Orleans, crop years 1892-93 to 1906-7." These are the last data that I have on the subject at hand. This was in the year 1906-7, the year that we raised the 14,000,000-bale crop, the big crop; and when Mr. Neville was before you the question was asked how many bales were annually delivered on contract, and he said about 500,000. That does not mean 500,000 bales of cotton. Oh, no! I read from page 264, of the Smith report:

It may be noted that these large tenders of cotton at New York unquestionably mean that a considerable amount of cotton was retendered again and again, since for several years the total tenders at New York have greatly exceeded the total amount of cotton certificated by the inspection bureau of the New York Cotton Exchange.

Now, out of their own establishment comes this information, and surely they can not be heard to deny it.

Mr. MANDELBAUM. Can you not include New Orleans, too?
Mr. BURLESON. New Orleans is pitiful.

Mr. MANDELBAUM. That is a spot market. I want you to read that, too.

Mr. BURLESON. The New Orleans spot market is one thing, and the New Orleans Cotton Exchange dealing in future contracts is quite another. I hold no brief for the defense of the New Orleans Cotton Exchange. If it can not exist under the operation of the Scott bill, let it go out of business, and I hope it will.

Now, how many bales are handled on the New York Cotton Exchange on these contracts? That is an interesting question. We have had some difficulty in getting these figures. I want to show you, and I think I can, to your satisfaction, approximately how many there were.

Mr. BEALL. This number that you have read is the number tendered, not the number delivered?

Mr. BURLESON. No, sir.

Mr. BEALL. Then, although the same bale might be delivered over and over, this is the total number tendered.

Mr. MANDELBAUM. Delivered.

Mr. BEALL. Well, is it?

Mr. MANDELBAUM. Yes.

Mr. BEALL. It does not mean actual delivery.

Mr. BURLESON. I will read this which is handed to me by Mr. Beall, which is particularly apropos:

It should be emphasized that the figures given for the New York Exchange are not necessarily actual deliveries of cotton on contract, but the total of notices of delivery; in other words, the total does not mean that there was an actual transfer of ownership of cotton to the extent of the figures given.

Mr. MANDELBAUM. That is absolutely wrong. I will state that under oath.

Mr. BURLESON. I am perfectly willing to take it as Mr. Mandelbaum wants it.

The CHAIRMAN. There is no controversy over the proposition that an enormously greater number of bales are dealt in than are actually delivered. There is no question about that.

Mr. MANDELBAUM. Yes.

Mr. BURLESON. There is no question about that. We have had Mr. Hubbard, Mr. Neville, Mr. Mandelbaum, and Mr. Marsh before the committee, and we have struggled to find out how many bales are bought and sold, and I want to say in that connection that every

future transaction on the New York exchange exercises its influen ultimately upon the market price of cotton. I lay down that prop sition and do not think it can be refuted. The particular influen exerted by an isolated transaction may be imperceptible, but ult mately this transaction enters into an aggregate which finally eithe depresses the price or raises it. There can be no question about tha The question is how many of these transactions take place.

Mr. Cocks. What would be the objection to that from an econom point of view?

Mr. BURLESON. It does not make any difference whether we obje to it or not. It is a law of trade.

Mr. Cocks. Whom does it hurt? That is what I mean.

Mr. BURLESON. If, under the rules and operations of the princip exchange, where these future contracts are dealt in, it exercises depressing influence upon the market price of spot cotton; it hurt the producer. If it has the reverse result, it hurts the spinne Speaking for the producer, I want to say that he does not desire a abnormal price, an unnatural price, or an artificial price for his co ton. All he wants is the price fixed by the legitimate law of supp and demand.

Mr. MANDELBAUM. One question, Mr. Burleson. According to your. explanation that you have given us, we depress the price if we delivery cotton and we do something wrong when we do not deliver it. No will you kindly point out what we should do?

Mr. BURLESON. Abandon your present practices.
Mr. BEALL. Turn from the evil of your ways.

Mr. BURLESON. Yes, turn from the evil of your ways. But, M Chairman, we are trying to get at how many bales of this spook cold ton are annually bought and sold. I want to distinguish betwee the phantom cotton and the bales tendered on contracts, and I wil approximately arrive at the truth. Of course it rests with thes gentlemen alone to tell us the real facts. They say they can not de it. Consequently we must enter upon a process of reasoning and get at the facts as best we can. We knew these annual sales until they adopted the fixed difference system in 1897, but since then we do not know; but when that practice was adopted, undoubtedly, as admitted by everybody, it greatly stimulated speculation in cotton Now, how many bales were bought and sold the last year of which we have the record? But I will not take the last year. The last year was not satisfactory to them, and that was the reason they adopted the fixed difference system; consequently it is not fair to take the last year. I am going to take the year before the last, and use figures the exchange itself has furnished.

