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80TH CONGRESS )

1st Session

SENATE

Calendar No. 830
j

REPOBT

\(

J

No. 775

PROVISION FOE REGULATION OF CONSUMER INSTALLMENT CREDIT FOR A TEMPORARY PERIOD

DECEMBER 12 (legislative day, DECEMBER 4), 1947.—Ordered to be printed

Mr.

FLANDERS

(for Mr. TOBEY), from the Committee on Banking
and Currency, submitted the following

REPORT
[To accompany S. J. Res. 157]

The Committee on Banking and Currency, to whom was referred
Senate Joint Resolution 157, a joint resolution to provide for the
regulation of consumer installment credit for a temporary period,
having considered the same, report thereon with amendments and
recommend that the joint resolution as amended do pass.
The committee has given careful consideration to the subject of
consumer credit controls not only during hearings at the present
special session of Congress but also during the preceding regular
session.
AMENDMENTS

In the light of such consideration the committee has amended Joint
Resolution 157 in the following respects:
1. The termination date of the authority granted to the Board of
Governors was changed from June 30, 1948, to March 15, 1949.
This latter date is believed to be more in accord with the present
economic outlook. The committee has taken notice of the fact that.
the Board of Governors has the power at any time within that period
to discontinue part or all of the controls should the need for them
cease to exist.
2. The scope of the joint resolution is confined to installment credit.
It no longer encompasses the entire field of consumer credit. Installment credit has been demonstrated to be the volatile element in the
aggregate of consumer credit. This amendment will allow reinstitution of the general type of consumer credit controls which were in
effect on October 31, 1947. To conform to this amendment, the title
of the joint resolution has been changed to include the word "installment" in connection with the reference to consumer credit.



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REGULATION OF CONSUMER INSTALLMENT CREDIT

3. Senate Joint Resolution 157 as originally introduced provided
that no consumer credit controls should be exercised after the termination date, except in time of war which begins after the date of
enactment of this resolution or any national emergency which is
declared by the President after such date of enactment. The committee has amended the joint resolution to omit the reference to a
national emergency., in the belief that there should be sufficient opportunity for Congress to restore such controls in the event of an emergency, other than war, if such controls were needed.
4. The committee has added to section 1, an enforcement provision
which would grant to the Board of Governors with reference to consumer installment credit the same type of powers relating to investigation and injunction as are presently exercised by the Securities and
Exchange Commission in connection with the Securities' Exchangee
Act of 1934, as amended. The enforcement powers provided by this
amendment are considerably less stringent than those which can be
resorted to under Executive Order 8343 and the Trading With the
Enemy Act, and are considered conducive to equitable and effective
enforcement of the controls.
GENERAL STATEMENT

The committee believes consumer installment credit controls have
a part to play in helping to stem the present inflationary pressures,
and that the controls should be authorized by the Congress until
March 15, 1949. This period is believed to be a minimum if the
regulation is to play an effective part in helping: to check inflation.
The provision relating to enforcement procedures will facilitate
equitable and effective administration of the controls. At any' time
within the specified period the Federal Reserve Board would* be in
position to modify whatever restrictions may be prescribed, or even
to remove them altogether, in the event that such action should be
warranted by a change in economic conditions.
Voluntary efforts to prevent loose installment practices from intensifying the present inflationary pressures have already shown themselves
likely1 to be ineffective due to the forces of competition. In the
few weeks since the end of regulation W many have tried "to hold the
line," but installment credit terms have already become too easy for
the present boom times.
The economic effect of adding borrowed dollars to current income,
together with the unprecedented volume of savings in the hands of the
public generally, in view of the present limits of productive capacity,
can only be to intensify and prolong the period of inflated prices.
Excessive installment credit would make no more goods available. It
would only help to hold prices high in the market place.
Only harm could result from inducing millions of American families
to go heavily into debt on too easy terms for goods at the present high
level of prices. The excessive credit built up in that way would not
only increase present inflationary pressures; it would have to be liquidated later out of current income should a down swing occur, thus
necessarily diverting that income from the channels of consumer
expenditures in the ensuing period.
The proposed legislation is limited to consumer installment credit,
and thus would authorize controls similar to those which were recently



REGULATION OF CONSUMER INSTALLMENT CREDIT

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in effect under regulation W, with, of course, authority to make appropriate changes from time to time to accord with changing circumstances. In other words, the controls would apply to only the installment portion of consumer credit rather than the entire field of consumer credit which was covered by the Executive order when it was
issued in 1941. The committee believes this scope for the regulation
would be adequate for present purposes, and that the narrower scope
conforms to the sound principle of holding even necessary regulations
to the minimum consistent with the public interest.
It should be emphasized that the regulations contemplated under
the legislation would not prohibit installment credit. They would
merely prevent excesses in the field—excesses which can be harmful
not only to thfc people directly involved, but also to millions of others
who are penalized by the inflationary effects of such excesses. The
person of small income is the one hit hardest when inflation pushes
prices beyond his reach, and the one who suffers most when the
resulting deflation throws him out of a job. The legislation should
tend to result in directing competition along the line of decreasing
prices rather than extending excessive credit terms. By making some
contribution toward preventing further inflation at this time, and thus
toward moderating any ensuing deflation, consumer installment credit
controls can especially serve the interests of the person of low income
in addition to serving the interests of all other consumers affected by
our national economy.
The committee recognizes that this legislation cannot do the full
job of stopping inflation. It is only one weapon to be used in that
fight. It is not a cure-all, and it will not mean an immediate end of
all cases of inconvenience or hardship. The committee is convinced,
however, that this legislation, by helping in the fight on inflation, will
tend to reduce the instances of real hardship.




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