DONALD REGAN SAYS U.S. SHOULD EASE CREDIT SUPPLY Donald Regan, President Reagan's former chief of staff, said the government should loosen the money supply, try to keep interest rates down and try to reduce the federal budget and trade deficits to avoid a recession. "I think what we have to face now is trying to preserve our economy," the one-time chairman of Merrill Lynch and Co Inc <MER> said in an interview on the ABC television network. "We've got to loosen money, we've got to keep interest rates down. We can't afford to let them go up. That means we're going to have to work on our twin deficits, both the budget deficit and the trade deficit," Regan said. "I certainly wouldn't tighten money at this particular moment," Regan said when asked about the prospects for a recession following Monday's price drop on Wall Street. "I think that if they were to do that, they'd create the same conditions that we did in '29...They choked off the money supply and what happened? We went into a major recession. I think that's the one thing we've got to avoid right now." Regan also called on the government to impose restrictions on program trading. "I think that that's exacerbated, exaggerated this decline, and I think it's something that they must stop," he said.