190). The Act also helped to create a "too-big-to-fail" mindset (Walter, 2004) that would have profound implications during the economic downturn of 2008 and beyond.
6.
Why did you include this piece of legislation in your list? The Act is described by Sammin (2004) as being "the biggest revision in financial services law since the Great Depression" (p. 653).
Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994
1.
What were the problems/conditions giving rise to the legislation? Rapid consolidations among the nation's banks were creating the potential for diverting needed banking resources from communities (Rose, 1997).
2.
What were the major provisions of the Act? The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (hereinafter "the Act") contained the following major provisions:
A. Bank holding companies that are adequately capitalized and managed can acquire a bank anywhere in the United States one year after this law is enacted. However, no banking firm can acquire another banking firm in a different state if the resulting institution controls at least 30% of the insured deposits held in the state involved (though a state may waive or alter this limitation if it wishes) or as much as 10% of nationwide insured deposits. The states can protect new banks from acquisition by out-of-state firms for up to five years.
B. Interstate bank holding companies that are adequately capitalized and managed may consolidate their affiliated banks acquired across state lines into branch offices via merger unless the states act to outlaw interstate branching activity. An individual state may enact laws permitting interstate branching prior to June 1, 1997, and a host state that contains a branch office of an out-of-state bank can examine and take enforcement action against that branch office.
C. If a state elects to prohibit interstate branching, banks headquartered in that state may not engage in interstate mergers.
D. For those states involved in the interstate banking system, their regulatory agencies will be permitted to set up cooperative agreements to supervise multistate depository institutions.
E. Federal banking agencies must consult with community organizations before closing a branch office owned by an interstate banking company if the branch is located in a low- or moderate-income area.
F. A federally insured bank can branch de novo into a state where it has no existing office but only if state law expressly permits de novo entry via branching. States can tax branches of out-of-state banks as if they were full-service banks operating in that state (Rose, 1997, p. 43).
3.
What were the significant effects or outcomes arising form the legislation? Following the passage of the Act, well-capitalized and well-managed bank holding companies were permitted to acquire banks in any state in the country (Rose, 1997). According to Walter (2004), one of the most significant effects of the Act was to increase merger premiums by approximately 35% as a result of the deregulation that resulted from the enactment of the Act because it eliminated geographic restrictions for bank operations in the U.S. (Walter, 2004).
4.
Did the legislation...
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Thirdly, health care costs were rising. "The number of people without any health insurance climbed to 15.9% in 2005 from 14.2% in 2000, and the share of people with employer-provided health insurance dropped to 59.5% from 63.6% over the same period, according to the Census Bureau data released in 2006. The number of uninsured Americans is now the highest since 1998" (Middle Class in Turmoil). Finally, the debts were rapidly increasing.
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