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4The Daily Tar Heel Wednesday, October 12, 1988
By DAVID BALL
According to banking experts,
about 500 of the 3,000 U.S. savings
and loan associations are insolvent,
and depending on federal actions
taken to remedy the situation, this
crisis could cripple the commercial
Savings and loan associations have
losses estimated at $50 billion to $100
billion, said Mark Flannery, profes
sor of finance at the UNC business
school. The associations are insured
by the Federal Savings and Loans
Insurance Corporation (FSLIC). To
close bankrupt institutions, the
FSLIC must pay off all depositors.
"The solution is to close the savings
and loans," Flannery said, "but the
FSLIC has little to no cash at its
disposal. There is no way for the
FSLIC to close savings and loans
without more funds."
The associations are in trouble for
a number of reasons. Since savings
and loans fund long-term mortgages,
their income is relatively fixed.
During 1980-81, interest rates on
deposits rose quickly, and the asso
ciations were faced with an ever
widening gap between their income
and interest paid to their customers.
Many other thrift institutions in
Texas and Oklahoma were heavily
"We are not an intolerant group,"
Lamerson said. "All of our members
are not liberals; they are a cross
section of the University population.
We have never suppressed anyone's
Campus Watch also attacked
CGLA's "theatrical escapades," spe
cifically a march held in January.
Lamerson said the march was not
strictly a CGLA function, because
many people in the community and
students who support CGLA funding
Campus Watch maintains it is not
anti-homosexual but pro-student, but
Stiles disagreed. "Most members of
Interested in campus opinion?
University classes mill be
10:00 a.m. to 2:00 p.m.
involved in real-estate lending and
were hurt when oil prices plummeted.
Bank failures tend to undermine
public confidence in financial insti
tutions, according to Jim Carter, vice
president of Central Carolina Bank.
"Any time there's a failure it's not
a positive sign to the public as to the
safety of their money," he said.
Savings and loans may also offer
exorbitant interest rates on deposits
to attract funds, because they need
money immediately to pay depositors
who want to withdraw their money.
"The savings and loans are desper
ate to get funds and will do anything
to get them," Flannery said. "This
practice (of increasing rates) cuts into
bank profits." .
Associations with negative net
worths are increasing the costs of
funds to healthy institutions, said
Wachovia Professor of Banking
Robert Eisenbeis. These insolvent
. associations are unlikely to survive
and only weaken solvent banks, he
said. To fix this, the banking regu
latory system must be reformed and
more funds must be found for the
bankrupt FSLIC, he said.
The Shadow Financial Regulation
Committee, of which Eisenbeis is a
member, has proposed a policy of
closing institutions with a zero net
from page 1
our organization are students," she
said. Campus Watch supports certain
students who agree with its ideas but
not the student body as a whole, she
Stiles said she was concerned that
Hans, the only student representative
for Campus Watch on the Student
Panel attending the press conference,
could not adequately answer ques
tions concerning Student Congress's
decision to fund the CGLA.
"The group (Campus Watch) sees
this as a chance for publicity to
promote their close-minded views,"
Stiles said. "That is their motivation."
Check out every Monday's DTH
The Board of Trustees
and the Faculty
of The University of North Carolina
at Chapel Hill
invite you and your family
for the presentation of
Distinguished Alumnus Awards
Edward G . Bilpuch of Durham, North Carolina
, Gail Godwin of Woodstock , New York
Richard Knitfit, Jr. of Dallas, Texas
Thomas W. Lambeth of Winston-Salem , North Carolina
Roger Mudd of Arlington, Virginia
the Installation of
Paul Hardin as Chancellor
Wednesday, October 12, 1988
Polk Place at South Building
(Rain Site is Carmichael Auditorium)
Savings and loans "can have a
negative worth in the present system,"
Eisenbeis said. "We need to deal with
the fundamental problems in the
deposit insurance system."
The current deficit, however, must
still be paid off. One proposal is the
merger of the Federal Deposit Insu
rance Corporation (FDIC) and the
FSLIC, using the surplus funds in the
FDIC to pay bankrupt thrift insti
tutions' debts, Flannery said.
Such a move would have harmful
repercussions for the commercial
"It would leave banks with non
credible deposit insurance," Flannery
said. "Healthy institutions might also
be charged higher insurance premi
ums to pay for the insurance fund."
The merger would open up only
By CHERYL POND
Carolina graduates can now
charge their credit card to the
limit and support their
alumni association at the same time.
