Newspaper article THE JOURNAL RECORD

Money Center Banks Cut Prime to 7.5% / Lowest in 9 Years

Newspaper article THE JOURNAL RECORD

Money Center Banks Cut Prime to 7.5% / Lowest in 9 Years

Article excerpt

The national prime lending rate was dropped to its lowest point in nearly nine years at 7.5 percent Tuesday by major money center banks in their fourth cut of this year.

In the reduction from 8 percent, the prime reached its lowest point since October 1977, when it was 7.5 percent. The latest cut was in response to last Wednesday's cut in the Federal Reserve discount rate from 6 percent to 5.5 percent.

However, how much the economy will respond to further declines in short-term interest rates is questionable, said James V. Baker Jr., chairman and president of James Baker & Co. of Oklahoma City.

"The Fed keeps lowering the discount rate in hopes of stimulating the national economy," said Baker, "but there is some concern that their action is having about the same efffect as pushing on a string.

"The only surprising thing was that the prime was not cut sooner. When the discount rate is cut, similar moves are made in federal funds, Treasury Bills and the prime. They are all lower, and therecertainly is no pressure for interest rates to start back up.

"Our firm has clients all over the country, and some note there are weaknesses where there was strength before."

Improved balance of trade remains the key to any economic upturn, according to analysts interviewed by the .

""We have had rather substantial growth in consumer spending in the economy,'' said James Annable, chief economist for First National Bank, in Chicago. ""So what's got to happen if this monetary policy is going to work is we've got to stop draining the coming impetus from this increased spending on imports.''

Among those cutting their prime Tuesday were Citibank of New York, the nation's largest, No. 3 Chase Manhattan Bank, New York; No. 5 Morgan Guaranty Trust Co., New York; No. 7 Security Pacific National Bank, Los Angeles; and No. 9 First National Bank, Chicago.

San Francisco-based Wells Fargo Bank, the nation's 10th largest, initiated the rate cutting among major banks by announcing its reduction late Monday. All of the rate cuts were effective Tuesday.

In Oklahoma City, local prime rates remained the same at the four largest banks. The base rate of Liberty National Bank and Trust Co. remained at 9 percent, the same as the local prime of First Interstate Bank NA of Oklahoma City.

Bank of Oklahoma, Oklahoma City, remained at 9.25 percent with its local prime, while United Oklahoma Bank remained at 10.5 percent.

The move by national money center banks followed previous cuts to 9 percent on March 7, 8.5 percent on April 14 and 8 percent on July 11.

"One significant thing was that Wells Fargo took the lead," said Baker. …

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