who are just getting into the field are, so far as I know, unanimously of the opinion that they could not conduct their business without the aid of the exchanges. And the reason for that, Mr. Chairman, if Mr. Burleson cares to have it, I will give.

Mr. BURLESON. Yes; I would like to have any reason you can give, if you can put it in a few words.

Mr. MARSH. I can, sir. The older mill treasurers of New England began with small mills and gradually built them up to large mills. When their mills were small they had no trouble in going to the banks and borrowing money enough to buy the cotton, which was comparatively small in amount, to run their mills. As their mills grew and these older treasurers remained in the saddle, the banks insensibly enlarged their accommodations to these treasurers, and so until the end of the career of these successful old treasurers they had no trouble in getting the money from the banks to buy the cotton which they needed. But now, sir, younger men are taking the place of these old treasurers, and the banks are beginning to ask questions. They say, "It was all right for us to lend money enough to buy 100,000 bales of cotton to Mr. Thomas Jefferson Coolidge, who was a seasoned veteran, who had grown up in this business, who had made an enormous amount of money for his mill, and we could trust him; but how about this young man who has got to come in and take his place? Are we willing to lend eight or ten million dollars to this young man on his judgment as to when is the right time to buy cotton? This young man has not been through the mill. We can not trust his judgment."

And the consequence is, sir, that as these younger spinners come along they are abandoning, and abandoning perforce, the manner of conducting the business of those older spinners, and now you will find younger spinners in New England conducting their spinning to a large extent in the way in which the English spinner conducts his business. He hedges his sales of goods by buying some cotton; or if he buys cotton at a time when he thinks the quality he desires is most easily obtainable, he sells or hedges against it.

Mr. BURLESON. Then in a nutshell you say the reason for this change is that the moneyed class in New England had a confidence in the old spinners that they have not in the younger ones, and here the bankers force the latter to hedge? If that is so, no man would be better advised of it than the president of the New York Cotton Exchange, would he? If this change in sentiment had taken place, or this view point has changed, on the part of the New England spinner, there would be no person who would be better informed about it than the president of the New York Cotton Exchange?

Mr. MARSH. The president of the New York Cotton Exchange never lived in New England, and I have lived there.

Mr. BURLESON. But is it not his duty to keep posted, Mr. Marsh, and haven't you said that one of the great advantages of this exchange was the facilities and opportunities its membership had for keeping right up with the trade, for gathering all kinds of information from all sources with reference to the trade? Would you say, then, that you would expect ignorance upon the part of the president of the exchange with reference to this change of sentiment on the part of the New England spinner?

Mr. MARSH. I should not expect anything.

Mr. BURLESON. Let me read you something that was said by the president of the New York Cotton Exchange, addressing the New England spinners [reading]:

The hostile attitude taken by the spinners of New England, at the formation of our exchange, and which has continued with more or less intensity during the past thirty-six years—

It was organized in 1871, and thirty-six years would bring it down to 1907, would it not? I haven't the date, but I take it from that that it must have been in 1906 or 1907 when this address was made [continuing reading]:

was, and is, to my mind, a mistaken policy, which the spinners of England and Continental Europe have avoided by their daily intercourse with merchants from all portions of the world.

If this change of attitude has taken place, Mr. Hubbard, who made that address, was not aware of it, was he, unless he was making a very loose statement or a false statement?

Mr. MARSH. I don't know what Mr. Hubbard was aware of.

Mr. BURLESON. Well, if he made that statement was he mistaken about it?

Mr. MARSH. A tendency had already set up which he did not call attention to in that statement, unquestionably.

Mr. BURLESON. And it has ripened in the last two years into a complete change, you would think?

Mr. MARSH. So far as the younger spinners are concerned.

Mr. BURLESON. There is about as much cotton manufactured in the South as in New England. The president of the American (Southern) Cotton Spinners' Association was here, Mr. Parker. Do its members patronize the New York Cotton Exchange to any extent ?

Mr. MARSH. Mr. Parker?

Mr. BURLESON. No; I didn't say Mr. Parker. I said the Southern Cotton Spinners.

Mr. MARSH. Mr. Parker is one of the best customers of the New York Cotton Exchange.

Mr. BURLESON. I didn't say Mr. Parker. I said the Southern Spinners.

Mr. MARSH. The Southern Spinners certainly use the facilities to a large extent.

