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BPEA Article

Deposit Demand, “Hot Money,” and the Viability of Thrift Institutions


RECENT TRENDS in financial markets have stirred fears about the ability of thrift institutions in the United States—savings and loan associations and mutual savings banks—to survive and prosper. Although these institutions constituted the fastest growing segment of the financial system from 1947 to the mid-1960s, their spectacular prosperity has dimmed since then as markets have become increasingly volatile. More and more they have experienced deposit drains, and no relief seems in sight. Accordingly, many knowledgeable observers question the prospects of these institutions as now constituted and regulated.


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