instead of being before a committee on agriculture I was before a committee of manufacturers. I have heard a lot about the buyer and I have heard a lot about the spinner, but I have heard very little about the seller and the producer. The producer is the man who wants to obtain, and should obtain, the greatest value possible out of the products which he raises. Now, then, if we can establish a valuation of cotton based upon the scientific value of cotton, we have accomplished something which is entirely new; we have established something which is of the greatest benefit to this country, and which is of the greatest benefit, of course, to that section of this country which produces the cotton crop-that is, the South.

Liverpool has asked us to adopt a standard of classification; that is, to adopt a standard of middling and good middling and low middling, and we respond to Liverpool by saying, "We will adopt a standard provided you will class every bale of cotton that goes to Liverpool that is submitted for arbitration, by that box; that a bale of good middling is a bale of good middling by that box, and the value of that bale of good middling is good middling; it is not the value that two or three men, arbitrators of the Liverpool market, may place upon that good middling when it reaches Liverpool." In other words, our efforts are devoted to this principle: We believe that the difference between the grades should be settled on the day of the sale and not on the day of the delivery. We find the planter now coming to sell his cotton forward, or in March, for delivery next October, insists with his commission man that he shall receive from him, from the planter, the grades of cotton at a fixed difference; that is, he says, "I want to sell you 300 bales of cotton for next October delivery, and I will deliver you that cotton in October, that good middling a quarter of a cent on, and low middling a half a cent off." He comes to an arrangement as to that point. Therefore he fixes the difference. He knows what he is actually going to receive. He is going to deliver that cotton in October, six months, nine months, before the cotton is planted. We find the consumer doing the same thing. We find him coming to us and saying, "I will buy from you a thousand bales of strict middling cotton at a quarter of a cent on, and I will fix the price of the cotton itself whenever I wish." In other words, he buys his fixed difference. Now, then, if it is a good thing for the planter to do that and it is a good thing for the consumer to do that, why is it not a good thing for the merchant to do it?

We believe that we are propounding a theory for the benefit of the producer, for the benefit of the country, and for our own benefit, in giving stability to the value of the cotton in which we deal, and we are utterly dumbfounded to see the Government of the United States bring forward a proposition to commit the valuation of this cotton of which we ship 60 or 70 per cent to Europe, to the people on the other side, in order that we may do business under a precedent and not do business under new methods which come up from day to day. The ordinary business life of an exporter of cotton in the United States does not exceed five years. It may exceed three years. You can look all over the South and you can count on the fingers of your two hands the number of men who have been in the export business exclusively in cotton for five years, and the reason is what I have been able to show you. He ships the cotton to the other side. The value of that cotton is determined not on the day he sells it, which may be

in September or October, but on the day that it reaches Liverpool, which may be January or February. While that cotton is afloat, Mr. Chairman, a storm sweeps over the South, the grade of the cotton is injured, a frost may come, and it is made tinged. That cotton reaches Liverpool, some portion of it does not come up exactly to the standard which he sold, and the value of that cotton, the reclamation on it, is determined, not on the value of the cotton on the day on which he sold it in the United States, but on the day on which it was delivered in Liverpool, Bremen, or Havre, and he has had all the contingencies of the weather against him and none in his favor; he can not have any in his favor. You say, "Well, men do this business. Why do they go into it? Why does it continue?" Why? The answer is very simple. I went into that business myself. The fascination to a young man to draw a bill of exchange on Rothschilds, or the North German Deutscher Bank of Berlin, or Barring Brothers, of London, and to feel that somehow he is in partnership with those firms, because he has that privilege, is very strong. Another reason is the fact that he always feels that he knows a little more than his father, and that is a very excellent thought, because if it were not so the world would not move. But after having been engaged in that business long enough to have lost a considerable sum of money, I quit it, and it took me five years to find out why I lost the money, but I found out, as other people have found out. So that now the American export houses who live do so by maintaining a house in Europe.

It is a remarkable feature, gentlemen, that if any of you travel on the seas you never see the flag of the United States on a merchantman; you never see it in the ports of Europe. We transfer all our cotton and all our wheat and all our products of every description, and send them to Europe on somebody else's ships. Did you ever stop to think that a foreign ship is the only article in the world that a citizen of the United States is prohibited by law from buying or selling? You can trade in anything else, but when it comes to buying a ship, you can not trade in it. If you prohibit a man trading in cotton for future delivery in the United States it is needless to say that that method of trading will continue in other portions of the world. The world does not go backward; it moves forward.

