stand in one way why the spinners would like very much to have the exchanges eliminated, and I will tell you right here why they would not have to any more, after that matter that came out accidentally yesterday to which I will refer briefly afterward because they would be the only buyers; no one could actually handle cotton any more except a spinner. I admit that, and I make the frank admission. To what would that lead? I will tell you, gentlemen, that you have now already the so-called cotton duck trust. You will be astonished if I tell you that within the last five years three attempts have been made to combine all the Southern cotton mills. It might surprise you if I tell you that to-day the very thing is going on which would leave, if successful, the producer entirely at the mercy of the spinner.

It has been asserted here that the law of demand and supply is made nugatory on the exchanges. There never was a greater fallacy propounded by the people who mention this fact. I do not want to detain you too much on it, but the fact is that from 1890-I haven't the statement any further back with me-beginning with 1890 every big cotton crop sold at a low price and every small cotton crop sold at a high price, which answers that assertion, and I dismiss it simply by stating the plain fact.

We have been charged, gentlemen, with almost everything under the sun, unfair dealing, and everything they could think of. Now you gentlemen, the majority being lawyers, are certainly also business men in the sense in which I take the law, and you certainly know that business generally deals with those houses, or with those corporations, where it is treated the fairest. Business does not go out of the way to deal with houses where it is treated unfairly. It always seeks to trade where it receives fair and just treatment. To-day, gentlemen, the cotton exchange of New York is the largest exchange in the world. It does more business to-day than New Orleans and Liverpool put together, and why? Because it is the only exchange where people know what they do; they know what they buy and they know what they get, and that is the reason they seek that market.

Another thing in the abolishment of the exchange, if such a thing could be brought about, which was incidentally brought out-which I frankly admit, Mr. Chairman, I never knew; it never came to my mind, I know it never came to the minds of any of the gentlemen of the committee, and I know it never came to the minds of any of the spinners the fact which was brought out by Mr. Neville quite accidentally when he stated that a mill man came to him to buy 25,000 bales of cotton to cover a contract of goods which was to be delivered nearly a year hence; that he sold him that cotton; that he went on the exchange and hedged it. How would it stand if there was no exchange, if Mr. Neville could not have hedged himself and could not have sold to the spinners that cotton, and the spinners could not have made a contract with the Chinaman, or that Chinese exporter? What would have been the consequence? That man, that exporter, would have gone to Manchester, to Lancashire. He would have bought his goods there. That mill man in Lancashire or Manchester would have gone to the Liverpool exchange and contracted for his cotton for future delivery, or hedged, and that would have enabled him to take the business away from this country, to take it away from the labor

ing man in this country, and injure this country in a political and economic sense. While I admit, and I had it brought out yesterday, that might not lead to the consumption of one pound of cotton less, because, so far as cotton is concerned, it would not make any difference whether it is consumed in England or consumed in this country, it would deprive the American factories of making it, and it would deprive the laboring men here from earning what they are justly entitled to.

The question of hedging has been touched on by my friend Mr. Burleson in a way which either shows that he does not understand the question or that he does not want to understand it; it is either one or the other. Gentlemen, cotton is hedged not for the purpose of an absolute insurance, not for the purpose of avoiding an absolute risk; cotton is hedged for the purpose of limiting that risk. There may be small variations, and if you could hedge those variations there would not be any longer any market; there would not be any necessity for any market.

Do

In looking further over those bills I see there is a clause in them even as to the foreign business; in other words, the Congress seeks to prescribe, or tries to prescribe, a man sending an order from Liverpool or Bremen to make an affidavit over there what his intention is. you think Congress has that right, to fix a restriction as far as Europe is concerned? We have sometimes imposed on the Chinaman and the Turk, but we have never tried it on the Europeans, and I do not believe for one moment they would tolerate it. [Laughter.]

