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H. LYONS
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41 H. CHESSER
MURRAY H. FIN LEY
C L. DELLUMS
EOWARO T. HANLEY
W ILLIAM H. M cCLENNAN
DAVID J. FITZM AURICE
ALVIN E. HEAPS
W ILLIAM H. W YNN

8 1 3 SIXTEENTH STREET. N.W .
W A SH IN G TO N . D.C. 2 0 0 0 6

A. F. GROSPIRON
THOMAS W. GLEASON
S. FRANK RAFTERY
M ARTIN J. WARD
JOSEPH P. TO N ELLI
GLENN E. W ATTS
ANGELO FOSCO
J. C. TURNER
KEN NETH T. BLAYLOCK
HARRY R. POOLE
FRED J. KROLL

(2 0 2 ) 6 3 7 -3 0 0 0

May 19, 1978

The President
The White House
Washington, D.C#
Dear Mr. President:
Shortly after you nominated G. William Miller to be Chairman of
the Federal Reserve Board of Governors, an article by him on methods
of combatting inflation was brought to my attention. In that article,
published in the October 5, 1974 issue of Business Week, he wisely
observed that:
"Working our way out of inflation requires an allocation of the
available but limited resources to areas of priority, thus reestablishing
a proper balance between supply and demand. Allocation solely by
controlling the aggregates — the supply of money and net federal spending
— will bring about levels of unemployment and general economic hardship
that are likely to be unacceptable. Allocation by direct controls involves
even more difficulties."
Not only did he correctly foresee the effects of incorrect policies,
but he also sensed the need for a new approach:
"Discussion and debate have begun to reveal a preponderance of
opinion favoring a selective approach. Last weekfs surrmit meeting gave
scant attention to the theology of monetary-fiscal and incomes policies.
Instead, it produced a cornucopia of ideas, suggesting a restraint here,
an incentive there, a protection of family income yonder, or a direct
control in certain cases. There now seems to be implicit recognition
that the economy should be managed by dealing with its parts and not just
the whole."




-2 -

AFL-CIO shares the concern that you and Chairman Miller have
Iex-oress8^ on the need to curb inflation. We are equally concerned about
tj e pursuit of policies which have repeatedly led the country down the
i
path of recession and unemployment. That was the result of the adoption
of tight general monetary policy and high interest rates which led to a
collapse of residential construction, followed by an economic slowdown
or general recession. Such a sequence of events was generated in 1955-57,
1959-60, 1965-66, 1969-70 and 1973-75. The latter period also saw the
highest interest rates in a century and the deepest recession since
World War II.
I
In order not to repeat that sequence, we urge you to give serious
Iconsideration to authorizing the Federal Reserve to implement the Credit
(Control Act of 1969, Public Law 91-151. Under that Act, you may authorize
the Federal Reserve Board to regulate and control any or all extensions
of credit, for the purpose of preventing or controlling inflation generated
by extension of credit in an excessive volume. If you authorized the
use of that authority, the Federal Reserve Board could exercise selective
credit regulation measures. Such policies would not entail ever-higher
interest rates, with a concentrated impact upon housing which is in
short supply, that would bring serious unemployment, along with continued
inflation in housing prices and rents.
I
I believe that selective credit regulation offers a potentially
juseful alternative to the extremes of either tight money/high interest
jrates, or wage and price controls, which you have wisely rejected because
« of their record of failure. It is my hope that you will seriously consider
the above issue, and if you agree that selective credit regulation could
be a useful alternative tool to combat inflation, authorize the Federal
Reserve Board to implement the Credit Control Act.
I am also writing Chairman Miller, conveying to him the same thoughts
and recommendations.




Sincerely yours,

President


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102