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Building and Loan Association (B&L)

Contents

  1. Unraveling the Essence of Building and Loan Associations (B&Ls)
  2. Tracing the Historical Trajectory of Building and Loan Associations (B&Ls)
  3. Distinguishing Building and Loan Associations (B&Ls) from Savings and Loans (S&Ls)

Demystifying Building and Loan Associations (B&Ls): A Comprehensive Guide

Unraveling the Essence of Building and Loan Associations (B&Ls)

Historical Overview: Building and loan associations (B&Ls), also referred to as thrifts, emerged as mutually held financial institutions in the 19th century, revolutionizing access to home loans and fostering a culture of mutual self-help among participants.

Key Highlights:

  • Membership Model: B&Ls operated on a cooperative membership model, where individuals pooled their resources, subscribed to shares, and collectively financed home loans.
  • Share Accumulation: Members purchased shares with predetermined maturity values, enabling them to secure loans against the accumulated value of their shares.
  • Evolution: B&Ls transitioned from terminating plans to serial and permanent plans, accommodating changing membership dynamics and financial needs.

Tracing the Historical Trajectory of Building and Loan Associations (B&Ls)

British Influence: The inception of B&Ls in the United States was inspired by British building societies, which provided an alternative avenue for middle-class homeownership during the Industrial Revolution.

Proliferation: Originating in Philadelphia in 1831, B&Ls rapidly proliferated across the Northeast and Mid-Atlantic regions, catering to the growing aspirations of skilled laborers for homeownership.

Peak and Decline: By 1927, B&Ls boasted significant influence, serving millions of members nationwide. However, the Great Depression precipitated their decline, paving the way for the emergence of federal savings and loan (S&L) institutions.

Distinguishing Building and Loan Associations (B&Ls) from Savings and Loans (S&Ls)

Government Intervention: In response to the economic turmoil of the Great Depression, the government introduced federal charters for S&L institutions, offering regulatory oversight and financial support to stabilize the industry.

Federal Backing: Federal initiatives such as the Federal Home Loan Bank Board and the Federal Savings and Loan Insurance Corporation provided crucial financial assistance and deposit insurance to bolster the resilience of S&Ls.