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GEORGE BRENNECKE,

Chairman Warehouse and Delivery Committee.

Suppose Henry & Sons had bought future contracts and accepted delivery of every bale of cotton in the stock at that time-the entire 138,484 bales, they would not have gotten sufficient strict good middling and up (22 bales) to keep their mill in operation for two days. They would have secured in all this lot of cotton only 43 bales which they could use. What folly! How dangerous it would be for them to attempt to secure their stock of raw material through this exchange.

These spinners all agree that, instead of the New York Cotton Exchange being a place of refuge for them against fluctuation in the price of cotton, it has become an additional menace to their business.

Now, I will go on. Yesterday the gentleman from New York asked where one could go to ascertain the difference between grades. I then replied, to spot-cotton markets in the South. In order to further answer Mr. Cock's question I want to read what the president of the New York Cotton Exchange said about the revision of 1906 and where he suggested we go to ascertain these differences. On page 164 of the report I find this statement made by the president of the exchange: "Probably the best markets to be governed by in the actual differences are Houston and Galveston," because they are the great spot-cotton markets. The other day Mr. Neville introduced Mr. Barbot to prove that there are what is known as quarter grades, clearly distinguishable from others. He spoke also of tinges and stains, his purpose being to show that it was necessary to have this wide range of 28 grades deliverable upon future contracts. I hold in my hands the Galveston News. I want to show that so far as the cotton trade is concerned these microscopic grades are never considered. You must always keep in mind the fact that when those who consume cotton want actual cotton they go or send to the spot markets in the South for it. There the cotton is bought, assembled, and assorted as to grades, and for the purposes of the trade there are only about seven grades of cotton considered. These other barely definable grades only serve to aid manipulation and stimulate speculation.

In Galveston, Tex., the trade requires quotations of prices for low ordinary, ordinary, good ordinary, low middling, middling, good middling, and middling fair, 7 grades, the same in Houston, the same in New Orleans, the same wherever actual cotton is dealt in; even the New York quotations that are telegraphed down to the spot markets reflect only information with reference to the value of these seven grades. This is shown by the News, the leading paper in the leading spot market, and yet the contention is made that 28 different grades should be deliverable upon future contracts, when the spot market takes no account of more than seven, and it, is the spot market at last

where the spinner goes to get his cotton. The wide range of grade deliveries are useful only for purposes of manipulation and serve as an additional means of depressing or inflating prices. Now, one other phase of the question and I will conclude. What will be the result if the Scott bill is enacted into law and these purely speculative transactions are eliminated? Will it result in the destruction of the exchanges, and if so, what will follow? I will say that if a condition has developed on the New York Cotton Exchange that makes it necessary to continue transactions, 90 per cent of which are pure gambling, in order that it may exist, then it ought to be our desire to bring about a change regardless of what the consequences might be.

Mr. Chairman, I do not subscribe to the proposition that if this bill is passed the field of speculative operations will be transferred to Liverpool and the producer placed at the mercy of the English spinner. Representative Hardwick will, before this hearing is concluded, present several amendments to the Scott bill, having for their purpose the making it impossible for the Liverpool exchange to be made the basis of these operations. If gambling in cotton was prevented in this country would the Liverpool exchange continue to deal in futures? I have from the lips of the oldest living member of the New York Cotton Exchange, made to me in the presence of William C. Lovering and I made this statement during the lifetime of Mr. Lovering, and did not wait until his death-Mr. Walter T. Miller, one of the men who organized the exchange, helped construct its present building, when I put the direct question to him as to what would be the effect upon the Liverpool exchange if we eliminated these speculative transactions upon the New York Cotton Exchange, this reply:

Mr. Burleson, it would be compelled to at once abandon the practice of dealing in such contracts because the principal source of their patronage is from this country.

