Evening star., 1955-03-11
Markets May Need
Some Control Now,
Senate Probe Told
By jones Y. Newton

The head of a New York in
vestment firm said today that
while Congress should not or
dinarily meddle with the stock
market" there are times when 1t
deserves attention and I'VE are
probably in such time at pres
ent."
BENJAMIN Graham, chairman
of Graham Newman Corp, said
that stock speculation has not
gone too far as yet, but there
may be a grave danger that it
will do So"
He added it was wise to agree
on measures to curb speculation
''in advance of the necessity for
their use-rather than to begin
discussing them while the fire
Is raging"
Mr.. Graham, in testimony pre-
pared for the Senate Banking
committees investigation Of
high stock prices, described his
company as a registered invest
ment company or investment
fund. =" In saying that the mar
ket perhaps had reached a level
calling for Government atten-
ton, Mr.. Graham counseled cau-
ton in whatever steps are taken
to curb the rise in stock prices.
Intervention Risky
1T should be recognized that
any form of intervention by
Washington in the stock market
is risky and controversial" he
warned You cannot be sure
that what you are doing is the
right thing and won't cause more
harm than good. Yet, despite
the hazards of any intervention,
q certain responsibility is there" ="
AS means of controlling the
market, the witness recommend
ed increasing the required cash
margins on stock purchases and
a change in the tax rate on
income from capital gains. Il
am inclined to favor strict con-
trolls for margin trading and a
fairly rapid advance to the 100
per cent margin limit, that is,
no borrowing at all - as the
Federal Reserve Board becomes
increasingly concerned about the
extent of speculation" Mr..
Graham said.
The witness said that his rea-
son for suggesting raising mar
gin requirements was that "it is
basically unSound for non-pro-
fessionals to borrow money to
speculate in stocks or in any
thing else. 1t is unsound for
them and for the economy as
a whole"
Tax Cut Urged.
Mr.. Graham suggested that
the present maximum lax on
capital gains of Is per. cent
might be cut in half on securities
owned at least two years. He said
that such a reduction should be
made effective for specified
period only, and he suggested
six months.
II believe such an arrange
ment would have the desired ef-
feet of increasing the supply of
common stocks at a time when
such increase is deemed neoes-
Sary," he added. From the
standpoint of the Treasury. the
result might well be that a larger
revenue would be realized, lin
spite of the reduced tax rate,
because of the inducement to
sell shares"
The witness said that the
fundamental reason for the rise
Tin stock prices was the swing
from doubt to confidence on the
part of the public in late 1853
and from emphasis on the risks
in common stocks to the empha-
sis on the opportunities in COM
mon stocks"
Mr.. Graham said there were
instances of "over-speculation"
In what he called secondary
stocks-those below the level of
the blue chip" category.
At another point in his testi-
mony Mr.. Graham said: 1T is
probably fair to say that the
market is not too high today if
we have really managed to HEX
the business cycle" of booms and
depressions.
ALTHOUGH such a DEVELOPMENT