Now, gentlemen, the title of the New York Cotton Exchange is, to my mind, a great misnomer. It is simply derived from the fact that the New York Cotton Exchange is situated in New York. It does not mean that it gets its business from New York. The membership of the New York Cotton Exchange is distributed all over the South and all over the civilized world, and it is a world's exchange and the only world's exchange in this country. I say that without any fear of contradiction, no matter from what quarter it may come. Much has been said on the question of wool, why it was that there is no necessity that wool should be traded on an exchange. Gentlemen, this is so simple that anybody who is familiar with the matter would laugh at it. It may astonish my friend over here [Mr. Burleson], who is just smiling at me when I mention the matter, to know that I was a wool raiser in Texas almost before he was born [laughter]; that I dealt in wools in San Antonio, Tex., almost before he was born; that I claim to be absolutely familiar with wool. Let me show you only one instance which affects the price of wool. You can either sell or you can not sell it. I have had to hold wool for a year and longer to be able to sell it. The difference between a manufacturer coming to you and wanting to buy wool and you going to the manufacturer and wanting to sell wool amounts to 2 or 3 cents a pound. I will refer to some of the reasons why it is not traded on an exchange. You take, for instance, the Texas wools, the New Mexican wools, the Colorado wools, the California wools, which are all traded in what we call the dirt and the grease. Those very wools do not shrink one year as much as they shrink another. If they should have a very heavy rain previous to the shearing time, they might not lose quite so much in scouring them as they would lose if they had no rain at all, as, for instance, this year. It is something which the

buyer absolutely has to determine for himself; it is his individual judgment when he gets that wool, and that is what makes the price, whether that wool shrinks 50, 52, 55, or 60 per cent. I have had wool before the greatest experts that the New York market ever saw, and one claimed it would shrink 52, another 55, and another 57. Gentlemen, that in itself made a difference in the price of 2 or 3 cents a pound, and that is one of the reasons why wools can not be traded on the exchange-only one.

Another is that it can not be classed like cotton can. Take, for instance, the State of Texas, with which my friend to the left is more familiar than with any other. There are sheep men in Texas who shear only once a year; there are others who shear twice a year, once in the spring and once in the fall. The spring wool is generally the growth of seven months and the fall is the growth of five, caused by the fact that they want to shear as early as possible in order that the sheep would have a little wool on them again when the cold season comes. The very character of the wool is entirely different. There is not a single clip-which used to be always sold by the name of the owner; that is the way they were sold-there is not s single clip that compares exactly the same with the clip of any other man. It is something entirely individual. I think I can better illustrate to you if I tell you that the American sheep originally was a Mexican sheep, whose wool was not adapted for anything but carpets. No cloth could be made out of it. When Texans went into the sheep business they commenced by degrees to raise fine breeds, and succeeded to a wonderful degree, and there are to-day as fine wools in Texas as are raised anywhere. But that does not do away with the fact that there are not two clips that are exactly the same. In my time I used to sell the Calahan clip that was a clip that amounted to 160,000 or 180,000 pounds every six months. Every man in New York knew what a Calahan clip was, and they bought the Calahan clip, no matter what it was. They thought sometimes they knew it, and sometimes they found out that they did not. [Laughter.]

Another thing that enters into the sale of wool, sometimes is shives and sometimes it is burrs, which can only be taken out by very improved machinery. You can not sell anything of that character ahead unless you can show what you have. Contrast with it the cotton. I do not know how much you know about cotton, but I think it is not disputed that cotton can be accurately classed and every grade of cotton ascertained.

Referring to the question somewhat, in my concluding remarks, I must say that I sympathize with those Members of Congress who come from sections where cotton is raised. They, as I believe, have been instructed and almost compelled by their constituents to assme an attitude antagonistic to the cotton exchange. I ask them to consider for one moment that if their constituents had been present at this hearing whether they would be still of the same mind that they were when they wrote those letters? I do not believe there is any man in the hearing of my voice who would not admit readily that it would have brought about a change of opinion in many of them. I ask them to rise to their feelings of patriotism, to rise above instructions from their constituents to that plane which does work for the common good and for the common country, and not only for a part a few misguided people in one section of the country. I ask

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you, gentlemen, to read the speech of Senator Vest and read the speech of Senator White, then a Senator from Louisiana, who made an argument on the Washburn bill, which is to-day as unanswerable as at the time he delivered it. I ask you gentlemen to rise to that plane of statesmanship of Senator White, now a Justice of the Supreme Court of the United States, the greatest tribunal in the history of the world.

Concluding, gentlemen, I wish to thank you, Mr. Chairman, and through you every member of this committee, for the patience with which you have listened to our arguments, for the courtesy shown to us, and, above all, for the great fairness displayed in this hearing. I wish to submit the speeches of Senator White and Senator Vest.

The CHAIRMAN. Without objection they will be included in the hearing. We could give a few minutes to examination, if some gentlemen have questions to ask.

(The speeches referred to will be found in the appendix.)

