Mr. DAVIS. As I said, it seems to be a matter of opinon, so I will read from the code. In the first part it gives the powers of the Code Authority which are, without taking up your time, to the best of our ability to insure the execution of the provisions of this code and to provide for the compliance by the exchanges and members thereof with the provisions of the act, subject to such rules and regulations as may be issued by the Secretary. Now, we are to investigate violations. We are to insure the execution of the provisions of this code by investigation of suspected violations. Over here [indicating] on the limit of margins, as Mr. Duvel said, on 2,000,000 bushels, that takes a 25-cent-a-bushel margin, which virtually puts it out. Then over here in section 6, on page 9, each exchange shall vest in its board of directors or board of governors, or in an appropriately constituted committee, authority, subject in each case to the approval of the Secretary, from time to time to modify, or abolish, the limitations on daily fluctuations in the price of futures provided in section 4 of this article, and shall vest in such board of directors, board of governors, or committee plenary authority from time to time to establish, modify, or abolish (1) limitations on the amount of members' or nonmembers' open contracts, for the purchase or sale of futures, and (2) margin requirements in excess of but not less than the minimum margin requirements fixed in section 3 hereof. Now it requires then a business conduct committee and under the business conduct committee, under this code, when established, supervisors to do the very things that have been mentioned here. The supervisor has assistants who are auditors. They check members' books at any time. They may bring them in, and if they have violated any rules the business conduct committee must prosecute their cases. If they do not, the Code Authority takes charge of the case, and if we do not do it we report to the Secretary of Agriculture and he does it. The CHAIRMAN. We desire to thank you, Mr. Davis. Now, any witnesses who have appeared may have the privilege of filing a statement for the record. STATEMENT OF M. B. THATCHER, WASHINGTON REPRESENTATIVE OF THE FARMERS' NATIONAL GRAIN COOPERATIVE, AND THE NATIONAL AGRICULTURAL CONGRESS Mr. THATCHER. My name is M. B. Thatcher. I am the Washington representative of the Farmers' National Grain Cooperatives, and the National Agricultural Congress. In connection with the question raised by Mr. Coughlin and some of the statements made by the witnesses yesterday as to why the representatives of the farm organizations were not appearing in these hearings calls for just a short explanation. We have been appearing for years with specific proposals for consideration of Congress. In this particular case, in connection with this hearing, we understood they were limited to the question of licensing floor brokers and in that regard the testimony would be limited to the opposition. That was our understanding. We have gone far afield in some three or four hearings. I merely want to state that for the record, as to why we have not appeared in this manner. If you care to extend the hearings and give the producers' organizations an opportunity to appear and testify on all of these questions that have been under controversy, then we must have an opportunity to call our technical men. The CHAIRMAN. Mr. Thatcher, the farm organizations appeared at the last session, practically all of them, and endorsed the pending bill. Mr. THATCHER. That is right. The CHAIRMAN. Have they changed their position in that matter? Mr. THATCHER. They have not. The CHAIRMAN. They still endorse it? Mr. THATCHER. Yes. The CHAIRMAN. Then, I do not think it is necessary to hear them. Mr. THATCHER. Thank you, Mr. Chairman. Mr. WICKHAM. Mr. Chairman, Mr. Coughlin, who is more familiar with this situation than anyone else, would like to have about 7 or 8 minutes. The CHAIRMAN. We can give Mr. Coughlin 4 minutes, if he wants to take that. STATEMENT OF JAMES J. COUGHLIN, PRESIDENT OF THE BROKERS' ASSOCIATION, CHICAGO BOARD OF TRADE-Resumed Mr. COUGHLIN. Mr. Chairman and members of the committee. The CHAIRMAN. I will ask the committee not to interrupt with questions so that Mr. Coughlin may have the full time. Mr. COUGHLIN. I am familiar with the particular instance mentioned by Mr. Mehl because in that case I appeared as counsel for two of the respondents. That particular case grew, I think, out of one of the most extraordinary conditions ever to exist on the board of trade. The transactions that were complained of took place in July of 1929. Now, first of all, let me call your attention to this: During that time the board of trade was occupying temporary quarters pending the construction of its new building. Those temporary quarters were about one-fourth the size of the quarters we were accustomed to. During that period, as you know, the great so-called Coolidge bull market was in full swing in stocks. In July of 1929 the Agricultural Marketing Act was passed. About mid-summer there developed a tremendous apprehension over a crop failure in