What was going on when I was born?

Banks are keeping interest rates high in part to protect themselves from losses on problem loans, Treasury Secretary Donald T. Regan told a Senate panel. The banking industry denied Mr. Regan's assertion. The Secretary also cited uncertainty in the financial community about Federal Reserve policies and about projected Treasury borrowings to meet large budget deficits. (Page A1.) New car sales by the Big Three auto makers fell 5.1 percent in the first 10 days of February, the first year-to-year decline since early last autumn. Chrysler's sales rose during the period, by 2.8 percent, but G.M.'s dropped 5.2 percent and Ford's, 8.6 percent. Analysts were not overly disappointed by the results, saying that the industry is in the early stages of an upturn. (D1.)

The pre-eminence of Japanese companies as the world's masters at making small cars was emphasized this week as never before by the decision of the General Motors Corporation to seek assistance from the Toyota Motor Corporation in producing a new subcompact. Not only will the car, to be assembled at a G.M. plant in Fremont, Calif., be a Toyota design, but it will have a Toyota engine and transmission and the entire 50-50 operation will be under the supervision of a Toyota executive. G.M.'s need for help from a company that its executives hardly deigned to notice not many years ago raises the question of why the world's largest manufacturing corporation, once studied as the model of scientific management, cannot produce a high-quality small car on its own. ''The answer is, they can, but they would have to price it at $10,000,'' said Martin L. Anderson, director of the Future of the Automobile program at the Massachusetts Institute of Technology. The key advantage enjoyed by Japanese manufacturers is an efficiency of production that permits Toyota, for example, to sell its subcompact Tercel in the United States for about $5,000.

A Business People item in Business Day Monday gave an incorrect first name for the new president of Bossard Consultants. He is John D. Rich.

A picture caption yesterday accompanying a dispatch from Gauhati, India, incorrectly identified the leader of the opposition Bharatiya Janata Party. He is Atal Bihari Vajpayee.

New York City is in better shape than usual at this stage of its budget-building - assuming Mayor Koch goes through with his contingency program of layoffs, service cuts and tax increases -State Comptroller Edward V. Regan said yesterday. The gap between income and spending in the fiscal year that starts July 1 seems ''manageable,'' he said, and ''is much smaller than the gaps usually faced by the city four to five months before the next fiscal year.'' The gap can be reduced even further, he said, if the Legislature approves changes in state aid proposed by Governor Cuomo. The Governor wants the state to start taking over local Medicaid costs and to change its formula for school aid.

MARCH 3 promises to be the high point in Norbert Brandt's 15-year career. It is the day when the 29-year-old executive chef at the St. Francis Hotel in San Francisco will cook dinner for the President of the United States, the Queen of England and 250 guests selected from California's elite and powerful. ''It is the most exciting meal I have ever done,'' said the Germanborn, Swiss-trained chef. Mr. Brandt was chosen to prepare the official dinner by members of Nancy Reagan's staff who were impressed with the hotel's reputation for providing fine catered meals. The dinner for the Queen and Prince Philip, who will be on a private visit to California as guests of the Reagans, will be held at the de Young Museum in San Francisco. Muffie Brandon, the White House social secretary, said: ''The St. Francis has the capacity to create a great meal and transport it in trucks. That was a very important element, because the museum has no kitchen and we had to have a way to get the meal there hot.''

Secretary of State George P. Shultz said today that Saudi Arabia and other Arab countries were holding off giving large-scale reconstruction aid to Lebanon until they were certain that Israeli and other foreign forces had withdrawn from that country. Testifying before the Senate Foreign Relations Committee, Mr. Shultz in effect acknowledged that the Administration's hopes of obtaining large-scale Saudi assistance for Lebanon now seemed dependent on whether the Saudis were satisfied with the American-led mediation efforts to gain Israeli, Syrian and Palestine Liberation Organization withdrawals from Lebanon. Most of Mr. Shultz's testimony dealt with broad international economic issues, but he was asked by the chairman of the Middle East subcommittee, Senator Rudy Boschwitz, Republican of Minnesota, whether the drop in oil prices prevented Saudi Arabia from fulfilling its plans to aid Lebanon. 'Not Broke by a Long Shot' Mr. Shultz responded that despite the drop in prices Saudi Arabia had a ''very large'' buildup of assets from its previous oil income, and ''they are not broke by a long shot.''

