Letter from Mr. A. F. Sales of Detroit, Michigan, to President Hoover Denouncing Short Selling on Stock Market

A. F, SALES ack 11/14/29 4466 MELDRUM AVE. THE WHITE HOUSE NOV 14 1929 Washington, D. C. DETROIT, g30 MICH. RECEIVED 12, 1929. Honorable Herbert Hoover, President of the United States, Dear Mr. President: The government of the U. S. must protect the people of this country from a far-reaching business paralysis, which threatens it as a result of the stock market collapse. This depression, despite the sayings to the contrary by government and business executives, is already very definitely showing its ear-marks thru lay-offs and the increase of un- employment. While it has been ascerted that there is no relation between stock prices and general business conditions, neverthe- less this non-relation is no different now than at any other time; and just as depressions followed previous stock market recessions, so also inevitably will one follow this collapse, whether there be a real reason or merely a psychological one. The only difference that there is now, is that the collapse this time is more colossal than at any time in its history, and this shall not tend to help matters any. The government owes its people a duty to protect them from such a manipulated panic and consequent industrial depression, if it is at all within its power. One thing is almost certain, and that is, that if the Federal statutes prohibited, under most severe penalty (not a fine), anyone from selling something sameting which he or they do not own, such as "short" selling of securities as was done by tens and fifty thousands of blocks in the late market, this crash most likely would not have happened. The recession of prices from a too high a level would not have crashed so suddenly but would have been more orderly and spread over a period at least a year or two or perhaps longer. This colosal robbery of hundreds of thousands of men and women traders of moderate means, who traded out of confidence in the institutions and industries of their country, is a disgrace to the nation. With these unfortunate ones, milions of others must pay and suffer thru unemployment and depression that follows. The "short" sale is nefarious invention used by the unscrupulous, who by these transactions cause a sudden drop in security prices, and catch unaware and trap the traders in their inability to quickly enough supply additional capital A. F, SALES 4466 meldrum AVE. DETROIT, MICH. -2- to cover the drop, and thus squeeze them out with a loss. When a sufficient number is caught in the squeeze a momentum is given that swells as additional ones are forced to liquidate without regard to losses or values. This legal robbery of hundreds of thousands of men and women, and the undermining of the confidence of milions of others, should be stopped by a law that will prevent the "short selling of securities and commodities. Let the law of supply and demand and the actual values take its Own course. The inability of the market to find a bottom as seen in the last couple of weeks, is a disgrace to the entire nation, and is a horror that will not be forgotten for years, not only by the hundreds of thousands of traders and their families, but by milions of others. The government must awaken itself to a conscious realization of its moral duty to protect the welfare of its citizens by something more tangible than mere talks and opinions after a thing has happened. Further talks and opinions by so-called influential men will do no good. But an announcement that it is the immediate intention of the government to enact a law forbidding "short-selling", might do a great deal towards stabilizing the present nervousness of the market as well as forestalling a far-reaching unemploy- ment situation, which results from the inability of corporations to sell additional securities for légitimate business expan- sion and the stopping of construction work as well as the reducing of operations to the very minimum. Will you please, Mr. President, cause this matter to be considered by the proper department, and as the head and leader of one hundred milion peaple who entrusted you with their interests and welfare, use your influence in stopping this disgrace and in restoring the confidence of the nation. Will the government stand by, with its arms folded, and say to its milions of citizens that it will not, or cannot, stop such colossal legal robberies, that run into bilions, and rival the sums sacrificed, in loan only, in our Liberty Loans ?. Very respectfully yours, A. a.Bales F. Sales November 14, 1929. My dear Mr. Sales: This will acknowledge the receipt of your letter of No- vember 12th. Sincerely yours, LAWRENCE RICHEY Secretary to the President. Mr. A. F. Sales, 4466 Meldrum Avenue, Detroit, Michigan. rsw