Depository Institutions Deregulation Committee (DIDC)
What Is the Depository Institutions Deregulation Committee (DIDC)?
The Depository Institutions Deregulation Committee (DIDC) was a six-member committee laid out by the Depository Institutions and Monetary Control Act of 1980. One goal of the act was phase out interest rate ceilings on deposit accounts, also called Regulation Q.
Grasping the Depository Institutions Deregulation Committee (DIDC)
There were six members on the DIDC. The five voting members were: the Secretary of the Treasury; the Chair of the Board of Governors of the Federal Reserve System; the Chair of the Federal Deposit Insurance Corporation; the Chair of the Federal Home Loan Bank Board; and the Chair of the National Credit Union Administration Board. The Comptroller of the Currency filled in as a non-voting member.
As well as gradually transitioning away from interest rate roofs, the committee's different tasks included conceiving new financial products that would allow thrift banks, or Savings and Loan Associations (S&Ls), to rival money funds and to dispense with roofs on time deposits. In any case, its overall purpose was to deregulate bank interest rates.
Starting around 1933, Regulation Q, which set least capital requirements and capital adequacy standards for board-regulated institutions in the United States, had limited the interest rates banks could pay on their deposits. These limitations were extended to S&Ls in 1966. Notwithstanding, as inflation rose pointedly in the late 1970s, more money was being removed from regulated passbook savings accounts than was deposited, and S&Ls found it progressively hard to get and secure funds. Simultaneously, they carried a colossal number of long-term loans at low interest rates.
Depository Institutions Deregulation and Monetary Control Act of 1980
President Jimmy Carter marked the Monetary Control Act on March 31, 1980. It gave the Federal Reserve greater control over non-member banks. The act allowed banks to combine, eliminated the power of the Federal Reserve to set maximum interest rates for deposit accounts, allowed Negotiable Order of Withdrawal (NOW) accounts to be offered cross country, raised the deposit insurance of U.S. banks and credit unions from $40,000 to $100,000, allowed credit unions and S&Ls to offer checkable deposits, and allowed institutions to charge any loan interest rates they picked.
The act was a response to the economic volatility and financial innovations of the 1970s that inexorably squeezed the exceptionally regulated savings and loan industry. Some accept the act inadvertently caused the collapse and subsequent bailout of the S&L financial sector. While S&Ls could pay depositors higher interest rates, the institutions carried large loan portfolios with low rates of return.
Why the Monetary Control Act of 1980 Failed
As interest rates continued to increase, the thrifts found themselves progressively unrewarding and becoming bankrupt. The Monetary Control Act of 1980 and the DIDC were all part of a work to reestablish solvency to the thrift industry — a work that at last failed as S&L administrations were unfit to operate in the deregulated environment that was made.
Features
- The Depository Institutions Deregulation Committee was a six-member committee laid out in 1980.
- The committee's primary purpose was transitioning away from interest rate roofs on deposit accounts by 1986.
- In any case, the Monetary Control Act of 1980 and the committee eventually failed to address the solvency issues that hastened the S&L crisis.
