What was the primary goal of the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA)?

The primary goal of the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) was indeed to create risk-based capital standards for depository institutions. This act was enacted in response to the savings and loan crisis of the 1980s and aimed primarily at improving the financial health and stability of depository institutions by ensuring they maintained adequate capital levels relative to their risk profiles. The introduction of risk-based capital standards allows financial institutions to better manage their capital in line with the risks they are undertaking, which in turn strengthens the financial system and helps prevent future crises.

While consumer protection and the regulation of investment practices are important areas within financial regulation, these were not the central focus of FIRREA. The act instead targeted the structural integrity of financial institutions and sought to reform and reinforce their capital requirements to enhance stability in the banking sector. Similarly, while supporting new financial products is vital for innovation within the financial market, it does not align with FIRREA's core objective, which was primarily concerned with addressing systemic risks and restoring confidence in the financial institutions themselves following significant failures in the industry.