European Stars And Stripes (Newspaper) - June 23, 1985, Darmstadt, Hesse                                June 1985 the stars and stripes Page 19 business news professor seeks end to prime rate system Houston up a University of Houston professor Calls the prime rate ant competitive and says it is time to do away with it As a Peg for business a banking and finance Paul Horvitz says he thought the onslaught of lawsuits brought against the sys tem in the 1970s would have brought an end to the prime rate but it has persisted the prime is simply a rate arbitrarily set by the and it can be changed any time by the regardless of what May be going on in the financial said investors guide by William Doyle some Banks and savings and loan associations pay much higher interest on Money Market Deposit accounts and certificates of Deposit than the Bank and at which i have my i dont understand How can this be done the  Banks and s is All claim to be members of either the Federal Deposit insurance or the Federal savings loan insurance before i move my i want to be absolutely cer would i have any risk at All not As Long As the institution to which you shift your Money has Odic or folic coverage and you dont Deposit More than the insured Odic or folic covers each depositor up to at each insured with that Federal insurance you have no worries about losing any in this Era of each Bank and is allowed to set the interest it pays on Midas and its a competitive world in which Banks and vie for some compete by paying High interest others provide convenient local offices and personal some Banks and offer High interest on Midas and reduce those rates after a Short period of if you have that you can shift your Money to another when you have a the Bank or has to pay you the interest agreed upon until the cd the Basic business of Banks or is to take Money in As deposits and put it out As the Bank or prospers when the interest it collects on Loans is High enough to cover the interest on its meet its operating expenses and provide a Banks and paying High interest on deposits usually have High interest which can be a number of Banks and have gone belly up when such Loans turned but Odic and folic have always protected All my investments Are handled by the Trust depart ment of a Bank and Are in Bonds and other items not connected with the there is no Federal Deposit insurance coverage of the Trust depart men managed what Are the possibilities of my losing Money because of fraud or computer manipulation How can a person feel Safe placing funds with the Trust department of any Bank in this imperfect almost anything is Possi if there Are dishonest people in that Trust depart they might steal your for that you might have bad experiences with Crooks anywhere you do however the probability of your being robbed by the Banks Trust department has to be counted As somewhere Between extremely Remote and although there Are bad apples in Many the vast majority of Bankers Are honorable Trust department records Are checked by the Banks Audi tors and regulatory you have virtually no cause for my advice is to Stop being such a lets say i have in a savings account and certificates of Deposit at Bank a and in a savings account and cd at Bank does the Federal Deposit insurance automatically insure me for the now have in Bank c it at least for a in the Case of a the Money you have in Sav checking and Money Market Deposit accounts at the two or More Banks involved remains insured for six even if the total exceeds but any withdrawals you make will lower the insurance even if you make deposits during the six month your cd and other time deposits remain insured until they reach you cant extend the time of the extra insurance coverage by renewing your cd As they these rules apply to both Odic coverage at Banks and Federal savings loan insurance coverage at savings and loan wishing to write to King features columnist Dovle May address their letters in care of the Start and Apo a University of Chicago graduate and a doctorate Holder from the Massachusetts Institute of this is not exactly although the prime rate does lag other rates in both changes Are related to the direction of Market the lag has been pronounced in recent up to 4 percentage Points below Federal funds and certificate of Deposit As Banks have attempted to protect profits from the Impact of deregulation and loan Horvitz said several studies have shown that when the commercial paper rate the prime moves up just As but when the commercial paper rate is the prime tends to fall after a lengthy that lag benefits the Banks but not the he Horvitz noted that Large corporations that can borrow in the commercial paper Market do not pay the spread Between commercial paper and the prime rate has averaged two percentage Points Between 1978 and and the Best firms never did pay he prime is an Index that we announce from time to time and to which we Peg other lending a new York banker most big Loans now Are pegged to Libor London Interbank offered but the prime is an important indicator for medium and Small sized Busi it gives them an idea of borrowing these businesses generally pay Points above Horvitz said lawsuits brought against some Banks sever Al years ago claimed some of the borrowers who thought their Loans were obtained at prime actually paid one or two Points More than the Banks Best the plaintiffs charged it was fraudulent to Lead people computer firms end discussions of merger Detroit a Burroughs has terminated merger talks with new Yor based Sperry a Bur roughs spokesman a new computer company formed by the merger would have ranked second behind Industry Leader International business machines various concerns of Sperry management made it impossible to form an Burroughs said in a writ ten statement read by company spokesman Irving Geller in publicly traded companies cannot responsibly remain in Public merger talks for an extended period of the statement merger talks Between the two computer companies started two months Geller Geller refused further comment on the failed Neotia but said Burroughs plans growth through inter Nal acquisition and other opportunities which present Sperry and Burroughs Are among five second Echelon computer companies that for years have been looking for a bigger share of the Large computer Market in the face of ibis overwhelming measuring up up photo a production worker at Goodyear aerospace in checks dimensions of a Twofoot i Ameter outer wheel half for the Mcdonnell Douglas with both halves a dc10 wheel weighs 227 pounds and will support More than 200 times its weight at speeds greater than 200 to believe they were borrowing at a certain rate when in fact they were paying considerably most of the suits were settled out of and most Banks also changed their loan contracts to reflect i agree Banks have the right to charge whatever they Horvitz but he the whole prime rate system is an ant competitive device that May be in Viola Tion of the antitrust Horvitz concedes that Banks dont set the prime rate in a smoke filled room but he said the Way the system is set up they have every incentive to keep the prime rate he said the Issue has become even More Complex be cause the prime now applies to floating rate that the Borrower gets a loan tied to the prime whenever prime the interest on the loan also he he said this gives Banks an incentive not to lower it is time for the prime to fade away and for the Banks to give it he it makes sense to have some other indicator for and we have a lot of them now like Treasury Bill and commercial paper he but Banks will try to preserve it because it helps them to increase their spread at a time of severe competitive pres digest video pirates steal millions from Britain film Industry London a despite an anti piracy pirate videotapes in Britain Are still costing the film Indus try 25 million pounds million a year and have moved out of the main Street shops into vans touring pub Lic housing the federation against copyright theft mobiles Are now the major Peter facts director of investigations told a news we have Good evidence that Strong teams of people Are operating full time All Over the one of these Mobile dealers in illicit videotapes operated out of a converted Duffy another had so Many pirate tapes at his storeroom in a Public housing project he was protecting it with close circuit billion Trade imbalance reported Between Japan Tokyo a Japan rang up a billion Trade surplus with the United states in second Only to the record billion of As japanese car exports continued to soar above last years the finance ministry Japan said its exports to the United states came to billion in while imports of products total de the huge Trade imbalance has Hurt relations Between the United states and Japan and has led to Calls in con Gress for imposing Trade restrictions unless Japan takes Steps to substantially open its markets to More prior to the april record Trade surplus with the United the previous High was billion in september Italy car import restrictions ruled illegal by european court Luxembourg a the european court of jus Tice has ruled illegal italian import restrictions on cars from other common Market countries and said the curbs must be Italy introduced measures last july that effectively pre vented dealers from importing cars outside the official distribution the court the known As parallel imports has grown in popularity because the tax free Price of the autos was As much As 20 percent lower than for cars delivered through official in about cars were imported in this the courts executive commission took Italy to the arguing the measures against the parallel imports violated the common Market the agreement bans member states from putting quantitative restrictions on imports from other member the automobiles were being imported into Italy from West France and the