Depository Institutions Deregulation and Monetary Control Act
The Depository Institutions Deregulation and Monetary Control Act of 1980 (H.R. 4986, Pub. L. 96–221) (often abbreviated DIDMCA or MCA) is a United States federal financial statute passed in 1980 and signed by President Jimmy Carter on March 31.[1] It gave the Federal Reserve 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 accounts (with a six-year phase-out).[2]
- It allowed Negotiable Order of Withdrawal accounts to be offered nationwide.[2]
- It raised the deposit insurance of US banks and credit unions from $40,000 to $100,000.
- It allowed credit unions and savings and loans to offer checkable deposits.
- It allowed institutions to charge any loan interest rates they chose.[3][4]
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| Other short titles |
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|---|---|
| Long title | An Act to facilitate the implementation of monetary policy, to provide for the gradual elimination of all limitations on the rates of interest which are payable on deposits and accounts, and to authorize interest-bearing transaction accounts, and for other purposes. |
| Nicknames | Consumer Checking Account Equity Act of 1979 |
| Enacted by | the 96th United States Congress |
| Effective | March 31, 1980 |
| Citations | |
| Public law | 96-221 |
| Statutes at Large | 94 Stat. 132 |
| Codification | |
| Titles amended | 12 U.S.C.: Banks and Banking |
| U.S.C. sections amended | 12 U.S.C. ch. 3 § 226 |
| Legislative history | |
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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 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.[5]
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.[6]
Despite the initial popularity of the DIDMCA, legislative actions in states like Rhode Island and Minnesota have challenged its provisions, particularly those allowing national banks to export interest rates. These states are considering bills to opt out of this federal provision, aiming to exert more local control over interest rate regulations.[7]
The legislative actions seeking to repeal DIDMCA-like policies have been criticized by examining Colorado's experience, as detailed in a study by J Howard Beales III and Andrew Stivers. They argue that Colorado's decision to opt out of federal banking law equality has led to reduced credit access, especially for consumers with lower credit scores or insufficient credit history. Their analysis suggests that such legislative limits on competition can exacerbate negative effects on citizens most in need of access to credit, highlighting the broader implications of undermining the DIDMCA's objectives.[8]
References
edit- ^ "Depository Institutions Deregulation and Monetary Control Act of 1980 Remarks on Signing H.R. 4986 into Law. | the American Presidency Project".
- ^ a b Gilbert, Alton. "Requiem for Regulation Q: What It Did and Why It Passed Away", Federal Reserve Bank of St. Louis: pp. 31-33. [1]
- ^ Michelle Minton, The Community Reinvestment Act's Harmful Legacy, How It Hampers Access to Credit, Competitive Enterprise Institute, No. 132, March 20, 2008.
- ^ John Atlas and Peter Dreier, The Conservative Origins of the Sub-Prime Mortgage Crisis Archived 2008-04-11 at the Wayback Machine, The American Prospect, December 18, 2007.
- ^ Collins, Robert M. (2007). Transforming America: Politics and Culture in the Reagan Years. New York: Columbia University. pp. 83–84. ISBN 978-0-231-51130-8.
- ^ Barton, Richard (2022). "Upending the New Deal Regulatory Regime: Democratic Party Position Change on Financial Regulation". Perspectives on Politics. 22 (2): 391–408. doi:10.1017/S153759272200113X. ISSN 1537-5927. S2CID 252061496.
- ^ Griffith, Jason Cover, James Kim, Caleb Rosenberg, Jeremy Rosenblum, Taylor Gess, Melanie (14 February 2024). "Rhode Island and Minnesota Latest States with Bills Opting Out of Federal Banking Law Allowing Interest Rate Exportation". Consumer Financial Services Law Monitor. Retrieved 14 March 2024.
{{cite web}}: CS1 maint: multiple names: authors list (link) - ^ Beales III, J. Howard; Stivers, Andrew (18 October 2023). "The Impact of Colorado Ending Equal Competition between State and National Banks". SSRN. SSRN 4607006. Retrieved 14 March 2024.
Further reading
edit- Allen, Larry (2009). The Encyclopedia of Money (2nd ed.). Santa Barbara, CA: ABC-CLIO. pp. 111–113. ISBN 978-1598842517.
