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Mr. BURLESON. I will ask you if you did not say this, I read from one of your home papers.

The New York raid is not a legitimate incident of the cotton trade, either in spot or futures. It is as if a man or set of men for the sake of gratifying a personal grudge and of reaping a personal profit should endeavor to stampede the occupants of a crowded building by the cry of “Fire!” The issue raises the question as to whether a few manipulators shall demoralize a great trade system and go unpunished therefor.

You said that?
Mr. THOMPSON. Yes.
Mr. BURLESON. You made that statement ?
Mr. THOMPSON. Yes.
Mr. BURLESON. Was it true?
Mr. THOMPSON. In my opinion.

Mr. BURLESON. Now, if great demoralization resulted to the cotton trade at that time, was it justified by the conditions, and if great demoralization resulted at that time, you say, in your opinion, that it was the result of the existing conditions ?

Mr. THOMPSON. I do not think it was. I do not think that the prices at that time were justified by the conditions.

Mr. BURLESON. Can you give this committee any estimate of the loss sustained by the trade as a result of this raid on the New York Cotton Exchange?

Mr. THOMPSON. No, sir.
Mr. BURLESON. Do you know of the Wall Street Journal ?
Mr. THOMPSON. I have heard of the paper ?
Mr. BURLESON. Is it not a conservative, reputable trade journal ?
Mr. THOMPSON. I think so.

Mr. BURLESON. Permit me to read a statement from the Wall Street Journal, and then I will ask you if you think the Journal is justified in the opinion that it here expresses, giving an estimate as to the extent of the loss caused by the slump. This statement of yours which I have read was made on January 20 of this year?

Mr. THOMPSON. Yes, sir.

Mr. BURLESON. This which I am about to read is from the Wall Street Journal of date January 25 of this year. It says:

Probably not more than 2,000,000 bales out of the 10,000,000 estimated for the year's crop had passed through all the stages beyond which commercial and industrial values can be affected before this lowering trend of the market began. That would leave 8,000,000 bales in one form or another, either worked up into textiles or raw cotton, yet to be sold to consumers.

At a low estimate of $70 a bale the volume of values affected would be $560,000,000 An average decline of 15 per cent would be equal to a shrinkage of $84,000,000. Nearly all of this decline occurred within two weeks, or eleven full business days—an average shrinking of $7,636,000 a day.

Do you believe the Wall Street Journal was justified in making that estimate ?

Mr. THOMPSON. Well, I do not know.

Mr. BURLESON. See if I can help you. About what was the decline in the price of cotton within those three days?

Mr. THOMPSON. About 3 cents, I think.
Mr. BURLESON. That amounts to $15 a bale, does it not?
Mr. THOMPSON. Yes; that is, if it had been sold at that decline.
Mr. BURLESON. At that decline ?
Mr. THOMPSON. Yes.

Mr. BURLESON. Now, if the decline was $15 a bale and there were 8,000,000 bales affected by such decline, that would aggregate $120,000,000, would it not?

Mr. THOMPSON. Yes.

Mr. BURLESON. Then when the Wall Street Journal says that the trade was demoralized to such an extent that a loss was sustained of $84,000,000, it was, as the Wall Street Journal claimed, a conservative estimate of the loss, do you not think so?

Mr. THOMPSON. You say that there was a loss. Now, if everybody had turned loose and sold their cotton at the bottom of that decline, there would have been a loss; but let me ask you something. You have not there all of that article that I wrote.

Mr. BURLESON. I will give you the article. Put your finger on anything that is in it

Mr. THOMPSON. I do not mean to say that you have not read all that you had, but in that article that you read-I do not believe it is here-I spoke of the fact that on account of discounting the short crop cotton had been forced up during the fall to a price that it never would have reached but for this fact, and that the market had gotten into a technically weak position, because people had continued to buy

Mr. BURLESON. What do you mean by the market being forced up?

Mr. THOMPSON. I mean that a great many people had bought contracts and had bought cotton.

Mr. BURLESON. You mean, then, that the future market had been manipulated by those-

Mr. THOMPSON. No, sir.

Mr. BURLESON. Well, what do you mean by the market having been forced up?

Mr. THOMPSON. I mean the people who made a study of the proposition concluded that on account of the scarcity of the supply the price would be better later on and justified their opinion by buying cotton and contracts.

Mr. BURLESON. Was it forced beyond the actual value of cotton ?

Mr. THOMPSON. I do not know, but the likelihood is in times of speculative activity that that is the case; it is overdone.

