Garn-St. Germain Depository Institutions Act

The Garn-St. Germain Depository Institutions Act of 1982 was a law passed by the United States Congress in 1982 that was intended to help depository institutions (banks and thrifts) recover from the savings and loan crisis. The act allowed depository institutions to offer a wider variety of financial products, including adjustable-rate mortgages (ARMs), and increased the amount of federal deposit insurance from $100,000 to $100,000 per depositor.

The act was named after its two sponsors, Congressman Jake Garn of Utah and Senator Bill St. Germain of Louisiana. It was signed into law by President Ronald Reagan on October 15, 1982.

The Garn-St. Germain Act was a controversial law that has been blamed for contributing to the subprime mortgage crisis of 2007-2008. Critics of the act argue that it allowed depository institutions to take on too much risk by offering ARMs and other risky loans. They also argue that the increase in federal deposit insurance encouraged depositors to take on more risk, knowing that their deposits were backed by the federal government.

Supporters of the Garn-St. Germain Act argue that it was necessary to help depository institutions recover from the savings and loan crisis. They also argue that the act did not contribute to the subprime mortgage crisis and that the increase in federal deposit insurance was necessary to protect depositors.

The Garn-St. Germain Act is a complex law with a mixed legacy. It is clear that the act had a significant impact on the financial industry, but it is difficult to say definitively whether the act was a positive or negative force.