Fin Policy Test 1

Depository Institutions Deregulation and Monetary Control Act of 1980 (DIDMCA)

) Established "NOW Accounts." Began the phase-out of interest rate ceilings on deposits. Established the Depository Institutions Deregulation Committee. Granted new powers to thrift institutions. Raised the deposit insurance ceiling to $100,000.

Federal Deposit Insurance Reform Act of 2005

Academicians have long been arguing for amendment to the FDIC system as its current mgmt style was untenable and could readily fail. On February 8, 2006, the President signed The Federal Deposit Insurance Reform Act of 2005 (the Reform Act) into law. This change was made effective March 31, 2006. The Reform Act merged the Bank Insurance Fund (BIF) and the Saving Association Insurance Fund (SAIF) into a new fund called the Deposit Insurance Fund (DIF). Increasing the coverage limit for retirement accounts to $250,000 and indexing the coverage limit for retirement accounts to inflation as with the general deposit insurance coverage limit. This change was made effective April 1, 2006.

Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, ("USA PATRIOT Act")

Authorizes and requires additional record keeping and reporting by financial institutions and greater scrutiny of accounts held for foreign banks and of private banking conducted for foreign persons. Designed to prevent terrorists and others from using the U.S. financial system anonymously to move funds obtained from or destined for illegal activity. The law requires financial institutions to establish anti-money laundering programs and imposes various standards on money-transmitting businesses. It amends criminal anti-money laundering statutes and procedures for forfeitures in money laundering cases and requires further cooperation between financial

International Banking Act of 1978

Brought foreign banks within the federal regulatory framework. Required deposit insurance for branches of foreign banks engaged in retail deposit taking in the U.S.

The first period begins with the?

Civil War era and includes the creation of national banks and the Federal Reserve System.

Fair and Accurate Credit Transactions Act of 2003 (FACT)

Contains extensive amendments to the Fair Credit Reporting Act and is designed to improve the accuracy and transparency of the national credit reporting system and preventing identity theft and assisting victims. It contains provisions enhancing consumer rights in situations involving alleged identity theft, credit scoring, and claims of inaccurate information. It requires use of consumer reports to provide certain information to consumers who are offered credit on terms that are materially less favorable than the offers that the creditor makes to a substantial portion of its consumers. Companies that share consumer information among affiliated companies, must provide consumers notice and an opt-out for sharing of such information if the information will be used for marketing purposes.

Financial Institutions Regulatory and Interest Rate Control Act of 1978 (FIRIRCA)

Created the Federal Financial Institutions Examination Council. Established limits and reporting requirements for bank insider transactions. Created major statutory provisions regarding electronic fund transfers.

Cons for Glass Steagall

Depository institutions will now operate in "deregulated" financial markets in which distinctions between loans, securities, and deposits are not well drawn. They are losing market shares to securities firms that are not so strictly regulated, and to foreign financial institutions operating without much restriction from the Act. Conflicts of interest can be prevented by enforcing legislation against them, and by separating the lending and credit functions through forming distinctly separate subsidiaries of financial firms. The securities activities that depository institutions are seeking are both low-risk by their very nature and would reduce the total risk of organizations offering them - by diversification. In much of the rest of the world, depository institutions operate simultaneously and successfully in both banking and securities markets. Lessons learned from their experience can be applied to our national financial structure and regulation. The Act was repealed in parts by DIDMCA (1980) and Gramm-Leach-Bliley(1999

Bank Secrecy Act (BSA) of 1970 More formally known as The Financial Recordkeeping and Reporting of Currency and Foreign Transactions Act of 1970.

Designed to aid the federal government in detecting illegal activity through tracking certain monetary transactions. Requires financial institutions to file reports of transactions conducted in currency in amounts over $10,000. Requires recordkeeping on beneficiaries and originators of funds transfers in amounts over $3,000. Requires information gathering and recordkeeping on sales of monetary equivalents (money orders, cashier's checks, traveler's checks) in amounts between $3,000 and $10,000. Establishes certain exemptions to the currency transaction reporting requirements.

