Word: ls
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...sitting in accounts that pay a maximum of 5.5% interest. Those funds could currently be earning about 18% in a money-market account, 14.9% in a six-month savings certificate or 13% in a tax-exempt municipal bond fund. If the 5,000 savings banks and S and Ls in the U.S. suddenly had to start paying comparable interest rates on passbook accounts, many of them would go broke. As it is, an estimated 85% of all S and Ls are losing money because the double-digit interest that they are paying on a variety of certificates of deposit...
...paid on passbook accounts to 5.25% at commercial banks or 5.5% at savings and loan associations or mutual savings banks. Those ceilings are supposed to be eliminated by 1985, but plans to get rid of them sooner have foundered because of opposition from banks and S and Ls. Raising the interest-rate limit by just 1% would cost the troubled savings institutions an estimated $1.8 billion annually. This week federal regulators will discuss a proposal to double the interest rates on passbook accounts to 10.5% for banks and 11% for S and Ls and mutual savings banks, but the measure...
...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...
...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...