Banking deregulation is the removal of regulations governing the banking system. Banking deregulation reversed laws that were set up in the 1930s, taking away much of the federal control that was put into place as part of the New Deal.
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In 1933, the Glass-Steagall Act was passed, establishing the Federal Deposit Insurance Corporation (FDIC) and creating banking reforms and regulations which governed financial institutions in the United States, covering issues from interest rates to speculation.
First Act of Deregulation
In 1980, the Depository Institutions Deregulation and Monetary Control Act was passed, eliminating the regulation of interest rates in savings accounts, among other things.
In 1999 the Financial Services Modernization Act was passed eliminating regulations that created a separation among different branches of finance, like banks, mortgage companies, insurance companies and commercial banking institutions.
Results of Deregulation
Deregulation led to finance companies taking over other companies. Big banks bought up one, two, three, and more smaller banks. Financial institutions also became mega institutions which covered private banking, investing, mortgages and insurance.
Banking deregulation is a complex issue that many blame for today's suffering economy, demonstrating the fine line between government involvement and government interference.
Banking deregulation is the elimination of regulations in the finance industry, opening the doors to larger financial institutions capable of handling more than just one facet of the finance industry.