Some Shifting of Funds in Southland; No Massive Movements : Depositors React With Concern but Not Panic

President Bush’s bailout plan for savings and loans has sparked renewed concerns and awareness among Southern California depositors about the financial soundness of their savings institutions, local industry officials and investors said Tuesday.

Although there has been some shifting of funds from savings institutions to alternatives such as Treasury bills or money market mutual funds, there is no evidence yet of any massive withdrawals from California savings and loans, regulators said.

And the shifting that has occurred, officials and investors said, seems to be motivated more by savers’ efforts to get higher yields rather than concerns about safety.

Treasury bills, for example, are yielding the highest interest in four years, while money market funds are yielding on average more than two percentage points over bank money market deposit accounts.

“I just want a higher yield,” said one Malibu investor who added that he plans to withdraw about half of his $700,000 in certificates of deposit and place them into mutual funds. But as far as safety of his savings is concerned, “I feel my money is secure.” The first time the government doesn’t make good on its insuring of $100,000 per depositor per institution, “there will be a run on every bank in the country,” he said.

Don Chronister, a teacher in Sepulveda, also said he is exploring pulling some money out of his S&L; accounts and putting it instead into mutual funds. But that would be because of his long-term investment outlook, he said. “I didn’t think yesterday’s news was anything dramatic. Everybody knew that S&Ls; were in trouble and something had to be done to bail them out or to strengthen the existing ones. Yesterday’s news seemed to be rational response to that.”

Elaine Kirk of West Covina said she has a diversified portfolio with some money in S&Ls; she has carefully selected. Consequently, she said, “I don’t necessarily feel it is necessary to take the money out.” But, she added, if President Bush’s proposed hike in insurance premiums charged to banks and S&Ls; is passed along to savers and “we don’t get a decent interest rate, then we will look at other things, such as mutual funds.”

Randy Westerfield, a retired marketing executive in Agoura, says he recently shifted his money out of a weaker S&L; into several stronger ones. “It’s better to be safe than sorry, because even though with S&Ls; your insurance is there, you may have to wait for your money” if an institution is closed, he said.

Officials at the Federal Home Loan Bank of San Francisco, which monitors S&Ls; in California and other Western states, said they don’t have available the information that would show whether there is a flight of savers from S&Ls.;

However, a spokeswoman said that a spot check of institutions after news two weeks ago of the Treasury Department’s proposal to levy a fee on depositors showed no significant movement of funds from S&Ls.;

At the Merrill Lynch brokerage firm, there is “very heavy” activity in brokered CDs, but it does not necessarily reflect a flight from S&Ls;, reported John R. Queen, manager of the firm’s Los Angeles branch.

Rather, he said, investors find that they “get a better yield by shopping nationwide (through a broker) instead of dealing with their local S&L.;”

Queen did say he is seeing a preference for buying CDs offered by banks that are insured by the stronger Federal Deposit Insurance Corp., rather than S&Ls; insured by the weaker Federal Savings and Loan Insurance Corp. Consequently, investors in FSLIC-insured institutions are getting a little better yield because there is more demand for FDIC-insured CDs, he said.

Chuck Johnson, vice president of marketing at Franklin Resources in San Mateo, which offers a number of mutual funds that appeal to safety-conscious investors, said, “We have not experienced any noticeable change in our business” as a result of S&L; developments. “It’s probably a little early, I would suspect, for anything to have occurred.”

Times staff writers Nancy Yoshihara and Linda Williams contributed to this story.

COMPARING LONG-TERM AND SHORT-TERM YIELDS Money market mutual funds *: 8.76% Bank money market deposit accounts: 6.33% 1-year bank CDs: 8.63% 5-year bank CDs: 8.88% 3-month Treasuries: 8.88% 1-year Treasuries: 9.05% 3-year Treasuries: 9.22% 10-year Treasuries: 9.05% 30-year Treasuries: 8.84% * (Seven-day compounded average yield) Source: Donoghue’s Money Fund Report, Bank Rate Monitor