and that it was putting the farmers' grain down 10 to 25 cents a bushel, you could in 30 days' notice, with the Secretary's permission, amend the code and take it out.

Mr. GILCHRIST. How is it amended when it is amended?

Mr. DAVIS. The Secretary and the President

Mr. GILCHRIST. By the trade itself?

Mr. DAVIS. Their recommendations.

Mr. GILCHRIST. The trade itself is instrumental in making the amendment?

Mr. DAVIS. The trade holds a hearing.

Mr. GILCHRIST. Yes.

Mr. DAVIS. And everybody is heard.

Mr. GILCHRIST. They then make a recommendation.

Mr. Davis. Then we recommend it to the Secretary. If the Secretary approves, he passes on it and the President approves the amendment, and then it becomes law.

Mr. GILCHRIST. Then it is up to the Secretary finally to amend the code if he wants to?

Mr. DAVIS. After hearings.

Mr. GILCHRIST. After hearings?

Mr. DAVIS. Yes, sir. And the agreement of the trade. Of course, he can force amendments against the advice of the trade. He has that authority under the code.

Mr. GILCHRIST. Well, that is all.

The CHAIRMAN. Any further questions? If not, we desire to thank you, Mr. Davis.

Mr. DAVIS. Thank you, Mr. Chairman.

STATEMENT OF THOMAS Y. WICKHAM, CHAIRMAN OF THE GRAIN COMMITTEE ON NATIONAL AFFAIRS

Mr. WICKHAM. Mr. Chairman, I should like to add my voice to the suggestion of a subcommittee, and I wish also to extend to that subcommittee a very cordial invitation to visit the Chicago Board of Trade and study these processes.

Now, that institution was not built from a blueprint. It is merely the experience of merchants, crystalized in the white heat of individual competition. Every rule there has a purpose. Every rule there is tested by the experience of merchants. It is hard to explain it all, but I do feel that if a subcommittee would come there, let us show them the reasons for these various rules, let us show them processes, they would have information that they will never get through orations delivered here.

We need study of this question, real study of it.

Dr. Duval is head of a bureau, and has naturally a desire to increase the power of that bureau, just as I, as a grain merchant, desire to promote my business. Our viewpoints are colored. They must be, by our personal desire and ambition; but here is a great trade institution that you propose to regulate. But if you are going to do so, study the question; study the trade.

One point, in particular, that has not been brought out at all in all of these discussions, and, in my judgment, it is the most important of all, and that is the uniformity of law. We have always been told that a law should be something that anyone who runs may read..

They say that the grain trade has always opposed legislation. Well, why shouldn't we? Legislation has become a matter of confusion. We are under the Agricultural Department. Other codes run to the N. R. A. Ours runs to the N. R. A. and the A. A. A. That is two more departments. We are under the Grain Futures Administration. There is a fourth department. And then we have 48 States passing laws regarding our contracts. Conflict after conflict. The United States Government says we can do something. The State of Illinois says we cannot. The code says you must do something. The State of North Dakota says you cannot.

Now, if you are going to pass a law, and I feel that the trade is more eager than anything else that it should be clarified and there should be some authority that we can go to and find out what we can do; but I submit that in all justice, if you are going to draft a law, if the Federal Government will say, as it has said, that these future. contracts are in the stream of interstate commerce and subject to Federal regulation and Federal control, and that is sustained by the Supreme Court, then you must take away the control of these 48 States. Only in fairness, make this legitimate. Quit constant legislating. I think you will all agree that legislation has become largely a matter of ballyhoo.

Now, study this question. I am speaking for the farmer. Every dime I ever had is invested in agriculture. I want the farmer protected and I want his market protected.

Here is a machine that, in my judgment, is the most efficient instrument of distribution commerce has yet devised. It is not perfect. Nothing human is. It has only been running for 80 years. It is not as good as it will be 100 years from now, but it is better than anything else. It is able to take 12,000,000 bushels of wheat every day and turn it into bread. There is not a station on a railroad in the wheat country where you cannot go any day and sell wheat for cash and there is not a grocery store anywhere in the civilized world where you cannot buy flour, and yet the crop will vary as much as 2 or 3 or 400 million bushels in a year. That is good distribution. That is the best distribution I know of. And I think that you gentlemen, charged with all of the responsibility that rests now upon you, because of the state of agriculture, certainly owe it to the farmers of this country to take a few days over with a subcommittee and study this question. We will give you everything we have. Mr. Boylan joins me in a very cordial invitation to come to Chicago.

