
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: FRIDAY, February 1, 1991                   TAG: 9102010777
SECTION: NATL/INTL                    PAGE: A/1   EDITION: EVENING 
SOURCE: Associated Press
DATELINE: NEW YORK                                LENGTH: Short

MAJOR BANKS CUT PRIME TO 9 PERCENT

Major banks began lowering the prime rate to 9 percent today, dropping the key lending rate by a half a percentage point within minutes of a surprise rate cut by the Federal Reserve.

J.P. Morgan and First National Bank of Chicago, the nation's fifth and 12th largest banks respectively, were the first to announce the rate cut, which is the second drop in the prime rate in five weeks.

The Fed announced earlier that it was cutting the discount rate - the interest it charges on loans to member banks - to 6 percent from 6.5 percent, also the second decline in five weeks. But the cut was only the second drop in the rate since August 1986.

The Fed has been under pressure by the Bush administration to lower interest rates to prevent the recession from deepening.

A cut in the discount rate lowers banks' cost of funds and encourages banks to lower the interest they charge on a wide variety of business and consumer loans.

A reduction in the prime is important because it signals lower interest rates in a wide variety of commercial banking loans, including loans for cars and many types of mortgages.

by CNB