Path: bloom-picayune.mit.edu!snorkelwacker.mit.edu!news.media.mit.edu!americast.com!americast.com!usa-post Newsgroups: usa-today.banks From: usa-post@AmeriCast.Com Organization: American Cybercasting Approved: usa-post@AmeriCast.com Subject: banks Mon, Jun 29 1992 Date: Mon, 29 Jun 92 05:27:36 EDT Message-ID: 06-29 0000 DECISIONLINE: Banking & Economy USA TODAY Update June 29, 1992 Source: USA TODAY:Gannett National Information Network FOMC TO MEET THIS WEEK: The Federal Reserve's Open Market Committee, meeting Tuesday and Wednesday in Washington, is expected to debate whether to cut interest rates to keep the economy. If the FOMC agrees to cut rates, it will then have to decide whether short-term rates should be cut slightly or whacked soundly to stimulate a recovery. "It's obvious the Fed should cut rates," says economist Lacy Hunt. CUT MAY COME THURSDAY: Economist Lacy Hunt says he hopes the Fed will push the federal funds rate down 1:4 percentage point, to 3.5%. That might be enough to spark a cut in banks' prime rate, now at 6.5%. Some advocate a half-point cut in the discount rate to 3%. Economist Donald Straszheim believes a rate cut could come Thursday if unemployment figures for June show that fewer than 50,000 jobs were added. MOST S&LS IMPROVED LAST YEAR: The financial health of most savings and loans improved last year, according to an analysis by USA TODAY of the nation's 2,188 S&Ls at the end of last year. Most built capital, reduced problem loans and reported improved earnings. But analysts warn that the S&L recovery is fragile - vulnerable especially to swings in interest rates. In fact, several large thrifts have big problems. (For more, see special S&L package below.) STOCKS FINISH WEEK MIXED: The stock market was little changed this past week as investors waited for the Federal Reserve to ease interest rates to give the economy a boost. The Dow Jones average of 30 industrials finished the week with a net loss of 2.94 points. Friday, the Dow slipped 1.60 points to 3282.41 as trading set its slowest pace in more than five weeks. Only 154.43 million shares changed hands on the NYSE. PERSONAL INCOME UP AGAIN: The Commerce Department says personal income rose in May for the fourth consecutive month, again giving consumers more cash to fuel a struggling economic recovery. Income went up 0.3%, representing a seasonally adjusted annual rate of slightly more than $5 trillion. Spending in May rose 0.5% to a seasonally adjusted annual rate of more than $4 trillion. RTC LAWYER INVESTIGATED: Gerald L. Jacobs, general counsel for the Resolution Trust Corp., is banned from working on potential lawsuits against former savings and loan officers until his ties with the failed Western Savings and Loan Association are clarified. His duties have been modified, the RTC said Friday. Jacobs formerly worked for Dicor, a real estate firm that defaulted on a $39 million loan from Western. VOLATILE WEEK ENDS QUIETLY: The energy futures market Friday quietly ended a volatile week that pushed crude oil and heating oil to their 1992 highs. Light sweet crude oil for delivery in August settled at $22.44 a barrel, down 14 cents, at the Mercantile Exchange. For the week, oil rose 18 cents a barrel. July heating oil settled at 62.27 cents a gallon, off .89 cent for the day but up .81 cent for the week. GOLD, SILVER FALL: Gold and silver prices dropped Friday. On the Commodity Exchange, gold bullion for current delivery was quoted at $342.50, down 70 cents. Republic National Bank quoted the metal at $342.50, off 30 cents. The metal also fell in London. Also on the Comex, silver bullion for current delivery was quoted at $3.974, down from $4.002. In London, silver fell to $4.01 from $4.04. SPECIAL PACKAGE ON S&LS: FIVE OF 10 BIGGEST IN TROUBLE: While USA TODAY's financial analysis of the nation's 2,188 S&Ls at the end of last year showed most had improved, several large thrifts remain neck-deep in problem loans. Five of the USA's 10 biggest S&Ls are on USA TODAY's list of 326 troubled thrifts. That means their problem assets were bigger than the tangible capital and reserves they had on hand to absorb loan losses on Dec. 31. PRIVATELY-HELD S&LS POST PROFIT: After losing nearly $48 billion from 1987 through 1990, the S&L industry cut its losses from $7.1 billion in 1990 to $186 million last year. Of those losses, $2 billion worth came from S&Ls operating under government control. Weed those out and S&Ls in private hands earned $1.8 billion last year, their first profit since 1986. THRIFTS PAD CUSHION: USA TODAY's analysis of the thrift industry shows that S&Ls more than doubled their cushion of tangible capital last year, to $38 billion or 4.09% of industry assets, on Dec. 31, vs. 1.63% at the end of 1990. Tangible capital includes the owners' investments in an S&L and accumulated earnings. Tangible capital is the financial firewall that separates thrifts from insolvency. PROBLEM ASSETS CUT 21%: The failure of many thrifts with problem assests along with the write off or sale of troubled loans and foreclosed real estate by other S&Ls helped the industry reduce problem assets 21% last year from 1990, to $45 billion. And the drop in short term interest rates helped borrowers who seemed likely to default in 1990 to be better able to handle their debts. (End of package.) DOW JONES OPENS ON DOWNSWING: The Dow Jones average of 30 industrials opens Monday at 3282.41 after closing down 1.60 Friday. The New York Stock Exchange composite opens at 221.68, up 0.15. The American Stock Exchange market value opens at 374.04, down 0.11. The NASDAQ OTC composite opens at 547.84, down 0.36. 24-HOUR TELEPHONE INFORMATION: USA TODAY Money Hot Line. 95 cents a minute. 1-900-555-5555. Banking & Economy Editor: William Snoddy. (1-919-855-3491) Making copies of USA TODAY Update (Copyright, 1992) for further distribution purposes violates federal law. This article is copyright 1992 Gannett News Service. Redistribution to other sites is not permitted except by arrangement with American Cybercasting Corporation. For more information, send-email to usa@AmeriCast.COM