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MEMBERS. NEW YORK
STOCK EXCHANGE

Registered as Investment Adviser
with U. S. Securities & Exchange Commission

J O S E P H D. G O O D M A N

Financial Columnist
FORBES Magazme
M I N E R V A R. G O O D M A N

JOSEPH D . GOODMAN & C o .
1 5 0 0 W A L N U T STREET B U I L D I N G
P H I L A D E L P H I A 2. PA.

KingsUy 1800

Feb. 20, 1945

Governor Marriner Eccles,
Federal Reserve Board,
Washington, C.C.
Dear sir:
I note your remarks today, to the effect that a special
tax should be levied on profits on stocks, real estate, etc. Why
not a special tax on rugs, jewelry, antiques, and everything else.
I am amazed at your recommendation. Countries abroad have
tried the products of frenzied minds, with the result that prices
went higher and higher, and nobody would Sell stocks.
If I can correctly observe affairs, I would say, should
Congress follow your suggestions, thousands of people would sell
their Government bonds, and never boy another one.
There is no valid reason at all for your suggestion. I am
surprised that the Governor of the Federal Reserve Board of this big
country has such silly ideas, Your reasoning is very shallow.




Yours truly,




February 26, 1945 •

Mr* Joseph D. Goodman,
Joseph D. Goodman & Co.,
1500 Walnut Street Building,
Philadelphia 2, Pennsylvania.
Dear Mr. Goodman:
It would seem to me that an investment adviser, as your
letterhead designates you, would first ascertain the facts before
writing such a vituperative letter as yours of February 20. I
would not be disposed to reply, but for the fact that you apparently
base your conclusions on fragmentary newspaper accounts of what I
discussed in the course of my testimony before the Senate Committee
on Banking and Currency.
I had not expected to be questioned on the subject of inflationary dangers in the uncontrolled fields of capital values,
and when pressed by Chairman Wagner, Senator Taft and others, I was
obliged to express my conviction that a special wartime penalty
rate on speculative capital gains was the most effective single
weapon for talcing some of the inflationary fever out, of these markets.
I am satisfied that the effect of such a penalty rate would be precisely the opposite of the one that you predict. I can think of no
single step that would do more to protect the Government bond market.
With regard to a special tax on rugs, jewelry, antiques,
etc., let me say that there is no analogy whatsoever. Price ceilings
cover such things, ^here is no speculative activity in them, and
even if diamonds and other luxuries were to be bid up to exorbitant
prices, it would be of little economic importance so long as the
prices of necessary goods were unaffected. Scarce and necessary goods
are, of course, rationed. I think it is of paramount importance that
the prices of such essential things of life as homes and farms should
be protected from speculative activiti^ that would put them beyond
the reach of returning war vv#terans, among others. My reasoning may,
as you say, be very shallow, but I would not care to defend your side
of this argument.
Very truly yours,

M. S. Eccles,
Chairman.
ETib

MEMBER. NEW YORK
STOCK EXCHANGE

Registered as Investment Adviser
with U. S. Securities & Exchange Commission

FINANCIAL COLUMNIST

F O R B E S MAGAZINE

JOSEPH D. G O O D M A N
1500 W A L N U T STREET BUILDING
PHILADELPHIA 2, PA.

Kingsley 1800

Feb. 28, 1945
Dear Governor ^ccless
I thank you for your letter of Feb. 26th, replying to my "vituperative"
letter of the 20th. M r letter was mild , compared with what was in my mind.
j
I know you have strong canvictions, and that a. few words from me will not
change them. But having been with the Federal Reserve system during the
first five years of its existence, I think I have learned something about
the viewpoints of the various governors of the Federal Reserve Board and
the reserve banks. Your views reflect the New Deal's mania for regimentation and Communism.
Yes, all I know about your statement to the Committee in the Senate was
what I read in the newspapers. You are reported as having said stocks advanced 80 percent since the war started. Well, at the beginning of 1939,
the Dow-Jones industrial averages were 150. They are now 159. (After the
outbreak of the war in Europe, they declined to the low 90fs in the Spring
of 1942).
Everything else has gone way up, except stocks. In 1937, for
instance, U. S. Steel was 126; it is now 63. Stocks such as Consolidated
Edison, General Electric, Socony-Vacuum, Standard Oil of New Jersey,
Kennecott Copper, Commercial Credit, were much higher - in some cases twice
what they now are. When France quit in the Spring of 1940, our market dropped
severely, starting from about 145. ^t its present price of 159, it is only
up 10 percent above where it was when that terrible panic occurred in the
Spring of 1940. The English market likewise dropped when France quit, from
100 to 61. It is now 141, or 41 percent above where it was when France quit;
our market is up 10 percent from the same point.
Inflationaiy factors have been brought about by the acts of the Government
itself, of which you are an important part. Wages and farm prices have gone
way up; the politicians are afraid to control the price of wheat, but steel
prices are where they were when the war started. You have kept money rates
low, with lower rates promised. Bonds have, therefor**, gone to the highest
prices in histoiy. As the result of government policies, there has been
practically no new-money equity financing for years. Since 1937, every
broker has been shipping stock certificates to customers, paid for in full.
The floating supply is the smallest on record, with brokers1 loans practically
negligible. As to homes, with the shortage all over the countiy, what else
can you expect but rising prices, with people having so much money to spend?
The way to free-up the Capital markets is to repeal the Capital-gains
tax completely, as in England and Canada. People will then be glad to take
quick profits, and more stocks will be available. The government will gain
in the income tax and stock-transfer tax. Put the tax way up, and nobody will
sell, which means, if anyone buys, prices will go higher than ever. For the
life of me, I cannot understand the reasons for your argument. Maybe, some
of the boys in Washington sold their stocks too soon, and would like to get
them back lower. But you don't eat stocks. Nobody has to buy them.




Yours •




March 5, 1945.

Mr. Joseph D. Uoodman,
1500 Walnut street building,
Philadelphia 2, Pennsylvania.
Dear Mr. Goodman:
In reply to your letter of February
28, I am enclosing a copy of a statement which
I have just issued in regard to my proposal
for a wartime capital gains tax.
I am not thinking exclusively of the
stock market, as you are, and while I do not«
imagine it would be possible to change your
viewpoint at all, nevertheless, I ihink it
quite likely that you have been misinformed
about the nature and purpose of my proposal.
Very truly yours,

M*
Eccles,
Chairman.

Enclosure

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