The March of Dollars

Residents of Detroit, Buffalo and other Canadian-U.S. border towns have long driven into Canada to buy gasoline at bargain prices, at times 40% less than at home. Lately they have had another reason for crossing the border: interest rates paid by Canadian banks are much higher than those obtainable in the U S A regular passbook savings account in Canada now earns up to 19% interest, while federal law holds U.S. commercial banks to a miserly 5.25%. An account in Canada is even more attractive to an American with large deposits. Banks there pay 19% interest and up on accounts of varying sizes that are left for 30 days.

No one knows how much money has so far flowed out of U.S. banks and into Canadian ones, but traffic in recent months around the tunnel connecting Detroit to Windsor, Ont, suggests that the amount is large. Says one Windsor bank manager: "We've had a tremendous surge in funds from across the river Nor is the march of dollars limited to border towns. Bank branches in Toronto and Montreal are getting deposits by mail from people throughout the US.

To get the maximum interest, foreign depositors must convert their holdings into Canadian dollars, which traded at a 50-year low of 80.3-c- against the U.S. dollar as recently as a month ago. But that does not seem to deter some savers who say that the risk of a currency decline is outweighed by the high interest rates they receive. Says Detroit Advertising Salesman Phillip Marien, who has a Canadian passbook account: "I don't worry too much about a currency devaluation. You can take money out at any time without a penalty."

Canadian banks, though, will soon be losing their monopoly on high bank rates. Taking advantage of Canada's new liberalized rules on foreign bank operations, the National Bank of Detroit is opening its first branch in Windsor this week, and it will offer the same rates as Canadian banks. Says one of its officers: "It will be nice to get a piece of the action over there."

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