Business: Turn of the Screw

Tightening money last week sent the Federal Reserve discount rate to 4%—the highest level in 24 years. It was the fifth such increase since the Fed set the discount rate at 1¼% in the 1957-58 recession as an aid to recovery. In abandoning the 3½% level that had held since last spring, the Fed's purpose was to narrow the abnormal gap between the cost of Fed money to member banks and the rate at which the banks could lend money to their customers. After commercial banks upped the rate to their best customers from 4½% to 5% (TIME, Sept. 14), the...