Garn–St Germain Depository Institutions Act

1982

Pub. L. 97–320; codified at 12 U.S.C. §§ 1464, 1701j–3, 3801 et seq.

📌 Link to the Text of the Act

Read the statute (12 U.S.C. §§ 1464, 1701j–3, 3801 et seq.)

📌 Why It Was Done

Enacted to address the crisis in the savings and loan (S&L) industry, the Act further deregulated depository institutions, expanded lending powers, and introduced new mortgage options. It was intended to give S&Ls more flexibility and prevent widespread failures.

📌 Pre-existing Law or Constitutional Rights

The Depository Institutions Deregulation and Monetary Control Act of 1980 (DIDMCA) had already begun phasing out deposit interest ceilings. Garn–St Germain went further, granting S&Ls broader powers in lending and commercial activity. No constitutional rights were directly altered.

📌 Overreach or Proper Role?

Supporters claimed it was necessary to modernize housing finance and save failing S&Ls. Critics argued it encouraged reckless risk-taking, contributing directly to the S&L collapse of the late 1980s and massive taxpayer bailouts.

📌 Who or What It Controls

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Savings and Loans (S&Ls) (granted expanded commercial lending and adjustable-rate mortgages)
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Banks and credit unions (benefited from loosened restrictions)
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Mortgage borrowers (new products such as adjustable-rate mortgages introduced)
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Regulators (tasked with overseeing riskier institutions under looser rules)

📌 Key Sections / Citations

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12 U.S.C. § 1464(c): Expanded powers of federal savings and loan associations
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12 U.S.C. § 1701j–3: Federal preemption of due-on-sale mortgage clauses
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12 U.S.C. § 3801 et seq.: Authorized adjustable-rate mortgages (ARMs)

📌 Recent Changes or Live Controversies

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Widely blamed as a root cause of the Savings & Loan crisis, which cost U.S. taxpayers an estimated $120 billion.
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Still cited in debates about financial deregulation vs. oversight.
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Many provisions effectively rolled back or superseded by FIRREA (1989).