Deposit interest rates in the United States were fixed by regulators until the 1970s and rarely changed, so that fixed-rate, term loans did not create significant income volatility. By the end of the 1970s, however, bankers in the United States were faced simultaneously with deregulation of interest rates on deposits and rising interest rates due to the prevailing high inflation.
In 1980, price and credit controls that were enacted to curb inflation further increased market volatility. Bankers found themselves paying higher rates on outstanding six-month certificates of deposit than they received as interest on prime-rate loans when money market interest rates fell 800 basis points from March to June.