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Senator MYERS. On Wednesday, May 7, the Board of Governors of the Federal Reserve System, as you well know, suspended regulation W.

We now ask the Banking and Currency Committee to delete from the Defense Production Act, that part of title 6, which provides the underlying legislative authority upon which this regulation rests.

We appeared before this committee and the Senate Committee last year and maintained at that time the same position which we maintain today, namely that the regulation should be repealed, as well as the legislative authority upon which it is based.

We also appeared in March of this year before the Senate Committee on Banking and Currency and took that very same position, which of course was before the Federal Reserve System itself had suspended the regulation.

At the time we appeared before the Senate committee, we filed a rather lengthy economic brief. That, of course, has been printed in the record of the Senate committee. Therefore, I do not wish to burden this committee with asking permission to print it again, but I refer you to that economic brief, which was presented to the Senate Banking and Currency Committee on March 17 of this year and was printed in the record of their hearings.

At first glance, many would presume that the suspension of the regulation should satisfy business and the public, whereas in fact just the opposite is true. In behalf of the National Foundation for Consumer Credit and its members and in behalf of American business generally, we urge the committee to strike the supporting legislative authority from the act now under consideration, and we shall tell you why.

I would ask at this point that we have printed in the record, Mr. Chairman, a 2-page statement which indicates the position of retailing generally on the subject of regulation W and their position is exactly the position that we present to you today.

The CHAIRMAN. It may be inserted in the record. (The information referred to is as follows:)

CHAMBER OF COMMERCE-EXCERPT FROM POLICY STATEMENT, APPROVED

APRIL 1952 ANNUAL MEETING

* * * On the basis of actual experience, no justification for Government controls of consumer credit can be shown except as a war measure for limitation of nonessential production.

Consumer credit performs an essential function in the processes of production and distribution. Interference with its normal flow offers an obstruction to effective operation of the free-enterprise system.

AMERICAN RETAIL FEDERATION FOR RETAIL INDUSTRY COMMITTEE 1-EXCERPT FROM TESTIMONY BEFORE SENATE BANKING AND CURRENCY COMMITTEE, MARCH 17, 1952

** * That it is the viewpoint of the retail industry that regulation W appears to be ineffective as a control device. There is adequate production and a plentiful inventory at all levels of the economy of the major consumer durables subject to the regulation. There is no upward price pressure in these lines.

To the extent that there are loans outstanding against this supply, consumer purchases of the durables on the installment plan make it possible to retire these loans and thus reduce the monetary supply.

Restraining the purchase of these consumer durables to curtail consumer debt simply creates more debt in other levels of the economy.

1 Some 65 National and State retail and service associations. See list Retail Planning Committee attached.

The regulation may dampen the sale of some goods, but it shifts consumer expenditures to other lines; and instead of increasing consumer savings it often promotes liquidation of present savings in order to put purchases on a cash basis.

Thus at a time of ample supply, the regulation has the effect of discriminating against one type of purchaser, and against types of retail outlets which serve that purchaser, and shift the debt burden from one level of the economy to another. A complete review of consumer-credit controls will be presented by the National Foundation for Consumer Credit, a member of the Planning Committee.

ROSTER, RETAIL PLANNING COMMITTEE OF THE RETAIL INDUSTRY COMMITTEE
American National Retail Jewelers Association
American Association of Nurserymen

American Booksellers Association, Inc.

American Hotel Association

American Institute of Laundering

American Retail Coal Association
American Retail Federation

Association of Credit Apparel Stores, Inc.

Associated Furniture Dealers of New York

Associated Retail Bakers of America

California Retailers Association

Chamber of Commerce of the United States

Colorado Retailers Association

Delaware Retailers Council

Florida State Retailers Association

Georgia Mercantile Association

Grain and Feed Dealers National Association

Idaho Council of Retailers

Retail Paint and Wallpaper Distributors of America, Inc.
Associated Retailers of Indiana

Associated Retailers of Iowa, Inc.

Institute of Distribution

Kentucky Merchants Association, Inc.

Limited Price Variety Stores Association, Inc.

Linen Supply Association of America

Louisiana Retailers Association

Mail Order Association of America

Maine Merchants Association, Inc.