Having established this court of arbitration in New York, and having established this method of fixing the differences, what do we find? We find the cotton exchange of New York, instead of becoming and remaining a local institution, has become an institution in which men engaged in the cotton trade for their own benefit, for their own advantage, for their own prestige, seek to join. We find members of the cotton exchange in Boston, Philadelphia, Baltimore, in the historic city of Richmond, and its port, Norfolk; we find them in Charlotte, Greensboro, South Carolina, that wonderful country which seems as though it were touched by an Aladdin's lamp in my memory; we find them in Augusta and Savannah, and even back in Alabama a membership has recently been taken out by a spinning friend of mine of many years standing; in Birmingham, in Mississippi, in New Orleans, in Texas, in Memphis, and in St. Louis. All those men have a vote in making the rules of the exchange, and we ask them to come and serve on our revision committee, something that is not known in any other exchange in the world.

Then we find that when you land in Liverpool and feel a little lonely in that dust and dirt of the city; when you land in Havre and look around those beautiful streets, or at those beautiful skies; when you land in Bremen, that wonderful city of German enterprise; whether you are in Moscow, listening to the bells of Kremlin, looking down the snowclad streets; or whether you are in Alexandria, under the shadow of Cleopatra's Needle, looking for the remains of the library of Alexander; or whether you are on the top of the Cathedral of Milan, that beautiful marble treasure, and looking out on the streams of the Alps, and noting that they are harnessed with electric power and have been for the past fifteen years for the purpose of consuming American cotton; or whether you are in Barcelona, the home of the cotton-spinning industry of Europe and you feel at all lonely, all you have to do is to turn on your heel and walk into the office of a member of the New York Cotton Exchange. This is an institution which is not confined to one city or one State or one country. You find these gentlemen everywhere. The reason they join this exchange is because of the fairness of the methods which we have adopted. If they were not fair, if the members were not satisfied, they would go and do their business elsewhere, and that is the reason why our business has grown as it has in the past, and, as I believe, it will continue to grow in the future.

As I have said, we keep our cotton in the warehouses in New York, that portion of it which comes to New York, but we do more than that. After we have put the cotton in the warehouse and locked the doors, we put a notice on the outside of the warehouse that "In this warehouse are 165,000 bales of cotton," of which so many bales are good middlings, and so many middlings, and so many low middlings, and so many strict good ordinary, and if you want to buy that cotton you know you are going to get the cotton which it is to the advantage of the seller to deliver to you. The buyer is put on notice. Is that done in any other trade except the cotton trade; in any trade, in any business, does any man tell you what he has got for sale before you enter his store to buy it?

I have heard since I have sat here this question of arbitration amongst the spinners. We established this court, gentlemen. There is a little verse somewhere in the Scriptures, I think it is in Matthew, which says:

Settle with thine adversary quickly, lest he hail thee before the just judge and the judge cast thee in to prison.

These disputes have arisen and have first been settled by arbitration, and have finally come to be settled by the classification committee of the New York Cotton Exchange, the last court of appeal, and in order to meet this increasing disposition to submit to the decision of that classification committee, which has classed the cotton in the port of New York for the last twenty-one years, we have been obliged within the past year, to accommodate the demands from spinners and from merchants in the cities, to enlarge our quarters.

I will close what I have to say with just this statement: If the decision of that classification committee was not satisfactory, it would not grow, but in order to show you that it is satisfactory, I should like to read from this little document. [Reading]:

(c) If this can not be done, the mill shall select one arbitrator and the shipper select also one (these arbitrators being other than official representatives) between whom the

dispute has arisen, to whom the whole question shall be submitted by both parties to dispute either verbally or in writing, and in the event these two can not agree, they are to select a third party to act as umpire, whose judgment shall be final. If an umpire can not be agreed upon, then the matter in dispute is to be submitted for the ruling of the New York Cotton Exchange, but this is to be as a last resort.

(d) If the dispute be as to grade, the samples drawn by the mill shall be submitted, unless the seller claims the right to have new samples drawn, in which event samples of cotton shall be drawn by either party with the consent of the other, or by a third party in the presence of both parties. Provided, however, that in cases where it may be impracticable to have samples subsequently drawn, the cotton not so sampled shall be assumed to be of the grade invoiced."

(e) In any arbitration, or where any question is submitted to the ruling of New York Cotton Exchange, the party against whom the decision is rendered shall be liable for the expense of arbitration or submission.

(f) These rules shall apply as to staple cotton, except in matters of length of staple, grade and differences, consequent thereon, which shall be arbitrated in New Orleans or Vicksburg, under the rules of the New Orleans or Vicksburg exchange, at the option of the buyer.

