Threatened by younger, more alluring and higher-yielding money-market funds, the long marriage between investors and the American savings and loan associations is in trouble. This year S and Ls may lose $5 billion of their $32 billion in net capitalization. To stem the flight of depositors, they have had to offer new savings instruments with higher and higher interest rates. The conundrum: at the same time that they carry huge portfolios of old mortgages, including some that were made in the 1960s and yield 6% or 7%, S and Ls must pay 15% or more for new deposits. As a result,...
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