Mr. BURLESON. Did you grasp the meaning of that resolution they adopted when they said the conditions on the New York Exchange made it unsafe to attempt to hedge there? How do you explain that if that is true? Can it be explained, Mr. Marsh?

Mr. MARSH. It can be explained; yes.

Mr. BURLESON. How do you explain it if it is true?

Mr. MARSH. I explain it as the case of certain gentlemen wishing to force certain other gentlemen to do something they want to have them do and using severe language to that end.

Mr. BURLESON. Then you take issue with the sincerity of statement embodied in that resolution, do you?

Mr. MARSH. I certainly do.

Mr. BURLESON. What is it that fixes the price of a future contract on the New York Exchange?

Mr. MARSH. A member of the exchange ready to buy and another member ready to sell at that price.

Mr. BURLESON. It is the fact that an offer is made and accepted which fixes the price of futures?

Mr. MARSH. Yes.

Mr. BURLESON. Now, what is the basis which controls the fixing of a price by the seller? In other words, upon what is the price to sell based?

Mr. MARSH. In the case of a merchant hedging it is based on what he has paid for his cotton in the South.

Mr. BURLESON. As a matter of fact, you maintain a reserve in New York City of cotton to be delivered or tendered on contracts?

Mr. MARSH. We do not maintain a reserve. There is, under the natural operation of our by-laws and rules, a reserve there.

Mr. BURLESON. We will get to that in a minute. I want to know if there is a reserve there?

Mr. MARSH. There is a reserve there; yes.

Mr. BURLESON. As a matter of fact, is not the price of future contract based upon what is in that reserve, and does not a knowledge of what is in that reserve control and fix the price of the future contract?

Mr. MARSH. No, sir.

Mr. BURLESON. You know Mr. J. F. Maury? (After a pause.) I mean Mr. James F. Maury. He is a member of your exchange. Mr. MARSH. Then I know him.

Mr. BURLESON. A sufficiently important member of your exchange to have been continued for a number of years as chairman of one of the important committees of the exchange.

Mr. MARSH. He is the treasurer of the exchange.

Mr. BURLESON. The present treasurer?

Mr. MARSH. Yes.

Mr. BURLESON. What do you think of this statement coming from Mr. Maury?

The present price of our futures represents the value of the kind and grades of cotton which the buyer expects to get if he calls for delivery.

Is that true or was he mistaken about that?

Mr. MARSH. In one sense of the word it is true and in another sense of the word it is not true. It is, of course, true that the character of cotton likely to be delivered in New York in its relation to middling cotton will have an effect on the price of futures relative to the prevailing price for middling cotton.

Mr. BURLESON. Then you accept that statement of Mr. Maury as true?

Mr. MARSH. Absolutely and completely? No, sir.

Mr. BURLESON. You do not?

Mr. MARSH. No.

Mr. BURLESON. Now, then, see if the chairman of your committee, Mr. Maury, has not stated the whole truth in that particular; see if you agree on this part of his statement:

He expects low grades and mixed lots, etc.

That is the man to whom cotton is tendered under the contract. He expects low grades and mixed lots.

Mr. MARSH. When?

Mr. BURLESON. When the cotton is tendered to him under the future contracts that are made on the New York Exchange.

Mr. MARSH. There are no such grades in the stock in the port of New York at the present time, and so he can not possibly expect it. Mr. BURLESON. Then, what do you think about this statement (I read from Mr. Maury's report):

If you go to any great southern market, as Memphis, New Orleans, Galveston, etc., you will see large lots of cotton of the various spinners' grades inspected and classed out in even-running lines of single grades, ready for purchase by spinners or exporters. We used to see these in New York years ago, but we do not now-it does not pay to send them here.

Mr. MacColl, president of the National Association of Cotton Manufacturers, in his recent address on April 24, advises establishing a cotton exchange in New England, especially for spot cotton, to bring the planter and spinner nearer together, and to have fixed standards of grade and sworn classers. We have all these and a working system tested by years, but it is tied down to a small number of bales of mixed lots brought to New York, because they are hard to handle elsewhere.

The speculative business will come here, too, because here are the largest number of buyers and sellers, and our future prices will then be based upon spinners' cotton, as they can not be said to be now.

The cotton world is demanding of us that we must represent the real trading basis, the spot prices for spinners' cotton, not prices based on "overs," low grades, and speculation.

