DIA Act 1980

Both of these regulatory legislations were extremely beneficial for the saving associations in the early 1980s. These pieces of legislation were enacted to minimize the net withdrawal flow of deposits from the institutions, which would help reduce the liquidity problem. For example, NOW accounts allowed for an unlimited amount of checks to be written to each deposit account, which allowed for cash to be more readily available. Thrifts were now able to make consumer and commercial loans to issue transaction accounts. According to the Federal Reserve, the Depository Institutions Deregulation and Monetary Control Act of 1980 was one of the most important laws enacted. At the time, high rates of inflation caused interest rates to rapidly increase, which in turn …show more content…
The DIDMCA gave the Federal Reserve more control over non-member banks and was aimed at deregulating depository institutions. In turn, it allowed for the Fed to gain more control over the monetary policy. In 1982, the Garn-St. Germain Depository Institutions Act deregulated savings and loan associations. Specifically, it allowed banks to provide adjustable-rate mortgage loans, which is a loan that does not have a constant interest rate. These pieces of legislation ultimately encouraged firms to take on risky investments, which led to failure. Many individuals question whether the DIA act of 1982 was a contributing factor to the savings and loan crisis in the late 1980s. The FSLIC, Federal Savings and Loan Insurance Corporation, did not help eradicate to the risky situation of the saving associations. It did not close many of the bankrupt associations. In fact, by not closing the failing associations, it was encouraging firms to invest in risky investments by continuing to insure deposits at these associations. This eventually lead to the savings and loan crisis in the late