savings and loan association chartered and supervised by the office of thrift supervision (OTS). Federal savings and loans (S&Ls) derive their funds mostly from consumer deposits and invest primarily in long-term residential mortgages. Congress authorized federally chartered savings institutions to serve the needs of home buyers under the Home Owners' Loan Act of 1933. Since the early 1980s, deregulation in the banking industry gave federal savings institutions the right to offer checking accounts and Negotiable Order of Withdrawal (NOW) accounts. The Garn-St Germain Act of 1982 allowed federal savings institutions to make consumer loans, offer discount brokerage accounts, and invest up to 5% of assets in commercial loans. Even with these expanded powers, federal S&Ls are required to keep at least 70% of assets in residential mortgages or mortgage securities.
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