Unwelcome Necessity

For the past three years, 25 of the most influential men in U.S. business, labor and education have devoted great quantities of time and talk to a searching examination of U.S monetary and fiscal policy. This week at the White House the members of the Commission on Money and Credit, a private task force sponsored by the nonpartisan Committee for Economic Development, will present to President Kennedy the results of their labors: a 300-page study called Money and Credit: Their Influence on Jobs, Prices and Growth.

Billed as the most significant such study since the 1908 Aldrich Commission report that conceived the Federal Reserve System, the report of the Commission on Money and Credit is apt to prove far less of a landmark. Where the Aldrich Commission inspired a major reshaping of U.S. banking controls, the new report recommends only minor adjustments.

But given the fact that its authors were largely blue-chip businessmen and bankers,* Money and Credit does contain one major surprise: it goes remarkably far toward endorsing existing Government regulation of the economy and asking for more of the same. Despite numerous individual dissents, carefully registered in footnotes, the report tacitly accepts as economic orthodoxy many of the countercyclical theories of the late John Maynard Keynes--notions that most businessmen rejected in New Deal days and that many still do. Explains Commission Member Gaylord A. Freeman Jr., president of The First National Bank of Chicago: "The report reflects what to many of us may be an unwelcome but apparently undeniable fact--that with the growing complexity of our national and international economies, the Government has been playing and is likely to continue to play an increasing role."

Flexibility for the Frontiersmen. The Commission's most notable suggestions for reform are all calculated to produce even more centralized direction of U.S. economic policy than already exists. Among the proposals:

P: The President should be empowered, subject to congressional veto, to raise or lower tax rates on a temporary basis by as much as five percentage points in order to combat inflation or recession.

P: The President should be given more control over the fiercely independent Federal Reserve Board, which dominates interest rates and the credit market. Specifically, as soon as a President takes office, he should have the power to replace the Fed's chairman and vice chairman.

P: An agency similar to the Federal Housing Administration should be created to insure loans for large-sized, potentially profitable farms.

P: Federal aid to education should be increased.

Freedom for Banks. The Money and Credit report also has good words for many of the New Frontier's economic theories. It accepts the proposition of "liberal" economists that budget deficits may well be necessary in times of recession, and that the national debt "should be permitted to fluctuate in response to the policies required for economic stability and growth." To achieve this, the commission urges removal of the statutory debt ceiling--a proposal so full of political dynamite that it was left unmentioned last week by Treasury Secretary Douglas Dillon when he asked Congress to raise the "temporary" debt limit (now $293 billion) by $5 billion.

About the only area where the commission wants fewer controls is in banking. It urges Congress to pass a law that would override state laws and allow banks to establish branches anywhere within natural geographic "trading areas." A Chicago bank, for example, could then branch into southern Wisconsin, western Indiana, and perhaps eastern Iowa to help meet some of the heavy credit demands that local banks are unable to handle.

* Chairman of the commission is Frazar B. Wilde, chairman of the Connecticut General Life Insurance Co. Among the members: Pacific Gas & Electric Co. Chairman James B. Black; First Security Corp. Chairman Marriner S. Eccles; Anderson, Clayton & Co. Chairman Lamar Fleming Jr.; Under Secretary of the Treasury Henry H. Fowler; Federated Department Stores Chairman Fred Lazarus Jr.; Chase Manhattan Bank President David Rockefeller; A.F.L.-C.I.O. Research Director Stanley Ruttenberg; American Farm Bureau Federation President Charles B. Shuman; Bank of America Chairman Jesse W. Tapp; Ford Motor Co. Finance Committee Chairman Theodore O. Yntema.

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