Word: thrifts
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Banks and so-called thrift institutions, which are savings and loan associations and savings banks,* have been able to do very little to stop the hemorrhaging of money out of their vaults, because Government regulations do not let them offer interest rates that can keep up with inflation...
...seen as a way of punishing the banking industry, which was held responsible by much of the public for bringing on the collapse of the financial system. The Federal Reserve's 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...
...when the Federal Reserve published figures reflecting that increased loan demand and money growth, American financiers reacted nervously. The report showed that the most important measure of the money supply, which is called M1B and includes money in circulation, checking accounts and checklike NOW deposits at thrift institutions, had grown by a stunning $4.2 billion to $431 billion in the third week of April...
...Fund Insurance (1980 sales: $3 billion). Shearson's main offerings to the merger were 11,000 employees in 270 U.S. and overseas branches, plus $8 billion in assets in popular money-market funds, which in recent months have lured a small army of savers away from banks and thrift institutions...
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...