Perpetual's CDs to Be Canceled
Crestar Financial Corp. plans to cancel at least $500 million of high-yielding certificates of deposit it acquired last week from failed Perpetual Savings Bank, leaving thousands of investors with cash to invest at a time when interest rates have fallen dramatically, sources said yesterday.</br></br>The approach is unusual, though not unprecedented, according to banking experts, who said the former Perpetual depositors are not easily going to find opportunities to reinvest the money at equivalent rates.</br></br>Typically, when an insolvent bank or savings and loan is taken over by another, the acquiring institution simply lowers CD rates to match its own, and gives the holders the option of leaving the money in or withdrawing it without penalty. That is what Riggs Bank did when it acquired the failed National Bank of Washington in 1990.</br></br>But the weak local economy, especially in such areas as construction and real estate where banks have traditionally earned substantial profits, left Crestar with little need for the extra cash from the high-yielding CDs. And Crestar has the right, under federal law governing takeovers of failed banks and thrifts, simply to cancel the CDs and send checks to investors.</br></br>"Frankly, there aren't that many attractive opportunities" for the bank to use the cash from CDs to make new loans, a Crestar spokesman said.