S&L 'money funds' in Maryland, Ohio

Are the money market funds offered by Maryland savings and loans really safe? How good is the guarantee of the state of Maryland? How solvent are the thrifts? - R.C.

Deposits in state-chartered savings and loan institutions in the states of Maryland and Ohio are not insured by the federal government but by state insurance pools. Therefore, they do not have to adhere to federal interest rate ceilings. As a result, they are offering insured accounts with interest rates very similar to those paid by money market funds. Most of the thrifts have minimum deposit requirements ranging from $1,000 to $3,000.

As for safety, they may be safer than many money funds and perhaps even more secure than federally insured bank deposits, since the state insurance pools have a higher assets-to-deposits ratio than either the Federal Deposit Insurance Corporation or the Federal Savings and Loan Insurance Corporation. Maryland S&Ls have been courting out-of-state depositors through advertising in national publications. Checking on the solvency of a particular thrift, however, may be difficult if you are an average investor, particularly if you live outside Maryland or Ohio. So you would have to rely on the state insurance pools for any sense of security.

If you would like a question considered for publication in this column, please send it to Moneywise, The Christian Science Monitor, One Norway Street, Boston, Mass. 02115. No personal replies can be given by mail or phone. References to investments are not an endorsement or recommendation by this newspaper.