Mr. BURLESON. Is he a member of the New York Cotton Exchange? There are only 450 of them.

Mr. MARSH. I think not. I was not sure, but I think not. He is an unimportant person.

Mr. BURLESON. Unimportant, but has he been a member of the New York Cotton Exchange?

Mr. MARSH. That I can not answer. Does anybody here know whether Mr. Milne has been a member?

Mr. MENDELBAUM. Yes, sir; he is.

Mr. BURLESON. All right. What do you think of a man who is a member of the New York Cotton Exchange, or has been a member of the New York Cotton Exchange, saying this? He was a member at the time that this statement was made.

Referring to yours of the 14th, asking my views as to the particular difference between grades, I am not now in touch with the business sufficiently to form an opinion. My contention is that cottons which have no standing or class in primary markets are not entitled to recognition or listing by the New York Cotton Exchange. The fact that they are listed and an arbitrary value fixed, and that a buyer of contracts must accept them at the value fixed by the exchange, a value that can not be obtained anywhere else in the world, is in my judgment a standing disgrace reflecting on the integrity or intelligence of every influential member. Whatever may be said regarding past operation of exchange business is proof that the system has given satisfaction, it is true nevertheless that the public is awakening to the fact that "heads, I win; tails, you lose" means that the profit all the time goes to one side and is not, as it first strikes the ear, a fair deal to both.

Now, I want to know if there is any truth in that statement, made by a man who was a member of the exchange at the time it was made. Mr. MARSH. It does not seem to me that there is any truth in it. It never has seemed so to me.

Mr. BURLESON. You said, in response to a question asked by Mr. Sims the other day, in a hypothetical case that he put to you, attempting to show that the price of futures was affected by combination, that it was a pipe dream, or some other expression-I believe you said it was a "fish story." Now, Mr. Marsh, let me read you this, referring to a slump in cotton:

Look as critically as we may, we can find no germane weakness that would account for the sudden collapse of the market. We must look to some outside agency. It is easily found. The slump was the result of a premeditated attack and persistent onslaught by a party of New York operators, backed by ample capital and prestige in speculation.

Mr. MARSH. I should say that was a fish story, too.

Mr. BURLESON. You would say that it was not true, then, would you? That is what I want to know. When you say a fish story," do you mean that it is not true?

What do you think

Mr. NEVILLE. Might I ask whom he is quoting from? Mr. BURLESON. You will have it in a minute. of this? Is this also a "fish story?"

If we believed that the present prices were the result of natural and legitimate causes, we would advise our friends to accept these prices and turn their cotton into money without delay. But we do not believe that the present prices are natural or legitimate. The brief experience we have had with the market this season before speculation interfered, showed that consumers were willing to pay the prevailing prices and producers were willing to accept them. If business had been permitted to run its natural course probably the increased volume of receipts would have gradually lowered prices. This would have been a natural and acceptable result. But when an outside element that knows nothing about cotton and has no interest therein except as a medium for gambling profits arbitrarily, interferes between the producer and consumer and undertakes to fix prices by sheer force of money and manipulation, we believe in suspending the rules and striking with the weapon at hand.

Mr. BURLESON (continuing). What would you say about an opinion expressed by that man about the ability of a combination to go in and drive prices up and force prices down?

Mr. MARSH. I should think he was sore.

Mr. BURLESON. Would you think it was true or false?

Mr. MARSH. I should think again that it was a "fish story."

Mr. BURLESON. What do you mean by that? Somebody may not know what you mean by that. I do not know myself; I do not know whether you mean to say that it is a false statement or not.

Mr. MARSH. An intentionally false statement?

Mr. BURLESON. I don't care whether you say it is intentionally false or not.

Mr. MARSH. I think on the face of it it is false, as a matter of fact. Mr. BURLESON. That was a statement made on September 16, 1907, by the president of the New Orleans Cotton Exchange, W. B. ThompIs he a member of the New York Cotton Exchange also?

son.

Mr. MARSH. He is not.

Mr. BURLESON. Has he ever been?

Mr. MARSH. Not to my knowledge.

Mr. BURLESON. You say, Mr. Marsh, that statement is a "fish story." Now, let me ask you this: What is the standard by which you fix differences between the various grades of cotton in the New York Cotton Exchange? That is, the standard used by your revision committee. The committee consists of 17 members, I believe. Mr. MARSH. Yes.

Mr. BURLESON. What is the standard they use?