STATEMENT OF PHELAN BEALE, GENERAL COUNSEL FOR THE NEW COTTON EXCHANGE, NEW YORK, N. Y.

Mr. BEALE. Mr. Chairman and gentlemen: My name is Phelan Beale. My address is 165 Broadway, New York City. I am counsel for the New York Cotton Exchange.

I have a very brief statement to make.

At the hearing before this committee on last Thursday, a committee composed of four members of the New York Cotton Exchange attended for the purpose of being heard. As the entire session was consumed by representatives of the Chicago Board of Trade who

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spoke on the question of licensing floor brokers, the committee of the New York Cotton Exchange felt that anything they might say would be more or less in the nature of repetition, and in consideration of not consuming the time of this committee, they have requested me to ask the indulgence of the committee to the extent that I be allowed 10 minutes, as counsel for the New York Cotton Exchange and its members, to present two brief arguments on the merits of the bill. This request, I realize, may not be agreeable to the chairman, but I respectfully point out that the hearings by this committee on the proposed bill at the last session of Congress were closed and thereafter the bill was amended so as to include cotton, consequently the cotton-futures trade has never been heard on the merits of the bill. May I further respectfully say that the cottonfutures trade may have appeared a few years back in respect of a similar bill affecting cotton futures, but at such time there were not present at least six members of the present committee.

With the consent of the chairman I will, therefore, proceed to submit briefly two arguments.

The first of these arguments is that the cotton trade is so separate and apart from the grain trade it would be a grievous error to include cotton in a bill that primarily was drawn to apply to grain. For instance, the planting of grain, the bringing of same to market, and placing the commodity into the hands of the ultimate consumer engage but few persons and affect but few industries in comparison with that of cotton.

It may be surprising to know that, according to economists and authorities on the subject, from 10 million to 12 million persons in the United States depend for their living on the growing, distribution, and manufacture of cotton or upon industries or trades which are otherwise vitally related to cotton. That the States in which these persons reside are 10 in number, containing nearly one-half of the population of the Union, and this population is dependent either directly or indirectly on cotton. Moreover, out of 6,300,000 farms recorded in the United States census about 2,000,000 grow cotton, and of these 1,600,000 are devoted chiefly to cotton. Cotton has been the chief export of this country for over a century, and now is, and is the most valuable crop raised in the United States. It is respectfully submitted to this committee that any bill that has reference to the control of contract markets of cotton and that may affect the price of cotton or its marketing should be a bill that relates solely to cotton, and no effort should be made to add cotton to a bill that was drawn primarily to apply to grain exchanges, wherefore the New York Cotton Exchange and its members ask that if this committee insists upon legislation affecting cotton-futures exchanges, then let such legislation be in a separate law, to the end that deliberation may be had thereon and a bill prepared that through no inadvertence nor sins of omission or commission may the greatest commodity in the United States and the greatest export of the United States be impaired.

The second of these arguments is that your committee, as well as every other patriotic citizen of the United States, are prompted only to demand legislation governing private businesses as and when such legislation is necessary to prevent abuses of the public welfare and

to protect a trade that belongs to no individual nor a group of individuals but, indeed, is the property of our people as is the public domain of our country. I deny that there is any such demand in respect of the cotton-futures contract markets. In support of this denial may I submit that over a period of months many conferences were held by representatives of the three cotton-futures exchanges with representatives of the A. A. A. Division of the Department of Agriculture to ascertain whether or not a code of fair competition was necessary to govern cotton-futures exchanges and its members to prevent abuses against the public or the cotton trade or the members of such exchanges. In these conferences representatives of the N. R. A. participated. The proposed code contained substantially the provisions of the bill H. R. 3009, now under consideration, except in respect of licensing floor brokers; and in fact the proposed code was, perhaps, more drastic in that the power was concentrated in the Secretary of Agriculture or the Administrator for Industrial Recovery.

