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whelming mass of testimony from men engaged most largely in mercantile and commercial pursuits is against that statement. The experience of men who, like myself, are not experts is against it. I affirm that the same principle applies to stocks as to grain and other commodities; that speculative markets make i. prices for future sales; whereas when the stock market in New York is down, as it is now, as a matter of course prices fall. When there is speculation, when men are most anxious to become rich suddenly, then prices go up because transactions multiply. How often have we heard it said that hard times make a rich harvest for lawyers. A greater fallacy was never exploded. Lawyers make nothing, comparatively, in hard times. In commerce, where trade is life, when men are hunting speculation and investment, then lawyers, like every other portion of the body F. thrive and prosper. No Senator, of course, is here to advocategambling; no Senator is here to say that puts and calls, where the article is never to be delivered, constitute legitimate commerce; no court in this country has ever given its sanction to any such transaction; but when we are told that because 1,000 bushels of wheat pass through 50 hands in a single day it constitutes a crime, I am not prepared for the conclusion. You can just as well say that the $150,000,000 or $200,000,000 that through the New York clearing house every day shows that the bankers in New York are engaged in wholesale gambling. You can as well say that the whole country to-day is engaged in gambling. Does actual money always pass from hand to hand in the transaction of business amongst the people of the United States even outside of cities? Who does not know that but a small portion of the business of this country is transacted for cash? Who does not know that our foreign business is not transacted with money? There is not gold and silver enough in the world to carry on our foreign commerce. It is done through bills of exchange and letters of credit. The shipper or exporter who carries the in of my constituents abroad sells it and brings back manufactured goods which he has bought with the proceeds of the #. He has a letter of credit based upon warehouse receipts, and no paper or metallic money passes between the parties. en we trade with South America we send our agricultural implements and now and then a steam engine that has been manufactured here. What do we receive in return? We receive coffee, and we pay for it, when we can not pay for it in goods manufactured here and shipped there, by letters of credit on Europe which we have obtained for the sale of our agricultural products there. What would be thought of that statesman who would stand here and say that the New York Commerce Exchange or Board of Trade is a gambling institution because there is no actual payment of money from day to day?, The president of that exchange, before the House committee, said that 8,000 bushels of wheat very often supplied 50 transactions, and legitimately. Who is there that would dare to say that in the mercantile exchanges of this country they are not required to deliver on future sales? In New York, St. Louis, Cincinnati, and Chicago the rules of the exchanges require that the buyer shall have the right to demand the article sold whenever he pleases. If a dealer there sells 5,000 bushels of May wheat, the purchaser can demand the delivery of the actual article, and it is bound to be delivered. Now, Mr. President, there are some witnesses who are worthy of credit and yet opposed to this bill. I think one of our Members is entitled to be heard. I refer to }. Hon. Michael D. Harter, from the Fifteenth Ohio district, a Member of the House. This gentleman is a practical miller and farmer, and, I take it, is a credible witness, otherwise the people of the Fifteenth Ohio district would not have put him where he is. He is a large miller, and here is his testimony on the subject: “Speculative prices simply determine the future values of wheat, in which the farmer has no direct interest, and yet even here speculative values disprove the claims made by the authors of this bill, for every year at the season when the farmer is marketing his wheat in large quantities all future or speculative values are higher relatively than the cash value of wheat, which is always controlled by actual purchase and sale of the article itself. Of course high speculative future values at this season of the ear are always calculated to advance the cash or farmers' prices for wheat. Let me illustrate this: “At one mill where I am interested we are not only large buyers of wheat, but have great storage capacity, and this coming harvest we shall put into our warehouse about 600,000 bushels of wheat. If the price were to advance before it were ground into flour 10 cents abushel, it would make us $60,000, but if it declined 10 cents per bushel we would lose $60,000. Not being speculators, knowing that wheat speculation in the end results disastrously to most of the people who engage in it, we should be unwilling to buy such a vast quantity of wheat if we were not able to sell the figures against it and † protect ourselves against loss on our transaction. Therefore, if we had no future market in which we could sell this wheat, we should buy very much

less of it, and should not be able to pay the farmer within 10 cents per bushel as much as we pay him now, because we would have to have that additional margin to insure us against fluctuations in the market.

