Building And Loan Associaiton

Before a crisis besmirched their good name, these organizations were better known as “Savings & Loan Associations” (S&Ls) because they focused on exactly that: collecting savings deposits, and using those funds to extend loans.

In the mid-1990s, an airline called ValuJet was known for its (extremely) low-cost business model, achieved by dangerous activities such as skimping on equipment maintenance, personnel training, and adherence to FAA protocol.

Predictably, the airline experienced a tragic accident in 1996 owing to all of the above. Rather than address the underlying issues, ValuJet bought another airline and adopted its brand name, AirTran Airlines, in hopes that the name change would distance it from the tragedy.

Similarly, S&Ls became embroiled in a crisis in the mid 1980s-1990s. They mismanaged their available capital reserves relative to prevailing interest rates and invested in riskier assets to “make up the difference." Then both investors and depositors found their money to be at risk, ultimately requiring a governmental bailout.

Luckily, the S&Ls changed their name to “Building and Loan Associations,” and the U.S. never faced the risk of banks overextending themselves on real estate portfolios and placing the livelihood of millions of Americans at risk ever again. The End. Now go to sleep.