Word: interesting
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Dates: during 1970-1979
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Since the Federal Reserve action, the prime interest rate paid by top corporations has jumped another 2% beyond its previously record heights to reach 15½%, and bankers believe that it may go still higher. Interest rates on Government bonds have leaped above levels prevailing at the outbreak of the Civil War, when Confederate forces were encamped at Manassas, ready to march on Washington. The Dow Jones index of industrial stocks since early October has slumped nearly 100 points and closed last week...
Worse than the high interest rates is the sheer shortage of mortgage money. Usury laws in two dozen states limit interest rates to below 13%. Thus many banks and savings institutions have stopped making loans because it is impossible for them to earn any profit. Traditional lenders are also running short of cash because people are transferring funds from savings accounts to booming money market funds, which invest money in high-yielding securities and pay twice as much as passbook accounts. Perhaps three-quarters of the savings and loan associations in Chicago have stopped making mortgage deals...
Despite the distress, Volcker's interest rate policy continues to win support from bankers, businessmen and politicians. The U.S. League of Savings Associations unanimously approved the Fed's actions, and the group's chief economist, Ken Thygerson, admits that it "was necessary to deal a lethal blow to speculation in the housing market." Ben Heineman, president of Northwest Industries, calls the program a "sensible way of checking inflation." Even Senate Banking Chairman William Proxmire, normally the central bank's most vociferous critic, endorses the program, saying it has had an important "psychological effect." The battle against...
...cost of money and tighten credit much further, the cheering will increasingly be mixed with catcalls. House Majority Leader Jim Wright of Texas is already bitterly denouncing the Federal Reserve for "pouring gasoline on a fire in a misguided effort to put it out." He argues that high interest itself is a cause of inflation because it increases the cost of buying a new home or constructing a new plant. Builders Union President Robert Georgine warned that President Carter's pledge to his workers to "not fight inflation with your jobs" would be recalled, perhaps vengefully, by blue-collar...
...attitude of "buy now before it's higher," as new figures showed again last week. Consumer installment debt exploded by a record $4.5 billion during September to a total of $303.9 billion. The lemming-like rush of consumers into debt could force the Federal Reserve to push interest rates still higher or perhaps to begin limiting the amount of credit available...