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ONNECTICUT GENERAL LIFE I N S U R A N C E HARTFORD, COMPANY CONNECTICUT F R A Z A R B. W I L D E PRESIDENT February 26, 1946 Mr. Marriner S. Eccles Chairman of the Board of the Federal Reserve System Federal Reserve Building Washington, D. C. Dear Mr. Eccles: Your current discussion of the inflation problem and the general attitude of the Board on fiscal matters strikes me as constructive and in the right direction. I might take minor exception to your idea that higher taxes would restrain inflationary prices in the stock market, but that is not too important as I see it. Lower taxes and a longer waiting period might work better both to make more natural sales and to get more revenue for the government. The two vital things are to move more of the government debt into the hands of the permanent investors and the other is to continue O.P.A. price control. I am really thoroughly alarmed at the prices of fixed income securities. If the Treasury doesn!t cooperate with the Federal Reserve and stop the downward trend in rates, I think we are headed for a disastrous crash in the market for fixed income obligation; i.e., bonds, preferred stocks, mortgages. Perhaps you will be interested in an imaginary letter which I did not send and do not intend to send to the Secretary of the Treasury. I attach a copy. I hope I will have a chance to see you the next time I go to Washington. Kind regardsI Sincerely yours, FBW:er Enc. J&mmrf IS# 1946 firn ìkmmM» fiwoe af ti» Tmrnmmw Tb# prefelMt of ÌMtmrmt m%m® whXXm ot gmxttmiL&r baelat** in vltal te ^ r nhola fb# it&raraii®© p&int «*£ fiat* m ^ prop^rly n t® m$ff*s«at> ti» SJtUOTMt* af tim country m mmà %hmtr Cmilim inélmàm thm this^or*» wfe * p&tmly ®$mn mg a&lft$h Th# ity§ur«§* «qpM&tft «r* * * & * mjority of w tot*& pep&Uttoa* It ^ppr^aulu mmrm mi tta# rmmpomlb&litf md hmrémm tbtagB km to tepoMi mmmgàtjlfe (1) te ìmMlm tbm mtiaml é b m a mmmaiUi m% % ( t j ta <lo it te * aasi&tr libiish irill mrmtm t&e X«*£t riBk wàmXm %imm pellcyhold#r* frmmaj Mpmt^mmfo* Trmmmf mm®§ othmr tao mJ#i* obj&ctiY©ei laperteiiM te t i » Xi£# inaurane« mné nmt tìm lmm% io t i - «fc&X* #MN«gr* i« It «•**« to aaigr of us in ths lif# i^sursne«tai*&n*i»atìmt ite progr** ©f stabili***! r&t#s in «iti» th» pattern mmiKHM^ró in 1942 in btót calettiate tu tà#n# andai i*#»f Ì0w omeì aaA It i*9 tb#r#for»t nmawKafcd tfcat t a fs Trmmmry Tm££tm it» po&Ugr of ti<ttainlqg stabilirne gatta aad that tioa ba eontli^rà in tm pattern ®£ 1942» stabilita- It i» roeogpadMd that to stabilise tho prie«« of ¿gibing*, incXttdlqg money, ta m d i f f i c u l t tasJu Historically* it baa nw#r tota it it ta sueemá, tho probateilitics are strong that MQoapllchcá« mmlntmimmm If of un end aaaoiii»e*d propra* it m sogMtor poi ley m a n te depart froa it la aitbur élrao» tioa* In other mmta* it is jmut sa important to resist a fartb&r lowering of istarast rata* m it mmM be to n*oiá sa iiMrea**« StagrftMffiiiiof aonetaiy aífairu uro deeply itioojie obligation* % im