National Bank Act of 1864

Established a national banking system and the chartering of national banks.

Competitive Equality Banking Act of 1987 (CEBA)

Established new standards for expedited funds availability. Recapitalized the Federal Savings & Loan Insurance Company (FSLIC). Expanded FDIC authority for open bank assistance transactions, including bridge banks

Banking Act of 1935

Established the FDIC as a permanent agency of the government

Banking Act of 1933 (Glass-Steagall Act)

Established the FDIC as a temporary agency; Separated commercial banking from investment banking, establishing them as separate lines of commerce

Federal Reserve Act of 1913

Established the Federal Reserve System as the central banking system of the U.S

Federal Deposit Insurance Reform Act of 2005

Establishing a range of 1.15 percent to 1.50 percent within which the FDIC Board of Directors may set the Designated Reserve Ratio (DRR). Allowing the FDIC to manage the pace at which the reserve ratio varies within this range. Eliminating the restrictions on premium rates based on the DRR and granting the FDIC Board the discretion to price deposit insurance according to risk for all insured institutions regardless of the level of the reserve ratio. Granting a one-time initial assessment credit (of approximately $4.7 billion) to recognize institutions' past contributions to the fund. The Federal Deposit Insurance Reform Conforming Amendments Act of 2005 requires the FDIC to conduct studies of three issues: (1) further potential changes to the deposit insurance system, (2) the appropriate deposit base in designating the reserve ratio, and (3) the Corporation's contingent loss reserving methodology and accounting for losses. The 2005 act requires the Comptroller General to conduct studies of (1) federal bank regulators' administration of the prompt corrective action program and recent changes to the FDIC deposit insurance system, and (2) the organizational structure of the FDIC.

Depository Institutions Act of 1982 (Garn-St Germain)

Expanded FDIC powers to assist troubled banks. Established the Net Worth Certificate program. Expanded the powers of thrift institutions.

Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA)

FIRREA's purpose was to restore the public's confidence in the savings and loan industry. FIRREA abolished the Federal Savings & Loan Insurance Corporation (FSLIC), and the FDIC was given the responsibility of insuring the deposits of thrift institutions in its place. The FDIC insurance fund created to cover thrifts was named the Savings Association Insurance Fund (SAIF), while the fund covering banks was called the Bank Insurance Fund (BIF). FIRREA also abolished the Federal Home Loan Bank Board. Two new agencies, the Federal Housing Finance Board (FHFB) and the Office of Thrift Supervision (OTS), were created to replace it. Finally, FIRREA created the Resolution Trust Corporation (RTC) as a temporary agency of the government. The RTC was given the responsibility of managing and disposing of the assets of failed institutions. An Oversight Board was created to provide supervisory authority over the policies of the RTC, and the Resolution Funding Corporation (RFC) was created to provide funding for RTC operations

Crime Control Act of 1990 Title XXV of the Crime Control Act, known as the Comprehensive Thrift and Bank Fraud Prosecution and Taxpayer Recovery Act of 1990,

Greatly expanded the authority of Federal regulators to combat financial fraud. This act prohibited undercapitalized banks from making golden parachute and other indemnification payments to institution-affiliated parties. It also increased penalties and prison time for those convicted of bank crimes, increased the powers and authority of the FDIC to take enforcement actions against institutions operating in an unsafe or unsound manner, and gave regulators new procedural powers to recover assets improperly diverted from financial institutions.

Real Estate Settlement Procedures Act of 1974 (RESPA) RESPA is a

HUD enforced consumer protection statute designed to help homebuyers be better shoppers in the home buying process. The statute directs the HUD Secretary to prepare and distribute special booklets to help persons borrowing money to finance the purchase of residential real estate to better understand the nature and costs of real estate settlement services. RESPA requires that consumers receive disclosures at various times in the transaction and outlaws kickbacks that increase the cost of settlement services. It mandates the use of a standard form for the statement of real estate settlement costs which shall be used in all transactions in the United States which involve federally related mortgage loans. Requires such form to conspicuously and clearly itemize the charges imposed upon both the borrower and the seller in connection with the settlement. Prohibits insured and other banks from making a federally related mortgage loan to any person unless specified information has been disclosed to the bank.

