Page 20 - Book4E

Economics is extremely useful as a form of employment for econo- mists.
—John Kenneth Galbraith
10
As usual, the success of Oxford Provident–style associations led to expansions of the idea. Associations came into being that allowed membership admittance on a quarterly, semiannual, or annual basis. Many of these associations also accepted members who just wanted to save and didn’t necessarily intend to buy a home, which introduced the charging of interest on the mortgage loans. Those members who only saved money were repaid the equivalent of their contribution plus the interest earned by the end of the association contract. This led to the consideration of accumulating deposits for reasons in addition to the purchase of homes.
The obvious next step in the development of savings and loan associations was the creation of associations that accepted new members daily and functioned indefinitely. The savings and loan business grew dramatically after World War II. Before the war, fewer than 50% of Americans owned a home. By the 1980s, more than 60% owned a home.
During the next 10 years, hundreds of savings and loans associations became financially desperate and were closed due to insolvency. A report in 1996 by the General Accounting Office showed the cost of the
savings and loan failures to be in excess of $160 billion, of which American taxpay- ers paid more than 80%. The Financial InstitutionsReform,Recovery,andEnforce- ment Act of 1989 authorized the disposal of the assets of the failed associations, and two new federal funds were established so all deposits made by individuals into savings and loan associations going
forward would be insured. By the late 1990s, about 1,780 federally- insured savings institutions existed with combined assets of more than $1 trillion. Single-family loans accounted for about 49% of these assets. The primary focus of savings and loan institutions remains real estate lending, particularly home mortgages.
Savings and Loan Associations (SLAs)