Consumers are accumulating debt at a rate so frightening that incomes are not keeping pace, according to William R. Emmons of the Federal Reserve Bank of St. Louis.

He sees no sign of a slowdown in household indebtedness. As of the 1998 third quarter, household debt was growing at an annual rate of 8.3%. The total-$5.846 trillion-was an all-time high.

Meanwhile, personal income growth had been holding steady at 5% during the 18 months leading up to last year's third quarter.

"We are in uncharted waters," Mr. Emmons said in an interview. "There has never before been a period when the household debt burden has been so high."

His conclusion echoes concerns of bank regulators, who wonder whether the institutions they watch are prepared for the risks they assume by extending so much credit.

Causing further consternation for regulators and economists is consumers' appetite for debt while the economy is healthy and the resulting uncertainty about what might happen during a downturn.

One probable reason for persistent debt accumulation is consumer optimism, Mr. Emmons said. But the American penchant for spending rather than saving does not bode well.

"Households are committed to an unprecedented level of debt service in the future, whether expectations of higher income growth materialize or not," Mr. Emmons wrote in the December issue of the St. Louis Fed's monthly Monetary Trends.

Mortgages are the fastest-growing category of consumer debt. Through the third quarter, mortgage debt was growing at an annual rate of 9.1% as other categories grew at 6.8%.

A number of factors are contributing to mortgage growth, Mr. Emmons said. Homeownership is on the rise; more people are consolidating other loans in second mortgages; and more buyers are making lower down payments.

One way of analyzing mortgage exposure is to look at the spread between the rate of growth in personal income and the mortgage interest rate, Mr. Emmons said. From 1950 to 1979, income growth exceeded mortgage rates by about one percentage point. From 1980 to 1997, mortgage interest rates exceeded income growth by about four percentage points.

"Even though there has been a lot of publicity about low interest rates, the actual borrowers who are paying interest are paying high rates," Mr. Emmons said.

Mr. Emmons contended that this shows, in part, that lenders are charging people for the increased risk of lending. "But is it enough?" he asked.

"When times are good, it looks easy, you can make your payments," Mr. Emmons said of borrowers' viewpoint. "But are you considering that things might get worse? I think it is an open question as to whether people understand their circumstances."

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