savings and loan association

In the USA, a cooperative, mutual, savings organization that sells stock to its members. Created primarily to finance loans for home improvements, construction, and purchase, S&Ls at one time provided 40% of the funds for home purchases. In the late 1980s a crisis developed, with S&Ls making huge losses on unsecured loans. A federal bailout pledging more than $100 billion in taxpayer funds was negotiated in 1989.

From 1986, declining real estate values and rising unemployment in many parts of the US reduced the value of investments and the ability of borrowers to repay loans. For the first time, mergers were permitted across state lines in hopes that the healthier institutions could assume the debt of the weaker, but losses mounted. The Federal Home Loan Board (FHLB) and the Federal Savings and Loan Insurance Corporation (FSLIC) were unable to reverse the tide or cover the losses.