Mr. BURLESON. You made a statement with reference to the condition in 1907—during the bear raid of 1907—did you not, over your signature ? Mr. THOMPSON. I have written a good deal, Mr. Burleson.

Mr. BURLESON. I think I can find it. I desire to read it to you, so that you may recognize it.

Mr. THOMPSON. I will say this, that whatever you find, wherever you find anything that I have said on this subject, I do not believe that the conditions, the actual conditions, ought to be the subject of raids, as you may call them, or of cliques or of people who get together for a speculative purpose without regard to actual conditions. That is the position I have taken all along

Mr. BURLESON. I do not seem to be able to lay my hand on it. It may be Mr. Marsh can tell me where that part of his statement is to be found in the hearings. I read it to him while he was being interrogated. I allude to the statement denounced as a fish story.

Mr. MARSH. This testimony makes rather a large book to go through. I have not struck it this morning.

Mr. BURLESON. I saw it in the hearings this morning. I think I can find it. I want to read it to Mr. Thompson while he is on the stand, and have his opinion whether it is a fish story.

Thé CHAIRMAN. I take advantage of this interval to remark to gentlemen generally that we want to close this hearing at 5 o'clock, and I trust that interrogatories and answers will be as brief as possible. Mr. BROOKS. May I ask one question while we are waiting ? The CHAIRMAN. Yes.

Mr. BROOKS. I understood Mr. Thompson to say that he could make more money if this law passed than he can now.

Mr. THOMPSON. No, sir; I said if I took a superficial view that I might think I would be able to make more money, because I sell cotton. I am a cotton factor. The cotton is shipped to me on consignment and I sell it. Now, there has developed in recent years a large interior market. People buy cotton in the interior and it comes through and never touches me, you understand. It passes by. We call these people the f. o. b. traders. It is a very large business in New Orleans. They are able to do that business because they are able to hedge those contracts. If they could not hedge those purchases and sales that they make, I mean that it would cripple the f. o. b. business, and if it did cripple the f. o. b. business I might think it would help me, that the spot .business would increase. But as a matter of fact, in crippling the f. o. b. business the disadvantages and the demoralization that would ensue through interfering with the present trade methods would be so great that as far as I am concerned I would lose money, because the profit that I have, the contracts that I have, would necessarily decrease in value by so much as the price that the farmer realized from his cotton decreased.

Mr. BROOKS. You are opposed to this, then, not from the standpoint of your business, but from the other standpoint ?

Mr. THOMPSON. I am opposed to it from the standpoint of the cotton producer. I am a friend of the producers.

Mr. BROOKS. If the spinners and cotton producers were both in favor of it, and you could make more money than you do now

Mr. THOMPSON. I say that I can not make more money. If I took a superficial view of it, I might think I could; but I can not.

Mr. BROOKS. I thought you said you could. Mr. THOMPSON. No, sir; I can not. * Mr. BURLESON. Mr. Chairman, I have found the statement I was looking for in the record.

Mr. MANDELBAUM. Was it a fish story?

Mr. BURLESON. No, I do not think it was. It was so denounced, but personally I believe it was a true story. I now read this statement from page 482 of the hearings:

Look as critically as we may, we can find no germane weakness that would account for the sudden collapse of the market. We must look to some outside agency. It is easily found. The slump was the result of a premeditated attack and persistent onslaught by a party of New York operators, backed by ample capital and prestige in speculation.

Did you make that statement ?
Mr. THOMPSON. Yes; I think I did.

Mr. BURLESON. Then answer whether it is possible for a party of New York speculators to go upon the New York Cotton Exchange and by systematic effort sell the market price of cotton down; yes or no,

Mr. THOMPSON. Yes; I think it is.

Mr. BURLESON. Was not that exactly what you were referring to when you made that statement ?

Mr. THOMPSON. Yes.
Mr. BURLESON. Let me see if you recollect this statement:

If we believed that the present prices were the result of natural and legitimate causes, we would advise our friends to accept these prices and turn their cotton into money without delay. But we do not believe that the present prices are natural or legitimate. The brief experience we have had with the market this season before speculation interfered, showed that consumers were willing to pay the prevailing prices and producers were willing to accept them. If business had been permitted to run its natural course, probably the increased volume of receipts would have gradually lowered prices. This would have been a natural and acceptable result. But when an outside element that knows nothing about cotton and has no interest therein except as a medium for gambling profits, arbitrarily interferes between the producer and consumer and undertakes to fix prices by sheer force of money and manipulation, we believe in suspending the rules and striking with the weapon at hand.

