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cotton upon the market is concerned, cotton in existence, no matter where it is, is the real market factor, and the only market factor.

Mr. SIMs. If it had been spun, consumed, and changed from cotton into some other form of property in the month of July and August, or June or May—I don't know when they had it—then it would not have been in existence in September in New York, and therefore could not have affected the market ?

The CHAIRMAN. Will you be kind enough, Mr. Sims, to shape your questions so as to bring out information and not make arguments ?

Mr. Sims. You are probably right, Mr. Chairman, and I will try to do so.

I want to state the further fact, as appears from the paper, that the September futures during September were kept up to about 13 or a little over, to the last day of September, and that the Brown & Hayne pool, or whoever they were, had to take and did take altogether about 275,000 bales of cotton which they then had, and had to merchandise, and I will ask you if it is not a fact that they had to sell that cotton afterwards at a lower price than the contract price was at the time the cotton was accumulated ?

Mr. MARSH. I can not answer that question, because I do not know what Messrs. Brown & Hayne's operations were. I never saw their books. I have no information as to whether they made money or lost money in their operations. All I can say on this subject is that so far as I know no single spinner in the world at any time during the summer of 1903 curtailed the consumption of cotton in his mill a single pound by reason of what was going on in the New York or New Orleans markets for futures.

Mr. Sims. Only one more question. Is it not a fact when what you call the bull campaign as being run on the exchange is under way that gentlemen who receive delivery sell some of the cotton that they have received to parties with the contract stipulation that they must ship it out of the New York stock and not run it or tender it on contracts or sell it to anyone for that purpose ?

Mr. MARSH. I have never had personal cognizance of such a transaction, although I have heard that it has been done.

Mr. Sims. If done, is it not uneconomic ?

Mr. MARSH. These “if” questions, Mr. Chairman, I am afraid my brain is not able to deal with.

Mr. Sims. Well, Mr. Chairman, if Mr. Marsh's brain is not equal to the task of answering the questions I shall give it up. I am without real information and I am not trying to ask questions that can not be answered; and if I ask questions along this line that can not be answered by Mr. Marsh, I do not think it is worth while to ask anyone else.

Mr. BURLESON. Do you operate on the New York Exchange as an individual or as a member of a firm ?

Mr. MARSH. As an individual. Mr. BURLESON. How many years have you been a member of the exchange?

Mr. MARSH. I think I was elected in 1901, but I have not kept it as an anniversary.

Mr. BURLESON. What office do you now hold on the exchange?
Mr. MARSH. Vice-president.

Mr. BURLESON. What other offices have you held ?

Mr. MARSH. I have been a member of the board of managers and an occasional member of this or that committee of the exchange.

Mr. BURLESON. Numbers of committees ?
Mr. MARSH. Yes.

Mr. BURLESON. The other day, Mr. Marsh, in response to a question by Mr. Beall, of Texas (when he asked you to distinguish between the conditions which surround the cotton trade which make it necessary to have an exchange for the sale of future contracts for cotton, and the conditions which surround the cotton goods trade, which in value represent about three times the value of the raw product, for which there is no exchange), if I understood you, you stated that the multitude of merchants, retail and wholesale, engaged in disposing of cotton goods enabled the trade to distribute any losses which might be sustained among so many or over so large an area that it was not necessary to have an exchange, but that it was necessary to have an exchange for the sale of raw cotton in order to maintain intact, or protect as far as possible, the volume of capital necessary for the prosecution of the business?

Mr. Marsh. I think that is a very accurate statement of what I said, sir.

Mr. BURLESON. There are fewer people engaged in the manufacture of wool than cotton, fewer people engaged in growing wool than cotton. It takes approximately $500,000,000 to handle the world's wool crop. Differentiate for this committee, if you can, why it is that it is necessary to have an.exchange for cotton and not for wool ?

Mr. MARSH. Before proceeding to speak of the wool I should like to call attention to one point which I did not make in the statement Mr. Burleson quoted from me. I said that the immense number of small merchants who handled dry goods enabled the risk to be distributed to such an extent as not to fall unbearably upon any one of them. I ought to have added to that statement the further statement that the retailers and wholesalers of dry goods work on a margin of profit so large as compared with the profit which handlers of raw cotton work on that a decline in the value of the goods which they have on hand may be very considerable before those goods get down to their cost.

