Evening star. [volume] (Washington, D.C.) 1854-1972, 1955-03-10
Easy Home Loans,
Stock Rise Called
Peril by Eccles
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Continued From First. PageO
which Is now entirely unregu-
lated.
5. More restrictive appraisals
of all FILA and CT home loans.
6. An increase in the required
down payment on homes and
limiting the terms of the loans
to not more than a 25-year
period.
Cites Auto Production
Mr. Eccles said the country
today had a "paradoxical situa-
ton" of a booming stock market
and excessive construction activ-
ity and an automobile produc-
ton rate of 8 million cars year,
which, he said, cannot be main
tanned.
While citing these danger signs
Mr.. Eccles said that lin the
economy as whole see no in
flationary developments"
The banker gave support to
Democratic leaders in Congress
who are advocating cut in per-
sonal income taxes.
1.-The proposed $40 tax cut
has been criticized as a politi-
cal move" he said. LAS to the
justification of this accusation,
I do not wish to pass Judgment.
But as an intelligent step under
present conditions designed to
create more buying power 4, to
help absorb the surplus goods
and labor, I believe it is eco
nomically sound"
Would Offset Loss.
The witness said the loss in
revenue resulting from the tax
cut will be more than made
up when the economy has taken
up the present slack
But Mr.. Eccles said he would
favor such tax reduction only on
condition that home mortgage
terms were restricted as he sug-
gested ard further credit curbs
applied to the stock market.
While saying that economic
conditions in general were
sound, Mr.. McCloy. under ques-
tioning, conceded there was
sort of public speculative psy-
Ghosts" developing in regard to
trading in stocks.
He said that despite all of
the built-in security" this coun-
try has in the way of legislation
to prevent financial collapse
there we're no steps that could
be taken to assure absolute pro-
lection against wild speculation
and rush of market buying.
Confidence in Board.
The New York banker said he
had great confidence in the
capacity of the Federal Reserve
Board" to make the decisions
and to take the steps necessary
to hold down the stock boom
and prevent any collapse.
Banking Committee Chairman
Fulbright asked the witness to
state what legislation passed in
the 1905 under the Roosevelt
administration he thought was
good and healthful to the econ
omy.
Mr. McCloy mentioned the
act setting up the Securities
Exchange Commission and that
providing for Government in
surance of bank deposits.
Senator Fulbright pressed Mr.
McCloy to name other laws he
thought had been healthful.
isn't that enough" asked the
banker.
Atuthat point Senator Douglas.
Democrat, of Illinois interrupted
to say to Chairman Fulbright:
IF you press Mr.. McCloy too
far he is likely to lose his union
card"
Mr.. McCloy denied that the
purchase of stocks for pension
trusts had been a major factor
in pushing the securities markets
to all-time high levels.
Both the entry into the mar
ket of pension trusts and for
eign investors had been cited as
reasons in the Senate's friendly"
investigation of the market for
the rapid l8-month rise in stock
price levels.
Funds Also Sell Stocks.
Mr.. McCloy said the amount
of money in pension funds seek
ing investment in all types of
securities was high. He esti-
mated the new money" from
that source last year as SO bill
lion.
But the banker. said that PEN
sion funds, in the experience of
the Chase National Bank, sold
almost as many stocks as they
purchased.
1T is our own judgment that
common stock purchases for
pension trusts. or indeed trusts
generally. are not major factor
in the determination of common
stock prices" Mr.. McCloy said
Buying for trusts is, of
course, an element in the total
demand (for stocks) and it can
not be overlooked. But as Chases
own experience in 1854 demon
strated, the overall impact is
compounded of many considera-
tions that make trustees sellers
as well as buyers