On the Cuff

The newspapers were jammed with ads inviting customers to buy on the cuff. Philadelphians could get a $269 television set for $5 down and $4 a week. In Rochester, N.Y., typewriters sold for 10-c- down --with free servicing for a year. A Manhattan appliance seller blared: "No finance charge, no interest charge, no credit charge." At $14.2 billion, total U.S. consumer credit was up 153% from 1945; almost half of it was in installment credit.

Last week, Congress decided to prick the price-credit bubble. As one small move against inflation, it gave the Federal Reserve Board power to revive the wartime curb on installment buying. Best guess was that henceforth installment buyers would have to plunk down as much as one-third of the purchase price, pay off the balance in 15 to 18 months. Sellers of expensive household goods (furniture, refrigerators, washing machines) thought it might cut their business by 20%.

A Curb on Lenders. More important than installment buying in the inflation pattern are business debts, which have been rising fast. Bank loans, which two years ago totaled $31,486,000,000, have now reached the record high of nearly $45 billion. To sop up some of the money that banks could still lend, Congress also gave the Federal Reserve Board power to up the reserves which member banks must put aside against deposits.

President Truman had asked that reserve requirements be raised 10% (to a maximum of 36%) on demand deposits and 4% (to 10%) on time deposits. Congress gave the board power to raise them 4 and 1 1/2% respectively. And it omitted half of all U.S. banks--those that were not in the Federal Reserve System. Bankers estimated that only $3.5 billion worth of credit had been immobilized.

Congress' unwillingness to adopt the President's proposals was not just Truman-baiting. His plan had split his own deflation team. Marriner Eccles, ex-chairman of the Federal Reserve Board, was for hiking reserve requirements a whopping 25%. Chairman Thomas B. McCabe counseled moderation: "If history is a guide," he said, "we must realize that these problems will not be solved in a day." But both McCabe and Eccles plumped for extending the new reserves to the entire banking system.

A Brake on Buyers. Secretary of the Treasury John W. Snyder disagreed. Cautious John Snyder manages the market in U.S. Government bonds and wants to keep it sweet. His biggest customers, by far, are the 14,000 U.S. banks. If Congress had wiped out their purchasing power, he might have found himself without buyers for his bonds. Snyder was the Administration's least deflation-minded member. He, like Harry Truman, wanted a little inflation. But the problem demanded some action. This week, as "a further anti-inflationary move," Snyder said that he would raise the interest rate on short-term Government securities, in effect increasing the cost of borrowing money.

Congress shared Secretary Snyder's worry--but for a different reason. The credit system is a sensitive machine and too much braking might cause it to stall. With a choice between too much boom and too much bust, Congress thought it would rather play it safe.

This file is automatically generated by a robot program, so reader's discretion is required.