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November 20, 1947.
Chairman Eccles:
In accordance with your request, I attach
hereto two brief statements which you could use,
in whole or in part, in discussing consumer credit
controls with Congress:
(1) Why a full consumer credit bill is
preferable to a joint resolution or
shorter bill which would merely revive the Executive Order;
(2) Vhy the restoration of consumer credit
controls by Presidential action through
the declaration of a national emergency
would not be desirable•
You will remember that you sent to the
Chairman of the Banking and Currency Committee
of both the House and the Senate on June 5 of
this year a draft of a consumer credit bill
which the Board had prepared, but this bill
was not introduced in either House.


A comprehensive bill fully and explicitly authorizing consumer credit controls, somewhat along the lines of a draft prepared by
the Board of Governors several months ago, is much preferable to a joint
resolution or a brief form of bill "which would merely authorize the
Board to reinstitute consumer credit controls pursuant to the terms of
Executive Order 8843 which was issued in August 1941* A comprehensive
bill would not require more than a few pages.
The Executive Order, and the statute under which it was issued, are sorely lacking in appropriate enforcement provisions. They
contain only criminal penalties and authority to suspend licenses. Both
penalties are so drastic that it is difficult to apply them in actual
practice. Accordingly, they tend to make enforcement either too lax or
unduly severe. To provide enforcement that is both equitable and effective, it is essential that there be specific provision for courts of
equity to aid enforcement through their power to enforce subpoenas and
enjoin violations. That is a sound type of enforcement machinery that
Congress has adopted in connection with other Government agencies.
A general provision giving the Board of Governors authority
to obtain such aid from the courts in connection with all of its functions
would be desirable. Such a provision, however, is especially needed in
connection with the exercise of consumer credit controls.
Six years of experience with consumer credit controls under
the Executive Order have also shown the need for other changes in the
underlying authority. For one thing, the statute should now prescribe
clearer and more appropriate standards or guides to be followed by the
Board in prescribing its regulations on this subject. In addition, it
should place clearer and more precise limits on the Board's authority.
The Executive Order covers all consumer credit, whether or not it is
instalment credit. Experience has shown that present purposes can be
served by a somewhat narrower statute applying only to the instalment
portion of consumer credit, and it is desirable that the Board's authority be so limited.
In addition, it is most desirable to have explicit and precise authority from Congress contained in one legislative enactment.
If Congress should merely revive the Executive Order, it would be
necessary, in considering the scope of the authority granted, to look
at at least three basic documents — the Trading with the Enemy Act
on which the Executive Order was based, the Executive Order itself,
and the action of Congress in reviving the Executive Order. This is
not merely a matter of inconvenience for the persons affected by consumer credit controls but makes for uncertainty as to the exact scope
of the authority granted and just what provisions are applicable.


For the reasons stated, a comprehensive bill is preferable.
Even if Congress should decide not to enact permanent legislation but
to make it effective only for a limited period, such a bill could be
utilized with a limitation as to time included. If, however, Congress
should determine to reject the idea of a comprehensive bill on this
subject and to enact merely a joint resolution or very brief bill, it
is most important that any such brief enactment include authority for
subpoenas and injunctions with the aid of the courts. If necessary,
this authority could be given in a one sentence provision through the
incorporation by reference of provisions on this subject already applicable to other agencies.



The Joint Resolution of August 8, 1947, states that consumer
credit controls shall not be exercised after November 1 "except during
the time of war beginning after the date of enactment of this joint resolution or any national emergency declared by the President after the date
of enactment of this joint resolution."
This makes it clear that such controls could be restored by
Presidential action during "any national emergency declared by the President" after the enactment of the resolution, bat it is equally clear that
a declaration of a new emergency would be required.
In^considering whether such a national emergency should be declared solely for the purpose of restoring consumer credit controls —
and that is what the declaration would amount to — it is necessary to
examine the relative istportance of the declaration of such an emergency
to the consumer credit controls which it would restore. Consumer credit
regulation is a desirable weapon to have in the fight against inflation
but its importance should not be overemphasized. In relation to the
overall inflationary picture, it is a limited measure which could not
stop inflation but merely assist in moderating it. The declaration of
a national emergency would be a grave step and it is questionable whether
such a step should be taken for the sole purpose of applying a desirable
but nevertheless limited brake upon the inflationary trend.
Congress, however, could act on this matter and provide the
necessaiy authority without the necessity for the declaration of a
national emergency, and this would seem the logical and appropriate
way that the control should be restored at this time.
Moreover, Congressional action is needed in order that the
controls can be restored in a form that will be properly effective. If
the President restored consumer credit controls only two methods of enforcement would be available. One is through criminal penalties and the
other is through suspension of the licenses of violators. Both are too
drastic to b$ utilized effectively in actual practice. What is needed
is authority for the agency administering the controls to enlist the assistance of the courts to aid enforcement through their powers to enforce
subpoenas a a enjoin violations. This is a sound type of enforcement
machinery that Congress has adopted in similar situations and it is
highly desirable that it be included as a method of enforcement of consumer credit controls. It could not be obtained, however, through Presidential action but only through legislation by Congress.
Consumer credit controls are needed, since they would help to
restrain the present inflationary pressures, bat a brief delay in obtaining necessaiy legislation would not be a matter of vital importance. The
situation is not likely to be materially worse by the time when Congress,
now already in special session, could consider and act upon the matter.