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

William E. Gibson

WEG

William E. Gibson The Brookings Institution

Discussants: James L. Pierce

JLP

James L. Pierce Staff, Board of Governors of the Federal Reserve System

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.