The Collaborative International Dictionary of English v.0.48:

loony \loon"y\ (l[=oo]n"[y^]), a. [Shortened fr. lunatic.]
   1. Crazy; insane; lunatic; mentally unsound. [Low, U.S.]
      [Written also loony, luny and looney.] See Luny.
      [1913 Webster]

   2. Very foolish; very impractical; as, loony ideas.
      [PJC]

The Collaborative International Dictionary of English v.0.48:

Luny \Lu"ny\, a. [Shortened fr. lunatic.]
   Crazy; insane; mentally unsound. [Written also loony and
   looney.] [Low, U.S.]
   [1913 Webster]