You made that statement ? Mr. THOMPSON. I did, sir.

Mr. BURLESON. Do you believe that it is possible for an organized coterie to interfere between producer and consumer in that way?

Mr. THOMPSON. Temporarily; yes, sir.

Mr. BURLESON. What is the result when an interference of that kind takes place-a cessation of commerce-a stopping of trading in cotton, is it not?

Mr. THOMPSON. Yes; I think so.

Mr. BURLESON. Because the producer ceases to sell and the mill man ceases to buy?

Mr. THOMPSON. Yes.

Mr. BURLESON. It brings about an obstruction and interference with commerce, does it not?

Mr. THOMPSON. Yes.

Mr. BURLESON. Now, I want to ask you, what would be the effect of this sort of a transaction upon the New York exchange-I read from one of the New Orleans papers, a cable report from Liverpool:

The cotton market Saturday morning was treated to the most sensational piece of bear raiding in its history. Private cables were unanimous in attributing the decline there to heavy American selling, and one of the cables estimated it at fully 125,000 bales. The result of this huge selling was a break in the English market which at one time amounted to 44 or 46 cpoints.

Their points are just twice ours—two for one ?
Mr. THOMPSON. Yes.
Mr. BURLESON. That would be 88 or 92 points with us, would it

not?

Mr. THOMPSON. Yes.
Mr. BURLESON. (reading):

The ring was thrown into wild confusion by the manipulation going on. They threw overboard their cotton by the thousand bales, and to this was added thousands of bales from speculators on the bear side.

What would be the effect of that kind of speculation on the New York and Liverpool exchanges ?

Mr. THOMPSON. If that was an authentic and true statement, the effect would be to temporarily depress prices.

Mr. BURLESON. Did you recognize what paper I read from?

Mr. THOMPSON. Yes; that is the opinion of that reporter of that paper.

Mr. BURLESON. Is that a reputable trade journal ?
Mr. THOMPSON. Yes.
Mr. BURLESON. Looked to by the cotton trade?
Mr. THOMPSON. Yes; considered by the cotton trade.

Mr. BURLESON. Take the paper and tell me if cotton did break $2 a bale on that day. There are the quotations [handing paper to witness.

Mr. THOMPSON. I believe it did. I do not remember the particular day.

Mr. BURLESON. But you remember the transaction, do you not?
Mr. THOMPSON. I remember when the market declined.
Mr. BURLESON. That was on February 19?
Mr. THOMPSON. Yes.

Mr. BURLESON. That is a different trade demoralization from the one I referred to a moment ago, the one taking place in January?

Mr. THOMPSON. Yes.

Mr. BURLESON. On this occasion the price went down from 88 to 92 points, between $4 and $5 per bale ?

Mr. THOMPSON. Yes.

Mr. BURLESON. Now, Mr. Thompson, is it not a fact that your exchange is helpless to contend against conditions of that kindunable to resist the effect of such large operations?

Mr. THOMPSON. No; our exchange responds, of course, Mr. Burleson, but we are not helpless. I believe very firmly that in many instances the temper of our people in our exchange has stopped this very thing.

Nr. BURLESON. Let me ask you directly if your exchange is not absolutely helpless whenever a transaction of this kind takes place on the New York exchange; do not your prices necessarily respond thereto?

Mr. THOMPSON. Our prices respond, but I would not say that we are necessarily helpless.

Mr. BURLESON. Oh, if Rockefeller were to go on your exchange-
Mr. THOMPSON. Yes.

Mr. BURLESON (continuing). And when these future contracts were offered for sale, on the New York Cotton Exchange or the Liverpool Cotton Exchange, if he went into the New Orleans exchange and stood ready to buy every one offered

Mr. THOMPSON. Yes.

Mr. BURLESON (continuing). You could prevent violent declines, of course; but are not conditions such that you admit you can not prevent the effect of these speculative transactions, and have you not stated over your signature time and time again

Mr. THOMPSON. We can not prevent fluctuations. We are going to have them.

Mr. BURLESON. I am not talking about fluctuations; I am asking you if it is not a fact that your little exchange is so weak—I will admit now, for the sake of argument, that you have described an ideal exchange. This is for the purpose of the argument.

Mr. THOMPSON. Yes.

Mr. BURLESON. In your statement you have described an ideal exchange.

Mr. THOMPSON. Yes. Mr. BURLESON. But is it not a fact—and I do not want now to hurt your feelings, but is it not a fact—that your exchange is so puny and

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