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 ?
Savings and loans, or "thrifts," would be allowed only to make home mortgage loans; in return, their deposits would be insured.
The savings and loan name may change - indeed, many savings and loans already have renamed themselves banks - but they will continue to fulfill an important function in the housing market as originators of home loans.
In addition to the 322 savings and loans that have failed or floundered since 1983 because of faulty appraisals, federal regulators are discovering that many ostensibly healthy lending institutions hold loans based on bloated property values.
While other giant savings and loans were crashing into ruin, Home and its owner, H.
board of directors will include four of the current members of First Federal Savings and Loan Association of Hazard's board of directors, two current members of Frankfort First Bancorp's board of directors and Frankfort First Bancorp's current President.
Both offices of Neosho Savings and Loan will remain open after the acquisition and no staff reductions are planned.
the "Company") (Nasdaq:WFSL) and United Savings and Loan Bank ("United Savings") announced today the signing of a definitive merger agreement.
Ellie Mae(R), the leading Internet technology provider for mortgage originators, today announced at the 2002 NAMB Annual Conference a partnership with DeepGreen Bank, a leading Internet home equity lender, owned by Third Federal, the nation's largest mutually owned savings and loan.
By expanding its services Caner will be able to better compete with other minority banks as well as with other savings and loans and commercial banks looking to do a better job in urban areas, says Dina Nichelson, executive director of the American League of Financial Institutions, a lobbying concern for minority-owned financial institutions.
593-6A(b)(5)(vi) and (vii), issued in 1978, required savings and loans to include net operating losses (NOLs) in taxable income before calculating a bad debt deduction.
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