Word: interests
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Dates: during 1970-1979
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...Volcker's approach," says this visiting scholar at the conservative American Enterprise Institute. "The Fed, by and large, is the economic bastion of strength and savvy in Washington." Up to now, he says, the Federal Reserve has been following a policy of "expensive easy credit," meaning high interest rates, but free availability of funds; direct control of the money supply, he asserts, is preferable. But Weidenbaum cautions that there is "no guarantee" the new policy can bring down inflation, while in his mind it produces "more certainty" of a recession. Weidenbaum had thought the recession would last through next...
...have responded terribly negatively. Yet the costs are high. The Federal Reserve is taking the agony route to lowering inflationary expectations: squeezing down total demand in the economy, thereby weakening both product and labor markets. Increasingly people are going to be squeezed out of [credit] markets at those astronomical interest rates." Heller does not, however, expect "a full-fledged credit crunch like we had in 1974." He also thinks that the U.S. can avoid a recession as deep as that year's, though only if Washington acts to ease its bite by cutting taxes...
MORTGAGE LOANS: Interest rates averaged 11.15% in early September, and are heading higher. Many bankers predict that they may reach 14% by year's end. But in 24 states, including Illinois, New York and Texas, usury laws hold rates to 12% or less. Lenders there are likely either to cut back on making home-buying loans or attach tighter conditions to them. A typical instance: First Federal Savings & Loan Association of Chicago has just shortened the repayment period on all mortgage loans to 25 years from 29 years, and now requires a minimum 25% down payment, vs. 20% formerly...
Builders are in trouble too. On construction loans, they generally pay 2 points above the prime interest rate that banks charge their top corporate customers. That means builders are paying 16½% interest, vs. 15½% only two weeks ago. Various charges may bring the effective interest rate to a towering 20% by the end of the year. Builders will start fewer houses and charge more for them. The National Association of Home Builders figures that the average price of a new house, now $64,000, will go up $1,000 by Dec. 31, and the combination of price increases...
PERSONAL LOANS: In many states interest rates on loans to buy a car or boat, finance a vacation or "for any worthwhile purpose," as the bankers say, have long been as high as the law allows-13.38% in New York on a three-year car loan. But bankers will tighten standards for receiving such loans; some say they will scrutinize a borrower's "relationship" with the bank. Translation: if you don't already have a savings or checking account there, don't bother asking for a loan. Bright spot: student loans will continue to be available...