savings and loan association

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Related to Savings associations: Savings Association Insurance Fund, Savings Banks

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 ?
But the savings association asserted that it was entitled to recover what profits it may have earned had the government not intervened, or at the very least, restitution of about $2 billion.
The judge said that he recognized the difficulty of calculating damages involving a savings association that entered into a 40-year contract 18 years ago that was then breached nearly 10 years ago.
The Board has previously determined by regulation that the operation of a savings association by a bank holding company is closely related to banking for purposes of section 4(c)(8) of the BHC Act.
In acting on notices to acquire a savings association, the Board reviews the records of performance of the relevant depository institutions under the Community Reinvestment Act (12 U.
Jones, chairman and CEO of Metropolitan Financial, 612-928-5000/ CO: Metropolitan Financial Corporation; Savings Association Insurance
and thereby acquire its wholly owned savings association, Emerald Coast Bank, both of Panama City Beach, Florida ("Emerald") after that institution's conversion from a state-chartered savings bank to a federally chartered savings association.
The Director expressed concern that TBC's proposal to convert Emerald to a savings association and acquire it pursuant to section 4 of the BHC Act was designed to evade Florida's interstate banking statute, which requires a Florida bank to be in existence and continuously operating for more than three years before it can be acquired by an out-of-state holding company.
25 percent, delinquencies and repossessed assets must be manageable, the savings association must be soundly invested and must have earned a profit for the quarter ended Dec.
Portfolio lenders are privately sponsored institutions that are capable of holding mortgages in their own portfolios; among these institutions are commercial banks, savings associations, and some mortgage banks.
Survey information on the proportion of banks and savings associations that offered various retail services over time is available for the following services: auto loans, non-interest-bearing checking accounts, negotiable order of withdrawal (NOW) accounts (which are interest-bearing checking accounts), savings accounts, money orders and cashiers checks, the return of canceled checks, automated teller machines (ATMs), and safe deposit boxes.
For the purpose of this table, it is measured as the percentage of banks or savings associations that offer a particular service.
FirstMerit also has filed a notice, under section 4(c)(8) of the BHC Act to acquire the nonbanking subsidiaries of Signal, including First Federal, and thereby engage in extending credit and servicing loans, activities related to extending credit, operating a savings association, financial and investment advisory activities, and securities brokerage activities.
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