Word: ls
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Dates: during 1980-1989
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...have always been the mainstay of home financing, are also hurting. To keep their deposits, these thrift institutions must pay as much as 16% interest, though many of the old mortgages on their books earn them less than 10%. As a result, an estimated 85% of all S and Ls are losing money. Administration officials are confident that most of the S and Ls have large enough capital reserves to tide them over until rates fall. But some financial experts are not so sure. Says the president of one of the largest U.S. commercial banks: "It could be a major...
...Internal Revenue Service ruled last week that the big cash bonuses in most cases nullified the tax-free status of the savings certificates. Moneymen were outraged by the ruling, while consumers were left more bewildered than ever by the jabberwocky of interest rates given by banks and S and Ls. In recent weeks financial institutions have paid between 5.25% and 50% annual interest on various deposits...
...origin of last week's IRS action was a congressional measure earlier this year designed to make it easier for the S and Ls to get deposits that could be used for mortgages. During the first seven months of 1981, S and Ls and savings banks lost upwards of $25 billion in funds. Some lending institutions have now virtually stopped making mortgage loans because they no longer have money available. Much of the missing investment is going into money-market funds, which gained $75.7 billion in the past eight months...
...reason for the cash flow is simple: S and Ls pay only 5.5% annually on passbook accounts, while money-market funds last week were yielding 16% and more per year. The A.s.C.s, which require that money be deposited for one year, were legislated to aid the S and Ls in their attempts to win customers back from the money funds...
Banks and S and Ls can pay on the A.s.C.s up to 70% of the average interest on the most recently issued one-year Treasury bills. On the basis of last week's Treasury offering, the yield on the accounts in early October will be 12.61%. The A.s.C. is more attractive than money-market funds for some investors because the first $1,000 an individual earns on it ($2,000 for a couple) is tax free...