"What is true of us is equally true in varying degrees of every miller, warehouseman and exporter in the United States, so that the passage of the Hatch bill would in the end surely reduce the number of buyers of cash wheat from the farmer and put down the price of the wheat that he had to sell.

“But I want now to prove still more clearly that so far as dealing in figures has any influence upon the price of wheat it is to advance it, and, as I have said, it is the speculative dealing in wheat that fixes the price of future wheat. I now want to show by a practical illustration how it is directly to the advantage of the farmer that this speculation should continue. But here is the illustration:

"Suppose we buy 600,000 bushels of wheat in August, September, and October. We find ourselves, under the present system, able to sell May wheat futures against all of it at an average of from 10 to 12 cents per bushel above the cash prices, let us say, at only 10 cents. Now, remember that the cash price is the actual transaction price, the May price being the speculative future or option price. You will at once see the margin the transaction gives us. We have to hold the cash wheat for eight months. If we pay 80 cents per bushel for it and sell it for May delivery at 90 cents, we are obliged to lose the interest for eight months at 6 per cent. This costs us 3.2 cents per bushel. Insurance and other charges and expenses cost us less than 1.8 cents, so that the total expense to us is not over 5 cents per bushel for carrying the wheat until May; from which you see that the speculative price of wheat, which this Hatch bill seeks to destroy, is really 5 cents at the season of the year when the farmer is deeply interested above the cash or actual transaction price which the Hatch bill seeks to make the price for all the wheat which the farmer sells. The farmer ought to see at once, therefore, that so far as speculation in wheat affects him it is altogether in his favor from every point of view, and constantly tends to advance the price which the buyer can afford to pay, and it is a mistake for any man to argue otherwise.”

I give that testimony from a Member of Congress who is a practical miller, largely interested in mills, and from an agricultural district. He states this as a result of his personal experience.

I am simply meeting the proposition that dealing in options and futures contracts and limits commerce with foreign nations and among the States. If it is admitted that Mr. Harter was correct in saying he would not have bought 600,000 bushels but for the future, as a matter of course all I have said is proved by his statement. It adds to the volume of commerce instead of restricting it. As to the risk itself, my opinion is that men will go on taking that risk until the world is wrapped in millennial glory, and then you will find some men betting that the millennium is to cease the next day. You can not eliminate this spirit of venture and enterprise and gambling if you choose, especially among a people like those of the United States. You must remake them all over from top to bottom, from the inside to the outside.

In 1610 this legislation was tried in Holland. That nation of merchants found it an absolute failure. They found out what they ought to have known long before they tried experimenting—that no statute can destroy the irresistible laws of commerce.

It was tried in 1734 in Great Britain, our great commercial rival, the mistress of the sea, in Sir John Barnard's bill against options. Some of the sections of that bill are almost identical with the provisions of the pending measure. For one hundred and twenty-five years that statute remained upon the British statute books a dead letter. No man ever availed himself of it except to evade a contract, and no man ever thought of going into court to enforce it against anybody except to get rid of a bad bargain.

In 1812 New York adopted the same sort of an antioption bill as proposed here now. That act was repealed in 1858, and yet in all the intervening time the merchants and dealers were interested in future sales amounting to many millions, both upon the stock exchange and the produce exchange of the great city of New York,

Now, Mr. President, what will be the inevitable result of this bill if you pass it? You will drive all trading in futures out of this country and into foreign countries. You will drive it to Canada, Great Britain, Belgium, and France. Do you suppose that the Congress of the United States can make a statute that will keep your wheat from going to Europe and being gambled on there? What makes the price of American wheat to-day? The Liverpool market. What makes the price of your corn? The European market.

The only competition that the millers and the pork packers now have is in the exchanges and the commission merchants who are buying largely for future delivery. There is hardly a bushel of wheat that goes into the city of New York that is not sold there "on arrival;” that is to say, it is purchased in the country to be delivered in the city of New York at some future time at prices then prevailing.

AFTERNOON SESSION.

