Banks – Banking (3.9 l.ft.; Box 30-40)
This secondary subject category consists of material relating to the precarious financial state of the nation’s savings & loan industry (“thrifts”) with requests for changes in legislation (particularly the 1982 Amendments to the Depository Institutions Act), changes in regulation, implementation of the “All Savers” accounts; status reports on thrift banks; failures/closures of specific thrifts; and numerous policy changes recommended by the White House policy staff, the public, and industry trade groups to bolster savings and loans institutions. The policy material covers issues such as interest rate changes, thrift control of assets, certificates from the Federal Deposit Insurance Corporation (FDIC), and FDISL to assist cash flow, legislative remedies for the “sale on call” California Supreme Court “Wellenkamp” decision. This category also includes material regarding the failure of Fidelity Federal Savings & Loan of San Francisco, the subsequent takeover by Citicorp as one of the first interstate bank takeovers and the lawsuit filed over the bidding process employed for takeover of this bank. There is material on many other bank failures, including material on failures of state chartered savings and loans closings.
The thrift material comprises over 70% of the material within this secondary subject category.
This secondary subject category also includes material regarding requests and meetings scheduled with the President and other White House staff by savings and loan executives; commercial and independent bank executives, and banking industry trade associations; praise and objections for deregulation actions by the Depository Institutions Deregulation Committee (DIDC); background information on state usury ceilings; reports on savings statistics of the American public; reports on regulation of financial institutions from the Vice President’s Task Force on Regulation of Financial Services and the proposal to consolidate bank regulation agencies; concerns about the status of international banks and U.S. holdings in international banks; commercial bank deregulation; support, opposition and evaluation of the annual financial services legislation and ; new regulations restricting FDIC coverage for “brokered deposits” (third party deposits) and the litigation over these rulings; the consideration of TIMs (trusts for investments in mortgages); reviews of changes in bank and thrift activities under newly proposed legislation; the status of commercial banks; protests against IRS regulations requiring a 10% tax withholding from payouts of savings instruments; the emergence of nonbank banks (consumer banks with no commercial loans) and the preemption of state licensing and regulation; and questions of chartering and regulating; and various complaints from the public on specific bank actions.
Note: A savings and loan association (or S&L), also known as a thrift, is a financial institution specializing in accepting savings deposits and making mortgages and other loans. By 1980s law thrifts could have no more than 10 percent of their lending in commercial loans. Thus their focus on mortgage and consumer loans made them particularly vulnerable to housing downturns and/or volatile interest rates. The first savings and loan associations date back to the 1800s, but they became particularly strong during the Great Depression with the creation of the Federal Home Loan Bank and the Federal Home Loan Bank Board.
In the late 1970s savings & loan institutions were already under severe strains due to rising interest rates. Cash flow and profitability were endangered by the pace of savings withdrawals compared to new deposits and home mortgage loans financed at lower interest rates than savings deposits were earning. Congress and the White House promoted policy and legislative measures to support the S&Ls, but closures, mergers and take-overs had begun.
Measures by Congress, and changes in interest rates gave some fleeting stability to the savings and loan industry in the 1980s. An accelerated decline in the late 1980s resulted in the full-blown 1990s savings and loan crisis with the collapse of many savings and loans institutions. Some of the causes for this crisis include the loosening of regulations for S & Ls resulting in risky and unsecured loans and commercial ventures.
In 1980, Congress passed the Depository Institutions Deregulation and Monetary Control Act of 1980. This bill began the major deregulation of all financial institutions from depression era rules and regulations. The bill allowed bank mergers, abolished interest rate ceilings on deposits and loans, and allowed credit unions and thrifts to offer checking accounts.
It also created the six member Depository Institutions Deregulation Committee (DIDC). The six members of the Committee were the Secretary of the Treasury, the Chairman of the Board of Governors of the Federal Reserve System, the Chairman of the FDIC, the Chairman of the Federal Home Loan Bank Board (FHLBB), and the Chairman of the National Credit Union Administration Board (NCUAB) as voting members, and the Comptroller of the Currency as a non-voting member. The DIDC was tasked with phasing out interest rate ceilings on deposit accounts by 1986.
Besides the phase out of interest rate ceilings, the Committee's other tasks included devising new financial products that would allow thrifts to compete with money funds and to eliminate ceilings on time deposits. The Committee automatically ended in 1986 when all interest rate ceilings were abolished.
Researchers will find both the savings and loan decline and the work of the DIDC documented in FI002.