A twenty-year anniversary was celebrated this year for an act that had a significant impact on the financial services industry. But for many, it went by un-noticed. On March 31, 1980, congress passed the Depository Institution Deregulation and Monetary Control Act, mainly called the Monetary Control Act. During a time when the banks were regulated and all offered the same rates, services and benefits, there was a general decline in fed membership. Thrifts were going broke trying to compete for money in the bond markets. Something needed to be done before all of the thrifts disintermediated out of existence. . The Monetary Control Act made seven major changes to the way banks conduct their business. First, the act began the process of lifting the legal ceiling on the interest rates that banks could offer their depositors. Now, banks were free to pay market rates on all savings and time deposits to attract new customers and to compete with other banks. The act also sought to tighten monetary control by extending federal reserve requirements to all member and non-member banks by requiring them to keep reserves. Because the depository institutions were now required to keep reserves, they could now use the fed to obtain loans, helping to expand loan servicing to non-member banks.
Thrifts were also granted new powers. They were now able to offer real estate and commercial loans. They were now authorized to sell NOW accounts. Negotiable Order of withdrawal accounts were initially limited to certain banks until the courts determined that they were savings accounts that earned interest and could be offered to the public. .
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One of the most important and widely recognized provisions was set to gain confidence in depository institutions as a whole. The act raised the FDIC ceiling on all insured deposits from $40,000 to $100,000 per account. This act has helped the banking industry change for the better by gaining more faith from the public in the safety of FDIC insurance.
