Net Withdrawals From S&Ls; Drop to $8.5 Billion in March
Depositors withdrew a net $8.5 billion from the nation’s savings and loans in March, the government said Thursday. The outflow, although $2 billion less than January’s record, was still considered very large.
The Federal Home Loan Bank Board said the March withdrawals followed outflows of $9.2 billion in February and a record $10.8 billion in January.
It was the 11th consecutive month of net withdrawals and the fifth in which withdrawals exceeded $7 billion.
While the agency, which regulates 2,938 S&Ls; nationwide, emphasized that net withdrawals had declined for a second straight month, a private economist said it was important to remember that the March figure was still very large.
“It’s the (fifth) month of the same thing. I don’t see a big difference,” said economist Paul Getman of the WEFA Group, a Bala-Cynwyd, Pa., forecasting firm.
Net withdrawals in the first three months of 1989 totaled $28.5 billion--more than triple the $8.4 billion withdrawn during all of last year.
From October, 1987, through April, 1988, money had flowed into S&Ls; as stock market investors sought the safety of federally insured accounts.
Sees No Lack of Confidence
James Barth, the bank board’s chief economist, attributed the bulk of the recent outflows to the thrifts’ failure to keep pace with the higher interest rates being offered by competitors such as mutual funds.
“Apart from a few isolated instances, there is no evidence that the outflows reflect a loss of depositor confidence,” he said.
Barth was supported by economist Martin Regalia of the National Council of Savings Institutions, a trade group. He said S&Ls; have not seen the need to raise their interest rates to attract more deposits because the housing market is weak and short-term and long-term interest rates are nearly identical.
“I’m not alarmed by the (outflow) number. If it got to the point where institutions that wanted to keep deposits couldn’t, then it would be more serious. Right now, we have not heard anything to that effect,” Regalia said.
Bush Administration officials have been citing the withdrawal figures as evidence that Congress should move swiftly to enact the President’s bailout plan for closing or merging failed S&Ls.;
The Bush bailout proposal is in danger of becoming bogged down in a dispute between the Administration and congressional Democrats over whether its cost should be counted as part of the budget deficit. The Administration opposes adding the bailout cost to the deficit, while many Democrats favor that approach.
Getman said that a portion of the withdrawal total clearly is attributable to confidence problems, but he said he doubted that confidence will improve.
