Installment Credit

Report Outline
Federal Controls on Instalment Credit
Prewar and Postwar Instalment Selling
Instalment Credit and Economic Stabilitrewar
Special Focus

Federal Controls on Instalment Credit

The Course of business activity in the spring of 1949 may determine whether or not Congress extends the authority of the Federal Reserve Board to impose controls over the terms of instalment purchases of automobiles and of certain other consumer goods. If business continues to slacken, complaints about the retarding effects of existing credit restrictions may increase to an extent that will influence Congress to let the present powers lapse when they expire by limitation on June 30. If, on the other hand, there is an early and definite resumption of the postwar boom, Congress may well decide to rearm the Federal Reserve Board with authority to put brakes on the expansion of instalment credit and thus to combat inflationary pressures generated in that quarter.

Differences Over Extending Credit Control Powers

Extension of “the power to control consumer credit” was the first point in the eight-point anti-inflation program recommended to Congress by President Truman in his State of the Union message on Jan. 5, 1949. The President observed that “At the present time our prosperity is threatened by inflationary pressures at a number of critical points in our economy.” The program he proposed was designed to put the government in position “to take effective action at these danger spots.” The Employment Act of 1946, he said, committed the government “to protect business and the people against the dangers of recession and against the evils of inflation.” The President's Council of Economic Advisers, created by the Employment Act, said in its Annual Economic Review that the authority for regulation of instalment credit had had “gradually increasing influence in checking credit extension of an inflationary character.” It added that “To abandon this restraining influence at this time would increase our vulnerability to inflationary strain.”

Neither the President nor the Council of Economic Advisers specifically recommended that the power to impose controls on instalment credit be made permanent. But Chairman McCabe of the Board of Governors of the Federal Reserve System, appearing on Feb. 14 before the congressional Joint Committee on the Economic Report, made it plain that permanent powers were sought. He told the committee: