More Banks Slash Prime Lending Rates

At least three more big banks--Chase Manhattan, Manufacturers Hanover Trust and Mellon--today slashed their prime lending rates half a percentage point to 9% in reaction to last week’s surprise rate cut by the Federal Reserve.

Several of the nation’s banks, including No. 1 Citibank, had cut their prime on Friday, just minutes after the central bank lowered its key discount rate to 6% from 6.5%.

The discount-rate cut was the second in six weeks and came amid mounting pressure by the Bush Administration to lower interest rates to prevent the economic recession from deepening.

The discount rate is the interest the Fed charges to member banks. When that rate is lowered, so are the banks’ cost of funds.

Chase, Hanover and Mellon said their prime-rate cuts were effective immediately.

The prime rate reflects a bank’s costs of borrowing money, including interest it pays on savings accounts or certificates of deposit, and trails more subtle increases in other interest rates.

Still, the rate is watched closely because bankers use it as a basis for calculating loans to businesses and for determining many types of fixed and adjustable-rate consumer loans. Home equity loans are included in that category.