A Carolina blue VISA card pic
turing the Old Well will soon be
offered to UNC graduates by the
Carolina General Alumni Associa
tion and a local bank chain. The
association had considered adopting
an affinity card program for two
years before finalizing a deal with
First Union National Bank this past
The concept of affinity cards is
not new. Many other universities
and organizations have these special
"Most other universities with
alumni associations of our size
already have a card in place," said
Bo Dunlap, assistant director of
Alumni Affairs. "I think, by waiting,
we have put together one of the
best, if not the best, programs in the
The Carolina Alumni VISA card
offers a low interest rate of prime
plus five, which translates to 15 per
cent. That compares favorably with
the 18 percent rate for a basic Mas
a few billion dollars to the FSLIC,
a "drop in the bucket compared to
the problem," Eisenbeis said.
Another option is to' generate
interest through raising taxes. "A tax
increase is a way to fund the FSLIC,"
The problem has not yet affected
the state, however.
"In North Carolina we enjoy a very
healthy banking and savings and loan
industry," Carter said. "You don't
hear of any real problems."
But according to Eisenbeis, the
next president will be faced with the
problem immediately, because the
FSLIC deficit doubles each year.
"It's time that the taxpayer realizes
the bill that's there is coming due,
and that the longer we wait, the bigger
itH be," he said.
card - carrying Carolina alumnus
tercard or VISA from First Union.
The card will be free for the first
year with a $20 annual fee
For each card issued to a Caro
lina alumnus, the alumni association
will receive a small royalty. A per
centage of each purchase made with
the card will also go to the associa
tion. First Union is not disclosing
the exact amount of these royalties.
The alumni association's cut of
the profits will be put into its
general fund, Dunlap said. "We
don't expect a great windfall," he
said. "We don't have any special
project earmarked for the funds."
The credit card is not officially
associated with the University, said
Susan Ehringhaus, assistant to the
"It was something the alumni
association was free to do,"
Ehringhaus said. "It's not something
they had to ask permission of the
University for. We have not
endorsed their card, but things that
benefit the alumni association
obviously benefit the University."
First Union will begin marketing
the card to graduates in a few
"We will be doing a direct mail
Light lunch will foUow
Usual campus parking
regulations will be in effect;
permit holders will not
Credit Union Rates
SHARE CERTIFICATE RATES
30-89 Days . . 6.500 simple
90-179 Days 7.252 7.521
180-269 Days 7.760 8.068
270-364 Days 7.770 8.079
365 Days 8.170 8.512
Compounding is daily. Rates subject to change daily.
Longer terms are negotiable, as are amounts of $10,000 or more.
Share Secured 10.00
Rates subject to change daily.
CSCU is not affiliated with UNC-CH.
ing, followed by telemarketing," said
Agnes Stevens, communication
officer for First Union Corporation.
First Union has placed advertise
ments in alumni magazines and
planned radio and television spots.
The bank also started a routine
credit screening to determine which
alumni should be contacted by
"We receive as part of our agree
ment a list of the alumni associa
tion," Stevens said. "Then we set
forth a criteria of what would make
a person likely to use our card."
The list of names and the bank's
criteria are then sent to a credit
bureau that does the screening, Stev
ens said. The bank does not get a
credit history on an individual until
a card application is received.
Undergraduates will have the
opportunity to apply for a card, but
the details have not been finalized,
Because it is designed for alumni,
the card will not be made available
to the general public, Dunlap said.
But if the association is contacted by
a UNC fan or supporter who is not
an alumnus, it would consider their
Choosing a bank to provide the
H with purchase
with this ad through October 31, 1988
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must have a high school diploma or equivalent, type
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Interested and aualified candidates should send a re
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affinity card was a long process,
according to Dunlap. "We made the
decision after talking with other
alumni associations across the
nation that have gone thrc ?h a
similar process," he said. ' Vo took
advantage of their experiences in
hopes of advantaging our program.
Almost all recommended going with
a bank that has a presence in North
The alumni association wrote the
10 largest banks in North Carolina,
soliciting proposals. Nine banks
responded, six with proposals. The
association then sent a synopsis of
each proposal to all the competing
. Three banks were selected to
make oral presentations. After eva
luating the proposals, the selection
committee chose the one they
thought most beneficial to the
alumni and the association.
Duke University and N.C. State ;
University's alumni associations
have also announced a similar card
affinity. Duke's alumni association
will offer a credit card through
BB&T, and NCSU's card will be
offered by People's Bank and Trust
Co. Wake Forest University recently
rejected the idea of an affinity card.
of 9 or 18 hole
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Lessons Available jj
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