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Mr. BURLESON. Took the prices from the board of trade prices? Mr. MERRILL. Yes.

Mr. BURLESON. That is right. The subject-matter that you were litigating over was the property rights

Mr. MERRILL. The property rights.

Mr. BURLESON (continuing). In these market quotations and prices ?

Mr. MERRILL. That is right, as well as the illegality of his prices.

Mr. BURLESON. Christie, when he answered, set up a defense admitting that he was running a bucket shop, and that his transactions were gambling transactions, but answered back that yours was a colossal bucket shop-a great big bucket shop ?

Mr. MERRILL. I know that he said so.

Mr. BURLESON. And he attempted to prove that your transactions were all of them substantially transactions where the buyer had no intention of receiving and the seller had no intention of delivering the subject-matter of the contract ?

Mr. MERRILL. That was his attempt, I think.
Mr. BURLESON. And he failed of making his proof, did he not?
Mr. MERRILL. According to the decision.
Mr. BURLESON. According to the decision he failed in making his

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Mr. MERRILL. Yes, sir.

Mr. BURLESON. And in this decision Mr. Justice Holmes, going on to differentiate between these various kinds of transactions on your exchange, finally reached this part of his decision where he says:

It seems to us an extraordinary and unlikely proposition that the dealings which give its character to the great market for future sales in the country are to be regarded as mere wagers or as pretended buying or selling, without any intention of receiving and paying for the property bought or of delivering the property sold.

Mr. MERRILL. That is right. '

Mr. BURLESON. Consequently he said “This character of transactions I am not speaking about at all," when he upheld the transactions of the Chicago Board of Trade ? Is not that the effect of his decision?

Mr. MERRILL. As being against the bucket-shop feature of it?

Mr. BURLESON. Wait a minute. Does he not say, to put it in a few words, that it is unlikely that the transactions on the Chicago Board of Trade are pretended buying or selling, without any intention of receiving and paying for the property bought or delivering the property sold ?

Mr. MERRILL. I do not so understand it.
Mr. BURLESON. Have I not read that very language there?

Mr. MERRILL. But I do not understand it as saying that it is unlikely.

Mr. BURLESON. And then he expressly declined to give his approval to that character of transactions ?

Mr. MERRILL. The language is:

It seems to us an extraordinary and unlikely proposition that the dealings which give its character to the great market for future sales in the country are to be regarded as mere wagers, or as pretended buying or selling and they are notwithout any intention of receiving and paying for the property bought, or of delivering the property sold.

Mr. BURLESON. Wait a minute.
Mr. MERRILL. All right.

Mr. BURLESON. He does not say that that is a likely proposition, does he ?

Mr. MERRILL. I so understand it; because the proof was in the court, on which that decision was rendered, that every transaction made on the board of trade does contemplate the delivery; and as he goes on to show, unless there is an offset, it is delivered.

Mr. BURLESON. Does not Judge Holmes say that it is incomprehensible to him and that he will not accept the proposition, that those are that character of transactions that take place there, believing thereby that they are all legal, believing also that these are not the character of transactions that take place there?

Mr. MERRILL. That the bucket-shop transactions are not; that is right. He believes that those are not; that those are not correct.

Mr. BURLESON. Then a bucket-shop transaction is a transaction where the buyer has no intention of receiving and the seller has no intention of delivering ?

Mr. BURLESON. You admit that that is an illegal transaction ?
Mr. MERRILL. Yes, sir.
Mr. BURLESON. You admit that it ought to be prohibited ?
Mr. MERRILL. Yes; I do.
Mr. BURLESON. It ought to be abolished ?

Mr. BURLESON. And prohibited; and that is what you meant when you said if the committee could find a way to point out how to prohibit that, you would be glad to have it ?

Mr. MERRILL. Sure.

Mr. BURLESON. If Mr. Scott's bill confines itself exclusively—and does not touch any other sort of transactions—to transactions where the buyer does not intend to receive and the seller does not intend to deliver, you have no objection to it, have you?

Mr. MERRILL. Not if that is the provision of his bill; but that is not. It does not come anywhere near it. If you have a bucketshop bill, and have it understood that it relates only to that class of business, gentlemen, here is my right hand, and I am with you to the end.

