Publication Date


Document Type


First Advisor

Taylor, Ryland||Horton, Donald C. (Donald Clare)

Degree Name

M.A. (Master of Arts)

Legacy Department

Department of Economics


Banks and banking--United States; Savings and loan associations--United States


During the two decades following World War II, financial intermediaries experienced a rapid rate of growth. Savings and loan associations, in particular, increased their total assets and their importance as a financial institution in the United States economy. This growth permitted savings and loan associations to compete effectively with commercial banks for savings deposits and mortgage loans. This paper attempts to assess the impact of this increased competition on the United States economy during the postwar period and particularly during the decade of the 1960's. In addition, it attempts to evaluate regulations currently applicable to both commercial banks and savings and loan associations. It further includes recommendations for statutory changes on the basis of this evaluation. In an attempt to develop the basis and underlying rationale for this competition, the history of savings and loan associations is traced from its earliest antecedents as a British building society to its contemporary organizational structure in the United States. Areas of competition and the rationale for such competition are then analyzed on both the microeconomic and macroeconomic levels. The current body of economic theory as well as empirical data is applied to determine the effect of this competition on real investment. The major conclusions drawn from this paper indicate that competition between commercial banks and savings and loan associations is generally limited to the markets for savings deposits and mortgage loans. Competition for savings deposits generally results in a higher rate of return to depositors and increases the amount of loanable funds from that which would exist in the absence of competition. From the standpoint of the commercial banking system, however, time deposits are less profitable than demand deposits and the system could increase its profits by refraining from competition because of its monopoly on demand deposits. The individual bank, however, must assume that time deposits originate from external sources and are, therefore, net additions to their supply of loanable funds. Competition for mortgage loans, theoretically lowers the rate of return to competing institutions. Housing starts were found to be interest inelastic in terms of the number of housing starts, but highly interest elastic in terms of the real value of residential housing construction. The net effect of competition between commercial banks and savings and loan associations, abstracting from such complicating factors as the effects of fiscal and monetary policy, is an increase in the amount of loanable funds in the economy and a rise in the real value of residential housing construction.


Includes bibliographical references.||Includes illustrations.


3, vi, 111 pages




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