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A checkrein on the money market funds? Hardly

It's the savings-and-loan associations vs. the money market funds. And the S&Ls seem to be getting the worst of it.The effort to slap restrictions on the free-wheeling funds is arousing a hornet's nest of opposition.

An American Bankers Association (ABA) spokesman says, "There is no sympathy for money market regulations." He claims that initially the association backed the call for regulations "in a limited way." But now, he says, "It is unrealistic to hope for money market regulations. It only makes it appear as though the banks are trying to shaft the small investor, the little guy."

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Consequently, some savings-and-loan associations are soft-pedaling the fund-regulation issue and concentrating instead on getting themselves into fighting trim.

Many of these trade groups, including the ABA, say they want to see options opened to the public rather than closed. Don't handcuff the funds, they're saying. Instead -- unleash us.

Regulation Q, which keeps ceilings on interest rates for various savings deposits, is scheduled to be gradually lifted until ended in 1986. However, say the banks, that is not soon enough if they are to be made to go on competing with money market funds.

Savings and loans are asking for what they call "a level playing field." They'd like to see the same rules apply to both sides. And they're working on developing more attractive offerings of their own.

At present, banks are prohibited by federal regulation from offering money market funds. However, some states have decided that state-chartered thrifts should be allowed to organize such funds. The Peninsula Federal Savings and Loan Association in Florida has already jumped into the game, and its fund -- which offers an 11.75 percent rate -- is now reported to be attracting $1 million a day, despite the fact that most money market funds have higher yields.

However, not every state-chartered bank is eager to follow suit. Many bankers wonder if the funds will really be cost effective and worry that such offerings will conflict with the Glass-Steagall Act, which bars banks from becoming investment brokers.

Offerings of other types are also in the works for savings and loans. In Washington State, a bill is expected to be signed by the governor which would allow financial institutions to set up a new class of accounts backed by high-yielding money market investments. However, the bill would require approval from the Federal Depository Institution as the interest rates from the new accounts would be above current interest rate ceilings.

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Jonathan Lindley, executive vice-president of the National Savings and Loan League, predicts that within two or three years savings-and-loan associations will also be permitted to offer insured accounts invested in short-term securities. He feels that ultimately offerings like these -- and not money market fund restrictions -- will allow the S&Ls to compete with the funds.

However, at the same time, he points to the savings associations' "social purpose" of housing finance and says that, "We need relief if you hope to see funds going to housing."

That relief, he feels, can be found only in temporary restraints on the money market funds.

Some institutions have begun providing new investment pools which put money in government certificates and yield interest of about 11 to 12 percent. These pools are known as "reverse repos" and differ from money market funds only through a legal technicality.

Coast Federal Savings in Sarasota, Fla., has been offering reverse repos with an interest yield of 12.75 percent for three weeks now. Richard Franz, executive vice-president of Coast Federal, agrees that the reverse repos are popular and spreading rapidly in his area but emphasizes that they are notm a solution to savings and loans' problems."It robs us of our deposits," he explains. "We still can't put them out as loans."

Others in the banking industry counter that complaint by pointing out that such funds at least return to the financial institutions a degree of control over investments.

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