Destroy this gambling and I believe the cotton exchanges of this country would at once become like the exchange at Bremen, an exchange where spot cotton is dealt in. I do not believe any serious trade disturbance would result, regardless of the effect this bill, if law, might have on the two big exchanges. I would not be candid, however, if I did not express my belief that there would be necessary some readjustment of trade conditions. There would be. But the intelligent producers and consumers of this country will readily devise a new system to meet the situation. Already it is in progress. The construction of a system of warehouses throughout the South has been inaugurated, where cotton can be stored and where spinners can come in direct contact, not with the producer himself, because he would not be there, but they would come in contact with the middleman. This system will not eliminate the middleman, it would not eliminate Mr. Neville as a spot merchant, not at all; it will eliminate Mr. Neville in a way as a speculator-I would not say gambler-it will eliminate Mr. Hubbard as such a speculator. These gentlemen could have their agents at the places where warehouses are located representing them, the spinning interests would be represented, and the producers' interests would also be represented, all interests represented, all there to find the cotton they need in lots of even running grades just as they desire it without all this stupendous burden of expense. I do not believe and can not see one single reason why cotton should under this system be bought or sold

under a wider margin by those who aid in marketing the crop. It was suggested three years ago by Mr. James R. MacColl, the president of the New England Spinners' Association, that

The New York Cotton Exchange has become so useless to us that we must devise for ourselves a place where we can go and have spot cotton find its way there and supply our needs.

Act

He suggested that in an address to the spinners themselves. ing upon that, the intelligent producers of the South, for a number of years, have been erecting these warehouses and they are nearly prepared to meet the situation which will be presented if this bill should become a law.

Mr. LEVER. How many in the South do you happen to know?

Mr. BURLESON. I believe it has been stated that there are some two thousand cotton warehouses there now. In this connection I will state that Mr. Haines, the secretary of the Galveston Chamber of Commerce, recently told me that capital could be readily enlisted to erect the necessary warehouses at Galveston to meet the demand, not only of Texas, but of the entire cotton territory tributary to that city, affording warehouse facilities, so that the cotton finding its way into those warehouses could readily find its way across the ocean, if needed for export purposes, or around to New England spinners, if needed by them, or the southern spinners. You need have no apprehension or fear that there is going to be any serious disturbance, any irremediable injury to the cotton trade, if this bill is enacted into law. And, gentlemen, one word more; whether this is so or not, who will be the sufferers if disturbance is occasioned, who will be the only sufferers? The producers upon the one hand and the spinners upon the other. They stand here, so far as this record is concerned, united in the expression of a desire that the Scott bill be passed and this great incubus be removed. If they are willing to take the risk and stand here to say to you that they are willing to take the risk, why should there be a single conscientious man upon this committee who would hesitate to act?

Mr. LEVER. Mr. Burleson, do you think there is any danger of the formation of a great cotton trust throughout the country which would control the price of cotton and put the farmer at the mercy of the trust?

Mr. BURLESON. The suggestion-pardon me, if I indulge in strong language the suggestion is absurd, for the reason that the American spinner is not the only consumer of American cotton; he has an active competitor upon the European Continent, an active competitor in Great Britain; no combination that could be entered into could possibly control this situation.

Mr. LEVER. You think the suggestion is radical?

Mr. BURLESON. It is ridiculous.

The CHAIRMAN. I believe under the arrangement entered into yesterday the representatives of the New York Cotton Exchange are to be given thirty minutes, if they desire to present any additional

matter.

Mr. MANDELBAUM. Mr. Chairman, I would like to ask Mr. Burleson some questions in regard to these samples; but before asking him I must say that I am unable to discuss this matter in the flights of oratory that he has employed in it; nor do I consider it necessary;

I desire to express myself in the plainest words so that everybody can understand them, having absolutely no reasons why my constituents in Texas or anywhere else should read them. Now, he has come before you with the statement that these goods are made out of trash cotton [exhibiting goods to committee] known as denims. Now, if he knows as much about the entire question as he knows about this material, he knows absolutely nothing about it. When it is possible to get them nothing but strict low middling to strict middling cotton go into the manufacture of denims. He wants to make you believe that this material here [exhibiting material] costs $16, when $1.60 would be a great deal nearer the price than $16.

Mr. BURLESON. Well, Woodward & Lothrop's clerk gave me those prices this morning; he told me it was worth $2 a yard.

Mr. MANDELBAUM. Did Mr. Lothrop tell you that it was worth $2 a yard?

Mr. BURLESON. Yes; $2 a yard.

Mr. LEVER. Will you testify that that is not a fact, the statement that Mr. Burleson has made?

Mr. MANDELBAUM. That this costs $2 a yard? Yes, sir; I testify that as a fact.

Mr. BEALL. What will you testify that it is worth?

Mr. MANDELBAUM. Well, that is a kind of lace lawn that is made for ladies' wear.

