Word: thrifts
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Dates: during 1980-1989
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...year mortgages that were created years ago, the savings institutions were sometimes paying customers 16% or more for new two- or three-year deposits. Making matters worse was the fact that as interest rates have risen during the past two years, many investors have pulled their cash out of thrift institutions and poured it into money-market funds or other places where they could get a greater return. In most months of 1981, withdrawals exceeded deposits at S and Ls and mutual savings banks...
There are fears that any new surge in interest rates, which many economists predict will occur perhaps as early as the summer, could eliminate one-third of the U.S. thrift industry. That would strain the Government's capacity to engineer the rescue mergers needed to absorb insolvent S and Ls. Says an official at the Federal Reserve: "If rates start to turn up again, then 1982 will be the crunch year. A lot of existing thrifts simply won't make...
Many savings and loan associations, which 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...
...what effect is that having on the consumer's ability to borrow money to buy, refinance or build a house? For years the savings and loan institutions have provided most of the money for housing. However, the continued threat from the new funds has all but ruined the thrift industry, thus eliminating for millions of Americans the opportunity to participate in the real estate market...
...variable-rate mortgages, loans whose interest rates are not fixed for 20 or 30 years but go up or down as general interest rates fluctuate, will help the S and Ls match their mortgages to deposits. But such loans are not likely to constitute more than 25% of all thrift portfolios before the middle of the decade. Some S and Ls will not last that long and will feed the merger trend that has begun. But the survivors will be in a better position than ever to be the country's major mortgage lenders, tending once again to their...