Federal Reserve Board Nominee Sees Further Discount Rate Cut; Lower Interest Rates Will Pave Way, Heller Says
Easton, Nina, American Banker
Federal Reserve Board Nominee Sees Further Discount Rate Cut
Lower Interest Rates Will Pave Way, Heller Says
H. Robert Heller, President Reagan's nominee to the Federal Reserve Board, on Tuesday predicted that lower interest rates would leave room for the Fed to further cut the discount rate.
"At the present, I think the conditions are set for a further reduction of interest rates at large,' Mr. Heller told the Senate Banking Committee, which was reviewing his nomination. "In that framework of declining interest rates overall, there may very well be room for cuts in the discount rate as well.'
The Fed has cut the discount rate three times so far this year. The rate, which now stands at 6%, is the amount the central bank charges financial institutions that borrow from it.
Mr. Heller, 46, who is senior vice president and director of international research at Bank of America in San Francisco, received a generally warm reception from members of the Senate committee. If the panel approves his nomination, it will be considered by the full Senate. Mr. Heller was nominated to the post May 12.
Also at Tuesday's hearing, the Banking Committee heard from Michael L. Mussa, the President's nominee for a seat on the three-member Council of Economic Advisers.
Mr. Mussa, a 42-year-old University of Chicago economist, said he was disappointed in the sluggish GNP growth so far this year. However, he attributed the slump to the oil price drop--and its effect on the energy sector--and added that he expects higher growth for the rest of the 1986.
In addition to his post as professor of international business at the University of Chicago, Mr. Mussa has served as a consultant to the World Bank and as a visiting professor to the International Monetary Fund. The Council of Economic Advisers counsels the President on economic policy.
In the past, Mr. Heller has urged parity among industrial countries on their banks' capital requirements--and he reiterated that call at Tuesday's hearing. Banks in countries such as Japan are permitted to operate with much lower levels of capital than U.S. banks.
He also criticized regulators for requiring higher capital at troubled banks. "It's very difficult for a bank [suffering from] higher loan losses to raise capital at that particular time,' he said.
Mr. Heller's own bank, Bank of America, has suffered substantial losses due to troubled loans this year. "We'd certainly be happy if profits were higher,' he said.
If his nomination is approved, Mr. Heller will receive a $25,000 bonus upon leaving Bank of America and will sell off his stock in the bank.
While the highly publicized discount rate cut last spring was coordinated with Japan and West Germany, the Fed's latest cut, in July, was a unilateral one. "I would certainly prefer that our policies be coordinated with our key trade partners,' Mr. …