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1 Wendy Lee Grimm, Proposed Credit Practices Rules (16 D.F.R. Part 444): Memorandum 1 (1983)

handle is hein.usfed/pcprmd0001 and id is 1 raw text is: UNITED STATES GOVERNMENT DATE: April 7, 1983 memorandum PLY TO erNOV Wendy Lee Gramm, Diretor 1 Bureau of Economics UBJECT: Proposed Credit Practices Rule (16 D.F.R. Part 444) TO: The Commission Lyj COV2T BURLING 1201 Fun:cylvnia Avenue, N.W. P.O. Box 7566 Washington, D.C. 20044 I have evaluated the memoranda of BE staff, Mr. Higgins and the Director, BCP. I agree with the primary conclusion in all three memos; the proposed rule should not be promulgated and the rulemaking should be terminated. The minor differences that remain between BE staff and Mr. Higgins are not critical for my final recommendation, but I evaluate them briefly for the record. Mr. Higgins believes the Barth-Yezer analysis of the FTC data set provides reliable evidence that the costs of the proposed rule would exceed its benefits to consumers. BE staff argue that because of data problems &nd methodological difficul- ties the econometric evidence is too unreliable for this conclusion to be reasonable. Their position with respect to the econometric evidence is the same as that toward all the evidence: the record evidence does not reverse the presumption that the proposed rule would be inefficient. I agree with BE staff that B-Y's analysis should have dealt more completely with some of the particular problems of estimating the supply and demand for credit in light of the prevailing sample-selection bias, truncation bias, multicollinearity and so on. However, I believe the effect of these biases is to overstate the anticipated benefits of the rule and to understate its costs. Therefore, I am inclined toward the position of BCP and Mr. Higgins that the econometric evidence does not merely fail to support the proposed rule but that even if the burden of proof were reversed this evidence justifies rejection of the proposed credit practices rule. Buy U.S. Savings Bonds Regularly on the Payroll Savings Plan

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