mm$mrim® preaetst primé for fixed Mst-orleal c^p« risos or by any oliier teat the preheat price* of beala» preferred istooke and are greatly iallated* mmmmd at mrtgagm imîtmtm that tbe&e mmrltim In other wräa* the priise of each eeeoritlea i# gretee<i*e to ttaeâr real *ü3jüí* Yìie direct ericlefcoe of tilia is the baying p t ? of tin* interact received* five y m m ago* ^ r a M p l * » m good bond oouid be bought to yield 51» Today, « boM of t p i l credit te a 3 É oompoit or le#aj i*#*» the dollar i i o a baa 1 m m reduced J ioie fe&t tbe haying of the dollar tea* alao been. draetieally reduced teoomm* the prie» of good* and eenriee* hure goae up« pswir a ^i^ü^fmtiw figure to t*aa« Thirty per eent distant im tagriUg Thia i t i r j » total'tíepreetatlm of mmmîy in fire year** Tbe arithmetic Im lUuetvata* belo*. 1940 Price of botó tlüöö Income 50 1945 frice of bond HOOG Incolte 30 Incoine réduction in dallar* ~ $20 » 40$ Ü 4 5finteei&ereeaa im 30 m M m mm t of lining mpprmimm^ 30$ I m m 3ö$ ~ 121 $50 origlimi dollar Immm at p^rteaylsgporar - only lai is 1945j i«#*t approximately é0$ áiacoiíiit im m l mim of the bond f# mm m tìi* Mmm â with %hmrnmrnerméít «tandil«. «# «mum Urn martoi .pris* is But tfa& f j ^ m h m is 6G% Imm* lXXa*trati<>& of th» m&mmm % tb* jmtiiie TkLm in a mmmm%® l*fl&tio& e ^ i ^ l M im boad prï®m+ hmmmm thm prt®m- of th* feesâs tfcMeel*** te*» » t dlroetljr eimügsi*, That tàln nitration in fl&tion is «*U mtämmtocni I t la aot ñtlly »ad Is ant a th^retiml i * t~ of its prmstiegil tepaet 0m mil prl+mtm mmmm of f Imà tmmm ^MSg0ldMmm : 9te ritti- «hlch tit« ftm^iy tea in tòta uftttor «ri*»« frost tkm énsg#r of s oollmpso i® bond prions* lost of us prodiot stili fwt^m totro*«*« in ta fo mm% of lining* Xt áoomH toots p®miMM tint an lœbaliiiieoâ ootditlot otti long contimi«* Im m £mm ooomaqr* Tho hlghmt prim® rim for £ooát mni prie« of fiäod litems soonrltioo got« out of lino* eortttety tb* tteo m i n & n*otio& will mmxr* io- mntietm J o o f m a ¡urtdiot «ito »ay ftcy Q m e r airoly proéiot that a an rmotloa is lMflttbl* mbm th* prie* af anything i» 0tlier mlmm&3 in bigbar« th* mc^mmf» It it po**iblo that fhoy ero, i» f&ct* áotiig m+ jkmmm& b* îormà 1mm?Ê but th» tfeo aom th* oat af lia» with pmmmthmA pt&mm mm In othor mmIt* iatorost rat*« e*a f^r th* mmlmlon mmm arjstal ol**jr tb*t f for til* proper protootioB of tfa* fiaaneitl «trattar* af tb* ooaatry mid for tb* protootioo of tli« ?r»a*ary in it# long t o n problem af ' fimnel^ govmwBM& i t Is ^ a t imf^ort^iit to tty te woiil th# imrsasi^g ^ m M of a nmjor rm^tios is boaâ priste« Xt le esrteiöly të# X^wlt Bp^ifie flt# th# litotill^d of that t i » ki§lmr fin#é iBee^i imuìàm* ê&rnMItmtîim ñf ratmm at th# pr###nt iapwatiw* ^p^^èsirj to tuia m i » mm sfecmid ®î%®m wmûm tìmt ìpi iEt#r«iit imt#»- ar# a Um mmmmp go la m timory which ia *hoily uaprovtd If m i ctispiwoé* tho ehftrgod by tli# (k»mgr*s& i i ì the .duty of tryiag t i rti e la thoori**» *#r#f it imsuM obs#rr# timi la tìm lato Twootio© àig&nr ami éi4 m t mt*rd & dangerous bocrn