I have always believed in the free markets. And after the recent financial crisis, I still do. But I’ve never believed that free markets could work in lieu of government.

Recent events have strengthened this view. We should finally accept the fact that the financial system is by necessity “socialist.” At this point, the question is not so much, “can the free markets work without government regulation?” It is more, “We know the financial system cannot work independent of government. How can we ensure market regulation serves the interests of the American people?”

One can look back at the history of the financial system—Wall Street has never functioned independent of government. The reason is not that government has always sought to meddle in an otherwise stable system. Rather, Wall Street has proven incapable of surviving independent of government. And every time Wall Street collapsed, it was the financiers who demanded the government intervene to save them. This should be common knowledge taught in history class, but it is often not.

The first extreme case of government involvement in the financial markets came in 1913. The Wilson Administration created the American Central Bank, also known as the Federal Reserve. The Federal Reserve, funded by tax dollars, was instituted at the request of bankers in order to offset the then recent, near catastrophic runs on banks.

The most commonly known example, however, is the so-called, “New Deal” legislation. The “New Deal” was enacted under Franklin D. Roosevelt in the 1930s. In addition to public work programs designed to provide employment, the New Deal legislation included provisions to check speculation on Wall Street.

The New Deal included another blanket form of protection to the banking sector—the Federal Government would provide insurance for a certain fixed amount of money held in private banks. Even if a bank were to collapse, Americans would not be left penniless. Before the recent near-catastrophe, this sum was $100,000. The figure has now been increased to $200,000, providing additional security. Most of the economy functions well without the government. Indeed, the central management of economies has proven disastrous, as illustrated by the Soviet Union. But, the failure to regulate the financial sector in particular has reaped virtually the same ruinous results. Every time Wall Street has attempted to deregulate, the house of cards collapsed.

The TARP bailout is a recent example of government intervention to save the financial sector. The bailout gave $700 billion in emergency loans to banks teetering on the verge of ruin. As has traditionally been the case, it was the bankers who asked for this money. In the free markets it is sink or swim, eat or be eaten, just like a nature documentary. The banks did not want to sink. In this instance, the banks were so large they could not be allowed to sink. As Americans’ private savings are either held in banks or invested in the stock market, the collapse of the financial system is unthinkable.

Conservative ideology stresses the independence of the free markets. One may reason that capitalism obstructed by government is not true capitalism. Non-capitalist economies do not work, and so we must avoid government at all costs. Of course, if this logic holds, there is no advanced capitalist economy in the world. All those wealthy, government-heavy nations in Europe have actually failed. They just haven’t told anyone. By the same logic, the American financial sector is socialist. For the last hundred years, there has been a central, quasi government-run bank with federal regulations and mandates. Some might argue that the financial system would actually work better without government intervention, but this logic has never survived the test of reality. There has never been a wealthy, prosperous nation without substantial government regulation and involvement in the economy. Ever. Perhaps there is some way to create a purely capitalist, rationally self-regulating financial sector.

This, however, remains a purely hypothetical undertaking. In all likelihood it is a pipe dream. No reasonable economist accepts the ideology of the “free market lovers” on the right. From Paul Krugman to Alan Greenspan, there is a consensus that the financial sector needs the government.

Now that we know the financial sector is socialist, it is important that we get socialism right. Socialism should serve the interests of the people who pay for it. American tax dollars paid for the bailout. The banks have become a product, just like a car an American family might purchase. In both cases, the consumer expects a useful, workable product. With Wall Street, this means regulations designed to protect consumers—bans on predatory loaning practices, limits on derivative trading, mortgage rate limits, and the like.

The market is complex, but there are ways to make it work for a more common interest. President Obama should understand this.

There is increasing populist rage directed at him from both sides of the political spectrum. The right is angry that the bank bailouts happened in the first place (despite the fact that they happened under a Republican president). They don’t understand that without the bailouts; the country would now be experiencing the second Great Depression.

Most “liberals” do get that the bailout was needed, but are frustrated at the lack of the promised post bailout reforms that could prevent another, or a worsening of this current, economic crisis.

Let’s learn our lesson for once. Let’s not return to the laissez faire, “leave the markets alone and everything will magically work out” attitude. But let’s also not bail out the finance sector unconditionally. Let’s not create a situation where banks can do whatever they want, until they fail, at which point they know the government will save them.

Without substantial market reform, this whole sorry state of affairs will continue, abuses will be unceasing, and it will happen all over again.