Barney Frank

Alan Greenspan on the Bank Industry, Restructuring Federal Reserve Loans (1991)

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• published: 27 Sep 2015
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Banking in the United States is regulated by both the federal and state governments. The five largest banks in the United States at December 31, 2011 were JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, and Goldman Sachs.[1] In December 2011, the five largest banks' assets were equal to 56 percent of the U.S. economy, compared with 43 percent five years earlier. The U.S. finance industry comprised only 10% of total non-farm business profits in 1947, but it grew to 50% by 2010. Over the same period, finance industry income as a proportion of GDP rose from 2.5% to 7.5%, and the finance industry's proportion of all corporate income rose from 10% to 20%. The mean earnings per employee hour in finance relative to all other sectors has closely mirrored the share of total U.S. income earned by the top 1% income earners since 1930. The mean salary in New York City's finance industry rose from $80,000 in 1981 to $360,000 in 2011, while average New York City salaries rose from $40,000 to $70,000. In 1988, there were about 12,500 U.S. banks with less than $300 million in deposits, and about 900 with more deposits, but by 2012, there were only 4,200 banks with less than $300 million in deposits in the U.S., and over 1,800 with more. American banking is closely linked to the UK; in 2014, the biggest US banks held almost 70 percent of their on and off-balance sheet assets there. Legislation passed by the federal government during the 1980s, such as the Depository Institutions Deregulation and Monetary Control Act of 1980 and the Garn–St. Germain Depository Institutions Act of 1982, reduced the distinctions between banks and other financial institutions in the United States. This legislation is frequently referred to as "deregulation," and it is often blamed for the failure of over 500 savings and loan associations between 1980 and 1988, and the subsequent failure of the Federal Savings and Loan Insurance Corporation (FSLIC) whose obligations were assumed by the FDIC in 1989. However, some critics of this viewpoint, particularly libertarians, have pointed-out that the federal government's attempts at deregulation granted easy credit to federally insured financial institutions, encouraging them to overextend themselves and (thus) fail. The savings and loan crisis of the 1980s and 1990s was the failure of 747 of the 3,234 savings and loan associations in the United States. "As of December 31, 1995, RTC estimated that the total cost for resolving the 747 failed institutions was $87.9 billion." The remainder of the bailout was paid for by charges on savings and loan accounts—which contributed to the large budget deficits of the early 1990s.[56] The concomitant slowdown in the finance industry and the real estate market may have been a contributing cause of the 1990–1991 economic recession. Between 1986 and 1991, the number of new homes constructed per year dropped from 1.8 million to 1 million, which was at the time the lowest rate since World War II. Until 1989, national banks (those with national charters) were required to participate in the FDIC, while state banks either were required to obtain FDIC insurance by state law or could join voluntarily (usually in an attempt to bolster their appearance of solvency). After enactment of the Federal Deposit Insurance Corporation Improvement Act of 1989 (FDICIA), all commercial banks that accepted deposits were required to obtain FDIC insurance and to have a primary federal regulator (the Fed for state banks that are members of the Federal Reserve System, the FDIC for "nonmember" state banks, and the Office of the Comptroller of the Currency for all National Banks). Note: Federal credit unions are regulated by National Credit Union Administration (NCUA). Savings & Loan Associations (S&L;) and Federal savings banks (FSB) are regulated by the Office of Thrift Supervision (OTS). The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 amended the laws governing federally chartered banks in order to restore the laws' competitiveness with the recently relaxed laws governing state-chartered banks. The late-2000s financial crisis is considered by many economists to be the worst financial crisis since the Great Depression.[67] It was triggered by a liquidity shortfall in the United States banking system[68] and has resulted in the collapse of large financial institutions, the bailout of banks by national governments, and downturns in stock markets around the world. In many areas, the housing market has also suffered, resulting in numerous evictions, foreclosures and prolonged vacancies. It contributed to the failure of key businesses, declines in consumer wealth estimated in the trillions of U.S. dollars, and a significant decline in economic activity, leading to a severe global economic recession in 2008. https://en.wikipedia.org/wiki/Banking_in_the_United_States