Behind the deepening financial mess is a general belief that less regulation is better for the national economy. President Reagan started it with his slogan of “Get the government off our back,” and later presidents of both parties have generally followed along.

Light or almost nonexistent regulation has let lenders sell home buyers mortgages they couldn’t afford, let them package mortgages into investment “vehicles,” let rating companies bestow top AAA ratings on the risk-filled packages, and let investment bankers and secretive hedge funds use “leverage” to buy those risky products with borrowed funds.

It worked for a while, as long as the housing bubble kept growing and as long as public trust and confidence ignored the few Cassandras who warned of a day of reckoning.

Cracks began appearing last year, when adjustable-rate mortgages triggered big rate increases, when big mortgage lenders neared bankruptcy, and when the adventuresome, highly leveraged investors suddenly found that their risky deals could mean huge losses as well as huge gains.

Bear Stearns, the nation’s fifth-largest investment bank, became the first big victim last August when two of its leveraged hedge funds went broke. Now JPMorgan Chase is buying it at a fire-sale price in a bailout backed by the Federal Reserve System and ultimately by American taxpayers. Other investment banks and hedge funds are vulnerable to collapse.

Where the breakage will end, nobody knows. The New York Times raised the question on March 23 of whether an enormous but little-known and completely unregulated insurance system known as “credit default swaps” is in trouble. The swaps are special insurance contracts intended to protect bondholders at least partly against default and loss. Total value of the swaps was $43 trillion last June, up from $10.2 trillion two years earlier, according to the Times.

Past episodes, such as the savings and loan debacle of the 1980s and 1990s and the near collapse in 1998 of a huge hedge fund, Long-Term Capital Management, came and went without precautions against future trouble.

Aside from dealing with the likely or actual recession, Congress, especially the Democrats, is preparing new rules intended to avert a recurrence. But Republicans have been slow to recognize the possibility of such a spell of economic chaos. President Bush is likely to veto any return to strict regulation of lending and investment.

Both Presidents Bush, with occasional help from Presidents Jimmy Carter and Bill Clinton and bipartisan support of Congress, made deregulation a cult and almost a religion. Regulation of air travel, railroads, telephone service, electric power, interstate trucking and much of the financial system was sharply restricted, often with questionable results.

It is time to give up the prejudice against regulation and reverence for free markets as a cure-all. It may take a new president to lead the way. The place to start is to require transparency and protect investors and mortgage seekers against fraud and against their own foolishness.