Banks and savings and loans now have a new bauble to dangle before consumers in hope of luring back deposits that have flown to high-yielding money market funds.
But the new 91-day note is called by regulators an experiment that may soon be changed. And some regulators and bankers say the instrument just isn't good-looking enough to compete with the attractive money funds.
''I don't see this one bringing in any new money,'' William Isaac, chairman of the Federal Deposit Insurance Corporation, said at the meeting which passed the proposal.
''Everything we're talking about is a compromise,'' complained Fed chairman Paul Volcker.
''It's a fraud,'' reacted the American Bankers Association.
The new note, with a 91-day maturity, will be available beginning May 1. The minimum investment is $7,500, and the interest rate will be determined by how much the Treasury is paying on its 3-month T-bills. Savings and loans can pay the T-bill rate; banks 25 basis points (0.25 percent) less.
The note was created at a March 22 meeting of the Depository Institutions Deregulation Committee (DIDC), a polyglot group chaired by Treasury Secretary Donald Regan, vice-chaired by Mr. Volcker, and filled out by the leaders of the Federal Home Loan Bank Board, the Federal Deposit Insurance Corporation, the National Credit Union Administration, and the Comptroller of the Currency.
The DIDC, a creation of Congress, is reponsible for deregulating interest rates. In practice this has meant trying to nudge depository institutions into the cold of free competition, while balky thrifts cling to government protection and complain they may freeze.
The new short-term instrument is therefore seen as a tentative step toward deregulation. At the DIDC meeting both Volcker and Isaac indicated their belief that such timidity is worse than doing nothing.
Mr. Volcker, saying the note isn't really competitive with money funds, stated, ''I don't sense a consensus'' on the issue, and proposed inaction while the DIDC staff continued to cook up alternatives.
''I have a fear of trying to do too much today,'' said Mr. Volcker.
''I want to do something today,'' replied Treasury Secretary Regan. ''I would like to see an instrument created at this meeting - for experience, to see whether it affects passbook savings.''
Volcker eventually agreed to vote for the proposal - but the committee agreed to consider further alternatives in 30 days. If the DIDC staff comes up with something better, said Mr. Regan, the 91-day note could become a ''plain vanilla account'' superseded by something fancier.
The new instrument is very similar to a note recently proposed by the US League of Savings Institutions. The league, good at lining up its members and getting them to march in lockstep behind single proposals, has over the past year been the most successful of depository institution trade groups.
Roy Green, chairman of the league, applauded the DIDC's new note.
''It will mean a resumption of savings flows into thrift institutions because it is insured and because it has a differential allowing thrifts to pay savers one-quarter of a percent more interest than commercial banks,'' said Green.
FDIC chairman Isaac, however, complained the built-in advantage contradicted the DIDC's congressional mandate. ''This committee was appointed to deregulate interest rates,'' he said. ''Now we're talking about creating a new instrument with a differential to control the flow of funds.''
The American Bankers Association, of course, was none too pleased about the disadvantage, saying it could lead to an unfair flow of money from banks to thrifts. ''All it guarantees is that interest rates for borrowers will be higher than they otherwise would be,'' said an ABA spokesman.
Along with some regulators, the ABA said the new account's features weren't attractive enough to lure consumers used to the ease of transaction and high yield offered by money market funds.
''The new CD will not be competitive against money market funds, but rather will compete only with an institution's existing six- month money market CDs,'' said an ABA spokesman. ''This new instrument will not stem the flow of funds out of depository institutions into money market funds.''
At its meeting Monday the DIDC also approved a new time deposit of at least a 31/ 2 year maturity, with a $500 minimum and no interest rate ceiling. The allowed maturity would be gradually sliced down, reaching 14 days by 1986.