Evening star., 1938-01-30
TIME PAYMENTS
WORRY BUSINESS
Whether InstaI|ment Buying
Helps Trade Is Question
for Economists,
By HARDEN COLFAx.

ny uhhOEN COLf Az
The Governments economists nov
are convinced Of one thing. This d
that installment selling can accelerate
q recovery in trade and then can ac-
centuate a decline. Having settled
that point, there remains q debate
over whether or not the long-run net
effect Of installment sales Is to increase
total trade.
The automobile industry Is found
by the Government experts to have
provided the laboratory test Of INSTALL
ment trade. It served during the first
half of 1887 to show how sales could
be stepped up in recovery period by
lowering the amount of down payment
and extending the period Of INSTALL
ment payments. Then, with the mar
ket fairly well saturated, it showed
during the last months of the year
how sales can dry up once there Is q
check to the recovery trend.
According to the officials whose busi-
ness 1t is to study installment selling
experiences. this was the first definite
revelation on q clear-cut basis of the
reactions that 90 along with sales on
q time basis.
Market Spurts, Then Slumps.
The results was to fill the market
for new cars in q hurry and then
to produce a decline that was un-
precedented in its sharpness, as pur-
chasers set about meeting the pay
ments for which they had contracted.
As jobs were lost and the outlook be-
came more uncertain, those who had
gone into debt to buy commodities
for current enjoyment found them
selves pinching on expenditures in
other directions in order to fulfill
their time payment contracts.
President Roosevelt got interested in
this situation when his friend Bill"
small-town automobile dealer in
upstate New York. brought it to his
attention. The Presidents interest
resulted IN series of conferences
with the high officials of the country's
leading automobile companies.
II he had consulted the Govern
ment's own experts, Mr.. Roosevelt
might have become acquainted with
the installment selling problem many
months earlier. In fact, it was about
year ago that these experts be-
gan to call attention to what they
regarded as dangerous trends In the
credit selling methods of many types
Of business.
s7,500,000,00o in Installments.
They discovered that in 1896 the
volume Of sales on an installment
basis was raised rs per cent over
1885 and that 1887 was running above
1896. New installment business in
1887 is set at about $4,000, ,00O, 900,
with an additional $2,500, ,00o, 900
tied up in contracts that stu were
running from previous years. This
would bring thes total to about
S7,500,O00,000. About IL per cent
of all retail sales during the past
two years were installment sales. In
automobiles. approximately IS per
cent of the cars sold involved time
payment contracts.
But. while the White House is
stirred up over consumer credit. it
appears that administration policy in
recent years has served greatly to
stimulate this method of selling.
Three Steps Strengthened Policy.
Three steps have been taken that
put the stamp of approval on use
of credit on easy terms for the pur-
chase Of goods. Those three steps are:
/. The Federal Reserve Board
amended its rules to permit the re-
serve banks to rediscount installment
paper-thereby making these evi-
dences of installment debt among the
liquid assets of banks and encourage
ing banks to 60 directly into the busi-
ness Of financing installment sales.
2. The Electric Home and Farm
Authority was created for the purpose
OF extending cheaper installment
credit to persons wanting to purchase
electrical equipment, such as refrig-
orators and washing machines. This
z. H. F. A. ties in with T. v. A. and
with the rural electrification program.
8. The Federal Housing Authority
was created to introduce the time
payment basis into mortgage fnanc-
ing. That law now is being amended
to allow purchase of . home on 4
down payment Of only 10 per cent
and with 20 years to pay out. It will
mean that $500 soon can b,,y . 5000
house.
. (copyrisht. 1898, Consolidated PressJ