Word: borrowings
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...more and more deposits have flowed out of the banking system and into the funds, the banks have been forced to borrow increasingly large amounts by selling certificates of deposit, usually in denominations of more than $100,000, at interest rates high enough to attract buyers. Not surprisingly, some of the biggest customers for the certificates have turned out to be none other than the money market funds. In sum, the more the passbook deposits in the banks have shrunk, the fatter have grown the money market funds, and the higher has climbed the cost to the banks of borrowing...
Monetary measures. They are being tightened. The Federal Reserve announced that it will impose a 3% surcharge, on top of the 13% discount rate, on some of the loans it makes to member banks. A bank borrowing from the Fed two weeks in a row, or more than four weeks in any quarter, will thus be charged 16%. If banks want to go ahead and borrow anyway, the move would tend to raise still higher the interest rates that they in turn charge when they lend the money to customers. Federal Reserve officials hope that banks will instead reduce both...
...biggest question of all is whether Carter's plans will have enough shock value to break the inflationary psychology that has gripped the nation. The most familiar manifestation of that psychology has been the compulsion of consumers to dip into savings or to borrow in order to buy before prices go higher. That action turns the expectation of more inflation into a self-fulfilling prophecy...
Skyrocketing interest rates have just about destroyed the bond market, once a pillar of stability and the source of most of the cash that corporations, states and cities borrow to build factories, schools and waterworks (see box page 14). Unable to raise cash by selling bonds, businesses have been turning to short-term bank loans. That is very expensive; the bank prime rate rose twice more just last week, by a total of three-quarters of a point, to as high...
...construction labor force may be unemployed in two to three months. In Houston, starts are down 50%, and John Pace, president of the Greater Houston Builders Association, speaks gloomily of "tens of thousands of homebuilders across the nation who are going broke." Builders, he points out, generally have to borrow from banks at interest charges that are two or three points above the prime rate...