The committee met, pursuant to the taking of recess, at 2 o'clock p. m., the chairman presiding.

The CHAIRMAN. Mr. Burleson, we will now hear from you.

TESTIMONY OF HON. ALBERT S. BURLESON, A REPRESENTATIVE

IN CONGRESS FROM THE STATE OF TEXAS.

Mr. BURLESON. Mr. Chairman and gentlemen of the committee, I hardly feel that I am addressing this committee in my representative capacity. I am myself a producer of cotton and have been asked by the representatives of the farmers' organizations engaged in the production of cotton to present their views with reference to these bills now before you for consideration. In view of these facts I feel that no different rule should apply in the matter of my being sworn, and I ask that I be sworn as others who have appeared before you.

(The witness was sworn by the chairman.)

Mr. BURLESON. In the outset, gentlemen, I desire to say that it is my purpose to be brief in the discussion of the issues which I think have been made before this committee, and above all things I am determined, and it is possible to do so, to avoid dodging or befogging these issues by indulging in a mere multiplicity of words.

Before I proceed to the main discussion I want to say in answer to the suggestion made by one gentleman representing the exchange, Mr. Mandelbaum, that I am sure that I am not acting under coercion in my advocacy of this legislation. Long before I received a letter on this subject I had started upon an investigation for myself with a view of reaching a conclusion, if possible, whether the practices of the so-called “cotton exchanges” were hurtful or beneficial to the cotton trade. After prosecuting this investigation for some time I reached a satisfactory conclusion in my own mind, and my colleague, Mr. Beall, will bear me out that a number of years ago, before any action had been taken by the Texas legislature in this matter, I met with him and one or two others in the city of Dallas for the purpose of taking such preliminary steps as would result in legislation to drive the wire houses, the representatives of the cotton exchanges, from the State of Texas.

The CHAIRMAN. The warehouses ? Mr. BURLESON. No; the wire houses. The CHAIRMAN. Explain what that term means. Mr. BURLESON. The wire houses, if I may so term them, are branch exchanges, are places—not called bucket shops—but places where representatives of members or firms on the cotton exchanges keep boards for the purpose of quoting prices thereon, noting conditions of the crop, and giving notices of sales or purchases on the exchanges, such information being received on a telegraph wire carried to such place for this purpose.

Mr. LEVER. And giving information to customers.

Mr. BURLESON. And giving general information relating to the cotton crop to those who buy or sell future contracts on the main exchange, through the particular wire house. As I say, I reached a satisfactory conclusion in my own mind about the hurtful result of such transactions, and I then introduced a bill which I thought would

correct the evil. And right here, Mr. Chairman, I want to say that if I am mistaken about it, if the practices and rules and regulations and business transacted on the New York Exchange and the New Orleans Exchange are not hurtful to the producer and the consumer of cotton and to the cotton trade, there is nobody more anxious to ascertain that fact than I am, and for that reason-and it will not disconcert me in the slightest-I invite any member of the committee, any representative of the cotton exchanges, to propound queries to me at any time during the progress of my discussion. If the query relates to a transaction or a phase of the business with which I am not familiar, I will promptly say so, but if I can elucidate the subject-matter of the query by my answer, or by telling what I believe or think about it, I will gladly do so.

Above all things, I do not want to do anything that is going to be hurtful to the cotton trade., The welfare of my people I represent a cotton constituency—the welfare of my State, yes, of my section of the country—is so thoroughly identified with cotton, the production of cotton, the sale of cotton, and the manufacture of cotton, that if a blow were struck it we would be the greatest sufferers, and for that reason I desire to move in this legislation with the utmost caution and to avoid making a mistake, if possible to do so. Above all, I do not want to do any injustice or wrong to the people who are identified with, or interested in, cotton exchanges, especially those who think they are serving a useful purpose; and I want to be absolutely fair in every statement that I make and in every conclusion based upon what I believe are the facts that have been established before you.

