To attract depositors in today's financial marketplace, savings-and-loans must offer more than toasters and an image of home, children, and puppies by the fire. They will have to stock their shelves with items attractive enough to lure customers from money funds, cash management accounts, and other siren-song financial innovations.
Federal regulators, acutely aware of this problem, are slowly moving to allow thrifts a flashier product line. A new 91-day note, authorized in March, will be revised next month in an effort to make it yet more competitive.
And last week, in a move certain to be challenged in court, the Federal Home Loan Bank Board (FHLBB) approved a way for S&Ls to offer a whole new line of goods -- stocks and bonds.
The 91-day certificate of deposit was created by the Depository Institutions Deregulation Committee, a group of government regulators charged by Congress with phasing out interest rate ceilings. The note, offered for sale since May 1, requires a $7,500 minimum investment, with a yield determined by how much the Treasury is paying on three-month T-bills. Banks can sell similar notes, paying 0.25 percent less interest.
The chairman of the committee, Treasury Secretary Donald Regan, termed the note an ''experiment.'' Other members of the committee, such as William Isaac, chairman of the Federal Deposit Insurance Corporation, complained the certificate wasn't attractive enough to lure cash away from money market funds.
The committee's staff was directed to keep working on the issue. Steven Skancke, its executive secretary, says further refinements will be suggested at its June 29 meeting.
''One has to look at the (minimum investment),'' Mr. Skancke says. ''What denomination is low enough to attract cash from money market funds, and high enough to keep out funds from passbook savings?''
In addition, the staff has been studying how liquid (easy to get in and out of) the instrument must be to compete with the highly liquid money funds.
Mr. Skancke and a statistician from the US League of Savings Institutions say it is too early to tell how popular the note has been, though some Western S&Ls reportedly say it's a hot seller.
The 91-day note is simply a new version of a standard S&L product: depository instruments. Stocks and bonds, on the other hand, are not things one expects to find for sale at the neighborhood thrift.
You can't yet buy 100 shares of Amercian Telephone & Telegraph at an S&L. But early this month the Federal Home Loan Bank Board gave its blessing to a plan that would allow S&Ls to enter the brokerage business.
Three S&Ls, Perpetual American in Washington, Coast Federal in Sarasota, Fla. , and California Federal in Los Angeles, have been given permission to set up a joint subsidiary to offer investment services. S&Ls across the country could eventually subscribe to the national venture, according to its proponents, though it must still be approved by the Securities and Exchange Commission and state regulators.
INVEST, as it's called, would get a corner in the branch offices of subscribing S&Ls. There, amid the tellers and loan officers, registered securities experts would sell stocks and bonds and provide reference material, debit cards, and general financial advice.
''It's absolutely essential that S&Ls reposition themselves in the financial marketplace,'' says Dan McConnell, chairman of INVEST, ''and this will have that effect.''
Such a service wouldn't be a panacea for the problems of hard-pressed thrifts. A 2 percent swing in interest rates would do more to shore up trembling balance sheets.
''The income will be useful, but it's something that will build slowly and may never be very substantial,'' says Lamar Brantley, staff vice-president of the US League of Savings Institutions.
But the service could solidify an S&L's customer base and broaden its product line at a time when the lines between financial institutions are becoming increasingly blurred.
INVEST, however, has some high-placed critics. Deputy Treasury Secretary Richard T. McNamar has called it ''the wrong approach,'' claiming there needs to be a more distinct seperation between the S&L and its broker subsidiary.
The service will also surely face lawsuits. Traditional brokers, for instance , are less than pleased. The Securities Industry Association has sent letters to SEC chairman John Shad and the 50 state securities commissioners, asking them to block INVEST.
An association spokesman says the FHLBB has no authority to permit brokerage activities; that the proposal violates, in spirit, the Glass-Steagall Act (which limits banking powers); and that Congress's prerogative of financial deregulation has been usurped.
The association will file a lawsuit that will ''at least include the FHLBB, and may include the three [founding] S&Ls,'' says Donald Crawford, the association's senior vice-president.