Mr. MARSH. What is that?

Mr. BURLESON. Their value to the spinner is fixed by the demand of the spinner for that particular grade; the law of supply and demand would fix the value of it, so far as the spinner was concerned, and its value would depend upon the number of bales of a particular grade and the number of spinners who wanted that grade of cotton? Mr. MARSH. The value to the spinner is determined by what he gets out of a given grade in the shape of yarns and goods, as against what he gets out of middling.

Mr. BURLESON. You mean, you would determine it as to its spinning value, as against the value determined by commercial conditions?

Mr. MARSH. What do you mean by "commercial conditions?"

Mr. BURLESON. The amount of a particular grade, for instance, and the demand on the part of the spinners for cotton of that particular grade.

Mr. MARSH. I would fix it upon the basis of what it is worth to the spinner.

Mr. BURLESON. How many members of the exchange agree in that view?

Mr. MARSH. I never counted them.

Mr. BURLESON. As a matter of fact, there is a faction on the New York Cotton Exchange who do not concur in the view that this system in vogue is the best system of fixing differences in values of grade, is there not?

Mr. MARSH. A faction?

Mr. BURLESON. Yes.

Mr. MARSH. I do not know of any such faction on the New York Cotton Exchange.

Mr. BURLESON. Is there any division of opinion as to whetherMr. MARSH. Undoubtedly; there are great diversities of opinion. Mr. BURLESON. Well, what proportion of the members of the exchange approve of the present plan for fixing the differences in value of grades?

Mr. MARSH. At the present time?

Mr. BURLESON. Yes.

Mr. MARSH. There is no way on earth of our telling that.

Mr. BURLESON. Well, take the last time you had a test of the proposition?

Mr. MARSH. We have never had a test of the proposition since it was originally adopted by a two-thirds majority.

Mr. BURLESON. Is it not a fact that the majority of the New York Cotton Exchange are now in favor, or were a couple of years ago, of changing your present rule for fixing differences between grades?

Mr. MARSH. We had no vote upon it. I have no earthly way of telling whether a majority are or are not in favor of it.

Mr. BURLESON. I will ask you if the suggestion was not made that instead of fixing differences in September and November, that one more month for fixing the differences should be added?

Mr. MARSH. Yes; that suggestion was made.

Mr. BURLESON. Was it voted upon?

Mr. MARSH. It was voted upon.
Mr. BURLESON. How was the vote?

Mr. MARSH. The vote was a tie.

Mr. BURLESON. Was not the vote on that proposition 163 in favor of the change, and 123 against it; it being lost because it failed to receive two-thirds vote in its favor?

Mr. MARSH. Those are not the figures that I have in my mind. Mr. BURLESON. The New York Journal of Commerce and Commercial Bulletin is in favor with you exchange people, is it not?

Mr. MARSH. I don't see what that has to do with it.

Mr. BURLESON. I want to get at the truth, as to whether or not they would misrepresent the New York Cotton Exchange, to its prejudice.

Mr. MARSH. Well, this was a matter of history. My impression is that the chairman of this committee has the exact figures of the vote on this occasion. I heard, before I left New York, that the chairman of this committee requested that the figures of that vote should be reported to him, and if that is correct, if I am correct in that, there is no use in discussing the question, because it is a matter of fact that may be determined.

The CHAIRMAN. It may be among my papers, but I have not

seen it.

Mr. NEVILLE. I have those figures here.

Mr. BURLESON. Was not that the vote, as I have given it?

Mr. MARSH. Mr. Neville said his impression was that the vote was 100 to 100, and that was my impression. But I do not attempt to carry in my memory the exact figures of all the votes which are taken on the New York Cotton Exchange.

Mr. NEVILLE. Here you are [handing witness a memorandum]. Mr. MARSH (reading). "One hundred yeas and 100 nays.'

Mr. BURLESON. When was that vote taken?

Mr. MARSH. The 13th of November, 1907.

Mr. BURLESON. I referred to the vote on the 25th of January, 1907. At that time, was not the proposition voted upon, and was it not published in the newspapers the next morning? I refer to the vote on the 25th of January, 1907. Was there not a vote upon that proposition; was there not a vote on the elimination of certain of the quarter grades?

Mr. NEVILLE. Will you pardon my suggestion? You have read the vote. Would you mind reading what they voted on? Perhaps that would give us some light on the subject we are discussing. I think there was something else that you had in mind that was voted upon.

