ECONOMY AND INTEREST RATES : Bush Urges Greenspan to Lower Interest Rates : * Government’s view: President seeks to end what he calls a lingering credit crunch. Strategy session puts Fed under the spotlight.

President Bush, faced with fresh evidence that the economic recovery has stalled, called on Federal Reserve Board Chairman Alan Greenspan and other bank regulators Friday to end what he called a lingering credit crunch in the nation’s financial system.

Bush and senior Administration economic policy makers met with Greenspan at the White House, and presidential spokesman Marlin Fitzwater suggested afterward that the unwillingness of commercial banks to lend more money was having a “chilling effect” on the economy.

The fact that Greenspan, the head of an independent board, was invited to an internal strategy session suggested that the White House hoped to put the Fed under the spotlight in order to pressure the central bank to ease its grip on the economy.

Fitzwater said Bush did not directly ask Greenspan to cut interest rates again. But officials had signaled as late as last Wednesday that the President’s top advisers saw a need for “continued economic stimulation”--meaning they want the Fed to nudge rates downward.

The session came as, separately, the Commerce Department reported that personal income of Americans and consumer spending continued to be weak during August, adding to the mounting evidence that the recovery is less-robust than had been expected.

The latest statistics showed that personal income rose just 0.4% in August, while consumer spending increased just 0.1% during the month.

Since consumers account for roughly two-thirds of the nation’s economic activity, economists warned that the weak spending figures could lead to sluggishness throughout the rest of the economy as well.

“This puts an upper limit on the rate of growth in what is shaping up to be an abnormally slow recovery,” said Gordon Richards, chief economist for the National Assn. of Manufacturers.

Friday’s session was the latest in a long-running effort by the Administration to prod the Fed into pumping more money into the economy. Chief presidential economic adviser Michael Boskin and Treasury Secretary Nicholas F. Brady have repeatedly lashed out at Greenspan for failing to move more aggressively to lower interest rates.

Earlier this month, the Fed slashed its benchmark discount lending rate by half a percentage-point, to 5%, but Administration officials--and many private economists--believe that the Fed still has not reacted swiftly enough to evidence that the recovery has remained weak.

“People are still having trouble getting money,” Fitzwater said Friday. “The President just asked them (Greenspan and his economic advisers) to be aware of it and advise . . . on any steps that needed to be taken or that could be taken. That’s the way it was left.”

Greenspan did not comment on the meeting Friday, and Administration officials were unusually tight-lipped about what was discussed. But Fitzwater said later that the Fed chairman told Bush that he still believes that the economy is beginning to emerge from the recession.

Even more dramatic evidence that the recession may be lagging came on Thursday, when the Commerce Department reported that the nation’s output of goods and services fell 0.5% in the second quarter, the second time the output figures for the period have been revised downward.

Another worrisome sign came from the Labor Department on Thursday when it said the number of people seeking unemployment benefits for the first time rose unexpectedly during the week of Sept. 14--an early warning signal of a worsening unemployment rate.

Personal Income

Trillions of dollars, seasonally adjusted annual rate

Aug., ‘91: 4.82

July, ‘91: 4.80

Aug., ‘90: 4.68

Source: Commerce Department

Personal Spending

Trillions of dollars, seasonally adjusted annual rate

Aug., ‘91: 3.84

July, ‘91: 3.84

Aug., ‘90: 3.69

Rate Gap

While major interest rate indexes have not passed the savings on to consumers. Banks’ cost of funds have fallen 2 to 3 percentage points in the past 2 1/2 years. But rates for new-car loans have dropped just half a percentage point, and rates for personal loans and credit cards have increased slightly. Banks are using the spread to improve their own shaky finances.

What banks charge by quarter

Credit card: 18.7%

Personal loan: 17.08%

New-car loan: 11.48%

What banks pay by quarter

5-year CD: 6.83%

1-year CD: 5.66%