The Depository Institutions Deregulation and Monetary Control Act of 1980 (, ) (often abbreviated DIDMCA or MCA) is a
United States federal financial statute passed in 1980 and signed by President
Jimmy Carter
James Earl Carter Jr. (born October 1, 1924) is an American politician who served as the 39th president of the United States from 1977 to 1981. A member of the Democratic Party (United States), Democratic Party, he previously served as th ...
on March 31. It gave the
Federal Reserve
The Federal Reserve System (often shortened to the Federal Reserve, or simply the Fed) is the central banking system of the United States of America. It was created on December 23, 1913, with the enactment of the Federal Reserve Act, after a ...
greater control over non-member banks.
* It forced all banks to abide by the Fed's rules.
* It relaxed the rules under which national banks could merge.
* It removed the power of the Federal Reserve Board of Governors under the
Glass–Steagall Act to use
Regulation Q to set maximum interest rates for any deposit accounts other than
demand deposit
Demand deposits or checkbook money are funds held in demand accounts in commercial banks. These account balances are usually considered money and form the greater part of the narrowly defined money supply of a country. Simply put, these are depo ...
accounts (with a six-year phase-out).
[
* It allowed Negotiable Order of Withdrawal accounts to be offered nationwide.][Gilbert, Alton. "Requiem for Regulation Q: What It Did and Why It Passed Away", ]Federal Reserve Bank of St. Louis
The Federal Reserve Bank of St. Louis is one of 12 regional Reserve Banks that, along with the Board of Governors in Washington, D.C., make up the United States' central bank. Missouri is the only state to have two main Federal Reserve Banks (Ka ...
: pp. 31-33
/ref>
* It raised the deposit insurance
Deposit insurance or deposit protection is a measure implemented in many countries to protect bank depositors, in full or in part, from losses caused by a bank's inability to pay its debts when due. Deposit insurance systems are one component of ...
of US banks and credit unions from $40,000 to $100,000.
* It allowed credit union
A credit union, a type of financial institution similar to a commercial bank, is a member-owned nonprofit financial cooperative. Credit unions generally provide services to members similar to retail banks, including deposit accounts, provis ...
s and savings and loan
Wealth is the abundance of valuable financial assets or physical possessions which can be converted into a form that can be used for transactions. This includes the core meaning as held in the originating Old English word , which is from an ...
s to offer checkable deposit
A transaction account, also called a checking account, chequing account, current account, demand deposit account, or share draft account at credit unions, is a deposit account held at a bank or other financial institution. It is available to the ...
s.
* It allowed institutions to charge any loan interest rates they chose.[Michelle Minton]
The Community Reinvestment Act's Harmful Legacy, How It Hampers Access to Credit
Competitive Enterprise Institute
The Competitive Enterprise Institute (CEI) is a non-profit libertarian think tank founded by the political writer Fred L. Smith Jr. on March 9, 1984, in Washington, D.C., to advance principles of limited government, free enterprise, and individ ...
, No. 132, March 20, 2008.[John Atlas and Peter Dreier]
The Conservative Origins of the Sub-Prime Mortgage Crisis
The American Prospect
''The American Prospect'' is a daily online and bimonthly print American political and public policy magazine dedicated to American modern liberalism and progressivism. Based in Washington, D.C., ''The American Prospect'' says it "is devoted t ...
, December 18, 2007.
The act was in part a response to economic volatility and financial innovations of the 1970s that increasingly pressed the highly regulated savings and loan industry and arguably had unintended consequences
In the social sciences, unintended consequences (sometimes unanticipated consequences or unforeseen consequences) are outcomes of a purposeful action that are not intended or foreseen. The term was popularised in the twentieth century by Ameri ...
that helped lead to the collapse and subsequent bailout of that financial sector. While S&Ls were freed to pay depositors higher interest rates, the institutions continued to carry large portfolios of loans paying them much lower rates of return; by 1981, 85 percent of the thrifts were losing money and the congressional response was the Garn–St Germain Depository Institutions Act of 1982.
The bill's passage is considered an important shift in the Democratic Party's positioning on economic regulation, as the party had historically defended New Deal era financial regulations, but had now come to favor financial deregulation. According to a 2022 study, this shift happened as a consequence of the congressional reforms of the 1970s, which undermined parochial and Southern populist interests within the Democratic Party. These parochial and populist interests favored a decentralized banking system. The party subsequently pursued deregulatory reforms that it perceived as beneficial to savers and consumers.
References
Further reading
*
External links
FDIC page on actPublic Law 96-221, 96th Congress, H.R. 4986: Depository Institutions Deregulation and Monetary Control Act of 1980
1980 in law
Federal Reserve System
United States federal banking legislation
Federal Deposit Insurance Corporation
Savings and loan crisis
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