Buying U.S. Bonds During World War I the United States government raised money to support the war effort by selling special liberty bonds through commercial banks. In this photo, Chicago citizens crowd into the Union Trust Bank to buy liberty bonds.PNI/N/A/Chicago Historical Society
Commercial banks are “for profit” organizations. Their objective is to make a profit. The profits either can be paid out to bank stockholders or to the holding company in the form of dividends, or the profits can be retained to build capital (net worth). Commercial banks traditionally have the broadest variety of assets and liabilities. Their historical specialties have been commercial lending to businesses on the asset side and checking accounts for businesses and individuals on the liability side. However, commercial banks also make consumer loans for automobiles and other consumer goods as well as real estate (mortgage) loans for both consumers and businesses.
Savings and Loan Associations
Since 1982 savings banks have been permitted to convert to SLAs. SLAs also may convert to savings banks. Both SLAs and MSBs can now offer a full range of financial services, including multiple savings instruments; checking accounts; consumer, commercial, and agricultural loans; and trust and credit card services.
Credit unions, SLAs, and savings banks help encourage thriftiness by paying interest to consumers who put their money in savings deposits. Consequently, credit unions, SLAs, and savings banks are often referred to as thrift institutions.
Of the various types of banks in the United States, commercial banks account for the greatest single source of the financial industry’s assets. In 2000 the 8,528 commercial banks in the United States controlled 24 percent of the financial industry’s total assets. Commercial banks, however, have seen their share of financial-industry assets erode over time, as more money has shifted to money market and other mutual funds. In the mid-1990s, for example, the approximately 11,000 commercial banks then in existence controlled 27 percent of assets. In 1950 they controlled nearly 50 percent of financial assets. Savings institutions’ share of financial assets has also dropped from roughly 13 percent in 1950 to 5 percent in 2000. Credit unions’ share has remained fairly constant at 2 percent.