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About Capital journal. (Salem, Or.) 1919-1980 | View Entire Issue (March 21, 1957)
Salem", Oregon, Th'urs'day, March" 21, 1957 THE CAPITAL' JOURNAL Section 1 Page 11 FRB's Report Neutral About Credit Checks Odds Against President Asking for Standby Control Powers By STERLING F. GREEN WASHINGTON Ufh- Speculation sharpened today on whether Pres ident Eisenhower will ask Con gress for standby powers to regu late consumer installment credit. The odds seemed to be against It, for interest has been lukewarm lately. But it was spotlighted by the issuance yesterday of a mas sive study prepared at Eisenhow er's request by the staff of the Federal Reserve Board. The researchers found that easy-payment buying of autos and consumer goods tends to be un ruly. "The major influence," they said, "has been to add fuel to booms; it has less often been an aggravating factor during recessions." Words of Caution The FRB staff found, that the credit structure, though carrying a record 31i billion dollars of installment debt, is less likely than in 1929 to collapse during a recession into defaults, foreclos ures and repossessions. It never theless cautioned: "The possibility of an episode of drastic and spiraling liquida tion should not be dismissed." The report is neutral on stand by controls; it presents various conflicting views in. its five vol umes and 1,619 pages. The reserve board itself has taken no position though it presumably would ad minister any controls voted, as jit does the margin buying of 'ttock on the exchanges. ; Eisenhower asked Congress 14 Jlnonths ago to "consider" standby 'controls. That was just after the 1955 auto credit binge, when total installment debt outstanding soar ed by SVi billion dollars., Ike Less Concerned f The rate of rise abated last year without damage, and the is sue nas taKen a DacK seat. Bus inessmen' who have visited Eisen hower recently said he shows far less concern. Neither has any strong movement for controls de veloped in Congress. 4 The FRB economists said that In five business upswings in the past 30 years, starting with the pre-1929 period and ending with the 1955 boom, "installment cred it buying contributed to a rate of sales of consumer durable goods that could not be sustained." , In some cases business sagged when consumers turned to paying ctt old debt instead ot incurring mew debt. This may have occurred in 1953, the board said, when in- ' stdllment buying fell off in the : spring and was followed by a gen- rial recesxinn imer in me vedr. 45 Per Cent in Debt i The study showed that 45 per Scent of American, families owe 'some installment, debt. A sur- prising number are in the middle land upper income brackets 56 I per cent of - all families in the 3 $4 000 to $7,500 income groups, 43 f group, and 32 per cent in tnc StlO.ooo-and-over group. 1 Three times as many families with incomes over $10,000 now use installment credit as did so in 1952, the report found, even though 88 per cent of these debt ors had liquid assets of $500 or more and presumably could have paid cash in many cases. Some families evidently use in stallment credit as a form of sav ing, it was indicated: they save their liquid assets and buy goods on installments. The report add ed: t "It has become respectable to be a debtor, and the desire to own a home 'free and clear' is no longer as strong as it was in the past. Airlines Form Trade Group SEATTLE mA trade associa tion of local-service airline car riers was announced here Wednes day with six companies as first members. Nick Bez, Seattle, president of West Coast Airlines, was elected the first chairman as the two-day session concluded. Joining in forming the associa tion, Bez said, were representa tives of Bonanza Air Lines, Las Vegas, New; Central Airlines, Fort Worth. Tex.: Ozark Air Lines, St. Louis, Mo.; and Lake Central Airlines, Indianapolis. The Fron tier Airline application was ap proved but was not represented because of the death ot the cnair man of their board. The association's immediate ob jectives, Bez said, will be to work out policies to Rive better service to the public and take up legisla tive matters of interest to carriers. 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