Mr. BURLESON. I have this data here. I clipped it from the New York paper myself. [Reading from the New York Journal of Commerce and Commercial Bulletin, January 25, 1907:]

The New York Cotton Exchange yesterday adopted by ballot the amendment proposed by the manager to its by-laws, which makes strict low middling stained the lowest grade of cotton deliverable under exchange contracts. The change will take effect in January, 1908. An amendment was also adopted eliminating all the quarter grades.

The proposed amendment changing the dates of meetings of the revision committee from the second Wednesday in September, and the third Wednesday in November to the third Wednesday in September, November and February, was not carried, considerable opposition having developed to this feature by Wall street and spot houses, as shown by the following circular, which all members found in their mail yesterday morning:

"We, the undersigned, are of the opinion, after giving the subject considerable consideration, that it would not be advisable to have another revision of differences

between grades of cotton commencing February, 1908, as it would have an unsettling effect on the market by restricting transactions during December and January. Operators would do very little during that period, pending the uncertainty of February revision particularly Europeans, who at times do a large business. The importers and jobbers in coffee have no fear of further revision, as the coffee exchange abolished the rule for fixing differences after it adopted the present differences between grades.

"A vote by ballot will be taken at our exchange to-morrow, Wednesday, January 23, between 11 a. m. and 2 p. m.

"We hope you will be present. If you can not, proxy can be used, which will be furnished by Henry Hentz & Co., or some of the signers of this.

"HENRY HENTZ & Co.
"STEPHEN M. WELD & Co.
"FERNIE, WILSON & Co.

"T. M. ROBINSON & Co.

"WILLIAM RAY & Co.

"HOPKINS, DWIGHT & Co.

"SHEARSON, HAMMILL & Co.

HENRY CLEWS & Co.
C. B. GUEST & Co.
W. R. CRAIG & Co.
C. E. RICH & Co.
LATHAM, ALEXANDER & Co.
SIEGF, GRUENER & Co."

The vote on the first two amendments was overwhelmingly in favor, but the figures on the revision amendments were 163 in favor and 123 against it, it being lost because it failed to receive a two-thirds vote in its favor.

Mr. MARSH. I had forgotten that any vote was taken at that time on the proposition to increase the number of revision dates. The occasion which I had in my mind was the 13th of November, 1907, when a vote was taken on the proposition to make the number of revision dates three instead of two, and on the 13th of November, 1907, the vote was yeas 100, nays 100, which shows a very considerable change in sentiment from the vote which Mr. Burleson reads. Mr. BURLESON. What is the date of that?

Mr. MARSH. November 13, 1907.

Mr. BURLESON. This was January, 1907. Is it or is it not a fact that vote took place?

Mr. MARSH. I don't remember it myself, sir. I presume it did, from the fact that you have a report from a reputable paper that it did take place.

Mr. BURLESON. I will ask you what influences the members; is there any pressure brought to bear upon the members to vote a particular way upon this amendment?

Mr. MARSH. Not in the least.

Mr. BURLESON. Is there a vestige of truth in this, or is it a "fish story:"

"The people who believe in reforming the New York contract have the votes," said one prominent member, "but the old machine has the organization.' There has been a great awakening among the members, but at the same time the people with business to give out to other members usually get what they want, and the machine may win again, although it is to be remembered that the last annual election was not a victory for the revision of November, 1906.

Is there any truth in that statement, taken from the same newspaper?

Mr. MARSH. Not a vestige of truth.

Mr. BURLESON. No such influences are brought to bear by members of the exchange who deal in large volumes of cotton or who deal in large transactions on the cotton exchange, on these brokers who have a vote upon the proposition, suggesting that they will not give them their business unless they vote in a particular way?

Mr. MARSH. Not a vestige or iota of truth in it.

36387-A A B-vol 2—10—18

Mr. BURLESON. I am glad to hear you say so.

[Reading further:]

It should not be overlooked, however, that a few very strong and influential firms, especially if they have representatives on the revision committee, may, in one way or another, create a sentiment that must necessarily influence the committee in their action. For instance, a large spot cotton firm, which also operates extensively in futures, might through its extensive brokerage payments easily influence some members of the exchange serving on the revision committee who were favored with its patronage. Indeed, it is alleged that precisely this thing has happened in New York, and moreover that such large operators have thus been able to influence the election of boards of managers and through them the appointment of revision committees.

What would you say, that that was true or false?

Mr. MARSH. I should say that that was an admirable illustration of what I said this morning to the effect that the report of the Commissioner of Corporations is so lacking in sound and exact knowledge of the facts and in sound and discriminating deductions from the facts that it carries no intellectual authority with any thinking member of the New York Cotton Exchange.

