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rostal Telegraph R E C E I V E D BY P R I V A T E WIRE FROM THE INTERNATIONAL POSTAL T E L E G R A P H Commercial Cables STANDARD T I M E INDICATED IN T H I S M E S S A G E i Is a full rate Telegram, Cablegram or Radiogram unless otherwise indicated by signal in the check or in the address. SYSTEM Gil America Cables DL DAY LETTER NL NIGHT LETTER NM NIGHT MESSAGE LCO DEFERRED CABLE NLT NIGHT CABLE LETTER RADIOGRAM Itlackaif 16 P . W . lpo m 52 Govt £ CW Washington DC 124&PM liny 21 Hon Iferriner S Eccles Chairnan Federal Reserve Board s If your reports indicate there is an undue anount of short selling I believe mrginal re qui resents should be increased to seventy five percent. If it is forced selling would it not be best to suspend operations for period of tine so that crash similar to nineteen twenty nine nay be avoided« A J Sabath M C il C M , J May 1940 CE? Concerning the attached telegram from Congressman Sabath At the request of Mr* Thurston, but in behalf of Chairman Eccles, I called Congressman Saoath about this at aoout 1:45 p»nu I explained that Chairman. Eccles had not called himself because he was almost continually occupied with meetings. As to the subject matter of the telegram, I said that I had gone to the trouble of seeing representatives of the SEC and that from such reports as they have available they do not feel that the amount of short selling recently has been excessive; the^/ feel that their present rule limiting short sales is working very well. As to the matter of closing the Exchange, I saia that this was within the jurisdiction of the Commission and that they are watching the market carefully with a view to seeing whether they should use their powers in the matter. Congressman Sabath reminded me that his efforts to secure legislation against Stock Exchange abuses had oegun as far back as 1929, that he had introduced bills for this purpose in 1 9 5 0 - 3 2 , etc., that he has always been "friendly to the New Deal*1. He mentioned some "resolution" that is now pending, as to which he might be called upon to hold "hearings", and he wished to "fortify himself with as much information in advance as possible" — feeling that such hearings might possibly do more harm than good. He is persuaded that the short seller is not only a speculator but a pure gambler and that he "never does any- good". He indicated that he had some intention of proposing legislation to require the SEC to obtain prompt daily reports on the volume of short selling. (Mr. Greene, apparently Mr. Francis Greene of the SEC, has apparently been consulted recently by Congressman Saoath by phone). The Congressman requested me to pass on the substance of the above to Chairman Eccles.
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