Mr. BROOKS. If all those classes of transactions were eliminated, would not that be asking your exchange to voluntarily commit suicide ?

Mr. MERRILL. It would not, if you ask us to eliminate the bucketshop feature of it. I have explained here that the courts have held that in every order executed on the board of trade it is implied must be made according to the rules and regulations of the board of trade, that they become a part of that contract, and that those rules and regulations provide for delivery in every instance unless a set-off is had.

Mr. BROOKS. One more question, which has not been asked in all these hearings. Would it be possible for an insurance company to take the place of this hedging, and fulfill the same purpose ?

Mr. MERRILL. I do not believe any insurance scheme could be made to work, because they would charge a great deal more in premiums.

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Now, you have raised the question of insurance. I want to say this, and I do not want it to go in the record. No; I do not care whether it is made a part of the record or not. You gentlemen realize that the biggest speculator-or "gambler,” if you wish to attach that word to business, which I deprecate the biggest gambler or the biggest bettor in the world is the insurance company in betting the face of the policy against the premium. Tremendous odds! And the company frequently goes broke in doing that. The percentage of insurance companies that fail is larger than the percentage of men who speculate.

Mr. BURLESON. Have you a copy of the Scott bill ?

Mr. MERRILL. I have had a dozen of them. I think I have one at the hotel.

Mr. BURLESON. Suppose you take the entire night, and come back here in the morning, and put your finger on one single transaction denounced there other than the transaction where the buyer does not expect to receive or the seller to deliver. Suppose you take the whole night to it and come back to-morrow and do that.

Mr. MERRILL. Let me ask you this, in order that I may go home to Chicago well informed: I should like to have this committee consider the case of a man having a lot of No. 4 corn or No. 3 corn, corn possessing disabilities which could not be eliminated, not such as dirt or excessive moisture, but such as moldy kernels, unsound grain, who wished to hedge that 50,000 bushels of grain in Chicago. Knowing that he could not deliver it, he would want to ship it southeast Texas or southeast Florida way, and that, as I understand it, would be a violation of the theory of the Scott bíll; and that is a vast business, an enormous business; and there are some others that are equally like it. It would paralyze business, gentlemen, to stop that; instead of carrying a working stock of grain of, say, 50,000 bushels, in my elevator, hedged, I would have to reduce it to such amount as I might be willing to risk. Now, I went about among the trade at Chicago and said, “Suppose Mr. Scott's bill is enacted into law and is declared constitutional, tell me what effect it will have on your business?!' The answer I got from the first man was, “Instead of buying 100,000 bushels of grain to be hedged at 1 cent per bushel, on which I would get $1,000, I would buy 10,000 bushels of grain at a 5-cent margin. I could not think of touching it for less than 5 cents.” And I tell you as a grain merchant-that is my business, gentlemen—with thirty-two years' continuous experience and successful trade on the floor of the exchange, that I would not dare to take over a quantity of grain and carry it without hedging it, because that would be to make myself a speculator. To hedge is not to speculate. And, if you will allow me to speak of myself, gentlemen, I have been for thirty-two years on the board of trade, and I have never had a speculative trade for myself since I have been there; not one. I have had many hedging trades against the grain I have had in the elevator to eliminate speculation. So that you can see I am speaking in favor of the proper place or regulation of hedging in business because I have a personal interest in the matter. That is the reason I ask you to give me the privilege of being personal in my remarks. I know that it is not in good taste.

The CHAIRMAN. If there are no further questions, this will close the hearings on the part of those representing the grain trade, and on

behalf of the committee I wish to convey to yourself, Mr. Merrill, and our associates, our thanks for the attendance of your representatives Y. and the information you have given us. Mr. MERRILL. On their part, Mr. Chairman, I desire to thank you and all the gentlemen of the committee for your courtesy and patince in hearing us.


