ABSTRACT
The passage of the Depository Institutions Deregulation and Monetary Control Act (DIDMCA) of 1980 and the Garn-St Germain Act of 1982 opened a new era of challenges to the financial service sector in general and the thrift industry in particular. The birth of money market funds under the pressures of the inflationary growth of the 1970s, and the roller coaster performance of the thrifts ever since, brought out clearly the threats to the survival of the thrift industry. Bounded by the tradition of dual banking system thrifts were burdened with mortgage assets most exposed to interest rate risks. The significant flight of deposits during the late 1970s from the thrifts hampered their ability to reposition their asset portfolio towards more interest-sensitive lending options. The changes initiated by the Acts did provide a reprieve from the certain demise of these institutions due to disintermediation (see Gillian et al. 1983). The Acts opened a whole set of options including MMDAs and broadened asset acquisition powers for the thrifts as a vehicle to ensure their competitive survival.
