Depository Institutions Act of 1982

AAA

DEFINITION of 'Depository Institutions Act of 1982'

A law passed by Congress with the intent of making savings and loan institutions more competitive. The best known of its many provisions was a section that enabled these so-called thrifts to offer money market deposit accounts with no interest rate ceiling, allowing them to compete more effectively with money market mutual funds for capital.

The Act also raised the ceiling on their direct investments in nonresidential real estate from 20-40% of assets, and their consumer lending from 20-30% of assets. The Act is more formally known as the Garn-St. Germain Depository Institutions Act after its sponsors, Congressman Fernand St. Germain and Senator Jake Garn.

INVESTOPEDIA EXPLAINS 'Depository Institutions Act of 1982'

Although welcomed at the time, critics say that the Act led to or exacerbated the savings and loan crisis of the late 1980s. They argue that - by raising the thrifts' cost of funds and allowing greater diversification in their loan activities - the thrifts were both forced and encouraged to take on more assets with greater risk in relatively unknown areas. Many thrifts were ill-equipped to manage these assets, and a significant portion eventually went sour.

RELATED TERMS
  1. Federal Reserve Communications ...

    A communication network established in 1981 in an effort to update ...
  2. Private Sector Adjustment Factor ...

    A method used by the Federal Reserve Board for calculating the ...
  3. Fractional Reserve Banking

    A banking system in which only a fraction of bank deposits are ...
  4. Federal Deposit Insurance Corporation ...

    The U.S. corporation insuring deposits in the U.S. against bank ...
  5. Bank Run

    A situation that occurs when a large number of bank or other ...
  6. Thrift Bank

    A financial institution focusing on taking deposits and originating ...
RELATED FAQS
  1. What mutual funds can be used for investing in the industrial sector?

    The industrial goods sector provides investors access to companies that engage in activities such as aerospace and defense, ... Read Full Answer >>
  2. What is the difference between a custodian bank and a mutual fund custodian?

    Custodian banks and mutual fund custodians, commonly known as mutual fund corporations, perform very similar roles for different ... Read Full Answer >>
  3. How do no-load funds typically perform relative to load funds?

    No-load mutual funds are pooled investments that do not carry an upfront sales charge when purchased or a deferred sales ... Read Full Answer >>
  4. What are the most popular mutual funds that invest primarily in the insurance sector?

    Under the purview of the financial services industry, the insurance sector is an attractive investment option for mutual ... Read Full Answer >>
  5. How should I use portfolio turnover to evaluate a mutual fund?

    The portfolio turnover percentage can be used to determine the extent to which a mutual fund turns over its stocks and assets ... Read Full Answer >>
  6. What are the risks involved in a banker's acceptance?

    College savings accounts are excellent ways to encourage saving for future college costs. Contact your investment professional ... Read Full Answer >>
Related Articles
  1. Home & Auto

    From Booms To Bailouts: The Banking Crisis Of The 1980s

    The economic environment of the late 1970s and early 1980s created the perfect storm for a banking crisis.
  2. Bonds & Fixed Income

    5 Signs Of A Credit Crisis

    These indicators can illuminate the depth and severity of problems in the credit markets.
  3. Insurance

    A Nightmare On Wall Street

    These tales of banking terror sent shivers down the spines of even the most steadfast bankers.
  4. Mutual Funds & ETFs

    Who Is To Blame For The Subprime Crisis?

    From lenders to buyers to hedge funds, it appears everyone has blood on their hands.
  5. Mutual Funds & ETFs

    Mutual Funds or ETFs: Which is Better?

    Trying to decide between a mutual fund or ETF? Here's what you need to know.
  6. Investing Basics

    Understanding Open-End Funds

    An open-end fund is a type of mutual fund that does not limit the amount of shares it issues, but issues as many shares as investors are willing to buy.
  7. Mutual Funds & ETFs

    Why You May Want To Be (And Stay) In Bonds

    Bonds are complicated, and it’s easy to feel intimidated or confused. Fortunately, you don’t need to be a numbers geek to be an informed investor.
  8. Professionals

    5 Signs That You Have a Lousy 401(k) Plan

    Knowing whether a 401(k) plan is good or not so good is important. This will help participants decide how much to invest and when to demand improvements.
  9. Professionals

    A Look at How the Ultra-Wealthy Invest

    Ultra-wealthy investors are cautious this year as they approach the markets. Many target mutual funds and stocks, but most also diversify their portfolios.
  10. Investing Basics

    What Does Overweight Mean?

    In the investing world, "overweight" refers to an expected stock performance, or a portfolio that is out of balance.

You May Also Like

Hot Definitions
  1. Stop-Loss Order

    An order placed with a broker to sell a security when it reaches a certain price. A stop-loss order is designed to limit ...
  2. Covered Call

    An options strategy whereby an investor holds a long position in an asset and writes (sells) call options on that same asset ...
  3. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  4. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  5. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
  6. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
Trading Center