The American Financial Stability Act of 2010 is also referred to as the Dodd bill

It was later enacted as part of the legislation known as the Dodd-Frank Act of 2010 or the Wall Street Reform and Consumer Protection Act.

The Bankruptcy Act of 1898 aka "Nelson Act" was enacted July 1, 1898.

It was the first United States Act of Congress involving Bankruptcy that gave companies an option of being protected from creditors. It was amended in 1938 and again in 1978

Economic Growth and Regulatory Paperwork Reduction Act of 1996

Modified financial institution regulations, including regulations impeding the flow of credit from lending institutions to businesses and consumers. Amended the Truth in Lending Act and the Real Estate Settlement Procedures Act of 1974 to streamline the mortgage lending process. Amended the FDIA to eliminate or revise various application, notice, and recordkeeping requirements to reduce regulatory burden and the cost of credit. Amended the Fair Credit Reporting Act to strengthen consumer protections relating to credit reporting agency practices. Established consumer protections for potential clients of consumer repair services. Clarified lender liability and federal agency liability issues under the CERCLA. Directed FDIC to impose a special assessment on depository institutions to recapitalize the SAIF, aligned SAIF assessment rates.

Gramm-Leach-Bliley Act of 1999 Repeals rest of the Glass-Steagall Act

Modifies portions of the Bank Holding Company Act to allow affiliations between banks and insurance underwriters. While preserving authority of states to regulate insurance, the act prohibits state actions that have the effect of preventing bank-affiliated firms from selling insurance on an equal basis with other insurance agents. Law creates a new financial holding company under section 4 of the BHCA, authorized to engage in: underwriting and selling insurance and securities, conducting both commercial and merchant banking, investing in and developing real estate and other "complimentary activities." Allows national banks to underwrite municipal bonds. Restricts the disclosure of nonpublic customer information by requiring financial institutions to provide customers the opportunity to "opt-out" of the sharing of the customers' nonpublic information with unaffiliated third parties. The Act imposes criminal penalties on anyone who obtains customer information from a financial institution under false pretenses. Amends the Community Reinvestment Act to require that financial holding companies can not be formed before their insured depository institutions receive and maintain a satisfactory CRA rating. Also requires public disclosure of bank-community CRA-related agreements. Grants some regulatory relief to small institutions in the shape of reducing the frequency of their CRA examinations if they have received outstanding or satisfactory ratings. Prohibits affiliations and acquisitions between commercial firms and unitary thrift institutions. Makes significant changes in the operation of the Federal Home Loan Bank System, easing membership requirements and loosening restrictions on the use of FHLB funds.

The second period encompasses the?

New Deal and its aftermath, during which a wall was erected and reinforced between commerce and banking.

Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 .

Permits adequately capitalized and managed bank holding companies to acquire banks in any state one year after enactment. Concentration limits apply and CRA evaluations by the Federal Reserve are required before acquisitions are approved. Beginning June 1, 1997, allows interstate mergers between adequately capitalized and managed banks, subject to concentration limits, state laws and CRA evaluations. Extends the statute of limitations to permit the FDIC and RTC to revive lawsuits that had expired under state statutes of limitations.

To Amend the National Banking Laws and the Federal Reserve Act (Mcfadden Act (1927))

Prohibited interstate banking.

Bank Holding Company Act of 1956

Required Federal Reserve Board approval for the establishment of a bank holding company. Prohibited bank holding companies headquartered in one state from acquiring a bank in another state.

