Almost every evening on the news the anchorman announces that one of the major banks has raised its prime interst rate. But if you watch carefully, it's never the same bank two nights in a row. One evening Walter Cronkite will say, "Chase Manhattan Bank today raised its prime rate to 18 percent." The next evening he'll announce, "The First National Bank of Chicago has increased the prime to 18 1/2" followed by a further bulletin the next day that "Citibank said today it will now charge 19 percent to its favored customers." You can assume that if one major bank raises the interest rates, all the others will follow suit.
Has it ever occurred to anyone that it's always a different bank that takes the lead in raising interest rates every night? It has to me.
I have no proof of this, but I wouldn't be surprised if the major banks have a deal with each other so one bank won't take all the flak for upping the prime rate every night I suspect there are conversations going on like this every day.
"Hello, George? Ed here at Manufacturers Hanover. I believe it's the Bank of America's turn to raise the prime tomorrow."
"Let me check the schedule. No it says it's Citibank's turn. If you recall, we raised it last Thursday."
"Citibank said the man who raises the prime at their main office has the flu and was wondering if your guy would announce the raise tommorrow and they'll raise it when your turn comes around again."
"I'd like to help them out, but I think it would look bad if we were the first to raise it two weeks in a row. Did you call Irving at Irving Trust?"
"Yes. He said he was playing golf tomorrow and could'nt do it. David Rockefeller's out of the country, so Chase Manhattan can't do it. Do you have any ideas?"
"What about one of the Riggs banks in Washington? They're small, but they might like the publicity."
"We thought about Riggs, but the problem is if one of the major banks doesn't announce the first increase, the public might not take us seriously."
"On the other hand, if we don't stick to the schedule we could have two major banks announcing a rate increase at the same time -- or worse, no one will announce a prime rate increase that day, and we'll all be in the soup."
"I agree with you. I think we should tell Citibank they have to raise the prime when it's their turn, or get out of the banking business."
"While I've got you on the phone, the Continental Bank of Chicago failed to raise its prime yesterday after Morgan Guaranty announced they were raising theirs."
"Those dirty rats. They're trying to make us all look bad. I think we should report them to the American Bankers Association."
"My thoughts exactly. Their excuse is they missed the evening news last night and didn't know Morgan Guaranty had raised it."
"That's malarkey. They know we raise it every day. I suspect they're just trying to steal customers from the rest of us."
"I wouldn't put it past them. Continental never was a team player. Well, it's been good talking to you. If Citibank gives me a hard time about raising the prime tomorrow, I'll call Gerry at Wells Fargo. He's been screaming that his bank hasn't been the first to raise interest rates since last summer, and his customers are starting to think that Fargo has lost its clout."