Copyright © 2012 Pearson Prentice Hall. All rights reserved. WEB CHAPTER 25 Saving Associations and Credit Unions.

Copyright © 2012 Pearson Prentice Hall.All rights reserved.

WEB CHAPTER 25

Saving Associations and

Credit Unions

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The Savings and Loan Industry Today

Despite the problems of the 1980s, the S&L industry did survive.

The next two slides show the totals assets and the number of S&Ls in the U.S.

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The Savings and Loan Industry Today

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The Savings and Loan Industry Today

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The Savings and Loan Industry Today

Consistent with the last slides, as the number of S&Ls has fallen, the average assets held by the average S&L has increased throughout the last twenty years (except during the 2007-2009 Financial Crisis).

The next slide shows this graphically.

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The Savings and Loan Industry Today

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The Savings and Loan Industry Today

The next three slides show the following:─ Consolidated balance sheet for the S&L industry─ The net income for S&Ls from 1984-2009─ Average ROE for S&Ls from 1993-2009

Many economists believe that S&Ls will disappear based on these findings. However, this does not appear to be a rapid trend. We may again see deregulation before all is said and done.

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The Savings and Loan Industry Today

The Savings and Loan Industry Today

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The Savings and Loan Industry Today

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Credit Unions

Idea developed in Germany where a group pooled assets to use a collateral for a loan

The loan proceeds were then loaned to members of the group.

Default was rare since all the group members knew each other.

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Credit Unions: Types of Organization

National Credit Union Administrationhttp://www.ncua.gov

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Credit Unions

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Credit Unions

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Credit Unions: Types of Accounts

Regular Share Accounts─ Savings accounts─ Receive no interest ─ Do receive dividends

Share Certificates─ Compatible to CDs

Share Draft Accounts─ Pay interest─ Write drafts against account

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Credit Unions: Share Distribution

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Credit Unions: Type of Loans

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Credit Unions: Advantages and Disadvantages

Advantages─ Employer support─ Tax advantage─ Strong trade associations

Disadvantages─ Common bond requirement

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Credit Unions: Memberships

Credit Union Assets

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Chapter Summary

Mutual Savings Banks: the role of this form of thrift institution represents the first style of saving organization was reviewed

Savings and Loan Associations: since the Federal Home Loan Bank Act of 1932, this form of savings institution was very successful until the late 1980s

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Chapter Summary (cont.)

Savings and Loans in Trouble: The Thrift Crisis: the reasons behind the crisis, including interest rate volatility, arcane regulations, and increased risk-taking were discussed

Political Economy of the Savings and Loan Crisis: adding the problem, moral hazard on the part of regulators and politicians added to this costly failure of the S&L industry

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Chapter Summary (cont.)

Savings and Loan Bailout: Financial Institution Reform, Recovery, and Enforcement Act of 1989: this sweeping reform called for significant changes in the oversight and insurance of the S&L industry

The Savings and Loans Industry Today: empirical evidence shows that this industry is shrinking in some respects, possibly suggesting its eventual demise

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Chapter Summary (cont.)

Credit Unions: the history, form, and role of credit unions was reviewed