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Federal Home Loan Bank Board correspondence with Sam Zolotow

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Title

Federal Home Loan Bank Board correspondence with Sam Zolotow

Description

L. David Taylor of the Federal Home Loan Bank Board responds to a letter from Sam Zolotow about discrepancies in advertised interest rates.

Subject

Interest Rates

Creator

Taylor, L. David

Source

Benjamin Rosenthal Collection

Publisher

Queens College Department of Special Collections and Archives (New York, N.Y.)

Date

1980-11-03

Rights

This material may be protected by the U.S. Copyright Law (Title 17, U.S.C.). We welcome you to make fair use of the content accessible on this website as defined by copyright law. Please note that you are responsible for determining whether your use is fair and for responding to any claims that may arise from your use.

Format

Image
JPEG
140680 bytes

Language

English

Type

Text

Coverage

Washington (D.C)
Santa Monica (Calif.)

Text

Federal Home Loan Bank Board

1700 G Street, N.W.
Washington, D.C. 20552
Federal Home Loan Bank System
Federal Home Loan Mortgage Corporation
Federal Savings and Loan Insurance Corporation

OFFICE OF EXAMINATIONS AND SUPERVISION

November 3, 1980

Mr. Sam Zolotow
1115 - 5th Street
Santa Monica, California 90403

Dear Mr. Zolotow:

In your letters of October 17 and 18, 1980, to Chairman Janis, you indicate that associations in the Santa Monica area are advertising different effective annual yields on new issues of 2 1/2 year variable earnings certificates, and you ask whether the Bank Board monitors these advertised rates.

Federal regulations limit the maximum rates associations may pay on these accounts. However, while these maximum rates apply to all associations, the manner in which associations may calculate earnings based on these rates is not uniform. For example, associations may calculate earnings on the basis of daily or "continuous" compounding, and on the basis of a 360 or 365 day year, or a 360 day year applied 365 times (365/360). In this regard, according to a published "effective annual yield table", a 10% annual rate will pay 10.5156% based on either 360 or 365 day compounding, 10.5171% on "continuous" compounding, 10.6691% on 365/360 daily compounding, and 10.6707% on 365/360 "continuous" compounding. These different compounding techniques account for different effective annual yields.

Regarding your other concern, it is not possible for the Bank Board to monitor the rates that all associations advertise and pay on these and other savings accounts. We do, however, periodically check association advertisements, and our examiners test check the rates. In addition, the public and other associations and banks tend to inform us of rates which an association may be advertising incorrectly.

Sincerely,

L. David Taylor
Director

CONGRESSMAN BEN ROSENTHAL
RECEIVED
NOV 10 1980

[handwritten:] Memo: No wonder small savers are bewildered by the magic (sic) of finance. Since bankers know all the intricacies, who benefits? Sam Zolotow

Original Format

Paper
Correspondence
8.5 x 11 inches (216 x 279 mm)

Citation

Taylor, L. David, “Federal Home Loan Bank Board correspondence with Sam Zolotow,” Queens College Archives and Special Collections, accessed November 23, 2017, http://archives.qc.cuny.edu/queenscollege/items/show/435.