Word: ls
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Dates: during 1980-1989
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...that, if interest rates do not abate, perhaps as many as one-third of them will close down in the next five years. Two weeks ago, the Economy Savings and Loan Association of Chicago became the first federally chartered institution to fail in a decade. Many other S and Ls will be forced to merge, as the stronger take over the weak. Last year 142 mergers took place among savings and loans, as compared with only 42 in 1979. Seventy more have occurred so far this year. Says George Salem, an analyst with Bache Halsey Stuart Shields: "S and Ls...
...banks remain relatively stable because of their large amount of business lending, which is normally tied to the fluctuating prime rate. But savings and loans and other institutions specializing in fixed-rate mortgages are in serious trouble. Two-thirds of all home loans on the books of S and Ls carry rates of 10% or less, though the thrifts have to pay 15% and more for new money. Says Analyst Gray: "In New York the thrifts are 20 feet under water; in other states it might be only five feet. But they're all under water...
Savings Certificates. Time deposits offered by banks and S and Ls pay more interest than a savings account, and they are still insured by the Government. The most popular certificate today has a maturity of 2½ years and pays 12% interest. Disadvantage: if the money is withdrawn early, the saver loses a substantial part of his interest...
Threatened by younger, more alluring and higher-yielding money-market funds, the long marriage between investors and the American savings and loan associations is in trouble. This year S and Ls may lose $5 billion of their $32 billion in net capitalization. To stem the flight of depositors, they have had to offer new savings instruments with higher and higher interest rates. The conundrum: at the same time that they carry huge portfolios of old mortgages, including some that were made in the 1960s and yield 6% or 7%, S and Ls must pay 15% or more for new deposits...
Help could be some time in coming, if it comes at all. The Reagan Administration is philosophically opposed to helping the S and Ls with transfusions of cash. Deputy Treasury Secretary R.T. McNamar denies that the S and Ls are in any permanent trouble. Says he: "As long as the savings outflow does not create a liquidity crisis, then the problem is an accounting matter. It can be met with accounting changes...