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Maroh 5, 19U5-

Honorable A. Mills Robertson,
House of Representatives,
Washington 25, D. C.
Dear Mr« Robertson:
I am taking the liberty of sending you the enclosed copy of a statement I have given out to clarify a
proposal I advanced recently when members of the Senate
Banking and Currency Committee, in the course of hearings
on the gold reserve requirement bill, unexpectedly questioned me as to what could be done to curb inflation of
capital values, particularly of farms and homes. My
suggestion, of course, would be one that would have to
pass muster with the Ways and Means Committee if it is
to be adopted, as I earnestly feel it should be in the
form I suggested or in some similar form.
I am also venturing to enclose a copy of a
roost illuminating letter I received from an aroy sergeant
in this connectionI know how deeply interested you are in these
matters and, therefore, while 1 am not imposing this
statement on members of your Committee generally, I an
sending a copy of this to you and to Mr. Cooper.
With kindest personal regards,
Sincerely yours,

M. S. Eccles,

Enclosures 2

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C o n g r e s s of rtje ® m t e b


féoitót of &epresentatibeg
®Kaéf)ington, 5®. C.
March 7, 1945

Hon« M. S« Eccles, Chairman,
Board of Governors of the Federal Keserve System,
Washington 25,
Dear Governor Ecclesj
It was indeed good of you to send me the full text of
your statement before the Banking and Currency Committee on the
subject of a capital gains tax* I intend to fully study your
suggestions, but my surface impression is that a ninety percent
tax on capital gains would be calculated to dry up venture capital
in the postwar era at a time when we are being told if private
enterprise does not do the job the Government will #
I note what the sergeant said about the retired individual who made two hundred thousand dollars in the stock market
of 1944. My personal feeling is that if that individual will keep
up his in-and-out of the market deals for a long enough time he
not only will lose the two hundred thousand dollars he made last
year but his initial investment as well* The present market is
more or less like the market from 1926 to 1929—no one loses when
there is a steady upswing» I think you will agree with me, however, that out of the biggest stock market boom in our history
very few reached the year of 1930 with any substantial gain« Mr«
Baruch was probably one of the shrewdest traders of that period.
He told a friend of mine that after the big break in 1929 he
figured stocks had reached rock-bottom, he went back into the
market and lost millions when the next nose-dive occurred« He,
of course, had enough to stand such losses but the average overthe-counter trader does not« Frankly, I have never been able
to convince myself that a virtually confiscatory tax on capital
gains would not do more harm than good«

With kind personal regards and air

ood wishes, I am

Sincerely your fHead*

A. Willis Rober



March 12, 19U5Honorable A. M i l l s Roberts on.
House of Representatives,
Washington 25, D. C.
Dear Mr. Robertson:
Your very kind letter of March 7 with regard to a special
wartime capital gains tax prompts me to this acknowledgment to express my appreciation of the judicial approach you are making to
this difficult and important matter, and to comment briefly on one
or two points you mention.
I share to the fullest your concern to make sure that such
an inflation-control device shall not interfere with venture capital
in the postwar era. And I am confident that this can be taken care
of adequately.
As to the retired individual who made $200,000 in the stock
market in 19i4U. 1 of oourse agree with you that if he gets in and out
of the market long enough, he will ultimately get caught when the
bubble bursts. The trouble is that it is these operations which make
for excessive booms and inevitable subsequent depressions. Even if
he is lucky enough to get out at the top of the market, as all speculators aim to do, somebody finally gets caught and ruined. What
happens to the individual is not of so much concern as the demoralising
effects upon the eoonomy as a whole, particularly the loss of production
and the unemployment that inescapably follow the crash.
If things are permitted to get out of hand after this war,
the inflation and deflation that were a result of an infinitely less
dangerous inflationary potential after the first World War will hardly
be a circumstance to the ruin that would be visited upon this country
as a result of present and prospective inflationary forces. If prices
of homes and farms continue their rapid rise, it will be increasingly
difficult and probably impossible to prevent corresponding inflationary
increases in all wages and prices.
Mr. Baruoh can afford to take losses, as you point out, but
it is the rank and file who get hurt and who need to be given protection from the very real dangers in this situation. I am concerned
also because it seems to me to be a deception of the public to encourage people to put money into fixed interest-bearing obligations,
such as Government bonds, with a comparative low yield and then do

Honorable A. Willis Robertson


March 12, 19U5

nothing to control prices of capital assets or the speculative fortunes
that so-called smart money is making out of this situation.
We are confronted with a choice of alternatives and it is
ay very carefully considered opinion that the suggestion I made, or
some similar expedient, is the best protective weapon available, even
conceding that it may not be by any means a perfect expedient. In
the end it is a matter of Judgment, and because of ay respect for
your knowledge of the situation «aid your judgment, I have not hesitated to write you on this subject.
I want to reciprocate most heartily your good wishes.
Sincerely yours,

M. S. Ecoles,

ET :b

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C o n g r e s s of tfje ® m t e b


l>ou£e of &epreöentattoeö
®0a£i)iugton, 3®. C*

March 13, 1946

Hon* M. S« Bccles, Chairman,
Federal Reserve System,
Washington 25, D. C.
Dear Governor:
Your very cordial letter of the 12th in further
regard to your tax proposal is appreciated»
1 have requested the Treasury Department to give
me figures on short-term and long-term capital gains and losses
during the war period and the revenue realized from the present

Those figures may throw some light on what our future

policy should be*
Uith kindest regards. I am