Moneymen offer investors new ways to keep cash and earn high interest 20% annual interest—Trust Deeds
Safely Secured… 18% United States Government Guaranteed Securities
… $3,000 earns 15.086% per year for 26 weeks … 15% interest on as
little as $1,000. No risks. No penalties. No fees. Those are some of the advertisements that try to attract Americans these
days, in newspapers and bank windows, as well as on television and
billboards. People are being swamped with offers for investment
opportunities, and savvy consumers are now flocking to newly popular
savings devices, including negotiable order of withdrawal
accounts, money-market funds, certificates of deposit, commercial paper
and U.S. Treasury bills. A savings revolution is sweeping the U.S. Only a decade ago, most people
were satisfied to put any money left over from the family budget into a
savings account at the bank, where it earned 4.5% interest; into a
checking account, where it earned no interest at all; and perhaps into
a few safe stocks. But today millions of people are taking money out of
those traditional savings havens and putting it into accounts that
often earn a return of as much as 17%. Says Walter Wriston, chairman of
New York's Citibank: “Americans are not stupid. They have been seeking
a better return on their money and getting it.” This year $43 billion has poured out of banks, savings and loans,
insurance companies and other investments into money-market funds and
various new accounts. In the month of April alone, savings and loans
had a record $4.6 billion net loss in deposits. The transfusion of cash into new institutions is putting severe strains
on some older ones. An estimated 90% of the 4,560 savings and loans are
now losing money. Industry Analyst Jonathan E. Gray of Sanford C.
Bernstein & Co. warns that, if interest rates do not abate, perhaps as
many as one-third of them will close down in the next five years. Two
weeks ago, the Economy Savings and Loan Association of Chicago became
the first federally chartered institution to fail in a decade. Many
other S and Ls will be forced to merge, as the stronger take over the
weak. Last year 142 mergers took place among savings and loans, as
compared with only 42 in 1979. Seventy more have occurred so far this
year. Says George Salem, an analyst with Bache Halsey Stuart Shields:
“S and Ls are in a state of shock from which they may never recover.” The financial jitteriness is even being felt in the Oval Office.
American moneymen in past weeks have been voicing skepticism about the
Reagan Administration's tax cut plans and consequently bidding up
interest rates. Last week the President said that the financial markets
were misjudging his plans, adding: “I have never found that Wall Street
is a source of good economic advice.” American banks, those stately citadels of stability, are going through
an upheaval. A few, like New York's Bankers Trust, have virtually gone
out of consumer banking and now lend money almost exclusively to
businesses. California's Bank of America and others have instituted
heavy minimum deposits and stiff fees on small accounts. Still others,
like New York's Citibank, are aggressively trying to win new customers
through improved services and bank-at-home computer terminals.
