6218 EXTENSIONS OF REMARKS March 31, 1988 EXTENSIONS OF REMARKS IMPROVING CAPITAL market volatility and the resulting panic friends made him one of the most influential INVESTMENTS must lie squarely with tax policy that lobbyists Washington has ever seen. He will changed the rules. be sorely missed. How can this poorly crafted tax policy be HON. JOHN J. DUNCAN corrected? Mr. Speaker, I would like to commend to my OF TENNESSEE One method might be to establish an "in­ colleagues a touching tribute to Si Kenen writ­ IN THE HOUSE OF REPRESENTATIVES vestment income adjustment" for invest­ ten by M.J. Rosenberg, who is currently spe­ ments declared as "long term investments" cial assistant to Senator CARL LEVIN. M.J. was Wednesday, March 30, 1988 at the time the investment is made and held the long-time editor of the Near East Report Mr. DUNCAN. Mr. Speaker, my constituent, for at least a minimum period of time. The and one of Si's proteges. adjustment would be in the form of a sliding Van A. Michael, has prepared a novel ap­ REMEMBERING l.L. "SI" KENEN proach to the taxation of capital investments. scale exclusion depending on the length of time the investment is held. If the invest­ (By M.J. Rosenberg) Van works with the National Christmas Tree ment was voluntarily liquidated prior to the Association, Inc., and has prepared the follow­ An era ended with the death of I.L. Kenen minimum holding period, the income would on March 23. Si's death was no shock to ing article on the subject. be subject to an "early withdrawal" sur­ those of us who knew him. He had been in IMPROVING CAPITAL INVESTMENTS charge or penalty. The result would be to failing health for the last few years. But he The "Tax Simplification" Act of 1986 inhibit the liquidation of long term invest­ looked good, far younger than 83, and there (TSA-86) resulted in an unexpected windfall ments in a "panic" market as well as cor­ was always the hope that he would rally for the securities business. But, that wind­ recting the present tax policy of taxing the and, once again, be as he was in his prime. fall has caused a major problem for our inflation of long term investments as well as Si was lucky. His prime lasted a long time. system of providing capital for American in­ the real income. He was already in his late sixties when I dustry. The key points of this program are: <1) first came to work at AIPAC in 1973. I came The TSA-86's elimination of the "capital the pre-declared long term investments; (2) in as a volunteer, anxious to do anything I gain exclusion," in effect, made ordinary the sliding scale exemption depending on could to help Israel during the Yorn Kippur income out of returns on capital invest­ the length of holding; and <3) the penalty War. ments. Beginning with the first business day for early liquidation. The AIPAC of 1973 was not the operation of 1987, many security dealers advised their The primary objective of this policy would we know today. I doubt that there were customers that there was no advantage in be to encourage investment in long term more than ten people working in the office holding investments. The tax consequences high risk enterprises and to make capital on 13th and G. The "Jewish lobby" was run of buying and selling short term, they said, available to new and expanding industries on a shoestring. Si's secretary would parcel were now the same as long term holding. as well as discouraging sudden liquidations out postage stamps like they were gold. And Brokers across the country were quick to and reducing market volatility. she would want to see the letter you were suggest "better buys" for their customers in Under the present tax rules, and assuming mailing to make sure you didn't swipe a place of present holdings. a 4 percent rate of inflation, a timber stamp for your mother's birthday card. Market volume immediately surged as cus­ grower raising pulp wood in the South over Si ran a tight ship. He made all the key tomers responded to recommendations to a 19-year rotation would have to realize a decisions. In those days, only Si's treasured 230 percent growth in his investment in long-time aide, Esther Chesney, and legisla­ sell their old investments and buy new ones. order to break even. Obviously, this tax on Every sale, every new purchase resulted in inflation discourages investment and our re­ tive liaison Ken Wollack, dared to question additional brokerage fees. No wonder Wall newable natural resources will ultimately a Kenen decision. But he rarely budged. He Street