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While the future of savings and loans industry remains in doubt, one thing is certain about the troubled industry: Depositors' savings accounts are protected and making money.

Based on assurances from the White House on down, Utahns won't lose one cent of their money in local savings and loans, even if their institution goes insolvent. Moreover, savings and loan depositors are earning higher returns than they would if their money was in other institutions.

"People should be flooding their money into S&Ls. Their accounts are protected by the government (up to $100,000) and paying an average .5 percent more in interest than other institutions," said Paul Neuenschwander, president of the Utah League of Insured Savings Institutions.

That may appear a desperate, self-serving statement by the local S&L industry, but Neuenschwander and other managers aren't bragging about the prospect of higher rates, because they put an additional squeeze on already narrow profit margins.

Savings and loans make much of their money on interest from mortgage loans, and when the interest they pay for deposits increases and approaches the rate earned on home loans, profit margins get smaller.

The trend has state regulators worried. "Most of our institutions are in good condition right now and operating at a profit, but they con't continue to operate profitably under this current system. It could drive some into the failing category," said George Sutton, Utah Commissioner of Financial Institutions.

The squeeze has been caused in part by recent and past years of publicity about financial troubles with savings and loans. Although reports should scare consumers, savings and loan deposits have grown steadily the past 10 years in Utah (see chart on M1). But recent reports about federal regulators moving in on three Utah S&Ls has local operators anticipating a net outflow of funds for February.

Hoping to stop the outflow of funds and attract new deposits, S&Ls across the country are offering higher than average rates.

Reports last week listed Sandia Federal Savings and Loan with the fifth highest rate in the country for jumbo certificates of deposit, at 9.85 percent. Sandia, based in Albuquerque, N.M., and operating nine offices in Utah, is currently being run by federal banking regulators to stop additional losses.

The FSLIC insures savings and loan accounts up to $100,000, so depositors don't necessarily have to consider an institution's health, just the rates and whether their deposits are within the insured limits. The average savings and loan deposit is about $6,000.

Deposits of $100,000 or more don't belong to the typical retirement age savings and loan customer, but large institutional investors, municipalities or state agencies.

The state's Money Management Council establishes criteria that public treasurers must follow in depositing public funds in financial institutions. State Treasurer Ed Alter said the criteria are based on an institution's net worth and as that net worth decreases the institution's allocation of public fund deposits does too.

"No public money can be deposited in an insolvent institution," he said. "The other side of the story is that public treasurers can't take advantage of the 9.85 rate at Sandia either."

He explained that most state and local agencies deal in deposits of $1 million or more and placing that much money over the $100,000 insured limit of a troubled institution is not prudent.

Those able to take advantage of the high savings and loan rates, however, may see their investing strategy coming back to haunt them.

The Associated Press has reported that rising interest rates are likely to increase the cost of the $90 billion taxpayer financed bailout proposed by the Bush administration.

Each percentage point rise in interest rates will add about $6 billion to the cost of the S&L bailout, according to estimates by SNL Securities of Hoboken, N.J. That estimate includes the higher rates the government will have to pay on the bonds it plans to issue to fund the bailouts.

It does not include the liklihood that higher rates will push more S&Ls into insolvency, the firm said. Thrifts with more red ink on their books also will cost more to bail out.

"Taxpayers will foot a much larger proportion of the bill than what's being announced. It may be double, even," Jim Marks, publisher of SNL Quarterly Thrift Digest, told the AP.