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February 17, 19h9


Board of Governors

FROM* Woodlief Thomas

Attached for your information is a summary of the spot
survey reports just received from the 12 Federal Reserve Banks
(in response to the Board's inquiry of January 27th) relative to
District tendencies in consumer durable goods and instalment
credit. Also attached are copies of the reports submitted*


are remarkably good reports and well illustrate the kind of
regional information which the banks supply to the Board from time
to time.


(In response to the Board »s inquiry of January 27, 19U9)
The following digest summarizes comments of general interest in
the attached spot survey reports just received from the 12 Federal Reserve
Banks relative to District tendencies in consumer durable goods and
instalment credit*
The bank reports indicate general agreement that Regulation V
could not be assigned any substantial part of the responsibility for
current market conditions. Dealers and financial institutions contacted
by the banks emphasized such factors as the recent high levels of production, the disappearance of the backlogs of demand for durable goods,
increased resistance by consumers to high prices, and the general
uncertainty as to future business trends#
Although there ?/ere many exceptions on the part of individual
dealers and financial institutions interviewed, a fair reading of these
reports leads to the conclusion that there is widespread approval for the
continuation of Regulation VI• The regulation would be supported by many
if only to prevent competition in credit terms.
There was a sharp diversity of opinion on the question of
relaxing the present requirements of regulation Vf. On the one hand, the
financial institutions in general seemed to support existing terms although
they probably would not object to extending maturities to 2U months on
new and late model used cars. Some lenders even wanted to have controls
tightened on certain appliance items. On the other hand, manufacturers,
distributors, and retainers indipated a desire to have easier terms. As

-2far as automobiles were concerned, they favored retention of the one-third
down payment but extending maturities to 2k months. On appliances and
furniture the terms suggested by vendors were 10 per cent down and up to
2k months on the more expensive individual items•
Recent inventory accumulations*—Substantial evidence was found
of recent inventory accumulations of practically all regulated items, but
there was reluctance to characterize these accumulations as "excessive."
It seemed generally agreed that inventories were unbalanced, particularly
in off-brands and higher-priced models. Used cars, low-grade furniture,
and washing machines were singled out by practically all districts as
specific examples of unfavorable inventory conditions*

There is increasing

effort on the part of manufacturers and distributors to force additional
stocks into the hands of retail outlets. "Quotas" are more frequently
being used as a "minimum" shipment, rather than for the purpose of
allocating available supply.
Price developments.-^Premiums on "used" new cars have apparently
disappeared in all parts of the country with the exception of new model
Chevrolets, and in some areas they are still present in the sale of 19U9
Fords. Various forms of price concessions are being made to a large
extent in the sale of regulated items. Price cuts are generally coming
out of the retailers1 margin, however, as there was little evidence of
price reductions by manufacturers or distributors. It appears that
declines in sales volume in nearly all areas are greater than could be
explained by seasonal influencesj and several bank reports pointed to the
next three or four months as the "test."

Financing of retail instalment paper.-"-Banks and finance companies are exercising a greater degree of care in screening applications for
credit and are showing increasing reluctance to handle some types of
retail instalment paper, particularly older model used cars. General
uncertainty over the immediate business outlook* and in some cases limited
resources on the part of smaller finance companies* were offered as
explanations* as well as increasing difficulty with delinquencies•
Dealer wholesale financing.--Ylithout exception* it was evident
that financing institutions were tightening credit lines* especially to
the smaller and less firmly established dealers. Adequate credit is still
available for financing current sales* but not for further building up
Financial condition of dealers.—-Reports of financial distress
in the consumer durable goods field are still apparently quite limited*
Most banks report that difficulties have mainly been with the inexperienced
dealers* or with dealers which had made extensive capital outlays•
Employment tendencies•--Lay-offs in plants producing regulated
articles have been fairly wide-spread with the exception of the automobile
factories. For the most part these are considered "temporary" and due to

cut backs in orders*" "inventory clearance*" and in some cases to seasonal

influences which had not been felt for some years* 7fashing machines*
cooking stoves, and refrigerators were most frequently mentioned as lines
affected by lay-offs.