A savings and loan association (S&L) is a financial intermediary that takes deposits and uses them primarily to finance real estate mortgage loans. Like a bank, the aim is to earn a higher rate of return on its loans (and other investments) than the interest rate it pays its depositors. To gain depositors, therefore, it must compete with other financial institutions and instruments to attract funds. Against banks, a savings and loan must vie not only with depositor interest rates but also various services such as checking accounts. But increasingly, the competition comes from money market instruments like government Treasury bills, corporate bonds, and stocks, to say nothing of longer-term investments such as real estate and collectibles. Indeed, with the government deregulation that occured in the 1980s, competition has become more intense as the line between banks, savings and loans, and other financial intermediaries has thinned.

Savings and loans constitute the second largest type of financial intermediary in the country, with total assets about 40 percent those of commercial banks. The trend since the S & L crisis, however, has been downward, as the industry might well lose half its institutions by the time the shakeout is over. At any rate, other major intermediaries include insurance companies and pension funds, which rank third and fourth respectively in terms of assets. Because of restrictions on interstate banking, it is a relatively diffuse industry, with many small, independent savings and loans. Within states, however, often there are a few large, dominant firms, making for oligopoly in an economic sense. In California, for example, Great Western and Home are the major players. Geographically, more than half of all savings and loans are found in Ohio, Pennsylvania, Illinois, Texas, New Jersey, Maryland, North Carolina, and California (19 percent of the…

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