Copyright © 2012 Pearson Prentice Hall. All rights reserved. WEB CHAPTER 25 Saving Associations and...
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Transcript of Copyright © 2012 Pearson Prentice Hall. All rights reserved. WEB CHAPTER 25 Saving Associations and...
Copyright © 2012 Pearson Prentice Hall.All rights reserved.
WEB CHAPTER 25
Saving Associations and
Credit Unions
© 2012 Pearson Prentice Hall. All rights reserved. 25-2
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.
© 2012 Pearson Prentice Hall. All rights reserved. 25-3
The Savings and Loan Industry Today
© 2012 Pearson Prentice Hall. All rights reserved. 25-4
The Savings and Loan Industry Today
© 2012 Pearson Prentice Hall. All rights reserved. 25-5
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.
© 2012 Pearson Prentice Hall. All rights reserved. 25-6
The Savings and Loan Industry Today
© 2012 Pearson Prentice Hall. All rights reserved. 25-7
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.
© 2012 Pearson Prentice Hall. All rights reserved. 25-8
The Savings and Loan Industry Today
The Savings and Loan Industry Today
25-9 © 2012 Pearson Prentice Hall. All rights reserved.
© 2012 Pearson Prentice Hall. All rights reserved. 25-10
The Savings and Loan Industry Today
© 2012 Pearson Prentice Hall. All rights reserved. 25-11
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.
© 2012 Pearson Prentice Hall. All rights reserved. 25-12
Credit Unions: Types of Organization
National Credit Union Administrationhttp://www.ncua.gov
© 2012 Pearson Prentice Hall. All rights reserved. 25-13
Credit Unions
© 2012 Pearson Prentice Hall. All rights reserved. 25-14
Credit Unions
© 2012 Pearson Prentice Hall. All rights reserved. 25-15
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
© 2012 Pearson Prentice Hall. All rights reserved. 25-16
Credit Unions: Share Distribution
© 2012 Pearson Prentice Hall. All rights reserved. 25-17
Credit Unions: Type of Loans
© 2012 Pearson Prentice Hall. All rights reserved. 25-18
Credit Unions: Advantages and Disadvantages
Advantages─ Employer support─ Tax advantage─ Strong trade associations
Disadvantages─ Common bond requirement
© 2012 Pearson Prentice Hall. All rights reserved. 25-19
Credit Unions: Memberships
Credit Union Assets
25-20 © 2012 Pearson Prentice Hall. All rights reserved.
© 2012 Pearson Prentice Hall. All rights reserved. 25-21
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
© 2012 Pearson Prentice Hall. All rights reserved. 25-22
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
© 2012 Pearson Prentice Hall. All rights reserved. 25-23
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
© 2012 Pearson Prentice Hall. All rights reserved. 25-24
Chapter Summary (cont.)
Credit Unions: the history, form, and role of credit unions was reviewed