It’s Easier to Lend America Money : Investors are lining up to buy T-bills from the Fed. They’re finding improved space, staff--and rates.

Times Staff Writer

John Wessel and his wife Ann have been buying Treasury bills in person for 15 years and remember the time a few years ago when lines of buyers often went out the door of the old Federal Reserve branch bank in downtown Los Angeles.

Today, with T-bills yielding their highest rates in four years, long lines have reappeared on Monday mornings, the day when three- and six-month bills are auctioned. But if the experiences of dozens of investors this latest Monday morning were typical, buying these securities in person is no longer much of a hassle.

Although getting through on the phone for more information has been a time-consuming experience lately, buying T-bills directly is relatively painless and quick, investors said. Thanks to computers, more efficient forms and increased assistance from Fed staffers, many buyers Monday morning were in and out in no more than five minutes.

“There is no comparison to the way it was before,” said Wessel, a retired Los Angeles engineer whose buying expedition Monday was his second this year.


“I considered doing it by mail, but I like the idea of doing it myself,” he added. “Then I know it’s done properly.”

Indeed, speedy processing is good news for thousands of investors like Wessel who have flocked to buy Treasury bills in recent weeks.

The volume of offers to buy bills--either in person or by mail--is running five times over the level a year ago at the Federal Reserve’s new Los Angeles branch at 950 S. Grand, said Cindy M. Stewart, assistant manager of marketable securities. In the week ended Feb. 24, individual tenders (bids to purchase) totaled nearly 1,500, up from about 260 in the same week a year ago.

Individual purchases have been averaging $50,000 to $60,000, with some as large as $200,000 or $300,000 although many are at the minimum of $10,000, Stewart said. On top of actual tenders, the branch has been receiving 1,000 calls a day from prospective buyers asking for more information. That is triple the level when T-bill rates are not so high, Stewart said.

Investors have been attracted to T-bills for many reasons. One of the most frequently cited is their safety: Treasuries, as all Treasury securities are called, are backed by the full faith and credit of the federal government. Some investors, concerned about the financial soundness of many banks and savings and loans, have pulled money out of them despite federal deposit insurance.

Many investors also are attracted by the exemption from state taxes of interest on Treasury securities. Others simply invest out of force of habit.

But investors interviewed Monday indicated that the biggest reason is simply high rates. At Monday’s auction, three-month T-bills went for an average discount rate of 8.65%, producing an actual annual investment yield of 8.97%. Six-month bills sold at an average discount rate of 8.66%, meaning an actual yield of 9.18%.

T-bills are sold at a discount from face value; the actual yield is higher because it is calculated based on the amount you pay, not the face value. Monday, a $10,000, three-month bill sold for $9,781.30 and a six-month bill for $9,562.20.


Better Than S&L; Rates

Both were slightly off from last week’s yields, but they were the highest since March, 1985. By contrast, a year ago, rates and yields were about three percentage points lower.

“The interest rates are better than at S&Ls;,” said Charles Howard, a Los Angeles retiree who has been buying Treasuries for 20 years.

“I know that bank deposits are insured up to $100,000, but my reason (for buying T-bills) is the higher interest rates and the fact that I don’t have to pay state tax,” said Madeline F. Koenig, a homemaker from Downey and 15-year veteran of T-bill investing.


Buying T-bills is often described as a complicated process, but many first-time buyers said they were not daunted.

One first-timer, Karen Peterson, a Torrance bank accountant, said she went in directly after investigating several savings institutions that she said would have charged her as much as $40 in fees for investments in Treasuries. That is enough to wipe out much of the interest earnings on smaller denominations.

Peterson was in and out of the Federal Reserve branch in less than five minutes. “It was fine; someone was here to answer all my questions,” she said.

Several buyers said they reduce hassle and time by filling out bid forms in advance. The time also is reduced because the Fed branch provides staff members in the lobby to answer questions from the growing numbers of first-time buyers. And tellers at the counters use computers to put purchase information directly into investors’ accounts, unlike several years ago when all work was done manually.


Phone Still a Headache

Also, the lobby of the Fed’s new branch bank is more spacious than the one at the old office. The branch has occupied the new quarters for two years, after moving from its old residence on Olympic Boulevard around the corner. There, lines went out the door often because the lobby was too small and processing was slower. That is unlikely in the new branch’s cavernous lobby.

But while going in person can be smooth, getting information over the phone from a staffer lately has been a headache, Fed officials admit.

In a recent week, callers to the live help lines got close to 20,000 busy signals, compared to about 5,000 calls that got through, the Fed’s Stewart said.


Fortunately, more help is on the way. The Fed branch plans to add five more phone lines and staff members to answer them next week, more than doubling the current level of three people, she said.