The CHAIRMAN. Have any other members of the committee any questions?

Mr. LATHAM. Instead of saying "speculative market," I would rather you would say "future market.'

The CHAIRMAN. I used that term as synonymous with "future market."

Mr. LATHAM. Yes, sir.

Mr. HOWELL. Do you believe that if this speculative business were eliminated the market in cotton would be more stable, or would you have these sudden fluctuations that unbalance the trade even if you did not have any stock exchange.

Mr. LATHAM. Even if you could eliminate the exchanges of the world-Havre and Liverpool and Bremen and the exchanges of this country-I believe the fluctuations would still be as violent as they are at the present time. They might not be, however. When I say "violent" I do not mean that they would act so quickly, but I believe the extremes from high to low would be quite as great as they are at the present time.

Mr. Cocks. Are futures dealt in on all the exchanges of the world? Mr. LATHAM. No, sir.

Mr. Cocks. Where are they not dealt in-I mean outside of the United States? Which markets do not deal in them?

Mr. LATHAM. I do not know, sir. I can tell you that they do deal in futures on the Havre Exchange and the Liverpool Exchange. I am not certain whether the Bremen Exchange has a future contract or not, but I believe it has now.

The CHAIRMAN. Have the members of the committee any further questions?

Mr. MENDELBAUM. I should like to ask a question. Mr. Latham, you have testified here, as to the position of the cotton goods market in 1907, that the mills were sold ahead in this country ten and twelve months; and in Europe, as you probably recollect, they were sold as much as a year and a half ahead. Was not that caused by the trade speculation at the time in manufactured goods?

Mr. LATHAM. Yes; I think it was.

Mr. MENDELBAUM. Is not the reverse the case this year?

Mr. LATHAM. Yes, sir.

Mr. MENDELBAUM. That is all I want to ask.

Mr. BROOKS. I just want to ask a couple of questions. I understand from your statements that you do not believe that there are any evil features of the exchange business as now conducted?

Mr. LATHAM. Will you repeat that question, Mr. Brooks?

Mr. BROOKS. I say, is it your position that the exchanges, as now conducted, have no evil features?

Mr. LATHAM. No, sir; I did not say that.

Mr. BROOKS. What is your statement on that point?

Mr. LATHAM. Do you wish to know my opinion on it?

Mr. BROOKS. Yes, sir.

Mr. LATHAM. I believe that the privileges of the exchange are frequently abused by people that have no business trading, that are incapacitated and unable to trade.

Mr. BROOKS. Is that the fault of the exchange or the fault of the people?

Mr. LATHAM. I think that is the fault of the people.

Mr. BROOKS. Then the evil that the exchange does is due to the people that deal on it instead of to its rules and regulations? Mr. LATHAM. I think so; yes, sir.

Mr. BROOKS. Are the people that do this evil members of the exchange or these outside uninformed masses?

Mr. LATHAM. I would not undertake to separate them. They are all people; and the man that abuses a thing, whether he is a member of the exchange or not, is equally guilty.

Mr. BROOKS. Those abuses hurt you?

Mr. LATHAM. They hurt the individuals.

Mr. BROOKS. I notice that the commission that were appointed by the New York legislature last year use the following language in their report, speaking of these exchanges:

In its nature it is in the same class with gambling upon the race track or at the roulette table, but it is practiced on a vastly larger scale.

Do you think that is a correct statement?

Mr. NEVILLE. Mr. Chairman, if you please, if Mr. Brooks is to read part of that report, I respectfully request that the entire report be made part of this record.

The CHAIRMAN. How long is the report?

Mr. BROOKS. I have not the report with me.

Mr. NEVILLE. I protest, Mr. Chairman, that it is not fair to the witness or to the question under discussion before the committee to take one paragraph from that report, which may follow something entirely different, or be followed by something entirely different.

Mr. BROOKS. Mr. Chairman, I suppose the committee can get hold of one of these reports.

Mr. BURLESON. Surely, when the question is asked the gentleman can state whether or not he concurs in the correctness of the statement. Then he can make any explanation he sees fit.

Mr. BROOKS. This sentence stands or falls upon its own merits as a statement.

