Prime rate acts as inflation weather vane
By JEFF BAKER
Of the Emerald
Loan rates charged by banks, busin
esses and the federal government may
not be of prime interest to consumers,
but they determine credit levels across
the country.
The prime interest rate — the rate
banks charge their best commercial
customers — is used as an economic
indicator by both financiers and market
analysts.
“It's a sensitive reflection of where
interest rates are overall,” says Charles
Smith, financial loan officer for Citizens
Bank of Oregon. “Other interest rates
are adjusted to the prime.”
The rate banks charge for other
loans are generally less than the prime
— from 10 to 17 percent for personal
and mortgage loans to 19.5 percent for
the prime.
University economics Prof. Barry
Siegal says banks often charge local
businesses lower rates to keep them
alive.
“Banks can't afford to keep lending
at a lower rate since they borrow their
money at a cost,” Siegel adds.
Siegel says the prime is a “reflection
of anticipation of inflation, which is why
we see it increasing." The real interest
rate “without inflationary prospects”
would be about 3 percent, Siegel
predicts.
State usury laws previously limited
the rates banks could charge for most
non-commercial loans to 15 percent,
Smith says This "arbitrary restriction"
was lifted last summer when "most
favored lender" loans were instituted.
These allow banks and savings-and
loans to charge roughly the same rates
finance companies do, Smith says. This
allows the market to set the interest
rate, as Siegel emphasizes it should.
The importance of the prime as an
economic indicator lies in the way it
measures the cost of credit. The con
sumer price index — the most closely
watched and widely quoted economic
statistic — measures the cost of goods
and services.
The two are connected, says Smith,
characterizing the prime as a “coin
cident" indicator — one that goes along
with economic trends rather than
predicting or following them.
One consequence of a high prime
rate is that it makes holding inventories
more costly, says state labor economist
Margaret Simeral.
“This increases production costs
and makes for a slower economic
recovery,” Simeral says.
Mortgage rates are more important to
Lane County’s housing-dominated
economy than the prime rate, Simeral
says. She calls the prime a “short-term
corporate rate" that is generally higher
than prevailing mortgage rates.
Bill would give police wiretapping leeway
By GREG WASSON
Ol the Emerald
SALEM — Fear of electronic
recording already has found
expression in Oregon law
through a statute prohibiting
recorded face-to-face conver
sations unless all participants
know the tape is being made.
But a new proposal would
create an exception for police
officers.
A small allowance already is
made for police when the crime
involves drugs. House Bill 2432,
if passed, would expand that
allowance to permit police to
Sports weekly:
Reject Jones’
dome donation
Sports Illustrated suggests in
its latest issue that the Universi
ty tell lumberman Aaron Jones
to keep the $250,000 he's
pledged to the University athle
tic department to help build a
new basketball pavilion.
Jones, through his attorney
Lewis Hoffman, has been
reported as saying he will not
donate $250,000 toward the
basketball facility if the Univer
sity doesn’t dismantle its
Environmental Law Clinic.
The clinic has received cri
ticism from Jones — and more
recently the Evergreen Forest
Products, Inc. — for its invol
vement in an Idaho suit restrict
ing logging in Idamo.
Sports Illustrated, in its Feb. 9
"Scorecard” column, avplaud
ed the University’s stance that
"it has no intention of closing
the clinic.” But the column sug
gests the University take one
more step in the matter to dis
courage boosters from wielding
undue influence over a univer
sity — or its athletic department.
"It ought to go even further
and directly repudiate Jones’
ultimatum — and his now-taint
ed gift," says the column. "No
school needs a gym that badly.”
legislative
issues
secretly record conversations in
all criminal and motor-vehicle
offenses. A police lobbyist
believes the change is needed.
“If police officers are not per
mitted to utilize the most so
phisticated techniques to ap
prehend those who are violating
the law,” says Jack Kane, lob
byist for the Oregon Council of
Police Associations, "we won't
be able to compete with them.”
Kane's feeling is echoed by a
representative from the attorney
general’s office, who says that
without the change, it will
remain virtually impossible to
arrest the "kingpins” of organ
ized crime.
But at least two members of
the House Judiciary Committee
have expressed concern that
the bill will allow police to run
roughshod over suspects. One
member, Rep. Joyce Cohen, D
Portland, is dismayed because
the bill does not require ap
proval before an individual
police officer is wired for sound.
“The bill should allow for the
OK of a judge or superior —
someone who knows who’s
taping whom, and when," she
says. "I’m concerned that this
bill would allow any police of
ficer to go on a fishing trip until
they find somebody who will
incriminate himself."
Rep. Dick Springer, D-Port
land, voices another possible
problem: The amendment, he
says, does not require officers
to have probable cause of a
crime before wiring up.
Black leader decries racism
It’s time for blacks every
where to organize themselves —
militarily if necessary — against
the rising tide of racism in
America, said Donald Brown,
president of the Black Student
Union.
Speaking to 20 people in the
EMU Tuesday night, Brown cit
ed the murders of more than a
dozen black children in Atlanta
and the hearts of blacks getting
cut out in Buffalo, N.Y., as ex
amples of racist violence in
America.
Brown said many blacks are
‘‘willing to work it (race prob
lems) all out” peacefully but
aren’t going to practice non
violence while they’re gunned
down by racists. He said he ad
heres to the Black Panther
philosophy of arming oneself
against violence.
A revolution in America is in
evitable, Brown said.
‘‘Miami was just a preview of
what’s to come.”
White liberals might not fit
into a black revolution because
they aren’t willing to die for the
black cause and will "change
sides when the going gets
rough," Brown said.
Many people — including
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some blacks — believe black
Americans aren’t discriminated
against as much as a few
decades ago, but discrimination
is more subtle and sophisticated
than in the past, he said.
Eugene isn’t free of racial
prejudice either, Brown said He
said landlords in the city have
refused to rent to him, and he
has frequently been pulled over
by policemen for just "acting
black” — bobbing his head to
the music of his car radio.
Only one black attended
Brown’s talk. Brown said the
lack of blacks at the speech was
a “definite problem” and that he
would rather be talking to a
black crowd.
Apathy is the reason most
blacks didn’t come, Brown ex
plained. Most of the 175 blacks
attending the University are
athletes who only care about
receiving professional sports
contracts after school, he said.
However, Brown said many
blacks were probably afraid to
attend the meeting because the
CIA and FBI keep close tabs on
black activities.
"We're probably being moni
tored right now ’ he said.
Brown s address was spon
sored by the Muslim Student
Union, Black Student Union and
other campus groups as part of
the “Week of the Oppressed.”
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"To me, that opens up a sit
uation where the officer can
just be wired without necessari
ly knowing that something is
going on,” he says.
"People may be breaking the
law and there may be evidence
inside a house that they are
doing that, but the police still
have to obtain a search war
rant.”
Springer also questions
whether secret recording with
out judicial approval may violate
constitutional limits on
searches and seizures.
The committee will schedule
further hearings on the bill
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