of Pacific Gas & Electric, the regulated utility. California has rules to keep regulated utilities at arms length from the unregulated businesses held by their parent companies. Yet amid growing financial chaos in the wake of a decade of deregulation and inattention by Washington regulators, the CPUC earlier this month chose to ignore its own rules. It\u2019s true that the holding company owns little but the regulated utility. It also is true that there appears to be little danger in the commission\u2019s move to allow Peter Darbee to head both companies. He has an upstanding reputation and apparently does not plan to stay too long. Yet, between the lines the decision signals something subtle and disturbing about the attitude of regulators and raises questions about how much they have learned from the history culminating in today\u2019s financial crisis. It shows that increasingly we disregard the old maxim about being \u201ca nation of laws, not men.\u201d Earlier this month it was Peter Darbee . . . tomorrow, no doubt, Henry Paulson. Why is it okay for the public sector to invest more and more power in single individuals, those who commit to the least on paper? Why is it okay to make exceptions to rules and to use taxpayer money to bail out the few who have acted irresponsibly at the expense of the many? Surely my grandmother--who raised my father during the Great Depression--must be turning in her grave. So too must be all the other widows and orphans who eventually came to enjoy the \u201cblue chip\u201d stocks that were created under economic regulation, rules which transformed America into a stable middle class nation that became the envy and powerhouse of the world.