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.

Bibliography

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 ?
The structure of the PGP enables FHLB Dallas member institutions like Tucumcari Federal Savings and Loan Association to make a contribution of USD 500 to USD 4,000 to a community-based organization (CBO), which FHLB Dallas will match at a 3:1 ratio.
(NASDAQ Capital Market: OFED) is the holding company of Oconee Federal Savings and Loan Association. Oconee Federal Savings and Loan Association is a federally chartered savings and loan association founded in 1924 and headquartered in Seneca, South Carolina.
Third Federal Savings and Loan Association has 21 full service branches in Northeast Ohio, 8 lending offices in Central and Southern Ohio, and 17 full service branches throughout Florida.
Third Federal Savings and Loan Association is a leading provider of savings and mortgage products with total assets of USD12.9bn as of September 30, 2016.
(NASDAQ: OFED), the holding company for Oconee Federal Savings and Loan Association, has reported a net income of USD1.5m, or USD0.25 per diluted share, for the three months ended June 30, 2016, compared to net income of USD1.2m, or USD0.21 per diluted share, for the three months ended June 30, 2015.
(NASDAQ Capital: IROQ), the holding company for Iroquois Federal Savings and Loan Association, board of directors has declared a cash dividend of USD 0.08 per common share, the company said.
Kentucky First Federal Bancorp (NASDAQ: KFFB), the holding company for First Federal Savings and Loan Association and First Federal Savings Bank, has said that its board of directors has declared a quarterly cash dividend of USD0.10 per share on its common stock.
Third Federal Savings and Loan Association is a provider of savings and mortgage products and was founded in Cleveland in 1938 as a mutual association.
Third Federal Savings and Loan Association of Cleveland, MHC, the mutual holding company of the Company and owner of 227,119,132 shares, or 80% of the Company's common stock outstanding, has waived its right to receive the dividend on its shares.
TFS Financial Corporation (NASDAQ: TFSL), the holding company for Third Federal Savings and Loan Association of Cleveland, has said that the board of directors has declared a quarterly cash dividend of USD0.10 per share on its common stock.
Board of directors of TFS Financial Corporation (NASDAQ: TFSL), the holding company for Third Federal Savings and Loan Association of Cleveland has declared a quarterly cash dividend of USD0.125 per share, the company said.
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