RTC Completion Act

Requires the RTC to adopt a series of management reforms and to implement provisions designed to improve the agency's record in providing business opportunities to minorities and women when issuing RTC contracts or selling assets. Expands the existing affordable housing programs of the RTC and the FDIC by broadening the potential affordable housing stock of the two agencies. Increases the statute of limitations on RTC civil lawsuits from three years to five, or to the period provided in state law, whichever is longer. Provides final funding for the RTC and establishes a transition plan for transfer of RTC resources to the FDIC. The RTC's sunset date is set at Dec. 31, 1995, at which time the FDIC will assume its conservatorship and receivership functions.

Federal Deposit Insurance Act of 1950

Revised and consolidated earlier FDIC legislation into one Act framing the basic authority for the operation of the FDIC.

Sarbanes-Oxley Act of 2002

Sarbanes-Oxley Act of 2002 Establishes the Public Company Oversight Board to regulate public accounting firms that audit publicly traded companies. It prohibits such firms from providing other services to such companies along with the audit. It requires that CEOs and CFOs certify the annual and quarterly reports of publicly traded companies. The Act authorizes, and in some cases requires, that the Securities and Exchange Commission (SEC) issue rules governing audits. The law requires that insiders may no longer trade their company's securities during pension fund blackout periods. It mandates various studies including a study of the involvement of investment banks and financial advisors in the scandals preceding the legislation. Also included are whistle blower protections, new federal criminal laws, including a ban on alteration of documents.

Fair Credit Reporting Act of 1971

Specifies the purposes for which a consumer report (often referred to as a credit report) or an investigative consumer may be obtained and the procedures which must be followed. This law places duties on the consumer reporting agency, reporting entities, and users of reports, and specifies certain protections for consumers.

The Check Clearing for the 21st Century Act of 2003 ("Check 21 Act")

The Act sets forth a statutory framework under which a substitute check is the legal equivalent of an original check for all purposes. Defines check truncation as removing an original paper check from the check collection or return process and sending in lieu of it a substitute check or, by agreement, information relating to the original check (including data taken from the MICR line of the original check or an electronic image of the original check), whether with or without subsequent delivery of the original paper check. The statute prescribes implementation guidelines, establishes a one-year statute of limitations for claims arising under the act with a comparative negligence standard for breach of warranty or failure to comply with requirements, and a consumer education requirement. The Board of Governors of the Federal Reserve System must study and report to Congress on several items including: 1) the percentage of total checks cleared in which the paper check is not returned to the paying bank; (2) the extent to which banks make funds available to consumers for local and nonlocal checks before the expiration of maximum hold periods; (3) the length of time within which depositary banks learn of the nonpayment of local and nonlocal checks; (4) the increase or decrease in check-related losses over the study period; and (5) the appropriateness of certain time periods and amount limits applicable under the Expedited Funds Availability Act, as in effect on the date of enactment of this Act.

Bankruptcy Abuse Prevention and Consumer Protection Act of 2005

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (the "Act") was passed by Congress and signed into law by President Bush on April 20, 2005 and makes substantial revisions to the Bankruptcy Code and related statutes. These revisions, the most significant changes in bankruptcy law and practice since the adoption of the Bankruptcy Code in 1978, affect all areas of bankruptcy practice, including consumer, business, tax, and international bankruptcy law. The Act is generally viewed as making it more difficult for individuals to have their unsecured non-priority debts discharged in bankruptcy

Community Reinvestment Act of 1977 (CRA)

The Community Reinvestment Act is intended to encourage depository institutions to help meet the credit needs of the communities in which they operate, including low- and moderate-income neighborhoods. It was enacted by the Congress in 1977 and was amended in 1978, 1992 and 1994.

DIDMCA Depository Institutions Deregulation and Monetary Control Act (1980)

The act has nine titles covering a wide range of subjects, including reserve requirements, access to and pricing of Federal Reserve services, a phase out of Regulation Q and new powers for thrift institutions. Prohibit interest payments Requires reserves of 3% up to 25 mill and up to 14% afterwards Gradual phase out of interest rate ceilings Permits NOW accounts, transfers between checking and savings, more loan authority to savings and loans, increased FDIC insurance to 100k, simplified required disclosures. Prohibited foreign control of domestic banks until 1981 Prohibited holding companies to cross state lines unless the state allowed it.

