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Abstract

This article examines the Federal Institutions Regulatory and Interest Rate Control Act of 1978 ("FIRA"), bank reform legislation that imposed stricter controls on insider lending transactions that Congress had seen as one of the primary threats to the successful operations of banks. It highlights the differences between state and federally chartered banks, illustrating that state chartered banks are not subject to federal banking provisions unless they become a member of the Federal Reserve System. It argues that FIRA provides the safeguards necessary to control bank insider abuses by imposing a myriad of lending limitations and reporting mechanisms. It discusses and analyzes the effectiveness of the laws and regulations instituted by FIRA that specifically govern loans to bank insiders, as well as the effectiveness of state control over insider lending practices that fall outside the reach of FIRA. The New York State Banking Law of 1976 is analyzed to determine the impact state law has on insider abuses, and is compared to the federal regulations concerning insider abuses.

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