Credit Control in Inflation

Archive Report

Defense Financing and Credit Expansion

Unless brought under effective control during the early months of 1951 by the indirect methods now available to the Federal Reserve Board, the steady expansion of bank credit since American intervention in Korea at the end of June will force consideration by Congress of direct measures to limit inflationary lending by commercial banks. The increase in outstanding bank credit during the last six months has amounted to $7 billion. Business loans reached a record high of more than $22 billion in December, an increase of almost one-third over December 1949.

Direct controls have already been applied to instalment credit and real estate credit under specific authority granted by Congress in the Defense Production Act. A first step to limit extensions of ...

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