Financial Legislations

Major Financial Legislations in the United States


Federal Reserve Act (1913)

  • Created the federal Reserve System


McFadden Act of 1927

  • Effectively prohibited banks from branching across state lines
  • Put national and state banks on equal footing regarding branching


Banking Acts of 1933 (Glass-Steagall) and 1935

  • Created the FDIC
  • Separated commercial banking from the securities industry
  • Prohibited interest on checkable deposits and restricted such deposits to commercial banks
  • Put interest-rate ceilings on other deposits


Securities Act of 1933 and Securities Exchange Act of 1934

  • Required that investors receive financial information on securities offered for public sale
  • Prohibited misrepresentations and fraud in the sale of securities
  • Created the Securities and Exchange Commission (SEC)


Investment Company Act of 1940 and Investment Advisers Act of 1940


Bank Holding Company Act and Douglas Amendment (1956)

  • Clarified the status of bank holding companies (BHCs)
  • Gave the Federal Reserve regulatory responsibility for BHCs


Depository Institutions Deregulation and Monetary Control Act (DIDMCA) of 1980

  • Gave thrift institutions wider latitude in activities
  • Approved NOW and sweep accounts nationwide
  • Phased out interest-rate ceilings on deposits
  • Imposed uniform reserve requirements on depository institutions
  • Eliminated usury ceilings on loans
  • Increased deposit insurance to $100,000 per account


Depository Institutions Act of 1982 (Garn-St. Germain)

  • Gave the FDIC and the FSLIC emergency powers to merge banks and thrifts across state lines
  • Allowed depository institutions to offer money market deposit accounts (MMDAs)
  • Granted thrifts wider latitude in commercial and consumer lending


Competitive Equality in Banking Act (CEBA) of 1987

  • Provided $10.8 billion to the FSLIC
  • Made provisions for regulatory forbearance in depressed areas


Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) of 1989

  • Provided funds to resolve S&L failures
  • Eliminated the FSLIC and the Federal Home Loan Bank Board
  • Created the Office of Thrift Supervision to regulate thrifts
  • Created the Resolution Trust Corporation to resolve insolvent thrifts
  • Raised deposit insurance premiums
  • Reimposed restrictions on S&L activities


Federal Deposit Insurance Corporation Improvement Act (FDICIA) of 1991

  • Recapitalized the FDIC
  • Limited brokered deposits and the too-big-to-fail policy
  • Set provisions for prompt corrective action
  • Instructed the FDIC to establish risk-based premiums
  • Increased examinations, capital requirements, and reporting requirements
  • Included the Foreign Bank Supervision Enhancement Act (FBSEA), which strengthened the Fed’s authority to supervise foreign banks


Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994

  • Overturned prohibition of interstate banking
  • Allowed branching across state lines


Gramm-Leach-Bliley Financial Services Modernization Act of 1999

  • Repealed Glass-Steagall and removed the separation of banking and securities industries


Sarbanes-Oxley Act of 2002

  • Created Public Company Accounting Oversight Board (PCAOB)
  • Prohibited certain conflicts of interest
  • Required certification by CEO and CFO of financial statements and independence of audit committee


Federal Deposit Insurance Reform Act of 2005

  • Merged the Bank Insurance Fund and the Savings Association Insurance Fund
  • Increased deposit insurance on individual retirement accounts to $250,000 per account
  • Authorized FDIC to revise its system of risk-based premiums


Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010

  • Creates Consumer Financial Protection Bureau to regulate mortgages and other financial products
  • Routine derivatives required to be cleared through central clearinghouses and exchanges
  • New government resolution authority to allow government takeovers of financial holding companies
  • Creates Financial Stability Oversight Council to regulate systemically important financial institutions
  • Bans banks from proprietary trading and owning large percentage of hedge funds