Mr. LEVER. What is it worth a yard?

Mr. MANDELBAUM. Well, I couldn't tell you exactly; it is so long since I dealt in the goods, but it is certainly a great deal less than $2. The CHAIRMAN. If Mr. Burleson testifies that he paid that price this morning for those goods, paid at the rate of $2 a yard, you wouldn't contradict it, I suppose?

Mr. MANDELBAUM. I didn't understand that Mr. Burleson so testified, that he paid $2 for those. If he does, I shall take a different course. Do you testify that?

Mr. BURLESON. I certainly do; an eighth of a yard for 38 cents. I have the checks here and ask that they be made a part of the record. Here is the bill: For the denim, one-third of a yard, 5 cents; for 1 yard of cheese cloth, 4 cents; for one-eighth of a yard of the cloth in question, 38 cents; and one-eighth of a yard of madras, 4 cents. offer these bills in evidence.

Mr. MANDELBAUM. That doesn't make the price of these goods. How much did you pay for this [exhibiting piece of goods]?

Mr. BURLESON. I found that after making these purchases. After they were through wrapping up my purchases the clerk said, "Here is a very fine piece of stuff made of high-grade white cotton." I said, "Cut the same quantity off," and he said, "I will give you that." I did not ask him the price of it. I wanted to show by that the character of stuff that is made out of the high-grade cotton.

Mr. MANDELBAUM. Have you any idea how many bales of cotton are consumed in that class of goods?

Mr. BURLESON. I have no idea on earth.

Mr. MANDELBAUM. Or how many bales of cotton on this class of goods [exhibiting goods]?

Mr. BURLESON. I should suppose the great bulk of it goes into the low grade of stuff.

Mr. MANDELBAUM. And the low grade of stuff ought to be in greater demand than the higher grades?

Mr. BURLESON. Undoubtedly it is.

Mr. MANDELBAUM. According to you, this is the cotton that pulls down the price of cotton?

Mr. BURLESON. It is the same principle as that of the New York Cotton Exchange. The thing that pulls down the price of future contracts is overvaluation of the higher grades in a high-grade year, or overvaluation in the low grades in a low-grade year; and I will ask you is not that a fact?

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Mr. MANDELBAUM. No.

Mr. BURLESON. You say that is not a fact?

Mr. MANDELBAUM. No

Mr. BURLESON. I believe when the grade of the crop is high the New York Cotton Exchange overvalues the high grades, and when it is low they overvalue the low grades, and thus it is that they are able to depress the price of the basis contract.

Mr. MANDELBAUM. If it is in such great demand and the goods can be sold at such an exorbitant price as you say here, wouldn't it be right that they pay a fair price for those fine cottons of which there is only a very limited supply in any crop?

Mr. BURLESON. They pay from eight to ten dollars a bale more for the cotton that goes into that finer grade of cotton cloth than they do for the cotton that goes into the other.

Mr. MANDELBAUM. Do you know what grade of cotton goes into this piece of fabric [exhibiting cloth]?

Mr. BURLESON. I don't know.

Mr. MANDELBAUM. I mean, do you know whether it is American cotton, India cotton, or what kind of cotton?

Mr. BURLESON. I don't know whether it is American or India cotton, and that does not make any difference, because every bale of cotton in the world affects the price of every other bale of cotton.

Mr. MANDELBAUM. Would it make any difference to you if I said it was made of Egyptian cotton?

Mr. BURLESON. It wouldn't make the slightest difference, so far as that is concerned.

Mr. MANDELBAUM. I do not want to detain this committee, as you have given us so much time, and I will only say a word or two. However, I want to point out that the source of Mr. Burleson's information, that which he used as a basis for his argument to-day, was received from a dead man. Now, Mr. Lovering appeared before the exchange and had at that time absolutely nothing against the exchange except that he found fault that the round bale was not deliverable, of which he was a receiver, and I believe it was made clear to him that it was impossible to make that round bale deliverable, as there was no demand for the round bale. He worked upon us for over a week, almost, both here and in New York, to get the round bale deliverable on the exchange, and use our influence to make it equally deliverable on the cotton exchange in New Orleans. I would like, with your permission, Mr. Chairman, to put in an extract from Shepperson's Cotton Facts, and particularly page VII, which shows the amount of cotton handled in New York and the amount of cotton handled and shipped through the port of New York,

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