Withdrawal of S&L; Deposits Slowed at End of the Year

Savings and loan depositors withdrew $4.9 billion in November as the thrift industry continued to shrink in response to tougher financial standards enacted last summer, the government said Tuesday.

It was the lowest level of withdrawals in four months but was still the 17th outflow in 18 months and brought total deposits at the nation’s 2,889 S&Ls; down to $947 billion, the Office of Thrift Supervision said.

Withdrawals in the first 11 months of 1989 totaled $64.9 billion. Outflows, which hit a record of $10.8 billion in January, 1989, were $6.4 billion in October.

The withdrawals early in the year were attributed to eroding depositor confidence and rising interest rates offered by investment alternatives such as money market mutual funds.

Economists say outflows in the last half of the year are part of a deliberate strategy by S&Ls; to comply with bailout legislation enacted Aug. 9.

“Most of the shrinkage was likely due to thrifts’ continuing strategy to reduce assets to comply with new capital requirements,” said economist James Freund of the thrift office.

The new standard, effective Dec. 7, requires S&L; owners to put more of their own money behind their institutions.

Weak thrift associations that have trouble raising capital are finding they must reduce their portfolios of loans and other investments. As they sell assets, they need fewer deposits.

The industry’s assets declined by $8.8 billion in November after a $6.3-billion drop in October. They totaled $1.28 trillion, compared to $1.33 trillion a year earlier.

The 275 failed thrifts under government control at the end of November, like the rest of the industry, experienced shrinkage. Government-controlled thrifts lost $2.2 billion in deposits and $2.3 billion in assets. Privately controlled thrifts shed $2.7 billion in deposits and $6.5 billion in assets.