Savings And Loan - S&L

Savings and Loans: You have savings. Like the excess $82 in cash you deposit each week into your savings account. And you have loans. Like home loans.

Banks: Credit cards. And big lines of credit for small to large businesses.

Savings and Loans: The little, local retail gal.

Banks: The big, fat-cat corporate dudes with huge appetites and small, fast, red cars.

Savings and Loans: Owned either by the lenders and borrowers of the Savings & Loan itself. Or it can be set-up like a normal-ish corporation.

Banks: Usually owned just by shareholders. Some are big. Bank of America. Wells.

Savings and Loans can loan up to 20% of their assets. Half of that for big business; half of that for small business loans. And why the delineation? Because small businesses default a whole lot more than big businesses. Savings and Loans are allowed to tap into the very liquid federal home loan bank system…i.e. get cheaper money.

In return, S&Ls have to have at least 65% of their assets invested in residential mortgages. Why is this a Thing? Because the American dream, from a political perspective, revolves in large part around owning your own home. The government has gone to a whole lot of effort to make it easy for the little guy to borrow money and have his or her own little castle. Little to start, anyway.

Banks...those cold, cruel, concrete-walled things...don't live under this structure. They don’t get to tap into the same cash pool reserves that S&Ls do, but they get to loan money, more or less, wherever they want to loan money. Banks exist to make money for the shareholders of the bank. And they’re financially Darwinian beasts, good at lending money that costs them low rates, at higher rates to borrower customers. And they live on the spread. So banks also get hot and heavy with other kinds of borrowings. Things like credit card issuance, and service, wealth or financial management services, and to some extent, merchant and investment banking services as well.

So, banks. Think: big loans, big money, big spreads..."wholesale."

Savings and Loans. Think: small loans, small money, small spreads..."retail."

Banks: Mr. Potter.

Savings and Loan: George Bailey and the rest of the Bedford Falls gang.

Oh, did you hear that? A glossary writer just got his wings…