Statement on Signing a Bill Affecting Interest, Credit, and Lending.

AS ENACTED by the Congress, S. 2577 contains a number of provisions that the administration did not request and does not desire. However, despite my serious reservations and objections about these provisions, one provision of the bill is of such overwhelming urgency that I must reluctantly give the total legislation my approval. That provision preserves the authority of Federal supervisory agencies to regulate rates of interest paid on accounts at banks and savings and loan associations. That authority is essential to avoid the risk of destructive competition among these institutions.

The Congress could have acted responsibly on this problem merely by extending the authority to regulate these interest rates. However, the Congress chose to do otherwise and included provisions that are both unnecessary and undesirable.

Three provisions either require or increase the likelihood of additional budget outlays at a time when responsible fiscal policy and control of inflation demand restraint:

1. Authority for the Secretary of the Treasury to lend an additional $3 billion to the Federal home loan banks.

2. A reduction in the insurance premiums for Federal savings and loan insurance, which has the effect of increasing budget outlays by $63 million in fiscal year 1970 and $102 million in 1971.

3. An increase of $70 million in the level of lending by the Small Business Administration to small business investment companies in fiscal year 1970.

Two provisions of the bill would authorize voluntary and mandatory credit controls, which, if invoked, would take the Nation a long step toward a directly controlled economy and would weaken the will for needed fiscal and financial discipline.

These aspects of the bill made the decision to sign it a very difficult one, but the need to prevent chaos in our interest rate situation has made my approval imperative.