3-6-3 Rule (Ofer Abarbanel online library)

The term 3-6-3 Rule describes how the United States retail banking industry operated from the 1950s to the 1980s.[1]:51 The name 3-6-3 refers to the impression that bankers had a stable, comfortable existence by paying 3 percent interest on deposits, lending money out at 6 percent, and being able to “tee off at the golf course by 3 p.m.”[1]:51[2]

The implication was that the banks were less competitive during that period than in subsequent years due to tight regulations that limited the formation and location of banks as well as restrictions on interest rates that could be charged or paid.[1]:51 As a result, bankers had “power and prestige … while profits were steady and certain”.[2] These regulations were loosened in the 1980s.[1]:51

Richmond Federal Reserve senior economist John R. Walter argues that, although there is evidence that restrictions on banks before the 1980s did limit the competitiveness of banking markets and thereby granted some banks monopoly power,[1]:52 “the regulatory restrictions probably had a limited effect on competition” during the time in question.[1]:75Chicago Federal Reserve researchers Robert DeYoung and Tara Rice argue that, “Like most good jokes, the 3-6-3 rule mixes a grain of truth with a highly simplified view of reality.”[3]

The rule has been noted positively following the late-2000s financial crisis as a preferable way for banks to operate following the bailout of major banks.[4][5]

Australia’s banking system, which was deregulated in the 1990s in a manner similar to that in the U.S., also came to be characterized in the same way[6] as did the United Kingdom’s.[7]


  1. ^ Jump up to:ab c d e f John R.Walter. “The 3-6-3 Rule: An Urban Myth?” Federal Reserve Bank of Richmond Economic Quarterly1 (Winter 2006) 51-78. Retrieved 15 October 2011.
  2. ^ Jump up to:ab William Blaylock, et al. “Banking Takes a Beating”. Time. 3 December 1984. Retrieved 15 October 2011.
  3. ^Robert DeYoung and Tara Rice. “How Do Banks Make Money? The Fallacies of Fee Income”. Federal Reserve Bank of Chicago Economic Perspectives4 (4Q 2004). Retrieved 15 October 2011.
  4. ^Russell Mokhiber. “How to Put Bankers Back on the Golf Course, Where They’ll Do Less Harm”. CounterPunch. 5 May 2010. Retrieved 15 October 2011.
  5. ^Andy Meek. “Local Banks Hanker To Repay TARP Money”. The Daily News (Memphis, TN, USA) 115 (15 June 2009). Retrieved 15 October 2011.
  6. ^Transcript of Professor Ian Harper interviewed by Radio Australia. June 1998. Retrieved 15 October 2011.
  7. ^Elena Moya. “Seven Deadly Sins That Led to Financial Hell”. The Observer. 14 February 2009. Retrieved 15 October 2011.

Ofer Abarbanel online library

Ofer Abarbanel online library

Ofer Abarbanel online library