WEB CHAPTER 25 Saving Associations and Credit Unions
WEB CHAPTER 25 Saving Associations and Credit Unions Copyright © 2012 Pearson Prentice Hall. All rights reserved.
The Savings and Loan Industry Today § Despite the problems of the 1980 s, 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 -1
The Savings and Loan Industry Today © 2012 Pearson Prentice Hall. All rights reserved. 25 -2
The Savings and Loan Industry Today © 2012 Pearson Prentice Hall. All rights reserved. 25 -3
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 -4
The Savings and Loan Industry Today © 2012 Pearson Prentice Hall. All rights reserved. 25 -5
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 -6
The Savings and Loan Industry Today © 2012 Pearson Prentice Hall. All rights reserved. 25 -7
The Savings and Loan Industry Today © 2012 Pearson Prentice Hall. All rights reserved. 25 -8
The Savings and Loan Industry Today © 2012 Pearson Prentice Hall. All rights reserved. 25 -9
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 -10
Credit Unions: Types of Organization § Mutual Ownership ─ Owned by depositors § Common Bond Membership ─ Defined field of membership § Nonprofit, Tax-Exempt Status ─ Lower service fee § Regulation and Insurance § Central Credit Unions ─ ─ Help with members’ credit needs Invest excess funds Hold clearing balances Provide educational services § Credit Union Size § Trade Associations National Credit Union Administration http: //www. ncua. gov © 2012 Pearson Prentice Hall. All rights reserved. 25 -11
Credit Unions © 2012 Pearson Prentice Hall. All rights reserved. 25 -12
Credit Unions © 2012 Pearson Prentice Hall. All rights reserved. 25 -13
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 -14
Credit Unions: Share Distribution © 2012 Pearson Prentice Hall. All rights reserved. 25 -15
Credit Unions: Type of Loans © 2012 Pearson Prentice Hall. All rights reserved. 25 -16
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 -17
Credit Unions: Memberships © 2012 Pearson Prentice Hall. All rights reserved. 25 -18
Credit Union Assets © 2012 Pearson Prentice Hall. All rights reserved. 25 -19
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 1980 s © 2012 Pearson Prentice Hall. All rights reserved. 25 -20
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 -21
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 -22
Chapter Summary (cont. ) § Credit Unions: the history, form, and role of credit unions was reviewed © 2012 Pearson Prentice Hall. All rights reserved. 25 -23
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