_ • I Herald & lantern 6 June '84 bllSIUCSS 55 . ... -v . I '

A Flight to Quality? How My Money Almost J

By JOSEPH R. ZELNIK There's an "analysis" label on this column to warn the reader that it contains opinion. Be further warned that, although it is a financial column, the writer is not a financial expert. It is written from the point of view of an economic conservative who never takes more than $10 to Atlantic City, and of a fiscal romantic who has some money at An Analysis First Savings & Loan not just because its rates are competitive, but because this newspaper once reported that its president, Linda Brown, likes to go barefoot. Nevertheless, there are a lot of people in this county relying on the interest from a few bucks in the bank, and this column might be of some interest to them. MY EYE WAS CAUGHT last week by a Manufacturers Hanover Trust ( Long Island) ad offering a 30-month CD paying 11.6 percent interest compounded daily for a yield of 12.47 percent. That's about 1 percent

higher than most of the financial institutions in this county, and close to 4 percent higher than I was receiving for an insured money market deposit account ($2,500 minimum) at a local S&L (not First). So I went to the S&L on a Friday afternoon, pulled out my $2,800, and put it in my checking account for the weekend, intending to send it off to Long Island on Monday. I'd been less than thrilled , with the money market account for some time. WHEN I DEPOSITS^ the money early in 1983. the institution was offering a $25 bonus and basing its interest rate on the 91 -day TBill plus half a percent. That equaled about 8.7 percent at the time. In the spring of 1983, with the T-Bill climbing, the institution dropped its interest rate to equal the T Bill, then at about 8.7 percent. AJew months later, the T-BilU§till up, the institution severed that link and began determining the account's interest rate by weekly "management decision." The rates have been about 8.5 percent ever since, not the lowest in the

county, but not the highest either. To its credit, this institution's monthly statement always reports the interest rate it paid Some don't. But the difference between that 8.5 percent and the 30-month CD's 12.47 is almost $100 a year — an evening out for two in Cape May, or a winter month's heat bill. THE SAME DAY I took my money out of the money market. I came home, got the mail, opened my Wall Street Journal, and guess what the lead story' said? "Large Banks Are Hit by New Set of RumoVs. LatinLoan Worries Affect Manufacturers Hanover." Yes, I know the Federal Deposit Insurance Corp. (FDIC) guarantees accounts up to $100,000. And money in. Manufacturers Hanover is probably as - safe as Bill Hughes in November. But I didn't send 'em mine.

Association Ranks Grow WEST CAPE MAY - The West Cape May Business Association had its monthly meeting recently. A favorable response to the association's advertising brochure has helped swell the membership total to 29. It was decided to establish a committee of three" to oversee the scholarship program Two graduating seniors in the Lower Cape May Regional High School Class of 1084 will be the first recipients It was also agreed that one or more members of the association will attend Borough Council meetings in the future The next regular meeting will be held at the Village West Restaurant. 406 Broadway, at 8:30 p.m Thursday. June 21

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\ Went to Long Island

% t The nervousness about ■Manufacturers Hanover, the nation's fourth largest I bank, came less than two I weeks after the federal government devised a $7 5- bill ion rescue package I for Continental Illinois Na5 tional Bank & Trust Co. of i Chicago > But I read in the same > day's Journal that the FDIC "is.burtlened with its i own portfolio of problem i loans and must deal with t other problem banks " I THE REPERCUSSIONS ; of rumored trouble in somelarge U:S. banks are awesome. The Journal, citing "the I general lack of confidence in the financial system." I reported that bond prices fell sharply, the dollar plunged on foreignI exchange markets, and ; stocks skidded in London." ; As investors shied off i from bank CDs in [ preference of short-term Treasury bills, the former's interest rates climbed the latter's dropped: And, of no small interest to Cape May County, longterm municipal bond interest rates climbed. The county is going to borrow $15.5 million in the fall, starting with bond anticipation notes, to finance I a new Crest Haveknursing ; home and courthouse renovations. Carla Smith with Kraft & Hughes, the county's Newark bond counsel, said last week that interest rates, now ranging from 8.5 to 9.5 percent, "are suppos-

ed to go up this summer." THE JOURNAL articles had some very interesting quotes A former Treasury Department official, talking about the Fed promise to rescue Continental Illinois. said, " they fell on their knees with hands outspread and said, 'save us.' " Another expert, com menting on the interna tional money market, said it "has only two gears - overdrive and reverse " And a New York banking consultant said some people may be thinking FDIC protection "rather than be-

ing a sign of stength. is a Sign of weakness " THERE WAS agreement that tqgfre is a "a general fhghf Sl quality by in vestorj^Bnd "a preference for liqJHpy For quality. substiwB* "safety;" for liquiditgMUbstitute "short term 'V AndGanks. the Journal said, ah£fiQding it "prac t ica 1 1 yaHxiss i hi e to build custonflB loyalty when its custonWs are moving money II and out of banks in reflmnse to minute c h a n JPs in interest rates jfr, My K burned at that one J

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