Lower Interest Rates

Puzzled voters might ask why such liberal Democratic senators as Maryland's Paul Sarbanes and Michigan's Donald Riegle seem intent on saving President Bush from Herbert Hoover's fate at the polls. Each time Federal Reserve Board chairman Alan Greenspan appears before their committees, they pressure him to lower interest rates in the hope of jolting the economy into recovery before the election. This also happens to be the White House formula for quick anti-recession action.The patriotic answer is that these senators are interested in what's good for their country.

Four years into a so-called recovery, and we're still below recession levels in every important respect except the stock market. A measly 88,000 jobs were created in March, and total employment remains some 3 million below its pre-recession level. Labor-force participation is at its lowest level since 1979. The recovery isn't just losing steam. It never had much steam to begin with. That's because so much of our debate over economic policy has been beside the point. On one side have been Keynesians -- followers of the great British economist John Maynard Keynes -- who want more government spending and lower interest rates in order to fuel demand.

WASHINGTON -- It is December in the Year 2001. The White House budget office announces that the federal government will have a deficit for the coming year of zero.Voila! A balanced budget.Politically speaking, this is the Holy Grail. The nation hasn't had one in 30 years, and although there were urban riots and a war in Southeast Asia the last time the budget was in balance, the public seemed convinced that it will help bring back simpler days. Over 80 percent of voters yearn for a balanced budget, and it was the Republicans' clarion call in the 1994 elections.

If you have a college student in the family - or an interest in presidential politics - by now you've probably heard that the interest rates on Stafford student loans are set to double on July 1 unless Congress takes action. President Barack Obama has been touring college campuses this week asking that rates be held to 3.4 percent. As one might imagine, this is a message that has some traction with young voters, a crucial bloc for Democrats, and the reception at places like the University of North Carolina at Chapel Hill and the University of Colorado at Boulder, where the president has taken his message, has been warm and welcoming.

WASHINGTON -- After several years of steadily higher forecasts of the cost of bailing out the nation's insolvent savings and loans, a federal regulator has brought in a lower estimate of the cost to taxpayers.Albert V. Casey, head of the Resolution Trust Corp., the federal agency that oversees the bailout, has told lawmakers in recent days that because of lower interest rates, which bolster the balance sheets of savings and loans, he believes the bailout will cost no more than $130 billion.

Propelled higher by sharply lower interest rates, the Dow Jones industrial average vaulted 35.39 points yesterday, closing at 3,292.20. When rates fall, investors tend to shun CDs, T-bills, etc., and buy higher-yielding stocks instead.TAKE YOUR CHOICE: "Fundamentals of the bull market, which has lasted 116 consecutive weeks without so much as a 10 percent correction, will stay intact." (Market Maneuvers) . . . "Sell most stocks. The bull cycle that started in October 1990 has reached maximum maturity.

Surging because investors welcomed lower interest rates -- yesterday's weekly sale pushed T-bill rates to a 29-year low of 2.7 percent -- the Dow Jones average jumped 26 points to close at 3,276.26.OCTOBER BLUES: Approaching the new month, the 1992 Stock Trader's Almanac warns, "The Curse of October 1929 was beginning to recede and then came 1987 and a 602-point 'meltdown' that month in the Dow. Also, October brings memories of back-to-back 'massacres' in 1978 and 1979. But the tenth month has also been known as a 'bear-killer,' having turned the tide in six major bear markets: 1946, 1957, 1960, 1962, 1966 and 1974.

With the Federal Reserve Board's lowering of interest rates last week, almost $650,000 in revenue the county is banking on to retain Carroll's $15-a-ton landfill fee could be in jeopardy.Should the nation's eased credit markets cause a dip in the amount of money Carroll earns on its $40 million investment portfolio, the County Commissioners could be forced to slash spending on social or other services."We are looking for places to cut if we need to," said Steven D. Powell, the county's management and budget director.

For months, the Federal Reserve confidently suggested that an economic upturn was just around the corner.Now, for the first time, Federal Reserve Chairman Alan Greenspan is saying that he has no clear idea when the economy's current stagnation might end: by spring, by Election Day, by early 1993 or perhaps not until later in the decade.That new pessimism, evident in Greenspan's latest speeches and in recent comments to associates, suggests that the chairman of the nation's central bank now believes new efforts by the Federal Reserve to lower interest rates will not necessarily revive the economy, as lower interest rates have in the past.

EA Engineering, Science,and Technology Inc.This Hunt Valley-based environmental services company more than tripled its income in the first fiscal quarter that ended Nov. 30.The company credited a profitable laboratory division, lack of costs related to discontinued operations, strong cost control measures and lower interest rates for the improvement.Three months ended 11/30/92.. .. .. Revenue .. .. Net .. .. .. Share'92 .. 12,104,100.. .. 156,700 .. .. 0.06'91 .. 12,062,000 .. ..42,600 .. .. 0.02% change .. +0.3 .. ..+267.

