The Garn–St Germain Depository Institutions Act of 1982 (, , enacted October 15, 1982) is an

Act of Congress An Act of Congress is a statute enacted by the United States Congress. Acts may apply only to individual entities (called private laws), or to the general public ( public laws). For a bill to become an act, the text must pass through both house ...

that

deregulated Deregulation is the process of removing or reducing state regulations, typically in the economic sphere. It is the repeal of governmental regulation of the economy. It became common in advanced industrial economies in the 1970s and 1980s, as a ...

savings and loan association A savings and loan association (S&L), or thrift institution, is a financial institution that specializes in accepting savings deposits and making mortgage and other loans. The terms "S&L" or "thrift" are mainly used in the United States; simi ...

s and allowed banks to provide adjustable-rate mortgage loans. It is disputed whether the act was a mitigating or contributing factor in the savings and loan crisis of the late 1980s. The bill, whose full title was "An Act to revitalize the housing industry by strengthening the financial stability of home mortgage lending institutions and ensuring the availability of home mortgage loans," was a

Reagan Administration Ronald Reagan's tenure as the 40th president of the United States began with his first inauguration on January 20, 1981, and ended on January 20, 1989. Reagan, a Republican from California, took office following a landslide victory over ...

initiative. The bill is named after its sponsors, Congressman

Fernand St. Germain Fernand Joseph St Germain (January 9, 1928 – August 16, 2014) was an American politician from Rhode Island. He was a member of the Democratic Party and served in the Rhode Island House of Representatives and the United States House of Rep ...

, Democrat of

Rhode Island Rhode Island (, like ''road'') is a U.S. state, state in the New England region of the Northeastern United States. It is the List of U.S. states by area, smallest U.S. state by area and the List of states and territories of the United States ...

, and Senator

Jake Garn Edwin Jacob "Jake" Garn (born October 12, 1932) is an American politician and member of the Republican Party who served as a United States senator representing Utah from 1974 to 1993. Garn became the first sitting member of Congress to fly in sp ...

Republican Republican can refer to: Political ideology * An advocate of a republic, a type of government that is not a monarchy or dictatorship, and is usually associated with the rule of law. ** Republicanism, the ideology in support of republics or agains ...

Utah Utah ( , ) is a state in the Mountain West subregion of the Western United States. Utah is a landlocked U.S. state bordered to its east by Colorado, to its northeast by Wyoming, to its north by Idaho, to its south by Arizona, and to its ...

. The bill had broad support in Congress, with co-sponsors including

Charles Schumer Charles Ellis Schumer ( ; born November 23, 1950) is an American politician serving as Senate Majority Leader since January 20, 2021. A member of the Democratic Party (United States), Democratic Party, Schumer is in his fourth Senate term, hav ...

and

Steny Hoyer Steny Hamilton Hoyer (born June 14, 1939) is an American politician and attorney serving as the U.S. representative for since 1981 and as House Majority Leader since 2019. A Democrat, Hoyer was first elected in a special election on May 19, 19 ...

. The bill passed overwhelmingly, by a margin of 272–91 in the House. An important consumer change was to allow anyone to place real estate, consisting of one to four dwelling units, into their own trust without triggering the

due-on-sale clause A due-on-sale clause is a clause in a loan or promissory note that stipulates that the full balance of the loan may be called due (repaid in full) upon sale or transfer of ownership of the property used to secure the note. The lender has the righ ...

. The due-on-sale clause allows lenders to foreclose on a current loan upon transfer to another. This greatly facilitates the use of trusts to pass property to heirs and minors. It may also protect the property of wealthy or risky owners against the possibility of future lawsuits or creditors, because the trust owns the property, not the individuals at risk. The bill states "... a lender may not exercise its option pursuant to a due-on-sale clause upon ... a transfer into an inter vivos trust in which the borrower is and remains a beneficiary and which does not relate to a transfer of rights of occupancy in the property (The Garn St. Germain Depository Institutions Act of 1982, (U.S.C.) 1701j-3(d)(8).) Title VIII of the act, ''Alternative Mortgage Transactions'', allowed banks to provide adjustable-rate mortgage loans. The bill's passage is considered an important shift in the Democratic Party's positioning on economic regulation, as the party had historically defended New Deal era financial regulations, but had now come to favor financial deregulation. According to a 2022 study, this shift happened as a consequence of the congressional reforms of the 1970s, which undermined parochial and Southern populist interests within the Democratic Party. These parochial and populist interests favored a decentralized banking system. The party subsequently pursued deregulatory reforms that it perceived as beneficial to savers and consumers.

Depository Institutions Deregulation and Monetary Control Act The Depository Institutions Deregulation and Monetary Control Act of 1980 (, ) (often abbreviated DIDMCA or MCA) is a United States federal financial statute passed in 1980 and signed by President Jimmy Carter on March 31. It gave the Federal Res ...

* 1989 -

Financial Institutions Reform, Recovery, and Enforcement Act of 1989 The Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA), is a United States federal law enacted in the wake of the savings and loan crisis of the 1980s. It established the Resolution Trust Corporation to close hundreds ...

* 1999 –

Gramm–Leach–Bliley Act The Gramm–Leach–Bliley Act (GLBA), also known as the Financial Services Modernization Act of 1999, () is an act of the 106th United States Congress (1999–2001). It repealed part of the Glass–Steagall Act of 1933, removing barriers in ...

* 2000 –

Commodity Futures Modernization Act of 2000 The Commodity Futures Modernization Act of 2000 (CFMA) is United States federal legislation that ensured financial products known as over-the-counter (OTC) derivatives remained unregulated. It was signed into law on December 21, 2000 by President ...

* 2002 –

Sarbanes–Oxley Act The Sarbanes–Oxley Act of 2002 is a United States federal law that mandates certain practices in financial record keeping and reporting for corporations. The act, (), also known as the "Public Company Accounting Reform and Investor Protect ...

* 2006 – Credit Rating Agency Reform Act of 2006 * 2010 –

Dodd–Frank Wall Street Reform and Consumer Protection Act The Dodd–Frank Wall Street Reform and Consumer Protection Act, commonly referred to as Dodd–Frank, is a United States federal law that was enacted on July 21, 2010. The law overhauled financial regulation in the aftermath of the Great Rece ...

References

External links

Bill summary and status

Public Law 97-320, 97th Congress, H.R. 6267: Garn–St Germain Depository Institutions Act of 1982
{{DEFAULTSORT:Garn-St. Germain Depository Institutions Act 1982 in American law United States federal banking legislation Savings and loan crisis 97th United States Congress Acts of the 97th United States Congress

See also

References

Further reading

External links