Mr. SIMS. By "the last year" you mean

Mr. BURLESON. The last year before the New York Exchange adopted the fixed difference system, in 1896. In 1896 there was a total crop of 7,140,000 bales. That year, according to their own admissions, they sold, for future delivery on the New York Cotton Exchange, 56,469,000 bales, with a crop of 7,140,000. The total crop in 1906, speaking in round numbers, was practically doubled, or 14,000,000 bales. Remember that the adoption of the fixed difference system greatly stimulated speculation. At the lowest, allowing for no increase of speculation, we have 100,000,000 bales of future contracts bought and sold on the exchange for that year. Am I not

irly justified in this estimate? Mr. Marsh was asked what was an dinary day's transactions on the exchange. He said 350,000 bales. Mr. BEALL. He said, in answer to Mr. Lever's question, that that ould be a normal day's transactions.

Mr. BURLESON. Three hundred and fifty thousand bales in one day. hat would be an active day, he was asked. He said 1,000,000 ales would be an active day. Now, gentlemen, are we justified in is estimate? Are we not moderate when we fix its annual sales and urchases at 100,000,000 bales? Knock off 10,000,000 and say it is 0,000,000 bales.

Mr. SIMS. May I ask you a question there right on that line?
Mr. BURLESON. Yes.

Mr. SIMS. I want to ask you if upon the average the entire certifiated stock in New York is not sold, in and out, every day of the year Mr. BURLESON. Yes, it usually has about 130,000 bales in its wareouses an ordinary day's sales is about 350,000 bales.

The CHAIRMAN. Let me suggest again that that is not the controerted point, and let us not spend any more time on it. It is 5 'clock already. How soon can you complete your speech? Mr. BURLESON. I have no set speech.

?

Mr. MANDELBAUM. I thought you were only going to speak for hirty minutes.

Mr. HAUGEN. You stated that we had difficulty in finding out the umber of bales bought and sold on the New York Cotton Exchange. think that you want to be fair. They were very candid in giving hat information.

Mr. BURLESON. Yes; I said they could not give the aggregate. did not understand either one of them to give an aggregate. If he lid, I beg his pardon.

Mr. HAUGEN. His statement was corroborated by the statement of Mr. Lever.

Mr. BURLESON. I am accepting his statement as to a normal day's trade, and I have based my calculation on it.

Mr. HAUGEN. I rather inferred from what you said that this information had been furnished reluctantly.

Mr. BURLESON. I say we have had some difficulty in getting at the annual sales. We have not gotten it at all. They have not given it to us. I will not assign any reason for their failure to do so. Now, how many bales of cotton were hedged during the year? How many is it possible for them to have hedged? Let us take the 90,000,000 bales of futures, how many of this number was it possible for them to have hedged? We spun in this country about 6,000,000 bales of cotton. We all know, Mr. McCall says, that thousands of spinners do not hedge at all. But for argument's sake, take every single bale that was used here, and eliminate the Liverpool Exchange and eliminate the New Orleans Exchange, and say that it was all hedged in New York, this whole 6,000,000 bales that was consumed here in the United States, that would give us only 12,000,000 bales hedged, 6,000,000 bales bought and 6,000,000 bales sold. Now take the 12,000,000 bales of hedges from 90,000,000 bales of futures dealt in and it leaves 78,000,000 bales of phantom cotton dealt in. Now, can this conclusion be escaped? If so, I would like the error to be pointed out by some one right now.

Mr. MCLAUGHLIN. Without expressing an opinion, suppose it was to be conceded that a very large part of the transactions on that exchange were speculations, that they were dealing in phantom cotton, that their transactions were merely a bet as to what quotations would be at a future day, just as we might bet on what the temperature would be on the 1st day of next July. What do you say to the proposition that the cotton exchange is necessary and does good as a protection to the producer and to the consumer of cotton, because the prices prevailing do bear some relation to the actual value as it might be determined by the supply and demand, and is practically the only means that the producer has of learning the prices and that he would be at the mercy of the spinner, and so on, if there were no such system; that the cotton exchange really serves a good purpose? Suppose it to be conceded that all you speak of is true, what do you say as to the good that is claimed for it?

Mr. BURLESON. The only justification that they claim for it themselves is the protection it affords as a place for hedging, and I contend that according to their own figures, with the fluctuations that constantly take place and the wide margins that exist between the price of futures and the price of spots, that it really affords no hedge.