The Fitch Ratings agency has downgraded the credit of another five European countries -- Belgium, Cyprus, Italy, Slovenia and Spain -- citing "the financing risks faced by eurozone sovereign governments in the absence of a credible financial firewall against contagion and self-fulfilling liquidity crises. " In other words, these self-styled fiscal medics plunged headfirst into deadly disease without making sure they had all their shots. Is every European country that tries to find a clean end by which to lift up this mess now doomed?

Imagine a presidential election in which each candidate was limited to spending the same amount of money to finance their campaigns. The money would come from taxpayers, but it would be money well-spent. Candidates having to ask for campaign cash always have to "pay the piper" down the road. Publicly financed campaigns would free candidates of their reliance on huge contributions from big business and wealthy individuals. Those companies and individuals are only thinking of how to line their own pockets once their candidate wins.

A state mortgage program aimed primarily at first-time buyers is lowering its interest rate and setting aside $100 million to lure people relocating as part of the military's base realignment and closure initiative. Officials want to help those buyers and aid the region's still-struggling housing market at the same time. Thousands of federal workers and contractors are moving to take jobs at Aberdeen Proving Ground, Fort Meade or one of several other installations in Maryland as part of the base changes, known as BRAC.

LAS VEGAS - If you'd love to purchase a new house but you're sitting on the fence, what exactly would it take to get you to buy? Mortgage rates lower than today's 5 percent range? Smaller down payments? Below-market value pricing? Special amenity packages? Or a big tax credit? What's the magic mix that will get you motivated? Or is it unlikely you'll get off the fence as long as you're worried about the economy and further drops in real estate values? Questions like these are at the core of the housing industry's problem: Builders are stuck with bulging inventories of homes - most of them priced lower than six months or a year ago - that are still not selling.

Don't look for the Federal Reserve's rate cut to revive the housing market. Mortgage rates already sit near historic lows. But larger forces are aligned against a revival: Falling home prices, tighter lending standards, and rising unemployment all are limiting how many people can buy homes, and how much they can spend. "No matter what happens to mortgage rates, housing is not going to turn around," said Patrick Newport, an economist with the forecasting firm Global Insight, of Waltham, Mass.

If the Federal Reserve's recent cut in interest rates makes it less expensive and easier for people to obtain loans, it would be bad news for Yusupha Touray. By his estimate, the 27-year-old Long Beach, Calif., resident owes about $93,000 in credit-card, phone, utility and hospital bills. "When my bills come, I know I don't have any money to pay them," he said. "So I don't bother anymore." Nevertheless, Touray said he receives pitches from credit-card issuers in the mail almost every day. If those pitches become a smidge more attractive because of lower interest rates, he said he just might be tempted to go even deeper in the hole.

The Federal Reserve Board has lowered the discount rate, the interest on loans the Fed makes to commercial banks. In theory, lowering it should set off a ripple of lower interest rates to consumers and stimulate the economy.Do you think the Fed's move will boost the economy? If banks lower their consumer loan rates, would you feel encouraged to spend more?To register your opinion, call SUNDIAL at 783-1800 (or 268-7736 in Anne Arundel County). After you hear the greeting, you'll be asked to punch in a four-digit code on your Touch-Tone phone.

Helped by lower interest rates and a more favorable tax arrangement, Black & Decker Corp. said yesterday that its first-quarter income increased by 119.5 percent compared with earnings in the same quarter a year ago.The Towson-based maker of power tools and household appliances reported income of $9 million, or 10 cents a common share, for the three months, up from $4.1 million, or 7 cents a share, last year.Revenues dropped to $1.07 billion from $1.09 billion in 1991's first quarter.Because of dividends on preferred stock sold in September, the amount of earnings applicable to common shares was cut by $2.9 million, or about 4 cents a share.

The numbers game isn't adding up for average investors. Government data, corporate earnings, loan defaults, retail sales figures and Federal Reserve decisions often produce more fog than clarity about the future. Even former Fed Chairman Alan Greenspan contributed to this murky horizon. His book slams President Bush's lack of spending curbs and attributes the housing boom to lower long-term interest rates stemming from communism's fall. More important, he warns of the likelihood of higher rates in the future to thwart inflation.

WASHINGTON -- The Federal Reserve faces enormous pressure to reduce interest rates on Tuesday as the economy appears to be taking a turn for the worse, chiefly because of a housing-induced credit crunch that largely caught the central bank by surprise. The Fed's credibility with financial markets and the American people is on the line. Both Wall Street and Main Street expect it will reduce interest rates at least by one-quarter of a percentage point, and perhaps more, to ease credit conditions.