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The 1970's

The 1970s
Photo of cars waiting in line for gasRapidly rising oil prices create an inflationary spiral, which raises interest rates. Recession follows. The expensive Vietnam War ends. Automation takes hold.

Outstanding debt from less-developed countries increases from $29 billion to $327 billion during the decade.


  • Automated Clearing House Interbank Payment System, a private company, is created to clear checks.
  • Congress charters the Federal Home Loan Mortgage Association (Freddie Mac) to provide capital to finance U.S. housing.

Bank Holding Company Amendments (BHCA) of 1970
The BHCA of 1956 left a large loophole with respect to non-bank activities. Growing political concern about the growth of conglomerate enterprises lead to these amendments.

The Bank Holding Company Amendments (BHCA) of 1970:

  • Require Federal Reserve Board approval for the establishment of a bank holding company
  • Liberalize non-bank activity restrictions.

President Richard Nixon announces his "New Economic Policy" in an attempt to revive the economy and control inflation. This policy is a major shift from traditional economic policies. To increase demand for U.S. goods in foreign markets, President Nixon devalues the dollar and ends the gold convertibility of the dollar. This devaluation allows the dollar’s price to float on world markets.

President Nixon imposes wage and price controls. He presents Congress with legislation to repeal tax on cars, to provide tax credits for business investments, and to reduce individual income tax.

Inflation increases when President Richard Nixon lifts wage-and-price controls.

Photo at gas station with sign that says 'Sorry No Gasoline'The 1973 Middle East War occurs. Organization of Petroleum Exporting Countries (OPEC) increases oil prices, decreases oil production, and imposes an oil embargo on the U.S. that generates even higher inflation and a trade deficit.


  • The oil embargo triggers the 1974-1975 world recession, which exacerbates the less-developed countries' debt burden.
  • The FDIC deposit insurance limit increases from $20,000 to $40,000 because of inflation.


    U.S. Presidents
    during the 1970s

    Richard NixonRichard Nixon

    Gerald FordGerald Ford

    Jimmy Carter Jimmy Carter

  • The Congress holds hearings and expresses concern about the concentration of Third World loans and the threat to the capital position of banks.
  • Eight of the largest U.S. banks are owed $37 billion. The largest portion of Latin American debt originates from U.S. banks, accounting for 217 percent of total capital and reserves.
  • Maine becomes the first state to allow the entry of out-of-state bank holding companies.
  • New York City is on the verge of bankruptcy and asks the federal government for a bailout. President Gerald R. Ford originally refuses, but he changes his mind after the city raises city taxes and cuts programs. The city obtains $2.3 billion in short-term loans from the government.

Home Mortgage Disclosure Act of 1975 (HMDA)
This act:

  • Encourages banks and S&Ls to lend mortgage money in low-income areas
  • Requires banks and S&Ls to document their lending practices.

First National City Bank changes its name to Citibank.

Several banks license VISA.

Inflation accelerates when President Jimmy Carter places emphasis on restoring economic growth instead of controlling inflation.

Community Reinvestment Act (CRA) of 1977
This act:

  • Directs banks and S&Ls to meet the credit needs of their communities, including low-income areas
  • Requires the FDIC to examine non-member state banks for CRA compliance.


    Photo of crown in Iran
  • Iranian Revolution occurs, the Shah is deposed, Middle East oil production is cut, and international oil prices soar.
  • Interest rates on securities surpass the rates that banks and S&Ls can pay.

The International Banking Act of 1978
This act regulates the establishment, operation, and control of foreign banks in the U.S.

Financial Institutions Regulatory and Interest Rate Control Act of 1978
This act:

  • Establishes Federal Financial Institutions Examination Council (FFIEC), which includes the Federal Reserve Board (FRB), the Office of the Comptroller of Currency (OCC), the FDIC, and the Federal Home Loan Bank Board (FHLBB)
  • FFIEC logo
  • Establishes requirements for bank insider transactions
  • Establishes standards for electronic fund transfers (EFT)
  • Provides for the assessment of civil money penalties against banks and individuals. The FFIEC begins operations in 1979.

President Jimmy Carter appoints Paul Volcker to the chairmanship of the Federal Reserve Board (FRB). Inflation is over 13 percent, and Volcker is committed to reducing that figure. Volcker concentrates on controlling the money supply instead of keeping interest rates low. Unemployment reaches 11 percent, and the prime rate reaches 21.5 percent during Volcker's tenure. Volcker is chairman of the FRB until 1987.

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Last Updated 05/02/2006 learning@fdic.gov

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