The CHAIRMAN. It appears that you will not be able to answer that question to-night.

Mr. BURLESON. It will take quite an elaborate discussion to do that; but there is one other phase that I would like to present, and then I will stop.

Mr. MANDELBAUM. One question about that phantom cotton. Suppose I sell a horse to Mr. Lever, and he sells it to the next gentleman, and the next gentleman sells it to the chairman, and the chairman sells it to Mr. Čocks. Are four of those horses phantom horses! [Laughter.]

Mr. BURLESON. No, and I would not so claim.

Mr. NEIL. The committee has given the other side a good deal of time on this proposition, and, if it is not trespassing upon the committee too much, I would ask that Mr. Burleson have time to-morrow to conclude his speech.

Mr. BURLESON. I realize, Mr. Chairman, that the date set for hearing the representatives of the grain exchanges is to-morrow, but I want to discuss the hedging facilities of the New York Cotton Exchange, and I do not believe I can do it at this late hour with fairness to the committee or myself.

The CHAIRMAN. I believe the committee would like to have Mr. Burleson answer the question which has just been asked him. It is very true that we have heard the gentlemen representing the cotton exchange for the last five or six days, but it is only fair to state that the time has been pretty evenly divided, because they were engaged in answering questions which the members of the committee asked for the purpose of eliciting information, so that I think the time has been fairly divided, so far as that is concerned. But that is not the question. What the committee desires is to get information, no matter from whom it comes, and if there is not objection, I think it might be understood that Mr. Burleson will have some time to-morrow morning.

Mr. BURLESON. If you will give me twenty minutes without interruption, I can finish what I have to present.

The CHAIRMAN. Suppose we have it understood that he shall have thirty minutes in the morning to conclude his remarks, and at the conIclusion of his remarks there are a few questions that I desire to ask Mr. Marsh or some other gentleman, and perhaps other members of the committee will have questions they would like to ask, so that on the whole we will extend this hearing for an hour, and take that much time off the time of the grain men to-morrow morning.

Mr. BURLESON. Will you permit me to present one further matter at this time? It will take only a few minutes to do so.

Mr. Mandelbaum asked about phantom horses, and did it hurt anybody? Let us see whether such transactions hurt anybody. What are the effects of these transactions? Have I not read of the effects of manipulation by large spot buyers, members of the cotton exchange, who are also members of the revision committee? Have I not shown that they can hammer prices of futures down? If I have, then we are face to face with the question, Does the price of futures control the price of spots, or does the price of spots control the futures? as these gentlemen have so very earnestly contended here. I can show you in Commissioner Smith's report, where the statement is made that the prices of spots, if not controlled by futures, are largely influenced. This report says on this subject:

A fact of great importance in this discussion is that the prices paid by cotton merchants for a large part of the cotton crop are based directly upon the future quotations of some cotton exchange. It is imperative that this be kept clearly in mind. Such merchants send their buying agents directly to the large plantations, or to the small country towns where cotton is brought in from farms in wagonloads of a few bales each. Instead of instructing these agents to pay a flat price for cotton, such merchants usually direct them to make their purchases within a certain number of points "on" or "off" (above or below) some cotton-exchange quotations of futures. These points on or off are known as "limits."

I am not going to ask you to accept this statement. You heard Mr. Parker say that instruction coming from New York merchants, large spot operators, to buy spot cotton was usually to buy it, so many points on or off futures. I will not ask you to accept his statement. You heard Mr. Lathrop, in reply to a question, state that frequently orders came to him, "buy spot cotton, so many points on or off futures." I will not ask you to take his testimony. I think, however, I have the right to ask your acceptance of the testimony I now offer. One of the ablest and most earnest defenders of the New York exchange, who was in the thick of the fray at the time of the Hatch and the George bills, was the firm Latham, Alexander & Co. Mr. Latham and Mr. Alexander are both dead, but the firm is still conducted.

Mr. NEVILLE. No, it is not.

Mr. BURLESON. Well, if it is not conducted, there is some member of your exchange operating under their name.

The CHAIRMAN. That is an immaterial matter.

Mr. BURLESON. It is immaterial, for I hold in my hand a pamphlet defending the New York Exchange, which was mailed from one end of this country to the other last year, containing a discussion of this matter and prepared by Latham, Alexander & Co. This was issued and bears date March 16, 1908.

Mr. SIMS. Mr. Latham has only recently died.

Mr. BURLESON. I do not know when he died, but he was a member of the exchange at the time this statement was issued. He was put