European Stars and Stripes (Newspaper) - July 15, 1990, Darmstadt, Hesse                                Sunday july 15, 1990 the Star band stripes Pago 17business news Dollar watch Buck reacts to of rate drop the other shoe finally dropped. It fell with a resounding Dunk thursday when Federal Reserve Board chairman Alan Greenspan hinted broadly to the Senate banking committee that he believes the time has finally come to Engineer lower interest rates in the United states. _ t a after several months of maintaining that inflation was too much of a danger to tamper with interest rates Greenspan now says he a had a change of  signal that the fed is ready to ease rates must please the Bush administration which has been pressuring the fed to slash rates As a Way of boosting the sluggish . Economy arid perhaps the presidents popularity rating. Randy Mcclain but the move by the fed when it comes will Likely be sour news for the Buck. International investors generally shy away from putting their Money into a. Currency when interest rates Are on the Way Down. They prefer investing in countries where interest rates Are rising or threatening to do so. These Days that Means great Britain and possibly West Germany Are in and the United states is out. Currency markets did no to waste any time sending a signal that lower . Interest rates will be negative for the Dollar. Between thursday night european time when Greenspan testified in the Senate and Friday morning the Buck fell from 1.66 Marks to near 1.63. The military Exchange rate was set later Friday at 1.61 Marks after a Price fixing in Frankfurt West Germany. That rate applies to Community Bank transactions this weekend. The Dollar also lost ground against the Pound losing More than 2 cents Between thursday night and Friday morning. One Pound was Selling Early Friday for about $1.8130, compared with $1,788 earlier in the week. Gunter Teich currency analyst with the Bank of Boston in Frankfurt said Greenspan a testimony shows the fed is ready to Cut interest rates in the states Quot any Day now. The fed chairman said the . Central Bank is disturbed at a credit crunch in the United states that is hampering the ability of Many businesses to borrow Money. He said the tight Money situation could endanger the general . Economy in the Long run. Teich speculates that the first sign of a fed credit easing will come with a reduction in the 8.25 fed funds rate which applies to Federal Reserve Loans to commercial Banks. Business a leaders have been arguing for months that Overly strict lending standards Are being imposed on them by skittish commercial Banks and now Greenspan is saying the fed understands it must counterattack. Lenders it seems have turned Down business borrowers in greater numbers in recent months perhaps out of fear of ending up saddled with a Mountain of bad debts like Many savings and Loans have in the last few years. Greenspan said the problem Likely could be corrected by a Quot modest interest rate Cut to Speed the flow of credit to businesses. Teich said one More bit of evidence that a Cut in . Rates is at hand came to Light Friday Mien the . Labor department announced that wholesale prices in june Rose by a modest d 2 percent aided by declining costs of food and Energy. _. I he slight Overall increase was in line with a of twists by most private economists and a Clear a no tuition that . Inflation is under control 1 Eich said. The Bottom line the Bank of Boston expert said is that the Buck could fall another pfennig or two Over the Short haul. He said the . Military Exchange rate could drop to perhaps lev or 1.60 Marks. The stars and stripes May have violated rules by Randy Mcclain financial writer merchants National Bank officials will find out later this month if a recent fire Cracker Sale car promotion has blown up in their  Sale conducted from july 4 through saturday in con Junction with a West German car Dealership is under scrutiny by the . European come in Stuttgart West Germany after complaints from some Bank customers. The promotion offered discounts Between $500 and $2,000 on Nissan Honda and Mazda automobiles As Well As interest rates As Tow As 8.25 percent when a Purchase was financed through merchants Bank. Neucom is studying whether the Sale which involved merchants loan officers journeying Oft Post to make Loans to service members ran afoul of the postwar status of forces agreement that governs the american presence in Germany. Neucom also is looking into whether merchants violated military mailing rules by sending a promotional flyer about the Sale to its customers and whether the Bank sidestepped Pentagon policy by promoting foreign cars during the event Ratner than .