Mr. BURLESON. Now, one more question, and I will be through. You have heard the description of the condition or a state of facts read by me from Mr. Thompson. I want to ask you this question: Can such a condition of the market for futures in New York as charged by Mr. Thompson be brought about by the use of money or independent of current conditions as to supply and demand? Mr. MARSH. It absolutely can not be brought about.

Mr. SIMS. Then Mr. Thompson's statement is not true?
Mr. MARSH. It is not true.

Mr. BURLESON. Not only not true as a fact but impossible of performance?

Mr. MARSH. Yes.

Mr. MENDELBAUM. You may have heard the statement of Senator Smith, of South Carolina, who came here and made what I considered a stump speech, in which he claimed that all the members of the New York Cotton Exchange stand together to rob the outsider, and then consider the line of questions propounded by Mr. Burleson, who tries to show the different factions that exist on the New York Cotton Exchange, can they happen at the same time or would that be possible?

Mr. MARSH. Of course Senator Smith's statement was made without exact knowledge of the facts, and he certainly would not have made it if he had been acquainted with the facts first-hand.

Mr. BURLESON. Bearing directly upon what Mr Mendelbaum said, you know Mr. Scales?

Mr. MARSH. Yes.

Mr. BURLESON. He was at one time a member of the exchange, was he not?

Mr. MARSH. I don't think so. I don't think he was.

Mr. HUBBARD. I think he was one of them.

Mr. NEVILLE. I don't know.

Mr. MARSH. He is not now.

Mr. HUBBARD. E. G. Scales was a member.

Mr. NEVILLE. Is that the letter the chairman read from the rostrum ?

Mr. BURLESON. No; this is another one. [Reading:]

The cotton exchange is a good thing for the producer if their rules are fair, but as it stands to-day it would be best to put them out of existence, as they have their rules so that they can get the country in and then skin them.

Mr. MARSH. Is Mr. Scales the country?

Mr. NEVILLE. Mr. Chairman, I am no lawyer, but we are trying to get a record before this committee in proper shape, and personal allusions without the appearance of the witness to be cross-examined is something that you have studiously avoided up to now, and I consider that in all fairness the admission of such letters as that in the testimony is contrary to the policy that you adopted when you started this investigation.

The CHAIRMAN. As I understand it, Mr. Burleson only used that expression as a postulate for a question. If there is any other present it does not appear.

Mr. NEVILLE. I move it be stricken out, because if Mr. Scales had that view he ought to be here for cross-examination.

Mr. BURLESON. In view of that I will read the entire letter. [Reading:]

Hon. A. S. Burleson,

Washington, D. C.

THE WALDORF-ASTORIA,

New York, February 14, 1910.

DEAR SIR: The inclosed copy of a letter I wrote explains itself. If you can force the New York Cotton Exchange to change its rules so that the spinner can buy a certain grade of cotton on the exchange and get what he buys at once instead of something else, you will have done the whole South the greatest service you could possibly do. While the New York future contracts sentimentally regulate the price of cotton in the South, that contract is so unfair to those who buy it, by forcing them to accept something that they don't want, that it is a menace to legitimate trade and has the effect of keeping prices unnaturally low. If changed as I suggest, it will advance the price of spot cotton and then cotton buyers and spinners will have a hedge contract closely related to spot cotton. I live in Dallas, am familiar with the future markets, and experience has shown me that the change I suggest is what is needed. The cotton exchange is a good thing for the producer if their rules are fair, but as it stands to-day it would be best to put them out of existence, as they have their rules so that they can get the country in and then skin them. If I could talk with you personally I could give you some valuable pointers. I am a planter and raise on my Texas farms about 1,000 bales of cotton each year. I want the exchange, if run on a fair basis; otherwise want it closed up.

Judge Rufus Hardy, Senators Gore, Culberson, and Bailey all know me personally.
H. L. SCALES,
Care of Waldorf Hotel.

I never saw him.

Mr. NEVILLE. That is another Mr. Scales altogether. I don't think he has ever been a member of our exchange. Mr. Hubbard tells me he thinks Mr. E. G. Scales was a member. I move that that letter be struck from the record. If he has such an interest in the matter as he says he has he would be here to-day and not writing a letter.

The CHAIRMAN. I can hardly recognize your right to make a motion.

Mr. NEVILLE. I will make the request then.

The CHAIRMAN. I will take the suggestion into consideration, and unless the members of the committee feel differently from my own. view of the case and wish another order made, I would remark that