Evening star., 1955-09-18
u. S. Officials Ponder
implications Of Boom
In InstuIIment Credit
By DON WHITEHEAD

BY DON WHITEHEAD
Main Street. USA. is a big.
wide, wonderful thoroughfare OF
easy credit.
It's treasure lane where homes,
automobiles, stoves, refrigerators.
vacations, television sets, radios.
monographs, furniture. clothes and
almost everything else can be
bought on the installment plan. 4
aBuy Now and Pay Later!" is
Main Streets theme song. And the
voices chant: Nothing down and a
few pennies a day. Buy now and
start paying next year. Wen
give you the money you need with
out questions Just your promise to
It's a street that encourages debt
in q competitive fight for business.
It's . place where a young couple
like Jim and Helen Delaney are
slicing up d $64.60 take-home wage
each week, mixing the money with
easy credit, and achieving Cat least
temporarily a standard of living
far beyond the dreams of people
in any other land.
It's q place where the Jim De-
laneys and their lieighbors no longer
avoid debt as their elders once did.
Instead, they are learning to live
with debt as q normal way to
achieve the sort of life THEY want.
Some are going in over their
heads. tempted by the credit terms
which look so easy to meet. The
American Collectors Association
estimates that some 8 million fam
lilies are delinquent In their pay
ments on one or more things they
have bought on time. C'Delinquent"
usually means 80 or more days over
due.)
But on the whole. Americans are
paying their bills promptly. The
percentage Of delinquencies is so low
that It's small problem in this
time Of prosperity.
Credit Rises Sharply
In the past few years, consumer
credit (which includes installment
buying) has climbed to a record
peak Of more than $32 billion or
more than $1l billion in two years.
Americans owe $12.5 billion on their
automobiles. With easy terms,
they've piled up more than $82 bill
lion worth of mortgages in order to
live In houses they can call their
own. The mortgage debt has
jumped s12 billion in the past year
alone.
The fast ursurge in consumer and
mortgage credit has the Eisen-
hover administration worried-not
so much by the size of the debt as
by the swift pace Of its increase.
One Federal Reserve System ex-
pert says:
IT don't know If the rise in con-.
sumer debt is too fast or just right.
IF it's just right, then everything
is wonderful. But consumer credit
and house debts are increasing at
terrific rate. If our economy and its
well-being is dependent on that sort
of increase, what will happen If we
don't continue to increase at the
present rate? There's the danger.
seIf prices start rising, then the
whole thing could go spiraling UP.
It would be better to have the debt
total increase at slower pace IN
line with the increase in income"
Perhaps, some Government econ
omists say, the Nation has plunged
into q new era Of prosperity in
which the soaring debt total isn't
out Of line with the workers ability
to pay. After all, even though con-
sumner credit has reached record
level. it represents only 9.3 per cent
of the peoples income after taxes.
Two years ago the percentage was
81.
Uneusiness Felt
II you add up the consumer and
mortgage debts, the total Of STA
billion is less than half the Nations
income after taxes. There seems to
be general agreement the people can
take care of this debt total without
too much trouble as long as employ
ment remains high. Right now en-
ployment is at a record high with
IS million people at work.
Still, there is an undercurrent of
uneasiness In the administration, a
chilly foreboding that the splurge
In easy credit buying could lead to
imitation and then perhaps to
depression-unless the trend is
slowed.
The Federal Reserve System has
taken some mild steps in this di-
rection. 1t has raised its rediscount
rate from ~ per cent to 2A per
cent in some districts. This means
it costs member banks an addi-
tional one-half to three-quarters OF
one per cent to borrow money.
Presumably this higher rate should
deter member banks from q
further expansion Of credit.
On the same line, the Govern
ment has frightened home-buying
credit under its mortgage insurance
programs, increasing down pay
ment requirements by per cent
and cutting the longest repayment
period to Is years from 80 years.