Mr. HEFLIN. Mr. Chairman, just one word

The CHAIRMAN. My opinion upon that point is this (if you will permit me, Mr. Heflin): If any gentleman, in asking a question, produces matter that other gentlemen think is not a fair representationfor instance, if the sentence which Mr. Brooks has read is regarded by Mr. Neville as not a fair statement of the substance of the reportI think Mr. Neville should have the privilege, at the proper time, of putting in other statements from that report that would correct any misapprehension that might thereby be created.

Mr. HEFLIN. That was the point I wished to make.

The CHAIRMAN. But, at the same time, I think the sentence which Mr. Brooks has read merely as a postulate for a question might be admitted, and that the witness should answer the question.

Mr. MENDELBAUM. But, Mr. Chairman, the point is this: The part which Mr. Brooks has read here might lead you gentlemen to believe that the committee reported adversely to the exchange, while the reverse is the case. In every instance it upheld the exchange.

The CHAIRMAN. The committee is familiar with that report, I take it; and my understanding is that Mr. Brooks simply referred to it in order to make his question clear to Mr. Latham. He could just as well have asked his question without having read the sentence; and I presume he can shape his question now so as to avoid reading it.

Mr. NEVILLE. As long as we have an opportunity of presenting the reverse of that proposition, that is all we care about.

Mr. HEFLIN. Mr. Chairman, my point was along the line suggested by the chair. Mr. Brooks has the right to pick out any sentence that he wishes to pick out, and propound that sentence in the form of a question to this witness, and have an answer from him. Then, if Mr. Neville wants the whole record to go in, when his time comes, he has the right to put it in. But he can not suggest now a whole mass of matter to Mr. Brooks about what should go in, when he wants to separate that from other matter.

The CHAIRMAN. I think all objection would be obviated if Mr. Brooks could frame his question independently of the statement. Mr. BROOKS. All right.

Mr. LEVER. I should like to suggest that the committee does not care to place itself in the attitude of refusing information; and, as far as I am concerned personally, I should be very glad to have the report go in the record.

The CHAIRMAN. That is a matter the committee can take care of at the proper time.

Mr. NEVILLE. I am not a lawyer; and if I "butted in" prematurely, I wish to apologize to the committee.

The CHAIRMAN. No apology is necessary.

Mr. NEVILLE. But being familiar with the report, and having appeared before that committee for four days

The CHAIRMAN. Your interruption was perfectly proper, Mr. Neville. Let Mr. Brooks now ask his question.

Mr. BEALL. Before he does that, let me suggest that that is not to be interpreted as a ruling that Mr. Brooks's question as originally presented was an improper question?

The CHAIRMAN. Not at all.

Mr. NEVILLE. I did not mean to imply that.

Mr. BROOKS. Then, Mr. Latham, do you think that the so-called "gambling" that is carried on on the exchanges to-day is in the same class as race-track or roulette gambling?

Mr. LATHAM. I am not sufficiently posted about horse racing or roulette gambling to answer the question. [Laughter.]

Mr. BROOKS. Do you believe that it involves practically a certainty of loss to those who are engaged in it?

Mr. LATHAM. I do not believe it involves a certainty of loss.

Mr. BROOKS. Practically a certainty of loss?

Mr. LATHAM. No, sir; I would not admit that.

Mr. BROOKS. Do you believe that it causes a continuous stream of wealth to be taken from the actual capital of innumerable persons of relatively small means and go to swell the income of brokers and operators?

Mr. LATHAM. Will you read that again, sir?

Mr. BROOKS. Do you believe that the practice causes a continuous stream of wealth to be taken from the actual capital of innumerable persons of relatively small means and go to swell the income of brokers and operators?

Mr. LATHAM. No, sir; I do not admit that, for the reason that I do not think the bulk of the money that either goes to or goes from New York is sent there by people of relatively small means; some of it is sent by such persons, I do believe; but the laws that have been

passed, particularly in the South, have prevented the trading in futures by people that are not professionals in the business, and the laws for the abolition of bucket shops and the general prevention of that business are laws that ought to be enforced as fully and as harshly as they are.

Mr. BROOKS. Then do these evils that exist apply to these people of relatively small means or people of considerable wealth?

Mr. LATHAM. Well, I do not know that my knowledge would extend that far; but I do know that in the old days of the South, when there was a bucket shop in nearly every town, that the country doctor, the country lawyer, and the postmaster, as well as everybody, went down to see the quotations and got to trading in futures.

Mr. BROOKS. Do you think there is less future dealing done now, that there was less volume in the last year than there was then? Mr. LATHAM. I do; yes, sir.

