April 1980 - Spring Meeting
Date: March 1980
Location: New Orleans
The following is an article that appeared in the May 1980 issue of Automotive Fleet.
Uncertainty over the economy and a record turnout marked the annual Automotive Fleet & Leasing Association (AFLA) meeting during early March in New Orleans. Over 260 persons attended as concern over skyrocketing interest rates dominated discussions both outside and during formal sessions.
The reality of tight economic times ahead was hammered home as prime interest rates set new highs as AFLA met. Assessing this situation and predicting that harder times are ahead before things will get better, Steve Leskovsky, president of Commercial Credit/McCullagh Leasing delivered the keynote address.
"Dramatic changes in the economic environment in the last three weeks have left most business people scratching their heads and wondering where it all ends," he said. The blame for the confusion over the current economic conditions in the U.S. can be laid squarely on the "inconsistent actions, over actions, and non-actions of our representatives at the federal level."
Leskovsky said the federal government's decision that federal reserve and monetary policy were the only means to stop inflation has result in the skyrocketing prime rate and a general drying up of the money markets. "Rather than suppress demand for money," however, "these actions have dramatically increased loan demand in the nation's banking system." It has resulted in a run by businesses borrowing funds in the commercial paper market.
As a result, "the country is sitting on a powder keg. In 1970, Penn Central, who was a heavy borrower in the commercial paper market, went bankrupt, triggering panic in that marketplace," he said. "The same scenario took place again in 1974 when two major companies who were borrowing heavy in the commercial paper market went bankrupt. The likelihood for a recurrence of those events today is very strong. One major bankruptcy of a company who borrows heavily on the commercial paper market, and the supply of funds available to the market, will flee to safer investments, primarily short-term borrowers over the brink or close to the brink of disaster."