Maryland Council of Retail Merchants, Inc.

Massachusetts Council of Retail Merchants

Michigan Retailers Association

Missouri Retailers Association

National Appliance and Radio-TV Dealers Association

National Association of Chain Drug Stores

National Association of Credit Jewelers

National Association of House-to-House Installment Companies

National Association of Ice Industries

National Association of Independent Tire Dealers

National Association of Music Merchants

National Association of Retail Clothiers and Furnishers

National Association of Shoe Chain Stores

National Consumer-Retailer Council

National Foundation for Consumer Credit, Inc.

National Industrial Stores Association

National Institute of Cleaning and Dyeing

National Luggage Dealers Association

National Restaurant Association

National Retail Dry Goods Association.

National Retail Farm Equipment Association

National Retail Furniture Association

National Retail Hardware Association

National Retail Lumber Dealers Association

National Retail Tea and Coffee Merchants Association

National Shoe Retailers Association

National Stationery and Office Equipment Association
Nevada Retail Merchants Association

Retail Merchants Association of New Jersey

New York State Council of Retail Merchants, Inc.
North Carolina Merchants Association, Inc.

Northwestern Lumberman's Association
Ohio State Council of Retail Merchants
Oklahoma Retail Merchants Association
Oregon State Retailers' Council
Pennsylvania Retailers' Association
Rhode Island Retail Association

Retail Merchants Association of Tennessee
Council of Texas Retailers' Association
Retail Tobacco Dealers of America, Inc.
Society of American Florists

Retail Merchants Association of South Dakota
Utah Council of Retailers

Virginia Retail Merchants Association, Inc.
Associated Retailers of Washington

West Virginia Retailers Association, Inc.

Senator MYERS. The National Foundation for Consumer Credit crosses trade and industry lines in its membership. Among those who support it are manufacturers of many types of consumers' durables goods; wholesalers who distribute these products to retailers, and the retailers who, in turn, sell them to the public. Also in its membership are banks, finance companies and consumer financial institutions— all of which render service to the people and industry corollary to the production and distribution of goods and services in which financing is a requisite.

The foundation represents product lines which have been covered by regulation W, and others which have not. We first shall summarize the reasons why we ask this action. Then we shall more completely document and explain each reason.

We

1. It is said by some that the suspension of "W" exemplifies flexibility in the handling of this power by the Reserve Governors. believe the action taken last week proves with fair conclusiveness the utter lack of flexibility which has been shown in a situation which has become almost an emergency condition in industry and commerce, well recognizable and important to the economy fully 6 months agoacted upon only last week.

2. It is said that the American durables goods industries now are free to operate in the competitive market without the deterring effect of the consumer-credit regulation. We shall show the committee that industry is far from free to plan its production schedules and its distribution under the present suspension.

Any big firm planning today its program for the future, planning to spend millions of dollars. in its production, is at a loss, now, to make such plans, when these goods have to then be distributed through the channels of trade. They are at a loss to know whether the Federal Reserve System may, next August, or next September, or next October, again impose upon them this regulation. So far from being free, as a result of the action of the Federal Reserve System, industry today will have great difficulty in planning for the future, unless this power to reimpose regulation W should be stricken from the act.

3. Business and industry plead to be permitted to rely, in the future, solely upon the judgment of the Congress as to whether and when such controls as regulation W are necessary in utter emergency or war. We fear the uncertainties of business fluctuation caused by the intermittent use of delegated power to manipulate production and

-distribution, in the hands of any few appointed men, however good men they may be. Their judgment in the case of regulation W has been faulty over and over again in the past several years; so faulty at times that the Congress itself has had to amend their action, which this Congress did last year.

We ask the Congress to hold fast to its own stand-by powerdecide when and whether to subject the American family's budgeting to the control of the Federal Government.

4. When the suspension of W occurred May 7, privileged segments of industry were given notice in advance; made use of it to their benefit. Other segments not so forewarned received their notification in the usual official manner. The very make-up of the Federal Reserve System and its habitual method of consultation with its 12 regional branches made this leak inevitable. No authority of this kind should be held by an agency so constituted.

