NEW MONEY MERCHANTS: Savings & Loan Men Teach Bankers Lesson

NEW MONEY MERCHANTS

A BANK, so the old saying goes, is a place where you can always get a loan—when you don't need one. While this may have been true in the past, bankers are now rapidly changing their ways. The main reason is that some of their major functions are being usurped by some hard-selling upstarts eager to lend money. They are the nation's 6,000 savings and loan associations, which represent the fastest-growing financial business in the U.S. As their name implies, savings and loan associations have two main functions: 1) to help people save their money, 2) to supply mortgage loans for house buyers. At the annual convention of the U.S. Savings and Loan League in Los Angeles last week, savings and loan men took stock of how they are doing in both fields—and found that they are doing far better than the banks.

Last year, of the $8.1 billion that went into savings accounts, 44% went into savings and loan associations (which have about 14 million members) v. only 35% into commercial banks and 21% into savings banks. Last year they handled some 37% of all home-mortgage loans, more than the commercial and savings banks combined, and more than four times the share of the insurance companies. With an estimated total of more than $8 billion in mortgage loans being written this year alone, the associations are financing one in every four new houses being built in the U.S. Assets of the nation's savings and loan associations have tripled since the war to a record of some $30 billion, and by 1960 savings and loan men expect them to hit $50 billion.

Behind the spectacular rise of the associations lie many factors, including the growth of the entire economy. While bankers by and large have waited for business to come to them, the savings and loan men have gone out and drummed it up.

As the U.S. changed from a nation of tenants to a nation of homeowners (57% of all non-farm homes are now owned by the people who live in them), savings and loan men took pains to cash in on the trend by concentrating on the mass market. Says the U.S. Savings and Loan League's Executive Vice President Norman Strunk: "We love the guy who walks in with 50 bucks to start a savings account, because we know that in five years he'll probably have several times that in his account —and in the meantime, the chances are good he may have taken out a loan with us."

To get the $50 guys, savings and loan men spend upwards of $20 million a year on advertising—far more, proportionately, than the $45 million or so spent by banks, whose assets are seven times larger. A number of savings and loan associations offer many traditional banking services, including safe-deposit boxes, travelers' checks and money orders. They also have gifts for new investors, offer special lures for children. Last year 300 associations were using the services of Hopalong Cassidy to promote savings among moppets. But the biggest lure of all is the interest paid on savings. The average savings and loan dividend is 2.8% v. the 1¾% paid by banks.