DEPOSITORY INSTITUTIONS DEREGULATION COMMITTEE €“ DIDC

A six-member committee established by the Depository Institutions Deregulation and Monetary Control Act of 1980, which had the primary purpose of phasing out interest rate ceilings on deposit accounts by 1986.

The six members of the Committee were the Secretary of the Treasury, the Chairman of the Board of Governors of the Federal Reserve System, the Chairman of the FDIC, the Chairman of the Federal Home Loan Bank Board (FHLBB), and the Chairman of the National Credit Union Administration Board (NCUAB) as voting members, and the Comptroller of the Currency as a non-voting member.

Besides the phase out of interest rate ceilings, the Committee's other tasks included devising new financial products that would allow thrifts to compete with with money funds and to eliminate ceilings on time deposits. But its overall purpose was to deregulate bank interest rates.

Since 1933, Regulation Q had limited the interest rates banks could pay on their deposits; these restrictions were extended to Savings & Loans in 1966. As inflation rose sharply in the late 1970s, however, more money was being withdrawn from regulated passbook savings accounts than was deposited, and S&Ls found it increasingly difficult to obtain and secure funds. At the same time, they carried a huge number of long-term loans at low interest rates. As interest rates kept rising, the thrifts found themselves increasingly unprofitable and becoming insolvent. The Monetary Control Act of 1980 and the DIDC were all part of an effort to restore solvency to the thrift industry - an effort that ultimately failed, as S&L managements were ill-equipped to operate in the deregulated environment, that was created.