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MARBLEHEAD -- Kevin Maguire thought he was just building an addition to his home when, attracted by low interest rates, he walked into a local bank last summer and took out a $100,000 equity line of credit to finance the expansion. Little did he suspect what he was really doing: propping up the economy. Since that day in August, Maguire has been adding not only to his home but to the bottom lines of more than a dozen businesses, which in turn have been adding jobs, hours, and overtime. So far, he has spread more than $60,000 from Somerville to Salem, N.H., buying materials, renting tools, and hiring contractors, with the impact of that spending, according to economists, at least doubling as it has worked its way from bank account to cash registers to paychecks.
''I'm a one-man economy builder,'' Maguire said as he recently tallied up his expenses.

Maguire, in fact, is part of an army of economy builders who have reacted to the Federal Reserve's low-interest rate policies as central bankers had hoped, tapping into equity and pumping it back into the economy to keep it afloat through war, terrorism, and corporate scandals. In many ways, Maguire and his home improvements show how monetary policy can work by encouraging the type of investment that leads to jobs, and how the Federal Reserve's aggressive rate cuts have prevented a far more severe economic downturn.

To get a sense of the impact of the Fed's easy money policy, just compare the current situation to the downturn of the early 1990s, when the nation's unemployment rate peaked near 8 percent, compared to the June jobless rate of 6.4 percent. A key difference: housing.

In the early '90s, with the Fed's benchmark interest rate above 3 percent, housing remained mired in recession with the rest of the economy, and employment in building construction plummeted by 250,000 jobs, or 17 percent. Today, at a similar point in the business cycle, the Fed's benchmark rate is 1 percent -- following 13 rate cuts over 2 1/2 years -- and building construction has added more than 24,000 jobs, a 1.5 percent gain, according to the US Labor Department.

Other housing-related activities have posted strong job gains, too. Even as sectors like manufacturing and technology experienced double-digit job losses, employment among building supply companies has grown 5 percent over the past two years, while jobs at mortgage brokers have soared by 67 percent. Maguire, meanwhile, has done his part to bolster these sectors, refinancing his mortgage three times in less than two years; spending nearly $15,000 at the local Home Depot alone; and hiring carpenters, electricians, plumbers, and masons. Among them: Bob DiMilla, a Saugus plumber, who earned $2,400 in May piping the new bathroom in the Maguire addition.

DiMilla recalled that during the early '90s, he was lucky to find 20 hours of work a week. Now he's working as many as 80, and using some of his earnings to pursue his passion for auto racing and boost the tourism industry. He travels several times a year to attend races, and estimates he'll spend about $700 when he attends a NASCAR event at Watkins Glen, N.Y., next month. ''In early 2001, there was a lot of skepticism that [lower rates] would have any effect at all,'' said Sara Johnson, an economist at Global Insight in Lexington. ''But this is the only recession in the postwar era without a collapse in the housing market.''

Favorable conditions unseen in previous downturns have allowed housing to bolster the economy. Unlike other recent recessions, which were precipitated in part by the Fed raising interest rates to squeeze out rising inflation, the US entered this downturn with inflation in check, which in turn has given central bankers room to cut rates -- and keep them low -- without fears of reigniting inflation.

Moreover, the boom of the 1990s helped to expand a source of wealth that becomes attractive to tap when interest rates fall: home equity. Over the past five years, equity in household real estate has jumped 43 percent, to $7.67 trillion in the first quarter of this year from $5.37 trillion in 1998, according to the National Association of Realtors.

Maguire and his wife, Amy, are among those who have seen their equity soar. By last summer, the value of their stylish ranch home, on a quiet tree-lined street about two blocks from the beach, had at least doubled from the $267,000 they paid in 1997. They had long talked about adding another bedroom and bath to the house, and planning for their second son, Casey (born six weeks ago), the idea of using some of their equity took hold.

What sealed the deal, recalled Maguire, were low interest rates. The local savings bank, subsequently acquired by Banknorth Group Inc. of Portland, Maine, was offering a deal that seemed hard to refuse: an equity line of credit at a quarter point below the prime rate -- the benchmark rate banks charge their biggest and best commercial customers. Maguire took the loan at a 4.5 percent interest rate; it has since fallen to 3.75 percent.

Soon afterward, Maguire plunged into the local economy, first hiring an architect, at about $900, to draw up plans, then buying lumber, concrete, other supplies, and tools. He spent nearly $1,300 for support beams at Moynihan Lumber in Beverly; more than $2,300 for lumber to frame the addition at Gilbert & Cole Building Products Inc. in Marblehead; nearly $5,400 for a new air conditioner, boiler, and plumbing supplies at Bourneuf Corp. in Lynn.

He sometimes found himself going three times a day to the Home Depot in Salem, where he has spent -- so far -- $14,929. The growing legion of customers like Maguire has made building supply one of retail's brightest spots. Home Depot recently reported record first-quarter earnings, and the Atlanta-based chain plans to add 40,000 jobs this year as it opens 200 new stores. Moynihan Lumber, which has stores in North Reading and Plaistow, N.H., as well as Beverly, has been hiring, too, as well as increasing employee hours and paying overtime.

''As long as the interest rates are where they are,'' said Gerard Moynihan, one of the owners, ''there is plenty of action in our business.'' Maguire also has been creating action for local tradespeople. While he's done much of the work himself, he's nonetheless had to hire contractors, paying them nearly $20,000.

Cunningham Construction, which has had its five-man crew working six days a week to keep up with demand, framed the Maguire addition in between bigger jobs. The bill: about $3,000. George Mitchell, a carpenter, earned nearly $7,000, working on and off from February to April.

For Mitchell, the timing of the job couldn't have been better, providing work when building activity tends to be slow. ''February is not the best time for carpenters,'' he said, ''and this job helped me keep my head above water.'' After Mitchell wrapped up his work, the Maguires moved into the new master bedroom, leaving their old room -- the new guest room -- empty. That led to a trip to Furniture World in Salem, N.H., where Maguire spent $3,302 for a bed, dresser, chest of drawers, nightstand and mirror, as well as bunk beds for his sons.

Meanwhile, Maguire was putting on finishing touches, which required a trip to Somerville, where he spent $173 for door and cabinet hardware at Raybern Co. Builders Specialty Hardware, which specializes in designer and upscale doorknobs, cabinet pulls, and similar products.

Through much of the 1990s, said company president Ken Brueggemann, business was driven by the stock market as the newly wealthy built luxury homes. When the stock market crashed, he feared sales might follow. But the Fed cut -- and kept cutting -- interest rates, and people like Maguire started tapping into their equity to finance home improvements. Raybern's business, which has been growing 3 to 5 percent a year since the mid-'90s, hasn't missed the beat.

''Whenever I get together with contractors,'' Brueggemann said, ''we say a prayer to the refinancing market.''

For the Maguires, the addition has been the answer to their prayers, giving them the room for their family to grow. The bathroom is still being finished, and Maguire plans to have the project completed within the next few weeks, and soon after, to start paying off the loan. Had interest rates not come down, he added, the addition would probably still be a dream.

''The current rate environment made it affordable, and allowed us to pull the trigger with a lot less trepidation,'' he said. ''If the rates had been 7 or 8 percent, we wouldn't have been doing this.''

By: Robert Gavin