Garn–St Germain Depository Institutions Act

Garn–St Germain Depository Institutions Act (1982)

1) Link to the Text of the Act
Read the statute (12 U.S.C. §§ 1464, 1701j–3, 3801 et seq.)

2) 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.

3) 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.

4) 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.

5) Who or What It Controls

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

6) Key Sections / Citations

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

7) Recent Changes or Live Controversies

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  • Many provisions effectively rolled back or superseded by FIRREA (1989).

8) Official Sources