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In Washington, Griswold persuaded the New Dealers to accept the "conduit theory" of taxation, which looked on the funds as a "conduit" for investors, freed the funds from paying federal tax so long as they distributed their capital gains and at least 90% of their dividend income to shareholders. Since the funds pay out all their earnings, this in effect frees them from paying taxes. In return for this concession, Griswold and the funds agreed to back other business tax proposals that President Roosevelt wanted. Griswold also helped draft the regulatory laws for the industry that came out of the '30s.
In Boston, Robinson went to work on M.I.T.'s portfolio. It needed some fixing.
In 1931 the trust listed the market value of its stock at just half of what it had paid for it. M.I.T. slimmed its portfolio from 128 to 77 stocks, concentrated in defensive stocks (utilities, foods, tobacco, etc.), better able to withstand the Depression. By 1933 Robinson and his staff saw light ahead, and M.I.T. began switching out of defensive stocks and into railroads, automobiles, mining and steel. With a poker player's eye, Robinson could look at a company's present and guess its future. He personally researched the Texas Co. (now Texaco, Inc.), persuaded the trustees to buy 15,000 shares. The trust kept on buying until it had put $9,400,000 in Texas Co.; today the shares are still in M.I.T.'s portfolio—at a market value of $44 million.
As investors continued to pour their money into M.I.T., the trust moved into first place among the nation's mutual funds in 1936, with assets of $130 million (v. $15.1 million in 1930). Despite its bullish position, M.I.T. sailed through the sharp market break of 1937 with hardly a change in its portfolio; it simply put new cash into Treasury notes as a defensive measure. In that year, Dwight Robinson was rewarded for his work by being moved up to trustee. In 1954, when Merrill Griswold moved up to honorary chairman of the advisory board, Robinson slipped into his chair to guide M.I.T. through its greatest period of growth. In four years the fund has nearly doubled in size.
M.I.T. bought heavily into steel after the war, when most other funds shunned it as a prince-and-pauper industry, saw its hopes for steel realized when the value of its investment grew from $65 million to $142 million. When the recession began in 1957, M.I.T. reckoned that it would be brief. It stayed in growth stocks throughout, now needs little portfolio shifting for the economic recovery.
Occasionally, the hard trading instincts of M.I.T.'s trustees have softened ever so little. The trustees once decided that the liquor industry was a good investment, decided to try whisky stocks. When Vance, Sanders got wind of the plan, it was horrified. A partner gathered up the cards of 1,200 M.I.T. shareholders, walked into a trustee meeting and threw them on the table. They represented Baptist institutions, Christian Scientists, Catholic convents, and other investors who might take a dim view of liquor—even in their portfolios. The trustees hastily backed down.