Newsday from New York, New York • 54

39 2,950 2,850 2,750 10-DAY DOW TREND Yesterday 2,891.83 Down: 7.18 2,650 Banks Dont Rush to Drop Prime Rate By Christine Dugas STAFF WRITER Mqjor New York banks will be slow to follow Bank of Americas lead in cutting its prime lending rate, economists aay. On Wednesday, San Francisco-based Bank of America announced it would lower its prime rate to 8 percent, from 9 percent. So far, no other banks have followed suit. The prime is the rate banks charge their best customers and an important indicator of trends in many consumer loan rates. Banks usually adjust their prime rate according to their cost of funds, so that if the rates banks pay for certificates of deposit, short-term federal funds, or other funds go down, then they are likely to cut their prime lending rate.

Bank of America, the main subsidiaiy of the nation's second largest bank holding company, cited the lower cost of funds and the likelihood that short-term interest rates would decline further as reasons for its move. Industry analysts and economists note that most other banks are in no hurry to cut their prime rate, despite the lower cost of funds. They say that pressure to increase eamingB and capital levels are driving banks to boost profits by increasing the spread between what they pay for funds and the rate they turn around and charge to lend out those funds. During the past two decades, this spread has averaged about 1.5 percent, according to Robert H. Chandross, chief economist at the New York office of Lloyds Bank.

Recently, the spread has hovered around 2.5 percent. One economist at a mqjor bank said there simply is a greater lag between the reduction in the cost of funds and a cut in the prime rate much like the lag between lower oil prices and the drop in pump prices. He noted that because the demand for credit has been fairly weak in the New York area, banks here feel less pressure to cut the prime. If demand were strong, and banks didnt reduce their prime rate, it would cost them some business, he said. Some analysts say Bank of America may be trying to take business away from its competitors by lowering its prime rate.

They see an opportunity, for a variety of reasons, to push ahead, said James J. McDermott president of Keefe, Bruyette Woods. He noted the bank can take the initiative because it is stronger than many other large banks. In January, Bank of America took the lead in a round of rate cutting. And early this month it was one of several banks to rush to cut its prime rate by half a percentage point when the Federal Reserve Board reduced the discount rate.

Nrwiday I Km Sawchuk Smiling, Michael Milken leaves federal court in Manhattan in 1989, as his legal battles began. Heading Off to Camp Milken draws minimum-security prison Milken and his three roommates will each have about 90 square feet, she said. The work camp has no gates, she said, and houses about 84 prisoners supervised by 11 staff members. For meals and hospital care, inmates go across the street to a more secure jail that houses prisoners awaiting trial. Camp inmates, based on their skills and background, are assigned to jobs ranging from cleaning up the barracks to construction work on the grounds.

Eight inmates work with the National Park Service on the restoration of nearby Alcatraz, Killian said. It isnt clear what Milken, whose skills and back- By John Riley STAFF WRITER Financier Michael Milken, who once made more than $650 million in a single year, will serve his prison term earning from 11 cents to 40 cents an hour at a minimum-security federal work camp near San Francisco. Court papers released yesterday revealed that the one-time junk-bond wizard has been assigned to serve his 10-year sentence for securities fraud in a former military barracks at Camp Parks in Pleasanton, Calif. Inmates at the facility, which was just converted to a prison last October, are housed four-to-a-room, according to prison spokeswoman Janice Killian. Please see CAMP on Next Page Robert Renos Column Returns Tuesday Times Square Retail Project Delayed NEW YORK NEWSDAY.

FRIDAY. FEBRUARY 22. 1991 By Pat Wechsler STAFF WRITER Metropolis Timesquare, a glitzy, high-tech Times Square retail project that was to be designed by the architect who oversaw the 1984 Los Angeles Olympics and the special effects director for Cats, has been postponed indefinitely because of the apparent financial difficulties of its developer Bruce Eichner. The Hahn which was to develop and lease the entertainment complex, said that it was pulling out of the project for now because of unanticipated and serious delays in building retail space in Eichners 44-story office tower on Broadway between 45th and 46th Streets. We are still enthusi- as tic about the whole concept and Times Square," said Kim Wenrick, director of corporate communications for Hahn.

But we dont feel that we can continue until Mr. Eichner meets his obligations. Eichner was not available for comment. Under the agreement with Hahn, Eichner pledged to build what was to be called a Whiz Bang" a $10 million, six-story semi-circular wall within the complex that was to be filled with 132 neon signs, 350 video screens, a computerized lighting system and a state-of-the-art sound system. Around this high-tech video theme, Hahn was to lease retail space to entertainment-related firms, such as record and book Btorea, restaurants and a movie theater.

Hahn said yesterday that it would take at least a year to construct the Whiz Bang, and Eichner has not even hired an engineering firm to implement the design. That means the project is at least a year off and we just didnt feel that we could enlist tenants with no assurance of a starting date, Wenrick said. Eichner and his younger brother, Jonathan, are facing a host of legal difficulties, including an investigation by the attorney general into Bruce Eichners City-spire project and a $20-million foreclosure on a Brooklyn waterfront condominium project headed by Jonathan Eichner. Bruce Eichner was also challenged in court by European American bank on the value of collateral he posted against $50 million in loans. i wVAVw V'Yy vVi 'i-ivi I tVV llWvM vs- I I t.ft.