Word: passbook
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Dates: during 1980-1989
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Until the 1970s, an after-taxes annual return of 1% to 2% on passbook savings was considered to be about normal. The trouble began in the mid-1960s, when inflation rose from 1% to 5%. In 1965, when thrifts were paying up to 4¾%, a family earning the national average of $7,704 and with a nest egg of about $3,500 in the bank would have realized an annual return of about $80 after inflation and federal taxes were taken into account. By 1967 inflation and taxes had reduced the gain to zero. In the year 1970, that...
...Regulation Q gives the Government the authority to fix the level of interest paid by banks. Thrift institutions are permitted to pay ¼% more as a way of attracting funds for the home mortgages that they normally provide. At present, banks pay 5¼% and thrifts 5½% on passbook accounts...
Even before these reforms, banks were trying to attract new savers with a variety of high-yielding time deposits and money-market certificates. These give much more interest than a passbook account; last week a six-month certificate paid 15.9%. But they usually require that the depositor keep his money in an account for six months or longer in order to earn the full interest...
...assets), Wriston has replaced David Rockefeller as the premier spokesman for America's moneymen. A graduate of Tufts University's Fletcher School of Law and Diplomacy, Wriston has pushed Citibank into the forefront of the banking revolution symbolized by automatic teller machines. Low interest rate ceilings on passbook deposits, he maintains, discourage the savings that are desperately needed to spur investment. Says he with characteristic bluntness: "We're being forced to rip off the public. The savers are subsidizing the borrowers...
Banks and savings institutions have undoubtedly been hurt by the money funds, since their cheapest source of funds is deposits in checking accounts and low-interest passbook accounts. Saddled with billions of dollars' worth of unprofitable old low-interest mortgages, some thrift institutions are tottering on the edge of bankruptcy. Last week the U.S. League of Savings Associations urged the Government to impose sharp restrictions on the money market funds and asked the Federal Savings and Loan Insurance Corporation to pledge up to $7 billion in low-cost loans. Says Carroll Melton, league economist: "The money market funds...