building societies and savings and loan associations

Building societies are British financial institutions that give mortgages (= a type of loan) to people to help them buy a house. They also offer a range of savings accounts for those who want to save money. In the US savings and loan associations provide a similar service. Mortgages are paid for out of interest paid by people borrowing money and out of money placed by the public in savings accounts, which is then invested by the society at a profit.

  Traditionally, building societies operated as mutual organizations which shared profits with their members. The first building societies had a few members who paid subscriptions towards their own home. When homes had been built for all of them the societies were closed. In the 19th century hundreds of permanent societies were created throughout Britain. Names such as The Coventry Building Society showed their local origins. People investing money in these societies did so in order to obtain interest on their savings, not necessarily because they wanted a loan for a house. Many building societies later joined together to form larger, national organizations, each with hundreds of branches.

  In the 1980s and 1990s, building societies had to compete for customers with banks, which also offered mortgages, and they began to offer banking facilities themselves. After 1986, many of the larger building societies including the Abbey, the Halifax and the Woolwich became banks. This meant that they could offer a full range of banking services. The country’s largest surviving building society, the Nationwide, decided not to become a bank because it believed that it could defend customers’ interests more effectively as a building society.

  In the US savings and loan associations, also called S & Ls or thrifts, were created for people who wanted to get a mortgage or save money. Originally, they operated under different rules from banks and had limits on the services they could provide. In the 1980s, as in Britain, the rules changed and now S & Ls and banks offer similar kinds of accounts.

  In the late 1980s S & Ls got a bad reputation when many failed. This was partly because they had taken risks in investing money in an attempt to compete with banks, and partly because many were dishonestly run. The US government gave back to people the money they had invested, but many Americans still associate S & Ls with this problem. The S & Ls that exist now are run under tighter controls and are regarded as safe places to keep money.

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