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Homework answers / question archive / How did two pieces of regulatory legislation the DIDMCA in 1980 and the DIA in 1982 change the operating profitability of savings institutions in the early 1980s? What impact did these pieces of legislation ultimately have on the risk posture of the savings institutions industry? How did the FSLIC react to this change in operating performance and risk?
How did two pieces of regulatory legislation the DIDMCA in 1980 and the DIA in 1982 change the operating profitability of savings institutions in the early 1980s?
What impact did these pieces of legislation ultimately have on the risk posture of the savings institutions industry?
How did the FSLIC react to this change in operating performance and risk?
In the early 1980s, the two regulatory pieces of DIDMCA and the DIA changed the operating profitability of savings in the institutions by allowing savers to accumulate money into newly established money market funds. The fact was made possible since the competition of saving institutions was hampered as lending restrictions were imposed on the institutions. Consequently, following the above measures, saving institutions were exposed to a risk of running out of the revenue stream as they were only able to offer low-interest loans. FSLIC reacted to the above change of operating performance and risks by providing insured deposits, thus allowing depositors to exploit maximum gains.
