Baby Steps for Banks

At the beginning of 1992 the economy was at a low. This caused the national commercial banks to create a discount rate causing a direct effect on savings returns. “In terms of what Americans were paying for rates, by midwinter of 1992 it was estimated that bank rates that low had not been seen since 1966.” The lowering of these interest rates were to help 92’s faltering economy. The federal budget deficit was at a soaring high of $352 billion which amounted to a gross national product rate of about 6 percent just shy of the post world war II rate of 6.3 percent. As the year progressed the uphill fight against regression seceded. Banks profited 31.5 billion over 1991’s 14 billion. The return of equity also increased sharply. Banks were able to preserve a large portions of earnings that strengthened their capital. Real gross domestic product improved 3 percent and inflation remained low. “Apparently, stubborn expectations of inflation, election uncertainties, and deficit fears limited the decline in longer rates, tilting upward on an already steep yield curve.” Only 100 federally insured commercial banks failed as opposed to 1991 in which 108 failed and more than 200 failed in each year from the year 1987-1989. Overall the commercial banks had a postivie effect on the economy for the year of 1992.