Mr. MARSH. I explained to the committee this morning that the revision committee of the New York Cotton Exchange as it now does its work endeavors to arrive at a fair and reasonable valuation of the different grades of cotton as compared with middling, taking into account its information as to the probable quantities of those grades in the crop

Mr. BURLESON. Right there, is there any rule of the New York Cotton Exchange that requires them to do that?

Mr. MARSH. There is not.

Mr. BURLESON. Is there any rule of the New York Cotton Exchange which prescribes a standard to guide them in fixing the difference in value of the grades?

Mr. MARSH. There is not, sir.

Mr. BURLESON. Is it not a fact that they invariably overvalue the grades of cotton that is least in demand?

Mr. MARSH. How is that?

Mr. BURLESON. Does not the revision committee in the New York Cotton Exchange fix the values of grades not in demand higher than they should be?

Mr. MARSH. The commissioner of corporations in his last volume charges the New York

Mr. BURLESON. I beg your pardon; I am not asking you about the report of the commissioner of corporations of New York. I am asking you as a matter of fact-well, I will get at it in another way. Is it not a fact, Mr. Marsh, that New York has ceased to be a spot market for cotton?

Mr. MARSH. Well, there are several hundred thousand bales of spot cotton dealt in in New York every year.

Mr. BURLESON. I will ask you if the number of bales of spot brought to New York is not brought there by reason of an artificial condition created by your exchange?

Mr. MARSH. I do not think they are brought there by an artificial condition. They are brought there because you can get more for them there than in some other market.

Mr. BURLESON. Is not the fact that you can get more for them there than in any other market purely an artificial condition?

Mr. MARSH. Cotton always goes where you can get the highest price for it. That is not artificial.

Mr. BURLESON. Exactly

Mr. MARSH. If it goes to the spinner

Mr. BURLESON. No, no; that is the very point I am trying to get at, Mr. Marsh. Is it not a fact that if it goes to New York at all to find a market that is because of an artificial condition?

Mr. MARSH. Well, sir, New York is alive and doing business, and cotton goes there. That may be artificial, or it may not; I can not answer that question.

Mr. BURLESON. Is not that one of the serious problems confronting the New York Cotton Exchange, as to how to bring cotton there, how to make cotton come there?

Mr. MARSH. It is unquestionably one of the problems we have to deal with.

Mr. BURLESON. And is it not a fact that the revision committee for years has overvalued the cotton least desirable or least in demandovervalued it, understand-in order to draw it there?

Mr. MARSH. No, sir.

Mr. BURLESON. You say it is not?

Mr. MARSH. It is not.

Mr. BURLESON. You wrote a letter to the Atlanta Constitution, did you not, Mr. Marsh, in April, 1907? I referred to it in a speech I delivered in the House, and it is embodied in the Smith report. Of course I am not asking you to accept this report or any fact in it, but I am going to ask you about this letter. Did you write a letter? Mr. MARSH. My impression is that I wrote two or three letters. Mr. BURLESON. On April 26, 1907 ?

Mr. MARSH. I think I wrote one to the Constitution.

Mr. BURLESON. Did you not, in this letter, state that it cost somebody one dollar and a half for every bale of cotton stopped off in New York?

Mr. MARSH. Certainly.

Mr. BURLESON. And that cotton sought by the consumers, the spinners, would not come there because the spinners could outbid those who wanted it to come there?

Mr. MARSH. Will you read exactly what I said?

Mr. BURLESON. Well, I want to know if that is substantially cor

rect.

Mr. MARSH. No, that is not substantially correct.
Mr. BURLESON (reading):

Years ago, in the early days of the New York Cotton Exchange, New York was a market in which large quantities of all kinds of cotton were regularly carried in stock and offered for sale to spinners precisely like stocks of dry goods and other commodities which are now even carried and sold by the New York merchants. This is no longer the case, as it was discovered some twenty years ago by New England spot brokers that they could buy cotton in the South and sell it to New England spinners at practically

the same price the New York merchants had to pay for their cotton delivered in New York. In other words, these New England brokers see that every bale of cotton that comes to New York and is carried in warehouses is subject to an expense of $1.50, which is not incurred if the same cotton is shipped direct from the South to the spinner. By saving this $1.50 per bale the New England broker was able to steadily undersell the New York cotton merchant and speedily capture all the old-time business in spot cotton which formerly New York controlled. Spinners ceased to come to New York in search of cotton for their mills, and the result was that the New York market was no longer able to carry at all times the considerable stock of all kinds of cotton it formerly did.

*

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Now, as has been pointed out above, every bale of cotton that comes to New York regularly costs somebody $1.50 to cover New York expenses; evidently, then, it is never possible for any character of cotton which spinners are buying freely throughout the South to come to New York at all. The mere saving of $1.50 per bale enables the spinner always to outbid New York for such cotton as he is buying freely.