That is the statement made by Mr. Maury in this report which he made to the New York Cotton Exchange, "that your prices for future cotton were based on overs, low grades, and speculation, and not on spot cotton." Is that true or false? That can be answered yes or no. You understand the question, do you not?

Mr. MARSH. I don't think I do.

Mr. BURLESON. I will repeat it in order that you may understand its full meaning, because I want you to answer it, whether it is true or not. This is the report to the exchange made by Mr. Maury, and he makes this statement.

Mr. MARSH. Will you permit me to ask there what that report is. You say a report made by Mr. Maury?

Mr. BURLESON. As chairman of your classification committee, I believe you call it, which was made July 10, 1907, before the New York Exchange. It was by a committee of the New York Exchange, the "Committee on Licensing Warehouses," of which Mr. Maury was chairman. I will read it again, because I want you to understand it, and I want you to say whether it is a false statement or not. There are certain facts connected with this business upon which you are entitled to draw your conclusions, and I want to agree with you, if I can, on the facts, and you may draw your conclusions and I will draw mine from the same facts. I want to ask you now this question. I will read this again:

The cotton world is demanding of us that we must represent the real trading basis, the spot prices for spinners' cotton, not prices based on "overs," low grades and speculation.

Now, Mr. Marsh, I want to know whether or not this statement made by Mr. Maury and four or five or six others-how many exchange members are there on that committee? It was signed by all the membership of the committee. Is it true?

Mr. MENDELBAUM. Mr. Chairman

The CHAIRMAN. I think Mr. Marsh is entirely competent to take care of himself.

Mr. MENDELBAUM. He has stated that he was chairman of the committee on licensing warehouses, and if Mr. Burleson would read exactly

what was said there he would see that he was chairman of the committee dealing with the proposition to deal with southern warehouses. The CHAIRMAN. I will repeat that I think Mr. Marsh is capable of taking care of himself, and I prefer to have it left with him.

Mr. MARSH. I answer that question, Mr. Burleson, by saying that Mr. Maury was absolutely correct in saying that the world expected the New York Cotton Exchange-will you read just what that is?

Mr. BURLESON. I agree to that part of it. I agree that that is what the world is demanding of your cotton exchange. That is not the part I am after. "Spot prices for spinners' cotton, not prices based on overs, low grades, and speculation." Now, I ask you the question, Are your prices based on overs, low grades, and speculation?

Mr. MARSH. I reply that they are not, and never have been.

Mr. BURLESON. Then, the statement made by Mr. Maury to that effect is not true?

Mr. MARSH. He does not say that they are.

Mr. BURLESON. What does he say, if he doesn't say that; what is the purport of his statement, Mr. Marsh?

Mr. MARSH. You have the statement before you.

Mr. BURLESON. I certainly have, and I have read it, and I so understand it. If he does not say that they are based on overs, low grades, and speculation, what does he say that they are based on?

Mr. MARSH. I can not see from the statement that he says they are based on anything.

Mr. BURLESON. Are you content with that answer to that question? Mr. MARSH. I think the answer is a good answer to the question. Mr. BURLESON. All right.

The CHAIRMAN. Let me ask you one question there. Would it be a fair inference from the statement Mr. Burleson has read that in the judgment of Mr. Maury the prices are based on overs, low grades, and speculation?

Mr. MARSH. It would be a fair inference. If I might have an opportunity to explain

Mr. BURLESON. I will give you an opportunity later.

Mr. MARSH. May I suggest that I am in the hands of the chairman, and not asking the privilege of the gentleman from Texas? I await the ruling of the chairman.

The CHAIRMAN. I think it would be fair to let the gentleman explain the circumstances.

Mr. MARSH. Mr. Maury is a member of the New York Cotton Exchange. He has not been in the active cotton business for many years. He is a man whom we all greatly esteem, and whose position as a member of the New York Cotton Exchange commands the highest respect on the part of his fellow-members. But he has not been in the active cotton business for many years. If I may venture to say so, he is somewhat of a theorist, and he has conceived a certain opinion as to the necessity of the cotton exchange extending its license warehouse system to Southern States, and in arguing for that position he has rather taken up the current talk about the stock of cotton in the port of New York, which he is not himself handling, and which he has not handled for many years. Therefore that answers that. Mr. BURLESON. All right. If you repudiate Mr. Maury and his committee, I ask if you know Mr. James T. Milne?

Mr. MARSH. Yes; I think I do know who he is.