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.

BREAKING DOWN '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. Thrift Bank

    A financial institution focusing on taking deposits and originating ...
  2. Thrift

    Thrifts are savings and loans associations. Thrifts also refer ...
  3. Garn-St. Germain Depository Institutions ...

    A law enacted by Congress in 1982 to enable banks and other savings ...
  4. Unitary Thrift

    A company that controls a single savings-and-loan association. ...
  5. Agency Matching Contributions

    A benefit that federal government employees receive under the ...
  6. Call Report

    A report that must be filed by all regulated financial institutions ...
Related Articles
  1. Insurance

    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. Financial Advisor

    2 Thrift Conversions for Your Portfolio (CHFN, WBB)

    Buying the stocks of these boring little banks can lead to very exciting profits.
  3. Insights

    Financial Regulations: Glass-Steagall to Dodd-Frank

    Here are some of the most important financial regulations that have been established.
  4. Insurance

    Federal Deposit Insurance Corporation (FDIC)

    The Federal Deposit Insurance Corporation (FDIC) insures deposits in banks and thrift institutions.
  5. Insights

    What's a Price Ceiling?

    A price ceiling is the maximum amount a seller can charge for a product or service.
  6. Personal Finance

    What is a Loan Loss Provision?

    Banks set aside loan loss provisions to cover losses from bad loans.
  7. Investing

    Introduction To Institutional Investing

    Investopedia explains: Learn about institutional investing and all of the major players in this field.
  8. Personal Finance

    Find the Best Savings Account Rates

    You know how to spot the highest interest rate, but how do you really get the best deal on savings accounts?
  9. Personal Finance

    The History Of The FDIC

    Find out why this corporation was developed and how it protects depositors from bank failure.
  10. Personal Finance

    What is a Financial Institution?

    A financial institution is in business to, among other things, accept deposits, make loans, exchange currencies, and broker investment securities.
RELATED FAQS
  1. Is a Thrift Savings Plan (TSP) a qualified retirement plan?

    Take advantage of the government's retirement plan for employees with the Thrift Savings Plan. As with a 401(k), contributions ... Read Answer >>
  2. What is the difference between a savings & loan company and a bank?

    Find out how a savings and loan company, sometimes also known as a thrift or savings institution, focuses on different types ... Read Answer >>
  3. What determines the interest rate in my money market account?

    Placing funds in a money market account may provide a higher interest rate than a savings account due to the underlying securities ... Read Answer >>
  4. Does it make sense for me to have a money market account if I don't want to buy any ...

    Saving funds within a money market account or mutual fund does not have to be limited to those wanting to buy or sell securities ... Read Answer >>
  5. What is the difference between a modified duration and a Macaulay duration?

    Understand how investors and savers can use money market mutual funds and conventional savings accounts, and learn the differences ... Read Answer >>
  6. What are the major categories of financial institutions and what are their primary ...

    Understand the various types of financial institutions that exist in today's economy, and learn the purpose each serves in ... Read Answer >>
Hot Definitions
  1. Graduate Record Examination - GRE

    A standardized exam used to measure one's aptitude for abstract thinking in the areas of analytical writing, mathematics ...
  2. Graduate Management Admission Test - GMAT

    A standardized test intended to measure a test taker's aptitude in mathematics and the English language. The GMAT is most ...
  3. Magna Cum Laude

    An academic level of distinction used by educational institutions to signify an academic degree which was received "with ...
  4. Cover Letter

    A written document submitted with a job application explaining the applicant's credentials and interest in the open position. ...
  5. 403(b) Plan

    A retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers. Generally, retirement ...
  6. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
Trading Center