A law passed by Congress with the intent of making savings and loan institutions more competitive. The best known of its many provisions was a section that enabled these so-called thrifts to offer money market deposit accounts with no interest rate ceiling, allowing them to compete more effectively with money market mutual funds for capital.

The Act also raised the ceiling on their direct investments in nonresidential real estate from 20-40% of assets, and their consumer lending from 20-30% of assets. The Act is more formally known as the Garn-St. Germain Depository Institutions Act after its sponsors, Congressman Fernand St. Germain and Senator Jake Garn.


Although welcomed at the time, critics say that the Act led to or exacerbated the savings and loan crisis of the late 1980s. They argue that - by raising the thrifts' cost of funds and allowing greater diversification in their loan activities - the thrifts were both forced and encouraged to take on more assets with greater risk in relatively unknown areas. Many thrifts were ill-equipped to manage these assets, and a significant portion eventually went sour.