-made ones. A your main interest is sofa at this office Quot said Mark a. Scheidler a Neucom management analyst who helps oversee the governments banking contract in Europe. Quot when the Bank actually goes out to attract Loans what Are the boundaries and what Are the rules for that a Scheidler was unable to say what particular provision of sofa is involved in eur come a review. He did say the off Post nature of merchants program is what raised a red  the Bank can to loan to non authorized customers and Here we Are going off Post to a non-. Entity a German corporation. Is that Legal or not we re not sure a Scheidler said. _ merchants maintains that its loan officers Are arranging financing Only for . Service members and other persons authorized to do business with the Bank. Bank employees ventured off Post Only to make borrowing Money easier for customers the Bank a management said. Neucom has asked for a Legal opinion on the fire Cracker sales legitimacy Scheidler said and once that is in hand the matter will be discussed with merchants at a meeting of eur come a european banking coordinating committee. That meeting is scheduled for july 26. The same topic willbe discussed with credit unions operating in West Germany when their coordinating committee meets july 27. The Flap Over the fire Cracker promotion has left merchants top management befuddled. In the last few months department of defense officials in Washington have been encouraging the Bank to boost loan volume in order to make overseas banking a profitable venture. Now merchants brass wonders How far  be allowed to go to get the Job done. Quot we re Here to be profit making and we need to generate loan business to do that a said Sherry Feauto manager of credit services for merchants in West Germany Greece and the Netherlands. Quot getting information out to the Public helps us generate loan business. Isnit that what Dod wants a the lending business has become extremely competitive in the last several months As car sales have sagged overseas Feauto said. Banks credit unions and some foreign lenders Are competing tooth and Nail for business and merchants is just trying to keep Pace she said. The governments overseas banking business typically loses several million dollars a year Dod officials have said but recent efforts have been aimed at nudging the operation toward the Black. Some gains have been made. For example merchants Bank in West Germany Greece and the Netherlands has been Able to boost loan volume from $44 million two it ears ago to More than $71 million today. Various fees also have been increased on such services As Check cashing and foreign currency Exchange. A spokesman for the Pentagon a directorate for financial services policy in Washington said the government wants merchants to continue to be competitive but that  be done by violating any rules. Scheidler stressed that no one is accusing the Bank of violating sofa at this Point. A the Bank feels reasonably certain its on Good grounds. We just want to take a look at the policy of h i to i a i i. To a. A thu it  a i t Montu Ihfe Al in tic a i Ftp it a in t. My 4-14 merchants announces interest rates As Low As 8.25% apr keep this flyer Lor your Chance to win a so Bond Fly via  bomb per sending a loan officer off base. Is that within the provisions of sofa or not a Scheidler asked. The fire Cracker Sale was done in partnership with the Auto Exchange a West German car Dealership. Merchants loan officers were on site at More than three dozen Auto Exchange showrooms around Germany for almost two weeks. Feauto said credit unions in West Germany have staged similar loan specials in the past and neither Neucom nor the Pentagon complained. On a related Issue Scheidler said the Bank May have violated a military mail Rule that restricts the Way and a cruising material can be sent to service members in the european theater. Neucom rules seem to prohibit the Bank from sending ads to customers unless they Are sent in envelopes along with some other official correspondence such As a monthly Bank statement Schmidl Essaid. The fire Cracker Sale flyer was mailed alone. Bob Schindler merchants general manager in West Germany said the Bank will Stop mailing ads that Way if its against the rules. Quot As far As we were aware we could use military mail for Normal business activities including making Loans. If there a a postal directive that says we can to though Well Stop Quot he said. One final area of concern for Neucom is whether merchants went too far in pushing foreign car sales with its fire Cracker promotion. Pentagon policy for much of the 1980s held that american institutions overseas should Quot publicize display and sell Only .-made cars on overseas bases. However that policy seemingly was altered last Spring to allow at least military Banks to have greater leeway in financing service members purchases of foreign cars. The apparent change in policy came about after questions were raised about a lending institution promoting foreign car Loans in the United slates. The controversy led to dodos Force management and personnel office coming to the lenders defense. Quot with regard to foreign car sales i see no reason to restrict on base Banks and credit unions in their loan programs any More than we could prevent our patrons from going olt base to buy a foreign made automobile a wrote a Dod official in a May 5, 1989, letter to the army and air Force Exchange scr ice Scheidler said it remains to be determined whether that letter reflects official policy and whether it applies overseas or Only in the United states. Rules also might be different for credit unions and the Bank he said. For their part merchants flank officials said they just want to make More Loans and they re equally willing to finance foreign made or american made car purchases. In fact Feauto said 58 percent of merchants current car Loans Are for american made cars