found itself unable, or unwilling, to suffer the consequences of a bad policy. knew how to run AIPAC. After all, he had discourage the churning of the market. The While we do not intend to create "tax invented the place. great bull market of 1987 fed by the brokers shelters" or "loopholes," we do feel that In his old age, newcomers to AIPAC would constant urging of "buy" and "sell," fol­ long term capital investment in natural re­ think of Si <who dropped in once a week, or lowed. sources must be encouraged and that so) as a "sweet old man." But his demeanor Like all markets supported only by hot air market volatility must be reduced. deceived. Si may have been sweet <some­ rather than basic changes in real value, times) but he was not benign. someone, somewhere, finally said, "sell but He was a tough boss. In late 1973 I wrote don't buy." TRIBUTE TO SI KENEN my first article for Near East Report. He Suddenly, the market heard a vast voice made me rewrite it a half dozen times and saying in unison, "sell!." No one asked, didn't compliment me on the final product. "What will be the tax consequences of my HON. STEPHEN J. SOLARZ <Not then anyway. Over the next 15 years Si decision to suddenly liquidate everything." OF NEW YORK repeatedly told me-with great exaggera­ There were none. IN THE HOUSE OF REPRESENTATIVES tion-how "brilliant" that first story was.) The reason for the holding period rule, Wednesday, March 30, 1988 It wasn't much fun arguing with him, lost in the euphoria of "tax reform," had about the Mideast or about his determina­ reasserted itself. The fall out of tax simplifi­ Mr. SOLARZ. Mr. Speaker, I rise to honor tion to reduce the size of every item in Near cation created the volatility in the stock the memory of a dear friend of many of us in East Report by about 60 percent. Trained as market, and ultimately resulted in the crash the Congress, and one of our Nation's most a lawyer, he was a skilled debater. of October 1987. respected statesmen. l.L. (Si) Kenen passed His demeanor was disarmingly gentle. Si Congress, the securities industry, and rarely raised his voice. He would express economists immediately began to look for away last week at the age of 83 after a life­ anger by lowering it, forcing you to lean in the reason for the crash. Programmed trad­ time of devotion to the precious causes of close to hear him. That manner was an ing, index futures, option trading and the Israel and United States-Israel relations. asset on Capitol Hill. He was liked on both "Bell witch" were all suspected of being the More than any other individual, Si was re­ sides of the aisle and by Senators and House "cause." However, no one bothered to look sponsible for transforming the United States­ members of every stripe. Si didn't have an at the question of what caused market vola­ Israel relationship from the iciness that enemies list. On the contrary, he believed tility in the first place. marked it during the Eisenhower years to the that every member of Congress was either a Basically, Congress had treated a bet at close friendship of today. He was the founder friend or a potential friend. And he treated the horse track and a Douglas fir forest, them accordingly. that would not mature for seventy years, as of the American Israel Public Affairs Commit­ He was effective. When he began his work the same kind of investment. When there is tee [AIPAC] and the first editor of the Near in Washington, Israel was receiving not one no penalty for sudden liquidation of all East Report. Si's excellent command of the dollar in U.S. aid. By the time he left, Israel holdings and, in fact, a benefit from such subject matter, his gentle yet persuasive was receiving $2.2 billion. Si didn't accom­ short sighted planning, the blame for manner and his magnificent knack for making plish that alone. He had a good product to e This "bullet" symbol identifies statements or insertions which are not spoken by a Member of the Senate on the floor. Matter set in this typeface indicates words inserted or appended, rather than spoken, by a Member of the House on the floor. March 31, 1988 EXTENSIONS OF REMARKS 6219 sell. But it is hard to imagine that the job The Chesapeake area had the largest 14 percent in the north Appalachians, 11 would have been done at all if Si hadn't de­ number of acidified streams and the largest percent in the Chesapeake area and 8 per­ cided that Israel needed a lobby in Washing­ number "extremely sensitive" to further cent in the Poconos and Catskill Mountains, ton.