Federal Savings and Loan

AAA

DEFINITION of 'Federal Savings and Loan'

A federally chartered savings and loan is a banking institution that functions in a very similar fashion to retail banks and credit unions, with some slight limitations on the type of services it can offer. Historically, the primary purpose of savings and loan associations was to allow members to deposit savings and borrow money at rates that were slightly more competitive than commercial banks. The competitive difference in interest and loan rates came from the fact that a savings and loan was "mutually owned" by its members, with no need to pass profits on to a third party.

INVESTOPEDIA EXPLAINS 'Federal Savings and Loan'

Federal savings and loan associations reached their heyday in the mid-1980s after being deregulated just a few years earlier. However, in response to the scandalous failure of a number of prominent S&Ls, including Charles Keating's Lincoln Savings and Loan, participation in savings and loans begain to dwindle by the early 1990s. In reaction to the growing insolvency of the savings and loan industry, the government reestablished stronger oversight and created the Office of Thrift Supervision in 1989. This regulatory body, itself a division of the Treasury Department, helps to ensure the safety and stability of member savings and loans. As part of the act that created this agency, savings and loan deposits came under the protection of the FDIC insurance and remain so today.

RELATED TERMS
  1. Federal Reserve Bank

    The central bank of the United States and the most powerful financial ...
  2. Unbanked

    A slang term for people who do not use banks or banking institutions ...
  3. Unitary Thrift

    A company that controls a single savings-and-loan association. ...
  4. Credit Union

    Member-owned financial co-operative. These institutions are created ...
  5. Interest Rate

    The amount charged, expressed as a percentage of principal, by ...
  6. Monetary Policy

    The actions of a central bank, currency board or other regulatory ...
Related Articles
  1. Top 6 U.S. Government Financial Bailouts
    Insurance

    Top 6 U.S. Government Financial Bailouts

  2. Are Your Bank Deposits Insured?
    Savings

    Are Your Bank Deposits Insured?

  3. A Nightmare On Wall Street
    Insurance

    A Nightmare On Wall Street

  4. Getting Government Loans
    Credit & Loans

    Getting Government Loans

comments powered by Disqus
Hot Definitions
  1. Passive ETF

    One of two types of exchange-traded funds (ETFs) available for investors. Passive ETFs are index funds that track a specific ...
  2. Walras' Law

    An economics law that suggests that the existence of excess supply in one market must be matched by excess demand in another ...
  3. Market Segmentation

    A marketing term referring to the aggregating of prospective buyers into groups (segments) that have common needs and will ...
  4. Effective Annual Interest Rate

    An investment's annual rate of interest when compounding occurs more often than once a year. Calculated as the following: ...
  5. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  6. Odious Debt

    Money borrowed by one country from another country and then misappropriated by national rulers. A nation's debt becomes odious ...
Trading Center