Commercial Banks Financing
Sources...
Commercial banks
store far more of
the country's money
than the
Savings and Loans. However,
only one bank dollar
in six goes to real
estate lending. As a
result, in total
number of dollars,
commercial banks
rank second behind
Savings and Loans in
importance in real
estate financing and
lending.
Of the loans made
by banks on real
estate, the tendency
is to emphasize
short-term
maturities since the
bulk of a bank's
deposit money comes
from demand deposits
(checking accounts)
and a much smaller
portion from savings
and time deposits.
Consequently, banks
are particularly
active in making
loans for financing real estate
construction
projects as
these loans have
maturities of 6
months to 3 years.
They are less
inclined to offer
long-term real
estate loans. When
they do, maturities
are usually 5 to 15
years rather than 25
to 30 years. There
are, however, two
exceptions to this.
In rural areas where
longer-term savings
deposits make up a
larger portion of a
bank's money
sources, the town
bank is a major
source of long-term
real estate loans.
The other exception
is the bank that
makes 20- and
30-year loans but
afterwards sells
them, rather than
keeping them in its
own investment
portfolio.
Commercial banks
operate under state
or national
charters, the latter
being identified by
the word
"National"
in the bank's name.
National banks are
chartered and
supervised by the
U.S. Comptroller of
the Currency, and
are required to be
members of the
Federal Reserve
System (FRS) and the
Federal Deposit
Insurance
Corporation (FDIC).
The Federal Reserve
System is the
"nation's
bank," and the
FDIC provides
insurance to
checking and saving
depositors. As of
mid-1983, FDIC
insurance was
$100,000 per
account.
State-chartered
banks are controlled
by state banking
regulatory agencies,
usually in a manner
similar to the
national banks.
State banks can
voluntarily join the
FRS and the FDIC.
Banks offer
depositors a choice
of accounts similar
to those offered by
S&Ls.
Commercial
Banks To Mutual
Savings
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