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¿/e/iy/iA'&'ne S&jfe-x/'p 5139 June 27, 1949 Hon* Marriner C. Eccles Federal Reserve Board Washington, D. C. In re Dear Mr. Eccles: It seems to me that all the evidence available i n dicates that the restrictions as to short selling of stocks, should be abolished. The present arrange ment makes it possible for the various groups that control the price of stocks to mark them at any figure desired and there is nothing that can be done about it. If regular short selling was allowed this condition would be quicly corrected and in the balance between the opposing forces stocks would sell for thefir true value. Today, stocks are marked up and down exactly the same as a merchant marks up and down his merchandise. An investor will p ay an artificially high price and face a loss later on. Deflation Is proceeding very satisfactorily and p r o bably will continue at a slow rate for the next fifteen years. I am sure that you will.take such actions as may be necessary to keep deflation on a satisfactory basis. It is a big job but I am sure you can do it. FHJ:CP JKr* Frederick H. Jackson, Attorney »t Law, 101 îreraont Street, Boatcm, Sfassachusetts. Dear Hr* Jacksont haw your latter of Jane 27 1» which you state that it la possible for various groups that control the priée of stocks to mark the» at say figure desired and you suggest that the rastrio* tlona as to short selling of stocks should be abolished* You feel that i f *regular short selling* were allowed, stocks would sell for their true values* Whatever nay be one's conception of true values, as to which judgments may well differ, we hare no evidence to sup port the view that the prices on the stock exchange do not, generally speaking, reflect market opinion* I fiie Board’ s present requirsBents presoribe 50 per cent short sale«, which is the same as that specified for long positions, the figure applicable in both oases having recently been reduced from 75 per cent. It may be noted in this connection that the outstanding short position for May 191& was the highest on rec ord since 1933» With respect to tâte pricing of short sales, i t may be added that one of the rules of the Securities Is Exchange Commis sion provides in effect that the prie* at which a short sale is made may not be below the last preceding different price* margin on In response to your last paragraph, we endeavor to keep as well informed as possible as to trends In economic conditions and as to actions which may properly be taken within ihe scope of our limited powers in the direction of promoting and maintaining etable economic conditions* In this connection you might be interested in the talk I made before the Commonwealth Club of California In San Francisco on April 8, 191#, in which I discussed the subject of economic stability, and 1 am enclosing a copy for your information* Sincerely yours, M* S* Ecoles 3e/i/iA<ne dikk 9139 August 2, 19^9 Marriner S. Eccles, Esq Federal Reserve Bank Washington, D. C. In re Dear Mr. Eccles: I b e g to acknowledge t£a® receipt of your letter and also copy of your Address before the Commonwealth Club of California. Your position relative to the Soviet Government will be approved by everyone who reads this Address. As to A m e r i c a ^ communists, they a r e t r A i t o r s and should be treated accordingly. A Court Martial should be set up and they should be tried and if convicted, should be disposed of in the same m a n ner as other traitors. Then there will be no communists in the u. S. A. We were discussing the restrictions on short sales. Selling short today is like throwing a chip on the ocean. That is w hy the amount of short sales outstanding are so negligible. Take Steel for instance, number of shares 26,809,756. Short interest less than 60,000 shares, and the same condition applies to the rest of the market, it is unnessary to say that the market Is not affected at all by these sales. Just how fantastic the market can be with out short selling has been fully demonstrated by the present market. January 22 the Dow-Jones Averages stood at 181.54 wi£h business booming, and unable to fill orders. Now» with steel operating at 80$ the Averages stand August 1 at 176.84. That is to say, within five points of the high of the year. An d the object of the fictitious prices? To sell stocks to the public. The operation has been entirely successful ac cording to official reports. No doubt at some time in the future, when a panicky public sells in order to save a part of their investment, buyers will be right there ready to take them. It is obvious that restrictions on short sales should be removed at once lest history repeat Itself. fed’kHi. rJ, JTHJ :CP
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