Banking Deregulation

August 7, 1981

Report Outline
Banking's Structural Changes
Divisions in the System
Aid for Thrift Institutions
Special Focus

Banking's Structural Changes

Deregulation, Mergers, Hybrid Institutions

Major structural changes are taking place in the U.S. banking system, as evidenced by a wave of mergers among financial and quasi-financial institutions, a crisis in the savings and loan industry, the continuing spread of computerized teller and credit card services, and the meteoric growth of money market funds. For decades, the foundations of America's highly compartmentalized banking system have been shaken, as consumers and businesses increasingly have bypassed traditional financial institutions to obtain credit directly from retailers, insurance companies or brokerage houses. In recent years, the partitions in the system have begun to come down, as the various sectors of banking have become much more competitive with one another in going after deposits and the loan business.

Record-high inflation and interest rates have prompted depositors to look harder for the safest possible hedges and the best possible returns. In response, financial institutions have sought to lure customers with all kinds of new services. Commercial banks, for example, have offered checking accounts that pay interest as though they were savings accounts, while brokerage firms have offered mutual funds that can be drawn down as though they were checking accounts.

Bowing to what seems the inevitable, Congress enacted sweeping legislation last year that provides for phased deregulation of interest rates, less protection for certain privileged banking sectors, greater competition among the sectors, and a more comprehensive national system of bank rules. If deregulation continues to be pressed in the coming years, some bank experts believe an integrated national banking system will emerge by the end of this decade and feature a relatively small number of hybrid financial institutions providing a wide range of services to customers in every state of the Union.

ISSUE TRACKER for Related Reports
Banking
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Oct. 05, 2012  Euro Crisis
Jan. 20, 2012  Financial Misconduct
Jan. 13, 2012  ‘Occupy’ Movement
Oct. 24, 2008  Financial Bailout Updated
Sep. 01, 2000  The Federal Reserve
Jun. 22, 1990  S&L Bailout: Assessing the Impact
Nov. 04, 1988  Behind the S&L Crisis
Apr. 26, 1985  New Era in Banking
Nov. 18, 1983  Bankruptcy's Thriving Business
Aug. 07, 1981  Banking Deregulation
Jul. 19, 1974  Banking Stability
Jul. 17, 1968  Banking Innovations
May 06, 1964  Monetary Policy in Prosperity
May 16, 1940  Revision of the Securities Acts
Feb. 27, 1937  Expansion of Branch Banking
Sep. 03, 1935  The Decline of Commercial Banking
Dec. 11, 1934  Proposals for a Government-Owned Central Bank
Sep. 12, 1934  Bank Reserves and Credit Inflation
Nov. 27, 1933  Bank Credit in Depression and Recovery
Aug. 12, 1933  Closed Banks and Banking Reform
Apr. 04, 1933  Unified Control of Banking
Apr. 09, 1932  The Glass Banking Bill
Mar. 24, 1932  The Guaranty of Bank Deposits
Apr. 17, 1930  The International Bank and the Gold Standard
Feb. 08, 1930  Branch Banking and Chain Banking
Apr. 29, 1929  Mergers of Banking Institutions
Oct. 28, 1927  The Federal Reserve Rate Controversy
May 21, 1927  Labor Banking and Finance Since 1920
Jan. 31, 1924  The Northwestern Bank Failures and the Attack on Treasury Savings Certificates
Dec. 01, 1923  Why State Banks Do Not Join the Federal Reserve System, the Effect on the System and the Issues Involved
Nov. 23, 1923  Branch Bank Controversy
BROWSE RELATED TOPICS:
Financial Institutions
Regulation and Deregulation