The result of these conferences was that the A. A. A. Division requested that the members of the cotton-futures exchanges submit memoranda showing why a code should or should not be imposed, and the reasons therefor. Memoranda were accordingly submitted, one of which was on behalf of the members of the New York Cotton Exchange. This memorandum is short, and every argument advanced therein is a meritorious argument against including cotton in the so-called "Jones bill ", wherefore I will end this paper by reading such memorandum.

After conferences and the memoranda, the A. A. A. Division were satified that no code was necessary. Such portions of such memorandum that are applicable here are as follows:

On August 22, 1934, a conference was held in Washington by officials of the A. A. A. Division of the Department of Agriculture, and of the N. R. A. There were also present those members of the New York, New Orleans, and Chicago cotton-futures exchanges, who had been invited to attend. The purpose of the meeting was to afford a free and full discussion of the need, if any, of a code for the cotton-futures trade-whether the same would be helpful and, if so, what provisions should the code contain.

Views were exchanged and a lengthy discussion ensued wherein every one who so desired voiced his opinion.

The suggestion was finally adopted that the proposed code prepared and presented at the conference by the A. A. A. Division be sent by each exchange to its members for examination, and after a reasonable period each exchange request its members to hold a general meeting at which to express their views on the advantages or disadvantages of a proposed code; and to elect a committee to prepare a memorandum to submit to the Department of Agricultureto reflect the prevailing opinion as registered by the members, accompanied by reasons to support such opinion.

A meeting of members was held at 3:15 p. m., on September 5, 1934. The view was unanimously to the effect that a code was neither necessary nor helpful.

Messrs. Geer, McEnany, and Wachsman were chosen as a committee and requested to prepare a memorandum, apprising the De

partment of Agriculture to the foregoing effect and submitting the reasons that prompted the negative vote.

The committee invited members to give to the committee the reasons on which they based their conclusion that a code would rather hinder than help. From the material so supplied, the committee exercised a selection which it submits to the following effect:

The members of the cotton-futures trade in New York City occupy a position entirely different from members of what might be called the basic trades or industries of the United States-perhaps a unique position-in that, by virtue of being controlled by a central authority, namely, the New York Cotton Exchange, which they established and under which they have voluntarily operated for 65 years, they have subjected themselves to a code of fair-trade practices to eliminate cutthroat competition and destructive evils to the public, which the committee understands is one of the chief purposes that the N. R. A. codes were designed to achieve.

The members of the cotton futures trade in New York City occupy a second different and unique position in that the central authority that they established, namely, the New York Cotton Exchange, and under the bylaws of which they have operated for 65 years, was created by a special law of the State of New York which permitted the members of such exchange to function through a body corporate for limited purposes, the chief of which were to maintain suitable quarters in which to trade, to adjust controversies between themselves, to establish just and equitable principles in trade, and to discipline by suspension or expulsion any member guilty of violating this code. Should the members not conform to the foregoing, the State of New York may bring an action to dissolve the exchange, wherefore the members of the cotton futures trade in New York City are subject to this control by the State of New York.

The members of the cotton futures trade in New York City occupy a third different and unique position in that, under the United States Cotton Futures Act of August 11, 1916, with amendments, more commonly known as the "Smith-Lever Act", such members must, through a tax provision, conduct their business in the manner and time and under the terms and conditions as in said act prescribed, as supplemented by the regulations of the Department of Agriculture, wherefore it may be conservatively said that for 18 years all members of the cotton futures trade have been subject to supervision and control by the Federal authorities-and are now so controlled.

The members of the cotton futures trade in New York City occupy a fourth different and unique position from members of what might be called the basic trades and industries of the United States in that they do not buy or sell anything whatsoever either between themselves or with the public. They offer to the public that for a stated broker's commission they will, on certain terms and conditions, pursuant to the rules and regulations of the New York Cotton Exchange, enter into contracts with each other for the purchase and sale of a single commodity-cotton-to be delivered in the future. These contracts must be of a kind described in the Smith-Lever Act; and the cotton to be delivered on such contracts must be of a kind specified in the same law and certificated by the Department of Agriculture. The stated commission as aforesaid is a fixed sum, wherefore