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ZOLAR

PUBLICATIONS

CABLE

ADDRESS:

ZOLARKING

ZOLAR PUBLISHING COM Inc.
33 WEST 60th STREET
NEW YORK CITY
Columbus 54094

BRUCE KING
President

April 12, 1945

M r . Marriner Eccles
Federal Reserve Bank
33 Liberty Street
New York City
Bear Sir:
During former War Loan Drives 1 have been quite successful
in selling a substantial amount of War B o n d s . It is with
much apprehension that I now view the present War Loan D r i v e .
Persons whom I have contacted seem to adopt the attitude
that the wsr is over and that they have already done their
share in purchasing War Bonds.
while this m a y be natural in view of our progress on the
European front, it appears that the public has gone into the
stock market where they feel they can double their money in
the next six months, whereas War Bonds return 2^% a year.
Should this trend become national, it might seriously
affect the present War Loan and the rate of redemption on
the past loans. Unless speculation can be checked in the
stock market, or a ceiling put on stock security prices, it
appears to the writer that we are in for another 1929
catastrophe.







April 18, 1945.

Mr. Bruce King, President,
Zolar Publishing Co., Inc.,
33 West 60th Street,
New York City.
Dear Mr. King;
Your letter of April 12 in regard to
the importance of putting a curb on speculative
activities, particularly those that attract
funds from the financing of the war, is very
much appreciated. It is the more impressive because of your own experience in aiding the war
loan drives. The considerations you mention are
among those that led me to suggest the special
wartime capital gains tax, and it is most encouraging to have your general approval of the
objective.
It is possible that you might be
interested in seeing an explanatory statement
which I Issued, giving the reasons why I advocated this tax at this time.
Sincerely yours,

M. S. Eccles,
Chairman.
Enclosure

ZOLAR

CABLE

PUBLICATIONS

ADDRESS:

ZOLARKING

ZOLAR PUBLISHING CO., Inc.
33 WEST 60th STREET
NEW YORK CITY
Columbus 5-1094

BRUCE KING
President

M . S . Eccles, Chairman
Board of Governors of the
Federal Reserve System
Washington, 25, D . C .
Dear Sir:
Your letter of the 18th together with the explanetory statement which
you released to the press on March 2nd was very gratifying* I have gome
over this statement carefully and am in full accord with its contents.
In m y opinion, h o w e v e r , you are going to have difficulty in trying to
get Congress to approve of s a m e . Too many persons in high places would
be affected.
The masses who would benefit by this legislation could not be sufficiently
aroused in view of the fact that the immediate need is not apparent since
only a minority have the sufficient means with which to speculate in the
market, real-estate or commodities. I believe that the Federal Reserve
itself could take immediate means in checking unwarranted price rises
either by placing ceilings on securities as of a given d a t e , or what
would b e more important, b y putting all securities that have not paid
dividends during the last 5 years on a bash b a s i s . The theory behirxi
this is that dividend paying stocks are presumably bought for investment
p u r p o s e s , while non-dividend paying stocks are purchased purely as a
speculation. In checking the market action during the past year, you will
note that seasoned securities such as General M o t o r s , General Electric,
U.S.Steel, etc. have only moved within a 10 point range, whereas highly
speculative issues with no dividend records for many years past have
moved up as high as 30 to 40 points. This is primarily due to the fact
that one can usually promise a great deal more than can be actually
fulfilled.
With reference to market sell-offs, non-dividend paying stocks declined
at a much more rapid pace than seasoned dividend p a y e r s . It is my belief
that if a company was not in a position to pay dividends during the 3
greatest years of production, most of the glowing promises of future
melons to be cut in favor of the speculative securities will vanish into
thin air as they have donein the p a s t .
Thanking you for the courtesy shown me in answering ray letter, I remain