California, whose Democratic Legislature and new Republican Governor have been at a standoff for weeks over how to close a $1.5 billion budget deficit, is all but certain to have to pay some bills with i.o.u's next week. With the state spending $4 million a day more than it is taking in, a $200 million payment to a consortium of banks due next Tuesday and the state's governmental machinery deadlocked, officials said they had no choice but to begin issuing the i.o.u.'s, called registered warrants, instead of checks on Wednesday. ''There is no hope of avoiding it,'' Ken Cory, the State Controller, said at a news conference this morning in Sacramento. Few California officials expected the warrants to be issued for more than a day or two, and some aides to the new Governor, George Deukmejian, said a few hours after the news conference that they were close to an agreement on ending the deficit. Negotiations broke down again late today, but were expected to resume Wednesday, the Governor's office said.

From the Broadway theater to the New York Botanical Garden, the arts and cultural activities of the New York metropolitan area pump $5.6 billion a year into the economy and generate 117,000 jobs, according to a study released yesterday. The study, by the Port Authority of New York and New Jersey and the Cultural Assistance Center, a nonprofit organization, measured the effect on the region's economy of the entire arts industry. The survey ranged from museums and art galleries to the theater and the production of movies and television commercials. The study included the effect of an estimated 13 million out-of-towners attracted by the shows and exhibitions. It counted the dollars spent by arts organizations on goods and services as various as ballet slippers and carpentry.

The stock market finished slightly lower yesterday, as selling pressure increased after the Dow Jones industrial average edged above the 1,100 level for only the second time. The 30 prominent issues that make up the Dow average closed off 4 points, to 1,093.10. The blue-chip barometer had been ahead 4.46 points, to 1,101.56, at 2 P.M., when profit taking began.

The National Institutes of Health moved yesterday to bar a former Harvard Medical School scientist who admitted committing a fraud in heart research from receiving Federal funds for a decade. It also asked the hospital where he worked to pay back to the Government $122,371 for one project on which he falsified data. The actions by the Federal agency were the harshest it has ever taken in such a case. The Harvard Medical School announced that it had issued new faculty guidelines on how to investigate charges of such fraud. The decision came after a year-long investigation by the National Institutes of Health into the case of Dr. John R. Darsee, a former research fellow at the Brigham and Woman's Hospital, which is affiliated with the medical school. In addition to punishing Dr. Darsee, the Federal investigators criticized supervisory practices in the Brigham laboratory where Dr. Darsee worked. The investigators said these might have contributed ''to the ease with which he was able to produce fabricated data and to the subsequent difficulty in documenting the extent of the problem.'' The supervisors denied that.

The Justice Department will investigate whether Environmental Protection Agency employees destroyed subpoenaed documents and whether the agency's former assistant administrator, Rita M. Lavelle, violated laws on conflict of interest, Reagan Administration officials said today. The officials said Anne M. Gorsuch, administrator of the agency, had asked for the investigation. Both issues are central to the battle between the Administration and Congress that erupted in December when the House cited Mrs. Gorsuch for contempt for refusing to turn over documents about the agency's efforts to clean up toxic waste dumps. Mrs. Gorsuch said she was acting on President Reagan's orders. Meanwhile, there appeared to be progress in the Administration's efforts to reach a compromise that would end the House's effort to prosecute Mrs. Gorsuch for contempt. Under a proposal offered by the Administration, all subpoenaed documents would be made available, but only to a very limited number of investigators.