Business: The Economy: Crisis of Confidence

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essentially strong, if its financial distortions continue much longer, it could tumble into serious difficulties. Some prominent Wall Streeters worried aloud last week that the economy stands on the brink of financial crisis. They were frankly concerned that marginal corporations, which have exhausted their cash and bank credit during the long money famine, may be unable to raise necessary funds and fall into bankruptcy.

Pressures are building on Nixon to mount a new and more energetic attack on inflation without provoking a severe recession. The President, in turn, is trying to convince business and financial leaders that he is deeply concerned about the stock market and the general economy. Last week he conferred with Bernard Lasker, chairman of the New York Stock Exchange. In the next few days, National Security Adviser Henry Kissinger and Budget Director Robert Mayo will exchange ideas with other prominent businessmen.

The Rising Dissent

Political advisers are warning the President that a continuation of the current slump could be poison for Republicans in the fall congressional elections. If the economy is not "back in balance" by Election Day, says White House Political Operative Murray Chotiner, "there is no question that Republican candidates for office can be hurt." A Republican National Committee official who has traveled throughout the nation recently brought back this report: "Millions of older people who own stocks are scared to death. Lots of them have depended on stock values to take care of them in their retirement. Now the cash value is down to perhaps a fourth of what they expected it to be. At the same time, inflation keeps on. You can tell people it is being brought under control, but you cannot keep telling them that forever."

Businessmen are wondering whether the current slump is really necessary; within the Government last week, some powerful voices began calling publicly for the first time for changes in the game plan. Most important were the rasping W.C. Fields tones of Arthur F. Burns, Nixon's longtime economic mentor. Now, as Chairman of the Federal Reserve Board, Burns is the master of the nation's money supply. Coming from anyone else, what he said might not have seemed startling; coming from cautious Arthur Burns, it raised eyebrows around the country.

In a speech to an American Bankers Association convention at Hot Springs, Va., Burns said frankly: "We have been less successful than we would have liked in moderating the advance of prices." Then he added: "There may be a useful−albeit a very modest−role for an 'incomes policy.' "

What did he have in mind? An "incomes policy" generally requires the Government to define just what wage increases would be considered tolerable−and under what circumstances it would be justifiable for companies to raise prices. Burns was not asking for anything so drastic. He has told friends that he is thinking of several possibilities, including: 1) presidential preaching to business and labor leaders that they have a "social responsibility" to hold down wages and prices; 2) wage-price guidelines drawn up by business and labor, rather than issued by the Government; 3) federal compilation and publicizing of statistics that would point a finger at industries, such as construction, where