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...certificates of deposit comes due. If all that money is not reinvested, the company may find itself in serious trouble. Said a senior Treasury Department official last week: "We're watching it very, very closely. We're deeply concerned." F.C.A. is not alone among S & Ls in a bind. Since the beginning of the year, Government regulators have forced nine failing S & Ls to merge with larger institutions...
...pilot who likes to restore vintage aircraft in his spare time, Knapp enjoyed being known as the Red Baron of the S & L industry. His biggest mistake was to gamble heavily that interest rates would fall. While other S & Ls hedged their bets by offering homeowners variable-rate mortgages, Knapp aggressively marketed fixed-rate mortgages at about 12.5% in the expectation of making big profits when interest rates fell. Instead, they rose slightly in the second quarter, putting the squeeze on F.C.A. To make matters worse, Knapp had permitted large institutional investments, many of which have deposits that exceed...
While cash was flowing out of S and Ls at a steady rate last year, it is currently flowing in. Some $142 billion has gone into the new money-market accounts. In addition, some $12 billion in Individual Retirement Account funds has been deposited in the thrifts in the past six months...
...thrifts have been using their new cash to fuel the housing recovery and improve their operating results in the process. Savings and loans made $21.6 billion in mortgages during the first quarter, compared with $9.3 billion a year ago. That lending helped the S and Ls increase their net worth by an estimated $1.9 billion during the period. Says Howard Kane, deputy chief economist for the U.S. League of Savings Institutions, an industry trade group: "The thrifts are heading back to profitability, if they're not already there...
With their financial foundation a little more secure, some adventurous S and Ls are starting to branch out beyond mortgages and look for new places to put their money. Western Savings & Loan of Phoenix (assets: $2.6 billion), Arizona's largest thrift, has assembled a nationwide group of S and Ls that plans to pool its cash and pump more than $1.5 billion into commercial loans to corporate borrowers. Such lending is permitted under the 1982 Depository Institutions Act, which lets thrifts make a wide range of loans that had previously been off-limits...