whieh ultiaatiily ooìIajkmkU vmmf otioorro ttmt la tlio fhirtion pollaio® éié mt mt If it l i l f M ^ ratea ft wouM furthor 8tSjml*t# the oooaoajr» Tnoso sto innr* ofesorrod tba pr&otieal working® of tri« eouiitry forftMgry^r® o&» to&tify tfa»t tfa* prioo of ttonoy 1$ tito lomst importaiit eonaidoriiiioa la tfc* *lad* of ttMMe irto f i i to proaoto »o* «MMNtyrtjmi or oxpond old onos* rni Àf&lU&ilitjr of o&pital f t d t and tho llfcellhooc tfe&t tax ifcwg wouid porait « M t profit tu t&f the aiioooosftal o»ti^p?oi»8tii* mai ìitiitor uro th« ¥*àX rotinone «bgr m m w i 0 p*t to WKTk» ?fe» oont to thm t**j»yer in aoririotiig tte «mtiottnl cfobt *o«éu> iKporteafc p&rtioiìlmrly tseùm «t \mltif®rwmé politimi w%mtp®tnt+ it profetili in uxil«portM&« fu & X*rs* tho n&tlois&ì taxo* nr# tfe# mm pmplm màm*é* ti ìmmim th» tfatir soooritloti pmpim «ti* t m y ìmrm gùvmrmmmt «lobi la m>tmy to pay o&vliigs turni I m roduead i» yl*Ld lamrmao* hn# co#t moro ti» Iwìk of wto Xo## incorna «hra lotoreot r&t«# thay jmy ì##i§ t&xos boemi** tho *J&Knr*r eoBfc of 2$ iaotoiui of àetmUy from an eeonossic&l ftmmmà m% && t&xt* «Itti mà timi* lif* U«tó«r & program of •tobillftatloft tritò intorwt n i m éontimiod in thm 1942 pntt#m total im%®mmt nìmatgmm ~woulé bm ÌM®rmm#à ¿ligfetly* flil& is of In tho ìmtóa of foim la tha Louf i « m p r a s s i Intorost^i in mmmmity terwtoi^ fhit 1# i^t, tootìi of plmolag ^ lurgw portioa of ttao m ^ m r %hmm Itifiai it in « t^apirafy m upmrè rmimìjùm of iat^.r#at r^t^i» iwìiviiimJL& md im%t%m%imm§ « i l i pratmWy I f i o m ^ M t l o ^ i mèo bolow» Suoli a pro^im^ pmiió te âlatlsietly good py&lla policy beams* it would Itoad a portila of tha p r ü t ^ äa&& with tha bant typa of Immtorê mmá at only m fractional isieraaaa la tba total lataraat ra^&i?a&asit& * 1« A long t a w boadf 40 to 50 ya&rsf 2 3/4 to a 2 5/8 rata, M i a bst&l eou&d baa* raatrictioaa against reacia or pXmàgm for a tissaf thia to pra*a&& ita baiag naad as a apaauìativ» cablala» . » Tha «umai 22«27 yaar 2§ bonä im tita präsent f«*% 2 ti© typaa éboulé im tap iaateie available at muy tima* 'It aoi^ld alno be émîmblm to parait largar pvnreìiAaae of P aaá 6 bouda« Truat Ande, aapaoialiy» wmM hm aerved by thi* lattar prograau Slnoorely yonrst, Fraaar B* fiMa 99V*ar March 5, 1946. Mr. Frazar B.ftilde,President, Connecticut General Life Insurance Company, Hartford, Connecticut. Dear Mr. wilde: This is to thank you for your letter of February 26 in regard to the general attitude of the Board on fiscal matters. Your favorable comment is very much appreciated. I was interested to read your unsent letter to Secretary Vinson and wondered why you had refrained from sending it. while the problem of debt management is by no means unmanageable in my judgment, it is a complex and controversial subject which is easier to discuss in conversation than by letter. 1 hope I will have the pleasure of seeing you when you come to Washington. In the meantime, let me reciprocate most heartily your kind regards. Sincerely yours, M. S. Eccles, Chairman. ET:b
