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HEARINGS

BEFORE THE

COMMITTEE ON AGRICULTURE

DURING THE

SECOND SESSION OF THE SIXTY-FIRST CONGRESS

IN

THREE VOLUMES

Vol. I. HEARINGS ON ESTIMATES OF APPROPRIATIONS FOR THE FISCAL YEAR ENDING JDNE 30, 1911

Vol. II. HEARINGS ON BILLS FOR THE PREVENTION OF "DEALING IN FUTURES" ON BOARDS OF TRADE, ETC.

VoL III. HEARINGS ON MISCELLANEOUS BILLS

Vol. II

Sixty-fiust Congress, Second Session

WASHINGTON

Government Printing Office

1910

4 0 14BSU 11\l J
1£ XL '""P

4/02 31150-200— w

PREVENTION OF "DEALING IN FUTURES" ON BOARDS OF

TRADE, ETC.

Committee On Agriculture,

House Of Representatives,

Wednesday, February 9, 1910. The committee met at 10.30 o'clock a. m., Hon. Charles F. Scott

(chairman) presiding. The Chairman. In compliance with the order that was made by

the committee at its last meeting, the object of the meeting this morning is to take up the consideration of the bill H. R. 2159 and a number of other similar measures which are known generally as the "antioption bills." A number of gentlemen are here desiring to be heard on one side or the other of this question, and it might perhaps expedite business if we could have all such gentlemen make themselves known at this time and state what credentials they bear, if any, or whom they represent. May I ask, first, that Mr. Barrett, who is the president of the Farmers' Union, I believe, state what gentlemen are with him as representatives of that organization.

Mr. Lever. Mr. Chairman, if you will permit me just a word; this is such a very important hearing, and means so very much to the country, that I feel that the witnesses—because they are witnesses— should be put under the oath of this committee, and I therefore move you, Mr. Chairman, that you administer the ordinary oath to the witnesses.

(The question was taken and the motion was agreed to.)

The Chairman. Mr. Barrett, I am not asking you now to take the witness stand, but will you be kind enough to give to the stenographer a list of the names of the gentlemen who are here as the official representatives of your organization?

Mr. Barrett. As the representatives or spokesmen?

The Chairman. As the representatives, and they can then be presented as spokesmen afterwards.

(The names of the following gentlemen were handed to the stenographer bv Mr. Barrett as representing the National Farmers' Union: Charles S. Barrett, T. J. Brooks, D. J. Neill, Dr. William Bradford, D. F. Domblaser, II. L. Pettit, W. A. Morris, John Grady, M. B. Tapp, md S. M. Shufford.)

The Chairman. Gentlemen who are here representing organizations rill please hand to the clerk of the committee their names and crelentials. The only gentleman who has spoken to me is Mr. Morrow, i Memphis, and I will ask him to be kind enough to present his crebntials to the clerk of the committee, and I will ask Mr. Cramp, of few York, also to do so.

Mr. Burleson. May I suggest that an announcement be made of hose who are going to appear as witnesses in order that it may be known who they are, with a view to preparing for any cross-examination?

The Chairman. That was the purpose that the chairman had in making this suggestion that the names be presented as soon as possible.

Mr. Mandelbaum. I represent the New York Cotton Exchange, Mr. Chairman. We have not any special credentials here, but as I understand it, you have been notified by the president of the Cotton Exchange as to the committee.

The Chairman. I have received his notification. That will be entirely satisfactory to the committee. Mr. Barrett, will you indicate your spokesman?

Mr. Barrett. Mr. Brooks will represent us at this hearing.

Mr. Cone. Mr. Chairman, I came up here more as a spot-cotton dealer or mill man, but I would like to make a few remarks during the course of this hearing, more as a spot-cotton dealer and mill owner than as representing any other interests.

The Chairman. We will be very glad to hear you. It would seem as though the most natural method of procedure would be for the proponents of the measure and its supporters to present their views first, and I will ask Mr. Brooks as representing the producers of cotton if he is ready now to take the stand.

TESTIMONY OF MR. T. J. BROOKS, OF ATWOOD, TENN.

(The witness was sworn by the chairman.)

