House Majority Leader Jim Wright (D-Tex.) yesterday criticized the Federal Reserve Board's new tight money policies as "an open invitation to economic disaster" that runs " the risk of stalling out the economy."
In a speech on the House floor, Wright lambasted the latest boost in the prime rate to a record 15 percent as "the result of a misbegotten policy" by the Fed. He likened the move to "pouring gasoline on the fire."
Wright's comments marked the most outspoken criticism of the Fed by a member of the Democratic leadership in recent weeks. Most other top congressional figures have supported the Fed or else kept silent on the issue. c
Meanwhile, the Treasury announced yesterday it will offer $6.75 billion in new securities in separate auctions to be held next Tuesday, Wednesday and Thursday to refinance $5.4 billion in maturing notes and raise $1.4 billion in cash.
The package, which is expected to be auctioned off at unusually high interest rates, includes a 3-Year, 6-month note with a minimum denomination of $5,000: a 10-year note of $10,000 and a 30-year bond of $1,000.
The developments came as the Federal Reserve Board continued its appeal to banks to crack down only on speculative loans and not disrupt the flow of credit to longstanding business operations.
Fed Chairman Paul A. Volcker made public a letter to the nation's major bankers urging them to "take particular care that small businesses, consumers, homebuyers and farmers continue to receive a reasonable share of available funds."
He also cautioned the banks not to jump too quickly to boost interest rates higher unless their own costs rise sharply across the board, not just on their more expensive marginal funds.
Volcker's plea was interpreted as an attempt by the Fed to build a record for urging moderation, in part to help ward off political criticism later if the credit-tightening brings on a crunch.