savings and loan association

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savings and loan association

(S&L), type of financial institution that was originally created to accept savings from private investors and to provide home mortgage services for the public.

The first U.S. S&L was founded in 1831. In 1932, the Federal Home Loan Bank System was created to oversee the S&Ls, with deposits to be insured by the Federal Savings and Loan Insurance Corporation (FSLIC). In 1933 the federal government began chartering S&Ls, although they generally were not required to be federally chartered. After World War II, the associations began a period of rapid expansion. Historically, S&Ls could be organized in two ways: either as a mutual or a capital stock institution. A mutual organization would be similar in operation to a mutual savings banksavings bank,
financial institution that, until recently, performed only the following functions: receiving savings deposits of individuals, investing them, and providing a modest return to its depositors in the form of interest.
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S&Ls went through many changes in the late 20th cent., primarily due to deregulatory measures instituted in the 1980s by the U.S. federal government, allowing them to offer a much wider range of services than ever before. The deregulatory measures allowed S&Ls to enter the business of commercial lending, trust services, and nonmortgage consumer lending. The Depository Institutions Deregulation and Monetary Control Act of 1980 began these sweeping changes, one of which was to raise deposit insurance from $40,000 to $100,000. Many contend that this extension of insurance coverage encouraged S&Ls to engage in riskier loans than they might otherwise have sought.

Two years later, the Depository Institutions Act gave S&Ls the right to make secured and unsecured loans to a wide range of markets, permitted developers to own S&Ls, and allowed owners of these institutions to lend to themselves. Under the new laws, the Federal Home Loan Bank Board (FHLBB) was given a number of new powers to secure the capital positions of S&Ls. The FHLBB allowed S&Ls to print their own capital, and escape charges of insolvency through such measures as "goodwill," in which customer loyalty and market share were counted as part of a capital base. As a result, an S&L that was technically insolvent could resist government seizure.

S&Ls began to engage in large-scale speculation, particularly in real estate. Financial failure of the institutions became rampant, with well over 500 forced to close during the 1980s. In 1989, after the FSLIC itself became insolvent, the Federal Deposit Insurance CorporationFederal Deposit Insurance Corporation
(FDIC), an independent U.S. federal executive agency designed to promote public confidence in banks and to provide insurance coverage for bank deposits up to $250,000.
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 took over the FSLIC's insurance obligations, and the Resolution Trust CorporationResolution Trust Corporation
(RTC), in U.S. history, government-owned company formed in 1989 to liquidate the assets of insolvent savings and loan associations (S&Ls).
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 was created to buy and sell defaulted S&Ls. The S&L crisis ultimately cost the government some $124 billion. The Office of Thrift Supervision (1989; functions transferred to the Office of the Comptroller of the Currency, 2011) also was created, in an attempt to identify struggling S&Ls before it was too late, but the largest S&Ls were among the institutions at the core of the financial crisis of 2008.


See A. Teck, Mutual Savings Banks and Savings and Loan Associations (1968); F. E. Balderston, Thrifts in Crisis: Structural Transformation of the Savings and Loan Industry (1985).

References in periodicals archive ?
585 now applies to eligible thrift institutions that previously kept a reserve for bad debts under Sec.
The act called for the elimination of interest-rate ceilings on savings accounts by 1986 and struck down regulations that, for more than 60 years, had forced thrift institutions to invest their deposits primarily in real estate lending.
Market share data are based on Summary of Deposits reports filed as of June 30, 2003, updated to include transactions through September 10, 2004, and are based on calculations in which the deposits of thrift institutions are included at 50 percent.
The remaining mergers involved a thrift institution as the acquirer, the target, or both.
The 1,872 privately owned thrifts currently in operation compare with a high of 3,252 federally insured thrift institutions operating in 1985, just before the crisis began.
The federal bank, thrift institution, and credit union regulatory agencies on April 23, 2004, issued for publication in the Federal Register a proposed rule under the Fair Credit Reporting Act (FCRA) that would incorporate the statutory prohibition on obtaining or using medical information in connection with credit eligibility determinations and, as required by the statute, create certain exceptions to be applied in limited circumstances.
the bank-rating company, found continued improvement in the financial condition of commercial banks and thrift institutions.
Tad Lowrey has been appointed by the Federal Reserve Board of Governors as vice president of the Thrift Institutions Advisory Council (TIAC).
Two thrift institutions operating in the market offer a full range of banking products and services, including commercial loans.
An analysis of first-quarter call report data for the nation's 2,129 thrift institutions conducted by Veribanc, Inc.
As the oldest statewide (Ohio) financial trade association representing Independent Community Banks and Thrift Institutions we take partnership and product endorsement very seriously.
According to Veribanc's analysis of third-quarter 1991 data released by the Office of Thrift Supervision on the nation's 2,261 savings and loan institutions, the dispostion of failed and failing thrift institutions may be two-thirds complete.