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.

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.