Depositors withdrew a record $10.7 billion from the nation’s savings and loan institutions in January, in one month surpassing withdrawals for all of 1988, the government said today.
James Barth, chief economist of the Federal Home Loan Bank Board, said four of every five of the nation’s 2,945 S&Ls; had deposit outflows in January.
Barth said a preliminary estimate shows withdrawals declining only slightly in February to between $8 billion and $9 billion. Net withdrawals for all of 1988 were $8.6 billion.
Barth attributed the bulk of the withdrawals this year to the fact that competitors, such as money market mutual funds, have more promptly increased interest rates than thrifts have on savings accounts. In January, money market funds, on average, offered rates 1.25 percentage points higher than S&Ls;, he said.
Another portion of the withdrawals occurred as part of a deliberate strategy by regulators to shrink ailing institutions, he said.
However, Barth acknowledged that some of the withdrawals were caused by confidence problems amid growing publicity about the condition of the industry.
President Bush announced his plan for restoring S&Ls; to health on Feb. 6. In the weeks immediately preceding that, the Administration floated a proposal, since abandoned, to charge bank and S&L; depositors a fee to help rescue the S&L; insurance fund.
“That sort of talk undoubtedly induced some people to believe, ‘Why keep your deposits at thrifts?’ ” Barth said.
4th Consecutive Month
February would mark the fourth consecutive month of heavy outflows from S&Ls.; Outflows totaled $8.3 billion in December and $7 billion in November. From May through October, outflows totaled $9.4 billion.
In the first four months of 1988 there were deposit inflows of $16.2 billion as investors pulled their money out of the volatile stock market and put it into federally insured institutions.
Net deposit flows do not include interest credited to savings accounts. Including the interest, S&L; deposits grew 4.2% in 1988, the slowest pace since the recession year of 1981.