Installments

While economists with harsh voices declaimed last season against and for installment purchase of merchandise, Lawyer Morgan Joseph O'Brien of Manhattan, 74, father of smart Kenneth O'Brien* and eight other children, studied the selling credits of 34 industries and found them good risk. The result is the $31,000,000 American Rediscount Corn., which was to start business in Manhattan last week, after the method of the Federal Reserve banks. Lawyer O'Brien is chairman of the company's advisory committee; Comptroller Lawrence H. Hendricks of the Federal Reserve Bank of New York is the president.

The plan of financing is this:

A man buys an automobile, or a baby carriage, on the installment plan. He gives his note (mortgage), bearing good interest, to the retail dealer. The dealer sells the customer's note to a credit finance organization for less than its full value, that is, at a discount. This organization in turn may want ready money for fresh purchases of mortgages. If such concern has been investigated, approved and licensed by the American Rediscount Corp., it will be able to get the cash readily. This is just what the Federal Reserve banks do for ordinary commercial paper. But the American Rediscount Corp. will be able to go further. A private corporation, it can make transactions that the Federal Reserve banks would not or could not touch.

Rediscount thus becomes facile, and just because of this facility the new company can enforce strict credit terms if it so pleases. Already it has set a gauge for the time-buying of motor cars. One-third of the retail price must be deposited at the time of purchase, the rest to be paid within twelve months. No money may be loaned on cars more than 2% years old, and only 1/3 of the retail price of the model when new.

*Looming young Manhattan lawyer and leader in the National Democratic Club, he married one of the daughters of Clarence H. Mackay. Irving Berlin, songster, married the other.