Mr. BURLESON. Well, considering that additional element, please, in a few words, if you can, differentiate between the conditions which environ wool and make it unnecessary to have an exchange for the sale of future contracts for wool ?

Mr. MARSH. That statement which I have just made was preliminary to a statement I desire to make with regard to wool. I have never been in the wool business myself, but a member of my family was in the wool business for a number of years in Boston, which is now the chief wool market in this country, and I became tolerably familiar with the conditions of conducting that trade.

In the first place, in the wool trade, owing to these possibilities of loss, due to having no opportunity to hedge, the margins are kept very much wider than they are in cotton. A wool merchant expects to get, tries to get, at least 20 per cent. A cotton merchant expects to get from one-half to three-quarters of 1 per cent. But, Mr. Chairman, in spite of the wool merchant aiming to get this very much larger margin between what he pays for his wool and what he sells

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it to the manufacturer for, the wool business is one of the most speculative and one of the most dangerous forms of modern merchandizing.

Any wool merchant in Boston will tell you that the wool firms there go through extraordinary vicissitudes of profits and losses

Mr. BURLESON. You evidently mistook the purpose of my question. I want you to tell this committee if you can the difference in conditions which environ the wool trade-I don't care whether those engaged in it lose more money or not; that is a subsequent matter tell, if you can, the difference in conditions which environ the wool trade, which make it unnecessary to have an exchange.

Mr. MARSH. The wool trade would have an exchange in a minute if it could. There is not a wool merchant in Boston

The CHAIRMAN. Well, can you tell us in a word why it can not? Mr. Marsh. The first and chief reason why it is impossible is that the determination of the value of a pile of wool in a warehouse is purely and simply a matter of guesswork. Wool is handled almost entirely in the grease. The value of the wool, however, is its value after it is scoured. Now, there are the most extraordinary divergencies of opinion between the most expert buyers as to the scoured value of any given pile of wool. It is a business which is more largely guesswork than any business probably in the world.

Now, when you come to taking a contract for future delivery, this element of guesswork, of uncertainty as to the real economic value of each particular lot which is to be delivered, introduces problems and perplexities which have so far proved insuperable. There was, as you know, undoubtedly, an attempt some years ago to establish a wool exchange in New York. It was never possible—never proved possible to work out any rules for the delivery of wool on contracts which were dependable, and which worked out in practice in a manner economically sound.

Another difficulty that arises in connection with wool, but along the same line, is that although the total amount of wool produced is very large there is a very extraordinary difference in the characters of wool that are produced, and the valuation of these extraordinarily different characters of wool has proved beyond the powers of any set of wool merchants who have ever put their brains to the matter.

In this connection, however, I should like to call your attention to the fact that there formerly was, and I supposed until I heard a positive statement to the contrary still was, trading in contracts for what are known as wool tops in Antwerp. That one specific

Mr. BURLESON. I beg your pardon; I was not asking you whether there was an exchange at Antwerp, or about a rumor of one in Antwerp. I again direct your attention to my request for conditions which environ the wool trade which you think makes it unnecessary to have an exchange, in the fewest words, please. .

Mr. MARSH. Well, in the fewest words possible, the conditions that make it impossible, or so far make it impossible, are the incalculability of the particular lots of wool that have to be dealt with.

Mr. BURLESON. Now, Mr. Marsh, am I to understand by that answer that the principal reason why the trade requires no wool exchange is that there is a much larger number of grades of wool than there is of cotton ?

Mr. MARSH. Yes; I am sure of it.

