Evening star., 1939-06-07
Falling Money Rates
Aid in Retirement
OF Debentures
High Credit Concerns
Sove Interest by
Borrowing From Bonks

Special Dispatch to The Star.
NEW YORK, June 7.-One of the
benefits of falling money rates is
the ability of such high credit con-
Germs as the Commercial Credit Co.
of Delaware and the General Motors
Acceptance Corp. to retire their de-
bentures and to save interest by bor-
rowing from the banks.
In the case of the former, a $685.
000, 900 issue is being retired and re-
placed by bank loans at a rate to
put the comany about $4OO 900 year
ahead. In the latter instance, 3 per
cent debentures amounting to $50
100000 will soon be redeemed with
the proceeds of q bank loan at 1Ea
per cent. While the savings in each
transaction are substantial, they are
not likely to establish any revolu-
tionary change in the scale of rates
to those who finance their purchases
through such media.
The ABOVE operations are cited as
evidence of the increasing popu-
larity, and, with it, the growing sta
bility, of the leading finance COM
panies nf the United States. One
of the bearish prospects after 1929
was that such concerns would spread
wreckage all over the business world.
AS matter of fact, about the best
rerord for co1yanru in tho y1o-t po y, i -
period was that of the corporations
that had been operating in the in
stallment purchase field. And, in
more recent years, the growth of
this type of banking and the COM
paratiyely small percentage of loss
involved in it have placed it on a
permanent footing in the indus
try ard given it national recok nj
ton.
Macy May Adopt Policy.
Now comes the report that the
R. H. Macy department store in
New York, the largest in the country,
may adopt a policy of installment
selling. Scores of stores through
out the country that have founo it
profitable to give credit to their
customers, after a long period of
limiting them to cash purchases.
have been highly gratlfied both as
to volume of expansion and mod
Grafton in losses that followed. The
mail order concerns find that the
credit accommodations they offered
are largely responsible for the steady
flow of orders to them when cash re-
tailers were reporting disappoint-
ing turnover.
1t is recognized that the owner of
an automobile, radio, or an elec-
trio refrigerator is more likely to
meet his installments than to pay
his grocer, his butcher or his doctor,
so the mortality rate on the former
type of debt is astonishingly low. On
the other hand, this frequently has
an offset in delinquency in tax pay
ments, in meager contributions to
charitable or social activities, and
prevents many mong the low in
come classes from accumulating a
savings account against a rainy
day" There is little doubt that the
various pension and unemployment
measures enacted in recent years
by the Federal and State authorities
have expanded the area of the buy
ers on credit.
New Philosophy of Life.
There is also another element that
has entered into this willingness
to mortgage the future and of which
the lnstallment companies are TAX
ing advantage. Losses IN securi-
ties and in real estate, and insecu-
rity of employment and of income
have developed philosophy Of life
and a manner of living whose ex-
ponents are not disturbed by debt
and see no good in saving, except to
preserve an equity in luXuries and
non essentials. such as the farmer
who cannot obtain men to harvest
his crops but can do so with the
costly machinery which he can now
purchase on time payments.
The growth of installment COM
panies and of buying on credit is
spreading from America to other
parts of the world. 1t is one of
the most interesting of the finan-
cial phenomena of this century. So
far, it has shown more justification
for its existence and its expansion
than some of the older relationships
between borrower and lender, and a
lower risk ratio.