General support for the Federal Reserve Baord's new monetary targets was voiced yesterday by the House Banking committee.
But the committee majority, in a monetary policy report, called for the Fed to continue to pressure banks to give credit for productive rather than speculative purposes. The Fed did direct credit on a voluntary basis as part of the credit control program introduced last March.
The report criticizes the Fed for failing to give any precise numerical targets for money growth next year in its original midyear report to Congress two weeks ago. "We do not expect this episode to be repeated," the report comments. The Fed has now published targets for next year's growth.
The committee report agrees with the Fed's general objective for a gradual deceleration of money and credit growth over time, and endorses the tentative figures for next year. These are designed to reduce money growth by half a percentage point from this year's target for the three narrower measures of the money supply, after allowing for institutional changes.
Fed Chairman Paul Volcker said recently in testimony to the House and Senate banking committees that money growth in 1980 may well be below the midpoint of this year's target ranges. The House committee said yesterday that the majority "regrets that the Federal Reserve could not or would not achieve the monetary growth paths indicated by its target ranges during the first half of 1980."
A supplement to the report from Reps. John J. Cavanaugh (D-Nev.), Parren J. Mitchell (D-Md.) and Stephen L. Neal (D-N.C.) stressed that the Fed should not try to make up for the slower than targeted growth in money earlier this year. The minority report tentatively endorsed next year's targets and while regretting the undershoot so far this year, agreed that the Fed should not try to make it up.
Rep. Henry Reuss (D-Wis.) Chairman of the House Banking Committee, is a strong advocate of a lending policy which discourages loans for corporate takeovers, commodity speculation and so on. The report says that "we need urgently to address the microeconomic question: To whom should our scarce credit resources go," but goes on later to say "this committee does not favor the use of direct credit controls."
The Republicans on the committee dissented from the idea of directing funds and want an end to the Credit Control Act of 1969 under which the Fed was empowered to invoke emergency credit controls earlier this year. The Senate has passed an amendment to do that, as part of the bill extending the Council on Wage and Price Stability. That bill already has been passed in the House, without the amendment, so the issue will come up in conference.