Mr. GRoNNA. Mr. Chairman, I have a telegram and a letter here from the American Society of Equity that I would like to place before the committee and have incorporated in these hearings. The CHAIRMAN. We will be very glad to have it. Mr. GRoNNA.. I did intend to say a few words on this subject, but I realize that, being only a farmer and never having speculated in options, I could add but very little to what has been said and to the testimony that has been offered to this committee. I want to say, however, Mr. Chairman, on the question of dealing in futures—and as I understand it, that is what this committee is considering here—there is no legitimate business can do away with the dealing in futures. That may be a broad statement. Every wholesale merchant, every boot and shoe dealer, every clothing manufacturer, and every tanning factory must deal in futures; but the objection that is being raised by the producers of the agriculture of the country is that you sell more than we produce. §. wholesale dealer sells more than he manufactures, and no retailer buys any more goods than he can dispose of. What we object to as producers of grain is this speculating in grain which does not exist. We will say, for instance, that our State, North Dakota, produces a million bushels of grain. I do not believe that anyone has any objection to the sale of a million bushels of grain, if they want to “hedge,” as it is called; but, on the other hand, if the sale is made of several millions of bushels of grain, which does not in reality exist, then it is evident to me, as it must be to everyone, that that is gambling, because it is dealing in something that does not exist. I have always been of the opinion that the practice of dealing in futures, in something that does not exist, is detrimental to the producing classes. There is no reason why a stock manipulator, if he is allowed to sell and to buy great quantities that do not exist, can not either inflate prices or reduce them. I am sorry to say that I have not had an opportunity of having a copy of Mr. Scott's bill, but I understand that what this bill does is to do away with the illegitimate dealing in futures. That is exactly what the farmers of my §. and the people of my State would like to have done. As I said, I have a telegram here from the American Society of Equity, and I also have a letter from them which I would like to read #. the benefit of the committee, if it is of any value. In this letter they say:

Hon. A. J. GRoNNA, Washington, D. C.

DEAR SIR: Your telegram to Mr. Pierson has been forwarded here by mail, by the new secretary of the North Dakota Union, J. M. Anderson. I have just wired you as per inclosed copy.

This is the telegram:

INDIANAPOLIS, IND., February 19. A. J. GRONNA, M. C., Washington, D. C.:

File with Committee on Agriculture request of American Society of Equity committee on national legislation to amend Scott bill so as to require a detailed description of the exact location in field or warehouse of any commodity offered for sale for future delivery when offer is made. We are with Farmers Union in war on crop gambling. Can't get to Washington within ten days.


Committee. The letter continues as follows:

The American Society of Equity has a national legislative committee composed of E. L. Davenport, Cisney, Ky., president of the tobacco grower's department, and the undersigned. In order to give this matter as much prestige as possible, it would be well whenever you give anything to the press with reference to Êquity legislation that it be impressed upon the public that the American Society of Equity has a standing committee on national legislation.

There will undoubtedly be thousands of objections to our proposed amending of the Scott bill, which must be expected whenever any effort is made to create conditions that will really make it difficult to buy or sell farm products of any kind for future delivery or otherwise by people who neither own nor control to such an extent as to be able to deliver any of the real commodities. I will but briefly give an illustration of the application of our proposed amendment in the case of a North Dakota grain grower who wants to sell a carload of wheat for delivery in November, and makes the sale in September and has his grain in the granary. He would, in case he expected to make sale by wire, file his affidavit that he had his grain stored in his granary or in shock in the field, describing the field geographically as per government survey, with whomsoever he expected to have act as his agent in the transaction, or with the purchaser in case he expected to sell it direct to some miller or manufacturer. The people who sell our grain before they get it would encounter some difficulty in describing where they have their grain. While they might be able to establish, or rather fake up, acceptable proof of their intention to deliver, they would have considerable trouble in proving that they had any grain at all.

There is no good reason why grain and cotton, for instance, shall be bought and sold at stipulated prices without the real possessor of it knowing anything about the transaction. If some one should undertake to buy and sell our farms in that way, it wouldn't be long before there would be some noise in this country. Ordinarily a man can not dispose of his equity in a contract to purchase a farm without the consent of the man who holds the warranty deed.

On account of the March 1 issue of the paper which I am editing I can not possibly get away now.

I would be glad if you would have the Congressional Record sent us here, one copy for the Equity Farm Journal and one for the American Society of Equity. I find that it does not constitute a part of the daily mail at present.

Thanking you in advance for this favor and for calling our attention to this hearing, I am, Very truly, yours,

National Legislative Committeeman. (At 4.30 o'clock p. m. the committee adjourned until to-morrow, Wednesday, February 23, 1910, at 10.30 o'clock a. m.)

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