The Chairman. Let me state first, Mr. Brooks, that it is the custom of the committee to feel pretty free to ask questions of gentlemen appearing before it, the questions of course always being asked with courtesy and in good faith, to elicit information; but we wish to consult the convenience of gentlemen who appear before us, so far as possible, and I would like to ask you whether you would prefer to make your statement first and then have whatever questions the members may wish to ask put to you afterwards, or whether you would prefer to submit to interruptions at any time?

Mr. Brooks. That would depend upon the amount of time granted. If the time was very limited, I would prefer to make the talk and then be asked questions.

The Chairman. I think it would perhaps expedite the hearing if the witness should be permitted to make his statement first, and the members would reserve their questions until he has completed his statement.

Mr. Brooks. Mr. Chairman and gentlemen of the committee, as has been announced, I am the representative of the Farmers' Educational and Cooperative Union of America, the largest agricultural organization in the world, to talk upon this subject of the abolition of future dealing, and if it is the desire of the committee I will give the names of the States that the organization exists in.

The Chairman. I think it would be well to present such a list, so as to give the committee an idea of the scope of the organization.

Mr. Brooks. We are organized in Washington, Oregon, Idaho, California, Arizona, New Mexico, Colorado, Nebraska, Iowa, Kansas, Oklahoma, Texas, Louisiana, Arkansas, Missouri, Illinois, Kentucky, Tennessee, Mississippi, Alabama, Georgia, Florida, South Carolina, North Carolina, Virginia, and Indiana; twenty-nine States, if I have named them all.

Mr. Chairman, this is a serious question; it involves hundreds of millions of dollars, and millions of people—the welfare of millions of people, financial and otherwise—and I shall not deal in jest nor in billingsgate. It shall be our purpose to try to approach this subject from the standpoint of statesmanship and welfare of the mass of the people, and not to argue simply from the standpoint of the selfish interest of any class or any section of the country; and without going into the details of the organization and rise and development of the exchanges with which the committee is doubtless familiar, I think it is best to come at once to those points of cleavage between the advocates of future dealings and those who are opposed to them. Mr. Chairman, innocence in youth is no excuse for misconduct in age, and it does not matter how innocent or how serviceable an institution may be in its incipiency and early development if it develops characteristics that are evil it should not escape retribution commensurate with the crime, and if we can point out that there are evils now committed by these exchanges in the practice of dealing in futures we think that will be the mam task for us, as we will not discuss the merits or demerits of any particular bill now under consideration. We trust to the wisdom of the committee and of Congress to frame a bill that will accomplish the purpose intended, and the purpose intended is the thing we wish to discuss.

Mr. Chairman, the exchanges are incorporated institutions composed of brokers who elect their own members, make their own rules, and limit their own membership, at least in part of them, and do not report to the public the volume of business that they do in a vear, nor all of the other methods used in carrying on their business. They are not, as they were originally, organizations or institutions primarily for the purpose of bringing together buyers and sellers of spot cotton or grain, as the case may t>e. The chief function of mat exchange is supposed to be to furnish a place and the means by which buyers and sellers come together and carry on their business; but the chief function of the exchange as defined by Mr. Herbert' Knox Smith is to-day to furnish uniform quotations through the country and to furnish a place to hedge. Now, Mr. Chairman, it may be within the minds of some people, for reasons sufficient to them, the chief function of the exchange as now operated is to offer an instrument or a temptation for investors, and to get considerable revenue out of the forfeitures of the margins staked on those changes in prices which the exchange deals with. As the principle is universally the same in handling grain and in handling cotton, and as we are not at all considering the subject of stock exchanges, I will confine most of my remarks to the cotton part of this question—the cotton exchange. The methods of the cotton exchanges are not understood by the mass of the people. Many of these rules are adopted solely for the reason that they do not want to be compelled to deliver cotton that is bought through the exchange. Since the custom of giving a through bill of lading from interior points to foreign markets has been in vogue, it has almost destroyed one of these exchanges as a spot cotton market, namely New York. This has necessitated the rules of the exchange being so arranged as to give the seller an advantage in trade, and this is why when futures are

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