Did I misquote you?

Mr. MARSH. You did, sir.

Mr. BURLESON. In what respect?

Mr. MARSH. Because you left out the phrase, "The spinners were buying freely throughout the South."

Mr. BURLESON. No, was not that what I said, that New York could not get the character of cotton that the spinners were buying? That is neither here nor there. It will not stop there, unless it costs somebody $1.50, will it?

Mr. MARSH. That is true.

Mr. BURLESON. If it does not come there somebody loses $1.50 on it, because he could get $1.50 more for it if the spinners were buying it freely in the South, more than the New York parties could pay. Is not that true?

Mr. MARSH. Yes.

Mr. BURLESON. Now I will ask you if you did not use this expression in that same address:

One of the most serious problems of the New York Cotton Exchange has been and is to frame its contracts so that a sufficient supply of actual cotton will regularly come to New York to insure the maintenance of this reserve.

Mr. MARSH. Undoubtedly.

Mr. BURLESON. Now then, in order to get cotton to New York, you must overvalue the grades that are not being used by the spinners or demanded by the spinners freely to the extent of that $1.50, must you not?

Mr. MARSH. No, sir.

Mr. BURLESON. Then, how do you get it there, and what makes it come there?

Mr. MARSH. Any grade of cotton correctly valued which spinners do not happen to be buying freely at a given moment and which the holders desire to sell will come to New York.

Mr. BURLESON. Will come to New York if it is going to lose somebody $1.50 to get it there?

Mr. MARSH. Certainly.

Mr. BURLESON. Cost him $1.50 more than he could get it by shipping it straight to the spinner, or South for export purposes?

Mr. MARSH. But the statement there is that the spinner is not buying that kind of cotton freely. That is the statement you have got before you, sir.

Mr. BURLESON. Is that what is termed "overs?"

Mr. MARSH. I don't know what are termed "overs."

Mr. BURLESON. Well, if there is a lot of cotton in the South and the spinners are buying freely, and there are certain grades that are not being taken by the spinners, and they leave it over and do not buy it, is not that what Mr. Maury meant in his report when he said overs? Mr. MARSH. I don't know.

Mr. BURLESON. Well, is that what you mean by overs; is that an expression that is used on the cotton exchange?

Mr. MARSH. It is an expression that is used by cotton merchants, and the meaning of it is this: If a spot cotton merchant has contracted to deliver to a spinner a hundred or a thousand bales of even-running cotton, an even grade, and in order to get that he has to buy from the producer 200 or 500 or 2,000 bales of all kinds of cotton, then what is bought beyond the hundred or the thousand bales of even-running cotton is called overs.

Mr. BURLESON. That which the spinners do not desire, then

Mr. MARSH. That which the spot merchant has not contracted at the moment to deliver

Mr. BURLESON. Has not been able to dispose of?

Mr. MARSH. Has not disposed of.

Mr. BURLESON. Is what is called overs?

Mr. MARSH. What the spot merchant has not disposed of.

Mr. BURLESON. Is that what you meant when you said then that cotton that was not in demand freely by spinners would find its way to New York?

Mr. MARSH. That is a part of it; yes.

Mr. BURLESON. What is the other part?

Mr. MARSH. Cotton comes to New York which is not overs.

Mr. BURLESON. Now, what is it?

Mr. MARSH. Spot merchants buy the cotton in the South and ship

it to New York.

Mr. BURLESON. At a loss of $1.50 a bale?

Mr. MARSH. Certainly not.

Mr. BURLESON. For the purpose of certificating in the New York Cotton Exchange?

Mr. MARSH. And for delivering it on contracts.

Mr. BURLESON. For the purpose of certificating it for the New York Cotton Exchange?

Mr. MARSH. It must be certificated to deliver.

Mr. BURLESON. To be delivered on the New York Cotton Exchange?

Mr. MARSH. Yes.

Mr. BURLESON. On contracts for future delivery?

Mr. MARSH. Certainly.

Mr. BURLESON. Now I want to ask you if you do not think there is extreme danger in permitting a committee of active members of the exchange to fix the difference in value between grades, in the month of November, to obtain until the following September?

Mr. MARSH. I do not approve, myself, of that method of arriving at the valuation of different grades of cotton.

Mr. BURLESON. Why don't you approve of it?

Mr. MARSH. Because I think the different grades of cotton ought

to be valued on the basis of their value to the spinner.

Mr. BURLESON. Their value to the spinner is fixed by the demand of the spinner for that particular grade of cotton, is it not?