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Garn–St. Germain Depository Institutions Act

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Garn–St Germain Depository Institutions Act
Great Seal of the United States
Other short titles
  • Banking Affiliates Act of 1982
  • Deposit Insurance Flexibility Act
  • Net Worth Certificate Act
  • Thrift Institutions Restructuring Act of 1982
Long titleAn Act to revitalize the housing industry by strengthening the financial stability of home mortgage lending institutions and ensuring the availability of home mortgage loans.
NicknamesAlternative Mortgage Transaction Parity Act of 1982
Enacted bythe 97th United States Congress
EffectiveOctober 15, 1982
Public law97-320
Statutes at Large96 Stat. 1469
Titles amended12 U.S.C.: Banks and Banking
U.S.C. sections amended12 U.S.C. ch. 3 § 226
Legislative history

The Garn–St Germain Depository Institutions Act of 1982 (Pub. L.Tooltip Public Law (United States) 97–320, H.R. 6267, enacted October 15, 1982) is an Act of Congress that deregulated savings and loan associations 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.[1]

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 initiative.[2]

The bill is named after its sponsors, Congressman Fernand St Germain, Democrat of Rhode Island, and Senator Jake Garn, Republican of Utah. The bill had broad support in Congress, with co-sponsors including Charles Schumer and Steny Hoyer.[3] The bill passed overwhelmingly, by a margin of 272–91 in the House.[4]

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. 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).)[5]

Title VIII of the act, Alternative Mortgage Transactions, allowed banks to provide adjustable-rate mortgage loans.[6]

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.[7]

See also[edit]


  1. ^ Leibold, Arthur (2004). "Some Hope for the Future After a Failed National Policy for Thrifts". In Barth, James R.; Trimbath, Susanne; Yago, Glenn (eds.). The Savings and Loan Crisis: Lessons from a Regulatory Failure. Milken Institute. pp. 58–59. ISBN 1-4020-7871-4. (further references: Strunk; Case (1988). Where Deregulation Went Wrong: A Look at the Causes Behind the Savings and Loan Failures in the 1980s. U.S. League of Savings Institutions. pp. 14–16. ISBN 978-0-929097-32-9.)
  2. ^ Reagan, Ronald. "Remarks on Signing the Garn–St Germain Depository Institutions Act of 1982" Archived 2008-07-06 at the Wayback Machine (1982-10-15).
  3. ^ H.R. 6267, Cosponsors Archived 2015-05-11 at the Wayback Machine.
  4. ^ H.R. 6267, Major Actions Archived 2016-01-08 at the Wayback Machine.
  5. ^ "My Analysis of the Garn st Germain Act and the Federal Regulations".
  6. ^ Pub. L.Tooltip Public Law (United States) 97–320 Full text Archived August 12, 2004, at the Wayback Machine
  7. ^ Barton, Richard (2022). "Upending the New Deal Regulatory Regime: Democratic Party Position Change on Financial Regulation". Perspectives on Politics. 22 (2): 391–408. doi:10.1017/S153759272200113X. ISSN 1537-5927. S2CID 252061496.

Further reading[edit]

  • Cornett, Marcia Millon; Tehranian, Hassan (1990). "An Examination of the Impact of the Garn–st Germain Depository Institutions Act of 1982 on Commercial Banks and Savings and Loans". Journal of Finance. 45 (1): 95–111. doi:10.2307/2328811. JSTOR 2328811.

External links[edit]