Mr. ELLERBE. I want to ask one or two questions. You said in your excellent remarks that it was always true that a big crop brought a small price and a small crop brought a big price. Is it or is it not true that there is an old expression that you should bull the tail end of a big crop and bear the tail end of a short crop? Mr. MANDELBAUM. I did not hear it expressed that way. I heard it different, that you should not bull the tail end of a small crop and should not bear the tail end of a big crop.

Mr. ELLERBE. Is it not true that when the country gets it into their heads that there was a short crop made, the prices generally go down at the end of that year?

Mr. MANDELBAUM. You want me to explain that, of course. You want a fair answer.

Mr. ELLERBE. Certainly.

Mr. MANDELBAUM. It depends entirely on the prospects of the growing crop, which casts its shadows long before it enters into actual appearance, and which, to a great extent, is caused by the fact that a great many, probably a great many more producers than I or you know, commence selling the new crops.

Mr. ELLERBE. The question I really wanted to ask you is thisI just happened to think of that-you stated that if there were no exchanges the farmer would be at the mercy of the spinner entirely? Mr. MANDELBAUM. Yes, sir.

Mr. ELLERBE. I want to ask you this question, and I am serious about it, because it has been troubling me some time. Is it not true that the spinners of the world need, approximately, we will say, a million bales of cotton a month?

Mr. MANDELBAUM. Yes, sir.

Mr. ELLERBE. Is it not true that during the months of October, November, and December from 60 to 75 per cent of the cotton is sold?

Mr. MANDELBAUM. Yes, sir.

Mr. ELLERBE. Is it not true that the spinners of the world requiring a million bales of actual spot cotton per month during those three months, when, we will say, seven million of bales of cotton are forced on the market, can they not go in the market and buy three million bales of cotton, go on your cotton exchanges and hedge against, as

you call it, four million bales, then withdraw from the market at the time the poor farmer has to sell his cotton and leave him at the mercy of anybody in the world, with nobody to buy his cotton? Mr. MANDELBAUM. You want me to answer that?

Mr. ELLERBE. I would like to have an answer to that. I want to repeat now, he would need three million bales of cotton. He can buy three million. He can go and buy Marchs and Aprils and Mays and Junes and Julys, four millions of it, and withdraw from the market and force the farmer to dump four million on the market when there is an actual demand for only three million.

Mr. MANDELBAUM. I want to answer the question just in the line in which Mr. Neville has. It is true the spinner uses approximately a million bales of cotton. It is equally true that the farmer, during the first four months of the cotton crop, raises not seven or eight million, but nine million. It is equally true that somebody has to buy that cotton, and it is equally true that by the medium of the exchanges those buyers are furnished to enable a spinner who has not got the money to buy the physical cotton during the entire year, to protect himself by a hedge from a man who has the cotton and paid for it. I do not know whether I have made myself perfectly clear to you.

Mr. ELLERBE. I understand you, I think.

The CHAIRMAN. Have you finished, Mr. Ellerbe ?

Mr. ELLERBE. I wanted to ask Mr. Hubbard just one question. The CHAIRMAN. Suppose we finish with Mr. Mandelbaum first. Mr. SIMS. You give the reason why you could not have a wool exchange dealing in futures like you do in cottons-these months, of course and I accept it as absolutely true. Now, then, do not wool manufacturers contract their output for many months ahead? Mr. MANDELBAUM. No, sir.

Mr. SIMS. Do not woolen manufacturers agree to sell-I mean the manufacturer of cloth-agree to sell the manufacturers of garments cloth to be supplied to them months ahead?

Mr. MANDELBAUM. I want to explain that to you.
Mr. SIMS. I am first asking you if they do it.

Mr. MANDELBAUM. I am very glad you brought that question out. The wool that most manufacturers buy has gone through a portion of the manufacturing process already; that it, through the scouring process. After wool is scoured you can determine with a greater degree of accuracy what it is than you can do before it is scoured. You have at least the question of shrinkage eliminated, just the same way as you can determine after it is put into cloth with some less risk what it is.

Mr. SIMS. You have not answered my question at all. I ask you if it is a fact that manufacturers of woolen cloth contract to sell their output for delivery several months ahead to the makers of clothing? Mr. MANDELBAUM. I did not understand you, but I will answer that question. I suppose it is done to a very limited extent. Mr. SIMS. Is it not a general thing?

Mr. MANDELBAUM. It is not; absolutely not.

Mr. SIMS. Do woolen manufacturers manufacture clothing and keep it in their manufactories and wait for somebody to come? Mr. MANDELBAUM. The cloth, yes.

Mr. SIMS. As a general rule?