| Full title | An Act to reform, recapitalize, and consolidate the Federal deposit insurance system, to enhance the regulatory and enforcement powers of Federal financial institutions regulatory agencies, and for other purposes. |
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| Enacted by the | 101st United States Congress |
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| Public Law | Pub.L. 101-73 |
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| Major amendments | |
| Relevant Supreme Court cases | |
The Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA), Pub.L. 101-73, 103 Stat. 183, enacted August 9, 1989, is a United States federal law enacted in the wake of the savings and loan crisis of the 1980s.
It established the Resolution Trust Corporation to close hundreds of insolvent thrifts and provided funds to pay out insurance to their depositors. It transferred thrift regulatory authority from the Federal Home Loan Bank Board to the Office of Thrift Supervision. It dramatically changed the savings and loan industry and its federal regulation, encouraging loan origination.[1]
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FIRREA created two new deposit insurance funds. It abolished the Federal Savings and Loan Insurance Corporation (FSLIC); the fund originally administered by FSLIC became the Savings Association Insurance Fund (SAIF). It also created the Bank Insurance Fund (BIF). Both of these funds were to be administered by the Federal Deposit Insurance Corporation. This section of FIRREA was amended by the Federal Deposit Insurance Reform Act of 2005, which consolidated the two funds. Critics of FIRREA assert that, rather than respond effectively to the S & L crisis, the act actually exacerbated the crisis and made it a true disaster.
The Financial Institutions Reform, Recovery and Enforcement Act of 1989 dramatically changed the savings and loan industry and its federal regulation. Here are the highlights of this legislation, signed into law August 9, 1989 :[2]
FIRREA allowed bank holding companies to acquire thrifts. It established new regulations for real estate appraisals. In addition, the Act established Appraisal Subcommittee (ASC) within the Examination Council of the Federal Financial Institutions Examination Council.
It also established new capital reserve requirements.
It increased public oversight of the process. It required the agencies to issue Community Reinvestment Act (CRA) ratings publicly and do written performance evaluations using facts and data to support the agencies' conclusions. It also required a four-tiered CRA examination rating system with performance levels of "Outstanding," "Satisfactory," "Needs to Improve," or "Substantial Noncompliance."[3] These rules increased pressure on banks to make mortgage home loans to inner-city and rural areas.[4]
Title XI of FIRREA empowered federal mortgage regulators to adopt standards for real estate appraisal and promulgate licensing requirements to the states. To accomplish this, the Appraisal Subcommittee (ASC) was formed, with representatives from the various Federal mortgage regulatory agencies. The ASC provides oversight and input to the Appraisal Foundation, which in turn promulgates the Uniform Standards of Professional Appraisal Practice, through the Appraisal Standards Board (ASB) and the minimum standards for appraisal licensure through the Appraiser Qualifications Board (AQB).[5]