Going Too Fast?

After a worried look at the pace of U.S. business, Manhattan's First National City Bank warned last week: "We have been going too fast . . . We are trying to do too much, saving too little, drawing excessively on our credit lines and overcommitting ourselves. It is well that the authorities are acting to contain forces that, running out of hand, can be our undoing."

Last week federal authorities acted again to hold back one of the forces that was close to running out of hand. The force: easy credit. As on-the-cuff auto buying in July hit a rate more than three times greater than a year ago, total consumer credit soared to a peak of $32.9 billion, a full $4 billion above July 1954.

To put a check on credit, the St. Louis and Philadelphia Federal Reserve Banks, for the second time this summer, hiked the rediscount rate (interest on loans charged member banks) from 2% to 2 1/4%, thus made it more expensive to borrow money. Five out of eleven Federal Home Loan banks also increased the cost of borrowing. Simultaneously, the Federal Reserve System took steps to reduce the cash available to its member banks for private investments and loans. As the money supply has been contracting and the need expanding, interest rates have been climbing--in some cases to double the figure of seven months ago. Sellers of commercial paper (short-term unsecured notes of leading companies) had to raise their interest rates for the eighth time this year.

But, for the time being, business ignored the tightening money supply and raced on to new records. Department-store sales around the nation were 9% higher than a year ago, and retail experts predicted an excellent fall and the biggest Christmas shopping season in history. Corporate dividends for 1953's first seven months hit a peak $5.3 billion, 10% above the comparable 1954 period. Steel orders continued to outrun output with no letup in sight.

There was one dark spot, and it was growing. New cars jammed dealers' lots in record numbers. In the New York area alone, there were 200,000 new cars awaiting buyers, compared to the carryover last year at the end of August of less than 100,000. Even though some dealers were selling cars at such big discounts that they made little or no money on the deals, they still jittered about getting rid of the cars before the 1956 models hit the market. Nevertheless, automakers seemed unworried, hustled to change over to the production of 1956 models. Minutes after the last 1955 Ford came off the assembly line last week, workers started setting up new jigs for the 1956 lines. In its haste to switch over, Ford finished producing '55 models and began turning out the '56's without stopping for the usual shutdown.

This file is automatically generated by a robot program, so reader's discretion is required.