Banks to Blame For High Rates, Regan Charges: Regan Charges Banks Keep Rates Unduly Hig)
Regan, in his strongest language to date, blamed banks and other financial institutions yesterday for keeping interest rates high while other sectorsof the economy were helping to reduce inflation.</br></br>Regan, insisting that the large federal budget deficits were not responsible for the persistent high interest rates,,, said, there doesnÛªt ÛÏseem to be a good reason-ÛÓor should I say there is no good excuseÛ for those rates to be'.as high as they are, especially with ihe recent declines in inflation.</br></br>He said that if banks set their charges more in line with the declining inflation rateÛÓwhich has dropped below 4 percent from about 13 percent at the start of the Reagan administrationÛÓinterest rates would come down.</br></br>ÛÏOther major sections of the American economy are now moving in accord with the current environment of low inflation,Û Regan told a luncheon of the Chemical Manufacturers Association. ÛÏAnd sooner, I hope, rather than later, the banks and other, financial institutions must do the same.Û</br></br>However, bankers point out that other factors besides inflation determine the rates they charge, such as bad loans. Besides, some bankers said after ReganÛªs remarks, they See REGAN, A4, Col. 1 ÛÏThere is sort of a latent fear among most investors that while inflation has been reduced substantially, it has also been reduced in the past,Û said Richard B. Peterson, a senior vice president and economist for Continental Illinois Bank. ÛÏIn those cases, inflation declined temporarily and began to rise rapidly .... WeÛªre not sure at all that itÛªs going to stay down.Û