Bank Regulations

Question 1

1864 National Bank Act

Answer 1

1. Creates system of national banks to be chartered by the Comptroller of the Currency
2. Establishes uniform currency

Question 2

1913 Federal Reserve Act

Answer 2

Creates the Federal Reserve System making it the lender of last resort

Question 3

1927 McFadden Act

Answer 3

1. National banks must abide by state branching laws

2. Allows national banks to have additional offices in the same city as their main office

Question 4

1933 Glass-Steagall Act

Answer 4

1. Established FDIC
2. Prohibits commercial banks from investment banking activities
3. Prohibits banks from owning commercial firms (and vice versa)
4. Prohibits interest payments on demand deposits (prevented interest rate wars)

Question 5

1956 Bank Holding Company Act

Answer 5

1. Gave FDIC authority to regulate bank holding companies

2. Prevents bank holding companies from branching across state lines

Question 6

1977 Community Reinvestment Act

Answer 6

1. Encourages banks to meet credit needs of their communities
2. Examinations of this act can be used when banks wish to expand or merge

Question 7

1980 Depository Institutions Deregulation and Monetary Control Act

Answer 7

1. Allows payment of interest on transactions accounts of individuals (not businesses)
2. Phased out interest-rate ceilings
3. Makes all depository institutions subject to reserve requirements
4. Gives thrifts the ability to own a wider range of assets
5. Raised deposit insurance ceiling to $100,000

Question 8

1982 Garn-St. Germain Act

Answer 8

1. Allows strong banks to buy failing banks in other states
2. Allows banks to offer money-market deposit accounts
3. allows thrifts to invest up to 10% of portfolios in riskier assets such as stocks and real estate

Question 9

1989 Financial Institutions Reform, Recovery, and Enforcement Act

Answer 9

1. Abolishes the Federal Savings and Loan Insurance Corporation (FSLIC) requiring FDIC to insure thrift deposit insurance
2. Creates the Office of Thrift Supervision
3. Sets up institutions to deal with failed S&L’s

Question 10

1991 Federal Deposit Insurance Corporation Improvement Act

Answer 10

1. Creates scheme of risk-based deposit insurance premiums
2. Requires FDIC to use least-cost method of dealing with bank failures
3. Created new structure of capital requirements for banks causing many to increase capital

Question 11

1994 Interstate Banking and Branching Efficiency Act

Answer 11

Phases in interstate banking and allows interstate bank mergers (unless prohibited by a state)

Question 12

1999 Gramm-Leach-Bliley Act

Answer 12

Repealed Glass-Stegall Act

1. Allowed banks to sell insurance and engage in investment banking activities
2. allows banks to form financial holding companies that may sell insurance, invest in real estate, and engage in other activities that had been prohibited

Question 13

2010 Dodd-Frank Act

Answer 13

1. Establishes Financial Stability Oversight Council to reduce risks to the financial system and Bureau of Consumer Financial Protection to keep financial institutions from taking advantage of consumers
2. Strengthens regulations to prevent bad mortgage originations
3. Subjects financial institutions other than banks to regulatory oversight if their failure might cause financial instability

Question 14

1987 Competitive Banking Equality in Banking Act

Answer 14

1. Provided $10.8B to FSLIC
2. Allowed for Regulatory Forbearance (breaking laws)
3. Closed loophole for separated services