9. Country damaged cotton will not be received unless put in condition by shipper. 10. In absence of other agreement, differences ruling on New York Cotton Exchange at date of sale are to be used in settling claims under all contracts, except that oneeighth differences are to apply on one-half grades from strict good middling white to strict low middling white, both inclusive, and in the absence of specific rules herein governing any dispute arising between parties, the ruling of the New York Cotton Exchange is to govern.

These are the rules of the Carolina mills. Here is the contract of the Carolina mills, sale memorandum and contract governing these rules, and also the names of all the gentlemen who participated in this discussion.

(The contract referred to will be found in the appendix.) The CHAIRMAN. You have concluded your statement?

Mr. HUBBARD. Yes, sir.

The CHAIRMAN. We will now hear from Mr. Mandelbaum.

TESTIMONY OF L. MANDELBAUM, OF NEW YORK CITY.

(The witness was sworn by the chairman.)

The CHAIRMAN. Please state your business and other connections in relation to the cotton trade.

Mr. MANDELBAUM. I am a cotton broker. My official connection with the exchange is, I am a member of the board of managers; I am a member of the committee on by-laws and rules, chairman of the committee on statistics and information, member of the supervisory committee, to whom all complaints against members have to be directed, and also a member of the revision committee. I am also a member of the so-called Marsh committee.

Gentlemen, I will be as brief as I can possibly be, and after what my colleagues have said there will be very little for me to say, except that I have been trying to determine for myself the real object of the propounders of those different bills which are the subject of consideration before your committee. I have sometimes thought that it was a matter of trade, that it was a question as to the benefit or loss occurring to the growers of cotton or other produce. Sometimes I have thought that the question was one of morals. Also it must be frankly admitted that the preponderance, the great preponderance, of the testimony brought in here was solely on the subject of the price and the prices of cotton, and the moral questions which seemed to pervade those bills have mostly been lost sight of. I have tried to fathom the reasons. There must be a reason for everything, and I

have tried as much as possible for myself to get at the reason for it, in studying these different bills, which are somewhat different in their character, particularly the so-called Burleson bill, which seems to consider the question only from a moral standpoint when the selling of cotton is concerned. According to that bill it does not make any difference how much a man buys as long as he does not sell anyI have come to the conclusion that there is no moral in that bill. [Laughter.] The so-called Scott bill, brought in by the chairman of this committee, is at least consistent. It treats the seller and the buyer equally on this question.

But no matter what those bills purport to be or what was in the minds of the proponents of the bills, it seems to me that they all reach the fact that Congress does not claim the power of direct interference or prohibition, because, if it claimed the right, it would have no reason to fall back on the mail or the telegraph, but simply would bring a law in of interference or prohibition. Now, I may be all wrong I am not a lawyer, gentlemen-but in order to justify Congress in prohibiting or interfering with the business of the exchange, they have to show that the business on the exchange is somewhat of not quite a moral character; otherwise I do not see that they would claim they have the right, on broad grounds, to interfere with and prohibit that business by prohibiting it the mail and the use of the telegraph.

Right there I meet another perplexing question, Mr. Chairman, and that is, if it is done for that high moral purpose, why was the coffee exchange exempted from its provisions? Why was the exchange excepted that deals in cotton oil futures, and why was the very stock exchange exempted from its provisions? It shows to me clearly that the moral question was not exactly the question either, and for that very reason it has been impossible for me to clearly make up my mind what these bills really stand for.

Let us look at the next question. There has lately been a great deal of talk about a white slave trade. I do not believe that any member of Congress would claim that Congress had the right to prescribe, based on the fact that white slaves are transported by means of railroads, that every man traveling with a woman should have to make an affidavit that he does not travel with her for the purpose of the white slave trade. Hotels are sometimes used for not exactly moral purposes, but would that give Congress the right to prescribe that any man entering with a woman to get lodging at night should make an affidavit that he is not bringing her there for immoral purposes? I do not think they would hold for one moment that such a thing would be the case or would be tolerated. Gentlemen, on the cotton exchange a contract is exactly of a similar nature. It is a strictly legal contract. It is a contract which has stood the fire of the Supreme Court. It is a contract which has stood the fire to be enforced in the South, notwithstanding all the laws that they have been able to get up against it, and it is a strictly legal business, notwithstanding the fact that it might be used sometimes for an illegal purpose. That does not make it illegal, and that, in my opinion, should not justify Congress in prohibiting it the mail and the telegraph.

Now, let us come to what an abolition of the exchanges would bring about, if such a thing were possible. I can very readily under