Mr. BROOKS. In the New York Exchange?

Mr. LATHAM. I do; yes, sir.

Mr. BROOKS. Well, do you think, without having a continuous influx of new customers replacing those whose losses force them out, that this would not continue as it does to-day?

Mr. LATHAM. I think that the exchanges would yet have a place and that they would continue to go on existing whether there were lambs or not.

Mr. BROOKS. You then think the exchange has no rules or regulations that need modifying or changing?

Mr. LATHAM. No, sir.

Mr. BURLESON. As I gather from your testimony you justify the existence of the New York Exchange because of the facility for hedging there?

Mr. LATHAM. Yes, sir.

Mr. BURLESON. By the merchant, the mill man, and by the cotton producer, if he wishes to do so?

Mr. LATHAM. Yes, sir.

Mr. BURLESON. Now, Mr. Latham, if this facility is not afforded there is no justification, then, for the existence of the exchange, is there?

Mr. LATHAM. I did not quite catch your question.

Mr. BURLESON. If this facility is not afforded there is no justification for the existence of the exchange?

Mr. LATHAM. You mean if no one is to go there to hedge?

Mr. BURLESON. No; I put this question to you, and you answered it in the affirmative; I asked you if you justified the existence of the exchange because of the facility afforded by the exchange for hedging, and you said yes; now, then, if the facility for hedging does not exist upon the exchange it has no justification for existing? I just reversed my question.

Mr. LATHAM. I should say not.

Mr. BURLESON. Now, then, Mr. Latham, I want to ask if it is not a fact that during the past nine years, I will say, the margin of difference between the price of future contracts on the exchange and spot cotton has not been such that instead of eliminating the risk by hedging the risk of the merchant and the spinner has been increased?

Mr. LATHAM. No, sir; I do not think so.

Mr. BURLESON. Now, then, I want to ask you if you concuryou heard the tribute paid to Commissioner Smith's report the other day, that it was a classic on this subject-and I want to know if you concur in this statement

Mr. NEVILLE. Will you please read the rest of the question? Mr. BURLESON. I will put my questions in the way I want them and you can cross-examine the witness if you see fit to do so. I want to see whether you concur in this statement of fact made by Commissioner Smith in this report: "From September, 1899, down to the present time, however, the margin has on the whole been very much greater than in earlier years, and, what is far more important, it has fluctuated with much greater violence." Now, then, he goes on and gives some statistics to support the proposition, and winds it up: "This means that merchants using the market for hedging purposes have been more or less constantly subjected to a very serious risk; whereas, as so frequently emphasized, the purpose of hedging is to reduce or eliminate risk. It means, too, that the calculations of speculators as to the movements of the contract price itself have been rendered more difficult and risks consequently increased." Do you concur in the correctness of those two findings? Mr. LATHAM. Personally, I do not so find.

Mr. BURLESON. Then you think that the Commissioner of Corporations was mistaken in those conclusions ?

Mr. LATHAM. No, sir; I didn't answer you in that way; I said as far as my personal operations were concerned they did not coincide with that report.

Mr. BURLESON. Do you know whether or not he is correct in those statements? I want your opinion.

Mr. LATHAM. I have not read the report and I wouldn't care to venture an answer.

Mr. BURLESON. I asked you whether, in your opinion, the Commissioner of Corporations is mistaken when he states that?

Mr. LATHAM. I said to you that he was mistaken so far as my personal operations are concerned.

Mr. BURLESON. But if, as a matter of fact, he was not mistaken, then you concur with the views expressed by the producers and the spinners who have spoken here, that the exchange ought to be eliminated?

Mr. LATHAM. I did not concur in that.

Mr. BURLESON. But if he is correct, and, as a matter of fact, he states that the margin from 1899 down has been so great that it does not afford a hedge

Mr. LATHAM. I deny that.

Mr. BURLESON. You do not concur in the correctness of his statement, but as I understand it you admit that if he is correct the exchange ought to be eliminated?

Mr. LATHAM. Before making such an admission I would have to read the report carefully.

Mr. NEVILLE. On what page is that, please?

Mr. BURLESON. On page 156.

Mr. LEVER. You can borrow no money on your hedges, can you, from a bank?

Mr. LATHAM. You can borrow money on cotton that is hedged quicker than on cotton that is not hedged.