Answer:
The 1980s policies of deregulation caused the savings and loan crisis in the United States. The deregulation allowed the savings and loan institutions to offer a wider variety of products and there was less regulation.
Explanation:
The banking deregulation in the United States during the 1980s allowed practices that had previously not been allowed in the financial industry, especially for the thrift banks or savings and loan institutions. Two major national legislative bills called the Depository Institutions Deregulation and Monetary Control Act (DIDMCA) signed in 1980, and the 1982 Garn-St Germain Act were implemented. The deregulation in these two acts allowed the S&Ls to offer a larger selection of financial products (including adjustable-rate mortgages), and there was less regulatory oversight, so they could offer people a high rate of interest on their deposits. It was hoped these changes would help the S&Ls to overcome their problems. When interest rates rose in the 1970s, these thrifts had difficulties because they had lent money at low fixed interest rates, so they were not earning at a rate that brought in enough capital given that now interest rates had risen. It was costing the S&Ls much more to borrow money in the short term so they were losing liquidity.
Considering the economic impact and practices of the banking industry, the two ways that the 1980s policy of bank deregulation affected banking include "enabling the banks to compete with international financial institutions.
Also, it allows the banks in the United States to maintain autonomy and decide their use of capital.
This banking deregulation also allows banks to invest their money into securities.
Hence, in this case, it is concluded that the banking deregulation of 1980 had a positive impact on the banking sector of the United States.
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