Mr. Chairman, I gladly say—I cheerfully bear witness to the fact that, in my belief, for ten years after the organization of the New York Cotton Exchange it served a most beneficial purpose to the cotton trade throughout the world. I believe it was a cotton exchange in the true sense of the word; that it discharged every one of the beneficial functions of an exchange. As a matter of fact, New York at that time was the second great spot cotton market of the world. Spinners' agents, mill treasurers, exporters' agents were there for the purpose of buying cotton, the actual cotton, in New York City, and many were connected with the exchange. Manufacturers of cotton went there during that period to get their supplies, and then and I want to absolve the members of the exchange from responsibility for it, because I would not be candid if I did not say so—I believe through no fault of theirs, a condition developed which makes it impossible for New York City to be a spot market for cotton. By the development of a commercial utility it became possible for cotton to be shipped direct from the section where it was produced to the door of the cotton mill cheaper than if it was stopped at New York.

The through bill of lading, undoubtedly, and this fact can not be questioned, when its use became thoroughly perfected and was adopted by the trade, brought about a condition which precipitated an immediate decadence of New York City as a spot cotton market. What authority have I for this assertion, Mr. Chairman? Out of the lips of the ablest spokesman for the exchange—and I mean no disparagement to the other gentlemen when I say this, for Mr. Marsh, who has been a professor in one of our leading universities, has been the ablest exponent and defender of the exchanges in this countrywe have it that a loss of a dollar and a half a bale is sustained upon

every bale of cotton that is stopped in New York. Of course, gentlemen, you know even if the improvident southern producer could not and would not take advantage of that situation, the shrewd, smart Yankee cotton spinner, the shrewdest man who lives upon this earth, would promptly take advantage of it, and he did, and the decline immediately commenced, and New York is no longer a spot cotton market of any importance.

Now, gentlemen, I want to support the statements of fact, which I will utilize before you, by some character of satisfactory testimony. Ordinarily I am going to take it from the lips of these defenders of the exchanges themselves. Before I conclude I intend to make these spokesmen of the exchanges my witnesses and with their admissions drive the conviction home to the mind of every member of this committee, who keeps an open mind, that the New York Cotton Exchange has developed into just what Mr. Parker, the greatest southern spinner, has called it, a curse to the cotton trade.

Now, let us see whether New York has ceased to be a spot market. I am going to read from the report of Mr. Herbert Knox Smith, and with reference to this publication, gentlemen, I want to state in the outset that I accept literally every statement of fact which is found in this report. I do not agree with all of Commissioner Smith's conclusions; in fact in one very important matter I am in thorough accord with the view taken by Mr. Marsh, which I will discuss later on, but wherever the report of the Bureau of Corporations states a fact I accept it, because there is no motive on the part of this government official to lie; there is no reason why he should embody in this report untruths. He is not swayed by self-interest; he is without local bias or prejudice; he does not live in a cotton-spinning section, he does not live in a cotton-producing section, he is a native of and lives in Pennsylvania; and, furthermore, I know the man. He is an official of ability and integrity, and every statement of fact he has made in this report he believes to be a fact. Now, has New York fallen into a condition of decadence as a spot cotton market? The statement made by Mr. Marsh about the loss of a $1.50 on every bale going there would show you it had, if I did not produce figures to further substantiate the fact. But let me show you the statistics bearing on the proposition. In order to be perfectly fair to the exchange I will take figures for periods ten years apart and then give the average for the ten years.

In 1870–71 the total sales of spot cotton at New York, in proportion to the total crop, were 16.9 per cent. Nearly 17 per cent of the whole cotton crop was marketed in New York City. The development of the through bill of lading took place about 1879. I was curious to know exactly when the general use of the through bill of lading took place, and I addressed a communication to the secretary of the Interstate Commerce Commission, who is one of the best posted men in matters of transportation in this country, with a view of ascertaining the history of its development. He replied that it came into free use in 1885, developing from along about 1880. Now, let us see its immediate effect in New York as a spot market. In 1880-81 the spot sales of cotton in New York had fallen off to 4.8 of the crop; in 1890–91 to 1.1 per cent of the total crop;in 1900-1901 to nine-tenths of 1 per cent of the crop; and for 1906–7, the last crop before Mr. Smith's report, nine-tenths of 1 per cent of the crop—the same as

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