[Congressional Record Volume 140, Number 63 (Thursday, May 19, 1994)]
[Senate]
[Page S]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: May 19, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
                             INTEREST RATES

  Mr. LIEBERMAN. Mr. President, yesterday I came to the floor to speak 
with my colleagues about my concern, indeed my anger, about the 
decision the Federal Reserve Board made on Tuesday to raise short-term 
interest rates. My concern is that that decision was made in spite of 
the fact that every economic indicator we see suggests that the economy 
is not overheated. In fact, we are growing at a moderate 2.6-percent 
rate. There is no sign of inflation, and in April the key indicators, 
the consumer price index, the producer price index, one went down and 
one went up a little. The housing industry tells us that new housing 
starts went down 2.5 percent in April.
  In the midst of all that, the Federal Reserve comes along and raises 
the cost of money to small businesses that need to create jobs, on 
consumers that need to buy cars and buy houses.
  Today, Mr. President, I want to speak not just about the fact of the 
rise in interest rates but, if I may put it this way, the speed with 
which some rates go up and the slowness with which others seem to move 
or, to put it more directly, I am troubled by the way in which the 
banks have so quickly raised the interest rate on the money that 
businesses and consumers borrow from them and how slowly, how long it 
takes them to raise the interest rates they are willing to pay to 
consumers who put money into the bank in savings.
  Mr. President, on Tuesday the Federal Reserve announced at 2 p.m. 
that they were raising short-term interest rates. By 2:30, a half hour 
later, three of the major regional bank centers, Citibank, First 
Chicago, and Bank of New York had already raised the prime rate a half 
percent to 7\1/4\ percent interest, which represented a cumulative 
increase in of a point and a quarter in the prime rate since February. 
It was one-half hour to achieve that. In one-half hour the cost for 
borrowing for small businesses that need the money to create jobs went 
up dramatically. The cost of a car loan, a $10,000 4-year car loan will 
cost the average consumer $300 more at 2:30 than at 2 on Tuesday 
afternoon. Another example. A $50,000 small business loan at prime plus 
3 will cost $2,700 more today than the same loan would have cost last 
February. All that in a half hour.
  But, Mr. President, have we seen any increase in the interest rates 
paid to consumers, particularly elderly Americans, who believe in the 
traditional savings bank certificate of deposit? Have we seen any 
increase in the interest rates paid to those consumers in the time 
since 2 o'clock on Tuesday? No. It was a half hour to raise interest 
rates on money we want to borrow; it is 44 hours plus and the clock is 
running and no increase in the interest paid on savings that hard-
working Americans put away in a bank that have been hovering around 3 
percent, which, Mr. President, in real terms adjusted for inflation 
basically comes to just about no interest at all.
  So I have come to the floor today to make an appeal to the banking 
industry of America to be fair with consumers. If the Fed has created 
the context, erroneous as I think it is, to raise interest rates on 
money borrowed, is it not fair to raise interest rates also on the 
money we put into the bank?
  I call on consumers. There was a TV debate the other night between 
the representative of the banking industry and a consumer 
representative about this, and the bankings industry representative 
said maybe consumers should go to the local banks and say they want 
more interest; maybe that is the way the interest rates will go up.
  Maybe that is the way it will go up. If it is, I urge American 
consumers again, particularly those senior citizens, those hardworking 
middle-class families that are putting in the dollars in the bank, that 
are not putting their money into the speculative futures markets and 
sophisticated instruments that travel so quickly around Wall Street 
these days--these are the traditional American savings, the bedrock of 
our country and what used to be the bedrock of our economy who deserve 
a better deal at the bank, who deserve higher interest rates. The clock 
is ticking. It is almost 44\1/2\ hours since the Fed raised interest 
rates with no increase in interest rates on savings given to consumers. 
Let us see those interest rates go up as we watch the clock tick away. 
That is fair, Mr. President.
  I thank the Chair and I yield the floor.
  The PRESIDENT pro tempore. The Senator from Minnesota [Mr. Kohl], is 
recognized for not to exceed 5 minutes.
  Mr. KOHL. Thank you, Mr. President.

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