Path: bloom-picayune.mit.edu!snorkelwacker.mit.edu!news.media.mit.edu!americast.com!usa-post Newsgroups: usa-today.banks From: usa-post@AmeriCast.Com Organization: American Cybercasting Approved: usa-post@AmeriCast.com Subject: banks Wed, Feb 19 1992 Date: Wed, 19 Feb 92 06:39:08 EST Message-ID: DECISIONLINE: Banking & Economy USA TODAY Update Feb. 19, 1992 Source: USA TODAY:Gannett National Information Network FED LOWERS RESERVE REQUIREMENT: The Federal Reserve Tuesday lowered from 12% to 10% the amount of deposits banks must keep in reserve to cover withdrawals - the first such move since 1980, when the 12% rule was set. The move, designed to stimulate the economy, will be effective April 2 and could free about $8 billion in cash for banks to lend or invest. The move came as a surprise and sent markets lower. (For more, see special Reserve package below.) STOCKS FALL ON LATE SELLING: Stock prices fell Tuesday in late selling on news of higher interest rates. The Dow was up much of the day, but fell as bond prices rose sharply. The Dow Jones industrial average sank 21.24 points to 3224.73. Other indexes also fell. Losers beat winners 1,080 to 714 on the New York Stock Exchange, where volume was 234.34 million shares. PRIMARY COULD HURT MARKET: Analysts Tuesday predicted a drop in stocks after President Bush's near-loss to Patrick Buchanan in the New Hampshire primary. "The market can tolerate nothing in the way of uncertainty," says Stephen Leeb, editor of investment newsletters Personal Finance and The Big Picture. He says a possible tax cut to boost Bush's popularity could result in a 10% drop in the Dow in six months. MIXED NEWS FOR REAL ESTATE: An FDIC survey of senior bank and thrift examiners reported Tuesday found that though the housing market is improving, the commercial real estate market is getting worse in most regions. Overall outlooks were most positive in the South and weakest in the Northeast. The residential market was seen as improving in all regions and the commercial market was strong only in the South. BANKS MAKE A COMEBACK: The banking industry, nearly crippled by bad real-estate loans in the past two years, appears to be on the mend. Wall Street believes in a recovery, having pushed bank stocks even higher than the rest of the market. Another sign of recovery is that banks earned 83 cents for every $100 in assets last year, vs. 74 cents in 1990. OIL PRICES FALL: Oil prices fell sharply Tuesday - the first day of U.S. trading after OPEC failed to make major production cuts. Light sweet crude oil dropped $1.34 to close at a five-week low of $18.12 a barrel on the New York Mercantile Exchange. Saturday, OPEC ministers agreed to cut daily output to 22.9 million barrels from 24.2 million last month - a smaller reduction than expected. CHRYSLER SHARES POPULAR: Chrysler sold about $850 million in preferred shares last week in a private placement, industry analysts said. Analysts said investors were so attracted to the shares' 9.25% yield, Chrysler boosted the number of shares offered and raised $450 million more than planned. BREEDEN MAKES PROPOSAL: Securities and Exchange Commission chief Richard Breeden Tuesday unveiled a package aimed at making it easier and cheaper for small companies to raise money by issuing stock, which would decrease small business' dependence on bank loans. Proposals include simplifying forms small companies use to register securities offerings. The SEC will consider the plan in early March. DISCOUNT RATE RISES: The Treasury Department sold $10.8 billion in three-month bills at an average discount rate of 3.83%, up from 3.72% last week. Another $10.8 billion was sold in six-month bills at an average discount rate of 3.93%, up from 3.80% last week. SPECIAL PACKAGE ON RESERVE: INFLATION FEARS TRIGGERED: The Federal Reserve's move to lower the amount banks must keep in reserve to cover withdrawals triggered fears of inflation. A sell-off drove yields on 30-year Treasury bonds higher, to 8% Tuesday, from 7.91% Friday. Bond prices fell because investors fear the Fed action could overheat the economy and ignite inflation. Inflation erodes the fixed return that bonds provide. RATES ARE TARGET: The Fed's move to lower bank reserve requirements is meant to help ensure a recovery without cutting interest rates too far, says James Annable, chief economist of the First National Bank of Chicago. When traders realize that, "that should please the bond market." But John Russell of Banc One says the problem is not banks having enough to lend, it is finding creditworthy borrowers. GREENSPAN REPORTS TO HOUSE: Wednesday, Fed Chairman Alan Greenspan goes before the House Banking Committee to give his semi-annual report on the economy. He is expected to argue that Tuesday's Fed move, combined with moves to push down short-term interest rates, should be enough to help the economy. Analysts say he wants to persuade lawmakers that a tax cut or increased government spending are not needed. (End of package.) DOW JONES OPENS ON DOWNSWING: The Dow Jones average of 30 industrials opens Wednesday at 3224.73, after closing down 21.24 Tuesday. The New York Stock Exchange composite opens at 225.65, down 2.51. The American Stock Exchange market value opens at 409.20, down 5.07. The NASDAQ OTC composite opens at 626.41, down 10.02. DOLLAR OPENS MOSTLY UP: The dollar opens mixed on foreign markets Wednesday. It opens at 0.5708 British pounds, up from 0.5639; 5.5221 French francs, down from 5.5270; 128.08 Japanese yen, up from 127.65; and 1.6470 German marks, up from 1.6250. (As of 3 p.m. Tuesday. Source: First American Bank of New York.) 24-HOUR TELEPHONE INFORMATION: USA TODAY Money Hot Line. 95 cents a minute. 1-900-555-5555. Banking & Economy Editor: Jason P. Smith. (919-855-3491) Making copies of USA TODAY Update (Copyright, 1992) for further distribution violates federal law. 08:0002190000D0219 LEGA- R G Pollack-confirms-settlement........... A D0219 This article is copyright 1992 Gannett News Service. Redistribution to other sites is not permitted except by arrangement with American Cybercasting Corporation. For more information, send-email to usa@AmeriCast.COM