Pros for Glass Steagall Act

The argument for preserving Glass-Steagall: Conflicts of interest involving lending and investing by the same entity, which led to abuses that originally produced the Act. Depository institutions wield much financial power, by virtue of their control of other people's money, therefore this power must be controlled to ensure soundness and competition in the market for funds, whether loans or investments. Securities activities can be risky, leading to enormous losses. Such losses could threaten the integrity of deposits. In turn, the Government insures deposits and could be required to pay large sums if depository institutions were to collapse as the result of securities losses. Depository institutions are supposed to be managed to limit risk. Their managers thus may not be conditioned to operate prudently in more

The third or current period is?

The third or current period is characterized by statutes designed to modernize the financial services industry and, consistent with safety and soundness, eliminate barriers to the provision of nationwide integrated financial services.

The Bankruptcy Act of 1978 was enacted on November 6, 1978.

This Act prohibits employment discrimination against anyone who has declared bankruptcy Made it easier for businesses and individuals to file bankruptcies and reorganize

Penalties for BSA

Willful violators can face a civil fine of $25,000 to $100,000 per fine. (financial institutions, affiliates or persons can be charged) Missing or Misstated reports face a civil fine of not more than the amount of the instrument in question. There additional penalties for structured transactions, foreign financial agencies, negligence and international counter money laundering. International money laundering could be up to $1,000,000 per fine.

Riegle Community Development and Regulatory Improvement Act of 1994

a wholly owned government corporation that would provide financial and technical assistance to CDFIs. Contains several provisions aimed at curbing the practice of "reverse redlining" in which non-bank lenders target low and moderate income homeowners, minorities and the elderly for home equity loans on abusive terms. Relaxes capital requirements and other regulations to encourage the private sector secondary market for small business loans. Contains more than 50 provisions to reduce bank regulatory burden and paperwork requirements. Requires the Treasury Dept. to develop ways to substantially reduce the number of currency transactions filed by financial institutions. Contains provisions aimed at shoring up the National Flood Insurance Program.

Housing and Community Development Act of 1992 Established regulatory structure for government-sponsored enterprises (GSEs)

combated money laundering, and provided regulatory relief to financial institutions.

The Bankruptcy Act of 1938, also known as the Chandler Act,

expanded voluntary access to the bankruptcy system and made voluntary petitions more attractive to debtors. The Chandler Act gave authority to the Securities and Exchange Commission in the administration of bankruptcy filings. The Act incorporated the current trustee appointment in the reorganization process instead of the investment banks.

Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA) FDICIA

greatly increased the powers and authority of the FDIC. Major provisions recapitalized the Bank Insurance Fund and allowed the FDIC to strengthen the fund by borrowing from the Treasury. The act mandated a least-cost resolution method and prompt resolution approach to problem and failing banks and ordered the creation of a risk-based deposit insurance assessment scheme. Brokered deposits and the solicitation of deposits were restricted, as were the non-bank activities of insured state banks. FDICIA created new supervisory and regulatory examination standards and put forth new capital requirements for banks. It also expanded prohibitions against insider activities and created new Truth in Savings provisions.

Bankruptcy laws

help people who can no longer pay their creditors get a fresh start - by liquidating assets to pay their debts or by creating a repayment plan. Bankruptcy laws also protect troubled businesses and provide for orderly distributions to business creditors through reorganization or liquidation.

