Financial Deregulation and Monetary Control: Historical Perspective and Impact of the 1980 Act

by Thomas F. Cargill, Gillian G. Garcia

Overview

The Depository Institution Deregulation and Monetary Control Act of 1980 has been the most comprehensive attempt at financial and monetary reform since the 1930s. Based on the authors' experience as visting scholars in the Division of Banking Research and Economic Policy at the Office of the Comptroller in 1980, this study explores the act's historical antecedents, its purpose, and its potential effects on the financial system and the conduct of monetary policy during the 1980s. The authors examine the strengths and weaknesses of this important first step in the series of reforms required to improve monetary control and create a more flexible, efficient, and competitive financial system.

Product Details

ISBN-13:	9780817975937
Publisher:	Hoover Institution Press
Publication date:	08/01/2013
Series:	Hoover Institution Press Publication
Sold by:	Barnes & Noble
Format:	eBook
Pages:	166
File size:	640 KB

About the Author

 Both authors have written extensively for economic journals. Thomas F. Cargill recived his Ph.D. in economics at the University of California, Davis, and is now professor of economics at the University of Nevada. He is the author of Money, the Financial System, and Monetary Policy (1979). Gillian G. Garcia was born in England and received much of her education there. A former Hoover Institution national fellow, she is assistant professor in the School of Business Administration at the University of California, Berkeley, and coauthor (with R. J. O'Brien) of Mathematics for Economists and Social Scientists (1970).

Table of Contents

CONTENTS

Figures and Tables


Preface


1.
ISSUES IN FINANCIAL REFORM AND MONETARY CONTROL: LATE 1979 AND EARLY 1980

Financial Reform


Monetary Control by the Federal Reserve


The Study in Brief



2.
STRUCTURE OF THE FINANCIAL SYSTEM: THE GREAT DEPRESSION TO MARCH 1980

Financial Reform in the 1930s


The Emphasis on Competitive Constraints


Problems with the Structure of the Financial System


Term Structure Risk: An Illustration


Proposed Solutions to the Structural Problems


Impact of the Studies



3.
FRAMEWORK OF MONETARY CONTROL: THE GREAT DEPRESSION TO OCTOBER 1979

Establishment of the Federal Reserve System


The Great Depression


The War Years


Postwar Years


The Renaissance of Monetary Policy


The Federal Reserve Econometric Model


The Evolution of Policy Procedures


Disappointment with Federal Reserve Policy



4.
DEREGULATION AND MONETARY CONTROL: THE CATALYSTS

The Inflationary Environment


Circumvention of the Regulations


Role of Competition in the 1930s Collapse of the Banking System


Influence of the Monetarist-Keynesian Debate



5.
MAIN FEATURES OF THE 1980 ACT

Financial Reform and Structural Change


Monetary Control and the Federal Reserve


Comparison of the Act with Previous Attempts at Structural Changes



6.
IMPACT OF DEREGULATION ON THE FINANCIAL SYSTEM

Improved Efficiency and Stability of the Financial System


Effects on the Banking and Thrift Sectors


The New England Experience


Impact on the Viability of Depository Institutions


Some Effects on Nondepository Institutions



7.
IMPLICATIONS FOR MONETARY POLICY

Federal Reserve Independence


Policy Procedures: The Channels of Monetary Policy


Policy Before October 1979


The New Monetary Policy


Implications for the Conduct of Monetary Policy


The New Money Multipliers


Inconsistencies in the New Money Definitions


Inconsistencies in the New Configuration of Reserve Requirements


The Supply of Credit



8.
THE FUTURE: PROBLEMS REMAIN

Maintaining the Viability of Depository Institutions


Remaining Constraints and Reregulation


Term Structure Risk


Conduct of Monetary Policy


Lagged Reserve Accounting



9.
SUMMARY AND OVERVIEW


10.
DEREGULATION AND MONETARY CONTROL FIFTEEN MONTHS LATER: A POSTSCRIPT

The First Year: The Financial System


The First Year: Monetary Policy


The Second Year: The Financial System


The Second Year: Monetary Policy


Solutions for the Remaining Problems


Postscript: Concluding Comments



APPENDIX

A Formal Expression of Federal Reserve Policy Procedures



Notes


Bibliography


Index