5. Simultaneously, some businessmen who specifically asked the Federal Reserve System in the conduct of their business, "Is any change in regulation W contemplated?" were told within 24 hours of the suspension itself, "No change in regulation W is contemplated in the near future." We would not argue that the answer to such inquiries should reveal the fact of impending change, but do hold that businessmen and others should not be told the exact opposite of the truth, which is to be induced to take business action and risk that could be terribly damaging financially.

It is our understanding, in addition, that representatives of the Associated Press and other news services likewise were told, "No change in regulation W is contemplated in the near future" a matter of hours before the suspension was made public. So glaring was this misstatement on the part of the Federal Reserve Board that in some newspapers the assurance of "no immediate action" was printed in the same issue with the announcement of the suspension; the authority for the two opposites-the same.

6. To provide for regulatory authority by law is inexcusable and illogical, unless its actual use is contemplated, at least at intervals. It has been the historic objective of the Governors to have this legislative authority made permanent. While the present bill contemplates only a 1-year extension, the long-term objective of the proponents of consumer credit controls must not be lost sight of, for they seek piecemeal what they would like to have in the entirety, knowing at this time they cannot get.

Even though used intermittently, since such a regulation as W no matter what its terms, can do nothing other than decrease production and distribution, being never able to increase either, the net result of the existence of such authority over long periods, must be and I notice that some members of the committee were very much interested in the employment and unemployment in the building industry-(a) fewer man-hours worked through the years; (b) shorter workweeks at intervals; (c) fewer products produced; (d) a lower physical standard of living, fewer products possessed by the people, because of this lessened production and payroll; (e) net fewer dollars of profit for dividends, reinvestment and expansion; and finally, (f) net smaller tax income available to Government-an over-all effect which means retarding the growth of our industrial system and

national wealth, whereas our basic national aim is to encourage even greater production and distribution.

7. Finally, we shall recapitulate, though not emphasize at this time, the broad, basic arguments against consumer credit controls; their effect on savings; on the sale of Government bonds; on industrial production and distribution generally and on the morale of our people. We did discuss those matters at length before the Senate committee, and that statement is in the record of those hearings, and therefore, I do not wish to burden the committee with that economic argument at this time. But the record is complete on that subject.

We point out the most important and most dangerous implication in such controls, i. e., the unfair bias with which they levy their burden upon one segment of the people, the segment least able to carry economic control.

To put it another way, the regulation imposes rationing by the pocketbook. The less fortunate, who must buy on installment, who are not able to pay cash for consumer durables, must go without them, when the regulation is imposed, whereas the ones with cash, or the wealthy, can buy all those consumer durables, refrigerators, television sets, and automobiles, that they desire.

We think that is one of the basic objections, one of the fundamental evils in the regulation.

An economic control, whatever, its good purpose if there is any, is a poor control, if intentionally it levies its burden inequitably upon the people. Continuing delegated authority for such a control implies intentional commitment to an inequitable economic policy.

For these reasons, staggering in their importance, we ask the Čongress to retain in its own hands this power to institute consumer credit regulation. By delegating the authority to an administrative agency, even if only for 1 year-particularly in a period when that agency, the whole administration, the Congress, and indeed the entire American business fraternity, admit that its use cannot serve the Nation well as conditions now stand, is a step toward permanent further strangu lation of private business by Government-a step toward killing the goose that lays real golden eggs, that is, provides the terrific tax income which the Federal Government must have. This income quite possibly is the most important single element in our long-term program of national defense.

I repeat at this time, the agency itself, the Federal Reserve Board, the Congress, and American business, have all indicated that there is no need for regulation W under present circumstances.

Without taking too long, we should like to elaborate somewhat upon each of these points:

1. The question of flexibility. The fact that the Federal Reserve Governors suspended "W" last week indicates no flexibility on their part. Six months ago, markets commenced to soften badly. Business everywhere was aware of it. Sales dropped, profits dropped, prices dropped. The Federal Reserve's failure to appreciate the seriousness of the weakening business situation-was caused in part by erroneous price and sales data furnished to the Governors.

On several occasions in these 6 months the Federal Reserve staff and the Governors themselves have shown great skepticism when told by business of the turn of the markets-saying on each occasion that data furnished them by Government departments showed con

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