Dwight D. Eisenhower photo

White House Statement on Regulation of Consumer Instalment Credit.

May 25, 1957

THE PRESIDENT will not ask the Congress to enact legislation creating a Presidential stand-by authority to regulate consumer instalment credit.

The possible need for such legislation was discussed in the Economic Report of the President for January 1956. It was stated in the 1956 Economic Report (p. 94) that "Although present conditions do not call for the use of . . . authority to regulate the terms of instalment credit, this is a good time for the Congress and the Executive Branch to study the problem."

At the request of the President, the Board of Governors of the Federal Reserve System has since conducted and made public an extensive survey and analysis of the subject. These and other materials were carefully examined by the Council of Economic Advisers and other agencies of the Executive Branch.

In reporting its findings based on the study and Board discussion, the Board of Governors stated that "a special Presidential authority to regulate consumer instalment credit is not now advisable." The Board further stated that in its judgment "the broad public interest is better served if potentially unstabilizing credit developments are restrained by the use of general monetary measures and the application of sound public and private fiscal policies."

The President indicated his agreement with the conclusion reached by the Federal Reserve Board. In this connection he released the following summary of a memorandum from the Council of Economic Advisers.

"First, fluctuations in consumer instalment credit have tended to accentuate swings in general business conditions, though movements in this type of credit have usually accounted for a relatively moderate proportion of overall changes in credit.

"Second, the losses involved in extending consumer instalment credit, even in periods of economic contraction, have not been large enough seriously to affect the financial position of lending institutions.

"Third, the growth of consumer instalment credit at a rate considerably more rapid than the rise in personal incomes mainly reflects the fact that a greater proportion of middle-income families are using this type of credit rather than that instalment debt has grown relative to the incomes of indebted families.

"Fourth, recent experience confirms confidence in the capacity of existing instruments of general credit control to hold changes in total bank credit and the money supply within appropriate limits. Although there is an apparent lag between changes in general credit conditions and changes in the cost and availability of instalment credit, there is evidence that general credit controls do reach consumer lending institutions and the use by consumers of instalment credit.

"Fifth, the large expansion in the use of consumer instalment credit in 1955 was in response to a cluster of powerfully favorable circumstances not likely to recur in the same combination. Prominent among these circumstances was a marked liberalization of credit terms. It is likely, however, that consumer and lender resistance will increasingly check further liberalization of down payment and maturity terms in this credit area."

Dwight D. Eisenhower, White House Statement on Regulation of Consumer Instalment Credit. Online by Gerhard Peters and John T. Woolley, The American Presidency Project https://www.presidency.ucsb.edu/node/233318

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