It wasn’t a wonderful life for most S&Ls in the ’80s

Q. Years ago, my aunt and uncle did business at a “building and loan” or “savings and loan.” Whatever became of them and how did they differ from banks?

A. Friends like to rib me by saying I still have the first dollar I ever earned here in 1968. Well, that’s not true, but I still do have the passbook that shows me, as an 8-year-old, proudly depositing the $75 I had saved from birthday and Christmas gifts into my first account at the now-defunct Greater Belleville Savings and Loan at 10 E. Washington St. I think I also have what’s left of the flashlight I chose as a premium when I later opened up an account at the new Citizens Savings and Loan (now Associated Bank) just up the street.

As you obviously remember, savings/building and loans were all over the place years ago, including the movies, where perhaps the most famous one of all —the Bailey Brothers Building and Loan — plays a key role in “It’s a Wonderful Life.” Savers like me certainly loved them because the Federal Reserve allowed them to pay a half percent more on savings accounts than commercial banks. Banks, meanwhile, were attractive because they could offer checking accounts, commercial loans and a host of other financial services.

But the success that grew out of the Great Depression started to come tumbling down in mid-1980s in what is now often called the Savings and Loan Crisis. Over the next decade, economic conditions, deregulation and unsound business practices saw the failure or closing of nearly half of all S&Ls, from 3,234 to 1,645. Since then, the numbers have dwindled more. New laws have blurred the differences between an S&L and a bank to the point where they’re almost non-existent, leading some experts to predict that the old building and loan eventually will disappear entirely.

It wasn’t that way a century ago. While banks catered to businesses and the movers and shakers, the average person looking for a simple home loan often ran into roadblocks. The earliest mortgages were offered by insurance companies. Often, they were either short-term with a balloon payment at the end or they were interest-only loans in which nothing ever went toward the principal. So people were either in debt forever or ran the risk of foreclosure when they were unable to cover the balloon.

This inability to own a home led to the Depression-era Federal Home Loan Bank Act in 1932, which assisted financial institutions in providing long-term, amortized loans for home purchases. That immediately prompted savings/building and loans to spring up all over the country, because their business was almost exclusively based on providing savings accounts and home loans for the average Joe. (I still have my parents’ Greater Belleville record showing how they paid off their $2,500 loan in three years — each payment neatly recorded by hand in black ink.) They were even governed by different regulators. If you remember, your money in a savings and loan was guaranteed by the Federal Savings and Loan Insurance Corp., not the Federal Deposit Insurance Corp., which protected banks.

But during the economic tempest in the 1970s, this business model began to collapse. To try to curb inflation, the Federal Reserve began charging financial institutions more to borrow money. This proved a double whammy because the S&Ls had loaned money long term at low rates while promising savers high rates. For a host of other reasons (fraud, deregulation, bad management, etc), S&Ls began failing almost daily. I’m sure many will remember the name Charles Keating and the five U.S. senators to whom he gave $1.3 million to help him fight existing banking laws. The failure of his Lincoln Savings and Loan in Irvine, Calif., cost the U.S. government $3 billion.

Since then, much of the S&L industry has been absorbed by the broader banking industry, according to economics expert Bert Ely, of Ely & Co. in Alexandria, Va. Both now operate under the same regulatory bodies. In fact, some of the largest thrifts are owned by commercial bank-holding companies. Eventually, Ely predicts, the building and loan will disappear, and, unlike the Bailey Brothers in that Christmas classic, nobody will shed a tear.

Q. What has become of Virginia Kerr and Sharon Reed on KMOV-TV?

A. Like Elvis, both have left the Channel 4 building. Kerr, a transplanted Alabaman and dyed-in-the-wool Crimson Tide fan, announced she was quitting just before last Christmas. She now lists herself as a “news presenter” on KLJY-FM (better known as Christian station 99.1 JOY-FM) on her Facebook page, where you can find a photo of her (proudly wearing her ’Bama hat) with hubby and son. As I reported last May, Reed moved to Atlanta to take an anchor spot at WGCL-TV.

Today’s trivia

What Paul Simon song originally was banned on British and Australian radio?

Answer to Saturday’s trivia: In the long, colorful history of the New York Yankees, only one man has ever hit home runs during four consecutive at-bats in one game. On June 3, 1932, Lou Gehrig not only became the only Yankee to pull off the feat, but the first player in American League history to do it as the Bronx Bombers blasted Philadelphia 20-13. (Gehrig almost became the first and only man to hit five home runs in a game but his last towering fly was caught in the ninth.) Since then, three more players in the Junior Circuit have added their names to this record — Cleveland’s Rocky Colavito on June 10, 1959, Seattle’s Mike Cameron on May 2, 2002, and Toronto’s Carlos Delgado on Sept. 25, 2003. Only two National Leagues have made the list — Boston’s Bobby Lowe on May 30, 1894, and Philadelphia’s Mike Schmidt on April 17, 1976. Ten other players, including St. Louis’ Mark Whiten, have hit four home runs in a game, but not consecutively.

This story was originally published August 8, 2015 at 7:12 PM with the headline "It wasn’t a wonderful life for most S&Ls in the ’80s."