Published September 1981 — Download PDF of the original newspaper column
Byrd's-Eye View By U.S. Senator Robert C. Byrd High Interest Rates No segment of our economy is immune from the high interest rates that have been plaguing our nation this year, choking off economic recovery, and spelling disaster for several key industries. The Federal Reserve Board, with the support of the Administration, has been pursuing a tight monetary policy that is responsible to some degree for these high interest rates. To provide some relief, I recently co-sponsored a resolution that calls on the Federal Reserve Board to discourage large banks from lending funds for unproductive and speculative purposes, such as giant business mergers, and, instead, require such banks to promote the expansion of credit to sectors of the economy that need it, such as the housing and automobile industries, farming and small business. The recent trend toward giant corporate mergers has resulted in an enormous loan demand that has cornered the limited available credit and contributed to the high level of interest rates. More than 30 major business mergers, each worth at least $500 million, have been proposed or completed since the middle of 1979. While these mergers consume enormous amounts of credit, they do not create jobs or add significantly to the economy's productivity. Instead, this credit needs to be made available for productive purposes and for stimulating the sectors of our economy that are most suffering. The housing industry, of course, is one of the hardest hit components of our economy. With most mortgage loans demanding an average interest rate of 16 percent or above, few Americans can afford to purchase homes. Consequently, new home construction is down significantly this year, with some predictions that housing starts in 1981 could reach a 35-year low. The high interest rates also have squeezed the automobile industry, farmers, and small businessmen. Bankruptcies are 42 percent higher in the first eight months of this year than for the comparable period last year. More than 90 percent of these failures hit small business-companies with liabilities of less than $1 million. Measures need to be taken to expand the credit available for all segments of our economy, which would lower interest rates. The channeling of bank funds into our country's depressed industries and away from non-productive and speculative purposes would be a step in the right direction.