Mr. BURLEsoN. And you think the extreme doubt about the quality of wool that there is another reason why you can not have a wool exchange? Mr. MARSH. I did not say the extreme doubt about the quality of wool. I said the extreme doubt as to the value of each particular lot of wool. Mr. BURLEsoN. All right. Would not doubt as to the value of each articular lot of wool that make for speculation rather than diminish the chances for it, and, in fact, afford an additional reason why you should have a wool exchange, from your viewpoint, rather than a reason why you should not have one? Mr. MARSH. Mr. Burleson, I do not think the reason for the exchange is the opportunity it offers for speculation. Mr. BURLEson. No, but to eliminate risk; but I will ask you this question: Was not the principal reason for failure to establish the wool exchange in New York because the existing exchanges furnished sufficient facilities to anyone who wanted to speculate or gamble, and that the wool exchange did not receive the patronage necessary to keep it going? Mr. MARSH. I have not been so informed. My information has been that the trouble with the wool exchange was the impossibility of making rules and regulations of a general character to apply to a commodity so incalculable in its varieties as wool. Mr. BURLEson. You know Mr. J. R. McColl? Mr. MARSH. Yes, sir. Mr. BURLEsoN. He was at one time the president of the National Association of Cotton Manufacturers? Mr. MARSH. Yes. Mr. BURLEsoN. You are not in accord with the view expressed by Mr. McColl when he said, speaking as to the necessity for a cotton exchange: Why should it be so, if the wool crop of the world, amounting in value to $500,000,000 annually as well as the silk and linen crop, are marketed successfully without trading in futures, this system does not influence or move the crop, and it certainly affords great opportunity for speculation which, is injurious to legitimate industry. The speculator claims to foresee coming conditions. Unfortunately this is not his chief business. It is to create temporary artificial conditions by selling quantities of cotton that he does not own or buying cotton he does not intend to accept delivery of. In the long run it must of course be admitted that supply and demand regulate price, but in the intermediate artificial fluctuations the speculator makes his money and the grower and manufacturer are apt to suffer disaster. You do not agree with those views at all, although Mr. McColl is the president of a number of cotton mills and has been a manufacturer of cotton for many years. Mr. MARSH. My first answer to that would be, Mr. Burleson, that there is no commodity handled in the United States in which there is more constant speculation than there is in wool. The speculation in proportion to the amount of wool handled is in my opinion fully as great as the speculation in cotton. Mr. BURLEsoN. And yet it is not necessary to have a wool exchange to hedge the risks. Mr. MARSH. There is no exchange. Mr. BURLEson. You said yesterday, in response to a question asked by Mr. Scott, that it was unsafe for the spinner and unwise for the spinner to go to the New York Cotton Exchange.

Mr. MARSH. Did I use those words, sir?
Mr. BURLESON. I think you did.
Mr. MARSH. Did I say unsafe?
Mr. BURLESON. I think so.

Mr. MARSH. Unsafe and unwise? I should be very glad to have the matter looked up.

Mr. BURLESON. Well, did you use the word unwise ?

Mr. MARSH. I do not remember using the word unwise. My recollection is that I said the contract for future delivery of cotton in New York was a cotton merchant's contract; was not designed for the use of spinners.

Mr. BURLESON. And that it was unsafe and unwise ?
Mr. MARSH. I don't think I said that, sir.

Mr. BURLESON. Well, do you say it is unsafe and unwise or do you not-for him to go there?

Mr. MARSH. In determining safety and wisdom I am not particularly an expert.

Nr. BURLESON. Well, I will put it to you this way then, if you can not readily answer that question. Does the spinner go there?

Mr. MARSH. I think he does.

Mr. BURLESON. Would you be surprised to know that Mr. McColl, of whom I spoke, in testifying before this committee has said:

My opinion is that the spinners of this country have used the future market to a very small extent. Lately they have been forced to use it more, but they have not used it to any large extent in years gone by. There are thousands and thousands of manufacturers who have never bought a bale of futures.

Is that statement, entertaining the view that you have just, Mr. MARSH. I think that statement is absolutely correct. I think the spinners of this country until a few years ago were of the opinion that the course for them to pursue was, as one of them stated to Mr. Hubbard and me, in a rather excited argument we had at Washington, to take a merchant's view of the situation and buy their cotton when they thought it was cheap, or sell their goods when they thought the price of the goods was high, and if they had bought their cotton when it was cheap, carry it until they sold their goods; or if they had sold their goods when they thought cotton was high, to keep short of cotton until they had a chance to buy the cotton at a lower price. It is a rather interesting commentary upon this spinner's attitude that his mill has during the last year practically gone bankrupt, that this spinner himself has been turned out of his job as treasurer of the mill, and that the Bishop of Massachusetts, who was a large stockholder in the mill, has preached a sermon against speculation.

Mr. BURLESON. Who was the spinner you speak of?
Mr. MARSH. I will not mention his name.

Mr. BURLESON. This statement made by Mr. McColl was rather a broad statement and embraced the use of futures for hedging purposes or any other purpose. I am asking you if it is not a fact that for many, many years the New England spinners especially have been extremely hostile to the New York Cotton Exchange upon the ground that its practices were inimical to their interests or the interests of the trade?

Mr. MARSH. The older generation of spinners in New England was unquestionably hostile to the New York Cotton Exchange or any cotton exchange, but the new generation of New England spinners

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