Other Banking Institutions Thrifts and Credit Unions

Institutions other than commercial banks can accept deposits from customers or members and provide some form of checking account. These other banking institutions include thrifts (savings and loan associations and savings banks), credit unions, and limited-service banks.

Savings and loan associations (S&Ls) and savings banks are sometimes referred to as thrifts. Savings and loans offer both savings and checking accounts and use the majority of their funds to make home mortgage loans to consumers. They and savings banks are often referred to as thrifts because they were created with the primary purpose of encouraging family thrift. Individual households could regularly place small amounts of money in these institutions and earn higher interest on their savings than they could in banks. (With de-regulation this is no longer true.) The S&Ls would in turn lend this money to individual households for the purchase of homes. At one time, over 60 percent of all residential mortgages were originated by thrifts. Today, however, thrifts face serious financial problems.

Savings banks are also called mutual savings banks because they are depositor-owned. They are almost identical to savings and loan associations in their operations and are chartered by the individual states. These banks originated in New England at the beginning of the 19th century. They were originally created to provide for the savings of households in New England and to pay interest on those savings (early U.S. banks did not. provide interest-earning savings ac-counts). Often these banks were opened by members of a particular trade or guild, such as fishermen. While savings banks have existed for nearly 200 years in New England, they have not really caught on in other parts of the country. Today the 600 existing savings banks are primarily concentrated in the New England states, New York, and New Jersey.

A form of savings cooperative because they ore member owned, credit unions are typically sponsored by a union, company, or professional or religious group. While credit unions have over 50 million members in the United States, individual credit unions lend to be rather small. They have typically concentrated on savings and short-term consumer loans such as auto loans. However, with deregulation they have been able to expand their services and today offer share draft accounts (similar to checking accounts) and even pro-vide some long-term mortgage loans.

Limited-Service Banks

Limited-service banks offer some services of banks, such as commercial loans and demand deposits; however, they cannot do both within the same organization. Perhaps the most recognizable of the limited-service banks is the Sears Roebuck Financial Network. Through acquisitions, Sears has developed a complete financial supermarket offering insurance, securities brokerage and real estate services.

Pushed, by concerns expressed by commercial banks, Congress decided in 1987 to ban the formation of new limited-service banks and limit the growth of the existing ones. However, the trend toward their formation had already slowed by that time, as many did not achieve sufficient volume and consumers did not show the expected enthusiasm about "financial supermarkets".