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Regulation Q Set The Table For The Credit Crunch Of 1966

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In early 1966, the Federal Reserve abruptly reduced the money supply for about nine months combined with the interest rate ceiling imposed by Regulation Q set the table for the 1966 Credit Crunch. The Credit Crunch of 1966 occurred because banks and financial institutions were restricted in providing liquidity for businesses for the expanding economy.. Both businesses and the US government had large demand for credit and were unable to obtain any credit at any cost . Businesses needed credit to met increased market activity and the US government needed additional credit to fund the ever-increasing Vietnam War. In early 1966, manufacturing firms had high level of backlog orders which led to them increasing their operational budgets because
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These were actions taken to try and control the credit crunch. Hoover thought that if he helped the rich by loaning them money they would in turn expand giving the unemployed jobs, which did not sit well with the middle and lower class. And the Reconstruction Finance Corporation was too late to resolve the economic

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