The Sherman Antitrust Act

is a federal law prohibiting any contract, trust, or conspiracy in restraint of interstate or foreign trade. Enacted in July 2, 1890, the Sherman Antitrust Act was the first major legislation passed to address oppressive business practices associated with cartels and oppressive monopolies. Even though the title of the act refers to trusts, the Sherman Antitrust Act actually has a much broader scope. It provides that no person shall monopolize, attempt to monopolize or conspire with another to monopolize interstate or foreign trade or commerce, regardless of the type of business entity. Congress passed the Act to combat anticompetitive practices, reduce market domination by individual corporations, and preserve unfettered competition as the rule of trade. Penalties for violating the act can range from civil to criminal penalties; an individual violating these laws may be jailed for up to three years and fined up to $350,000 per violation. Corporations may be fined up to $10 million per violation. Like most laws, the Sherman Antitrust Act has been expanded by court rulings and other legislative amendments since its passage. One such amendment came in the form of the Clayton Act.

There are primarily two distinct periods in banking legislation?

regulation and deregulation

The three requisite part of the US financial system

retail, investment or central banking

The purpose of DIDMCA

the sole purpose is to increase the amount of reserves to a level essential for the conduct of monetary policy To provide for an orderly phase-out and ultimate elimination of interest rate ceilings

The Bank Secrecy Act(1970) or Currency Transactions reporting Act or Anti-Money Launder Act

was designed to help prevent and detect money laundering activities. Financial Institutions are required to report suspicious activity that might signal money laundering, tax evasion or other criminal activities. They must also report cash transactions that total $10,000 on a daily basis. Reports used are called Suspicious Activity Report (SARs). This Act has been amended several times since inception.

The Clayton Antitrust Act of 1914

was enacted October 15, 1914, to add further substance to the U.S. antitrust law regime by seeking to prevent anticompetitive practices. There are 4 sections of the bill that proposed substantive changes in the antitrust laws by way of supplementing the Sherman Act of 1890. In those sections, the Act thoroughly discusses the following four principles of economic trade and business: price discrimination between different purchasers if such a discrimination substantially lessens competition or tends to create a monopoly in any line of commerce sales on the condition that (A) the buyer or lessee not deal with the competitors of the seller or lessor ("exclusive dealings") or (B) the buyer also purchase another different product ("tying") but only when these acts substantially lessen competition mergers and acquisitions where the effect may substantially lessen competition or where the voting securities and assets threshold is met any person from being a director of two or more competing corporations, if those corporations would violate the anti-trust criteria by merging (interlocking directorates) These practices are illegal when they might substantially lessen competition or tend to create a Monopoly in any line of commerce. "the labor of a human being is not a commodity or article of commerce." The act restricted the use of the injunction against labor, and it legalized peaceful strikes, picketing, and boycotts.

The Glass Steagall Act What is the cause about this?

was enacted in 1933 and is also known as the Banking Act. This was primarily due to the bank runs that took place as a result of the The Great Depression. It was devised as a way to regulate bank's use of their assets, regulate interbank control and prevent undue diversion of funds into speculative operations or other non-bank activities. Established the FDIC and separated investment and commercial banks.

The Bank Merger Act

was enacted in order to reduce the possibility of undue concentration of one financial institution. Required federal regulators to do a comprehensive analysis of effects before approving merger application. The US department of Justice and the Supreme court may challenge the decision. Did little to stem the tide in bank merging activities. Was amended in 1966 due to a landmark decision of the Philadelphia bank which many thought was not a good decision.

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA)

which opens a new era in the history of bankruptcy law and practice, was passed by Congress and signed into law by President Bush on April 20, 2005 The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 represents an important new development in the U.S. Trustee Program's continuing efforts to improve bankruptcy processes and procedures. The Act gives the U.S. Trustee Program new responsibilities in a number of areas, including: implementing the new "means test" to determine whether a debtor is eligible for chapter 7 (liquidation) or must file under chapter 13 (wage-earner repayment plan); supervising random audits and targeted audits to determine whether a chapter 7 debtor's bankruptcy documents are accurate; certifying entities to provide the credit counseling that an individual must receive before filing bankruptcy; certifying entities to provide the financial education that an individual must receive before discharging debts; and conducting enhanced oversight in small business chapter 11 reorganization cases.