Business Notes Interest Rates

Chairman Alan Greenspan was doing a pretty fair imitation of Scrooge. In congressional testimony last week, the Fed chief gave his gloomiest ever assessment of the economy, warning that consumers and businesses are so top- heavy with debt that a recovery is nowhere in sight. And any attempt by Congress or the White House to sneak through a quick-fix tax cut, he added, could widen the budget deficit and further harm the economy.

- His bleak words did not go over well among business leaders. Ed Yardeni, a New York City economist, immediately sent out a fax to his clients: "Will someone please remind this guy that he is Chairman of the Federal Reserve Board of Governors! Send him some antidepressants. Consumers are frightened enough without hearing all this depressing talk from Mr. Greenspan." Urged Yardeni: "Let's have a full-point cut in the discount rate today!" The message evidently got through. Late in the week Greenspan turned Santa Claus. He lowered the discount rate, which is what banks are charged for borrowing money from the Fed, by a full percentage point. The new 3.5% rate is the lowest in 27 years. Commercial banks quickly followed by dropping their prime lending rate by a point, to 6.5%.

CHART: NOT AVAILABLE

CREDIT: NO CREDIT

CAPTION: FED DISCOUNT RATE