Canada, so that during this period, through the impetus gained from the passage of the agricultural marketing act, the reaction from the stock market, and the conditions created by the Canadian crop scare, we had, I think, the biggest trading in point of value that I have ever seen on the board of trade. We traded in those days in excess of 200,000,000 bushels of wheat a day, whereas our total trade today in all grains is approximately 20,000,000. That gives you some idea of what we were faced with. During that time we did not have enough brokers; we did not have enough telephones; we did not have enough messengers; we did not have enough space, and it is simply a human miracle that the business that was brought into the board of trade those days was dispatched and that there were not a great many more irregularities because of these conditions. It is one of those things for which there never will be any logical explanation. Sometime I would like to speak a few minutes on just how this case arose, so you could see how ridiculous it is. In October of that year the man whom the director charged was suspended for 5 days was upon further investigation suspended for 2 years and the other two men were exonerated by the investigating committee of the exchange. Subsequently, in March of 1930, 6 months after this happened, the Grain Futures Commission filed its two complaints. Those complaints went to hearing in April. The counsel who was appointed for the Government took sick after the first day of the trial and it was postponed, I think, until some time in May; the hearing was dragged out for 4 or 5 weeks; and a record accumulated of about 2,000 typewritten pages. The record was closed on August 30 with the agreement that the case was to go to the commission on the record then made and briefs were to be filed. The Government was to file its brief first. No time was fixed for the filing of the briefs, but it was agreed that they would be filed with reasonable dispatch. I asked Government counsel what he considered reasonable dispatch and he said 90 days. Ninety days went by; 6 months; a year went by; 2 years went by; and sometime after the expiration of 2 years, the Government brief was filed. Mine was filed 30 days thereafter. In September of 1932 the case was at issue before the commission, more than 2 years after the termination of the taking of testimony. The Hyde Commission was then in office. The Hyde Commission went out of office without disposing of the case, in the spring of 1933. The present commission took the case up and when we appeared here in Washington and argued it before them, Government counsel concurred in my motion to dismiss all but one of the defendants out of the case. In other words, 32 years after the procedure was started, the Government decided that it had no case against this man, so the matter stood there. Then, some few weeks afer that hearing, the commission dismissed the case, not for want of jurisdiction-and, I want to correct your impression about that-but, for the simple reason that no case whatever had been shown under the Grain Futures Act. Now, if that three and one-half year period that it required to dispose of that case is to be taken as typical of what the procedure is liable to be under this act, I think the committee ought to know it. I want to call your attention to one other fact in this case, because it is very significant. The immediate question in that case was not bucketing or not cross trading. The complaint alleged that these three brokers were guilty of executing orders at prices varying from one-half to 2 cents a bushel out of line with the recorded prices. There was not one scintilla of evidence offered by the Government to show that that was true. When I examined the Government auditors The CHAIRMAN. Mr. Coughlin, I do not think that we can go into each individual case. If you want to, you may file a statement. Mr. COUGHLIN. Yes, I will just drop that point. I think that I have brought out what I wanted to show. The CHAIRMAN. I think that you have made clear your position in the matter. Mr. COUGHLIN. But, it occurs to me that if after all of these years; considering the varying conditions under which we operate; considering that we have 1,500 members that are scattered to the four winds; that there have been some 14 or 15 complaints of irregularities made and only one of which has been called to the attention of the directors of the board for disciplinary action, it seems to me that the Grain Futures Administration has given us just as clean a bill of health as we could conceivably ask for. The CHAIRMAN. We thank you, Mr. Coughlin. Mr. COUGHLIN. Thank you. The CHAIRMAN. I would like to put in the record one page of last year's proceedings showing the tremendous transactions and the future trades that cause most of the complaints. The matter referred to is as follows: DISCUSSION OF WHEAT TRADING, COMMITTEE HEARINGS, APRIL 3, 1934 Mr. HOPE. What constitutes the largest operation or transaction that you have a record of? Mr. DUVEL. We have had a number running over 2,000,000 bushels. During the 10 years prior to March 1933 there were 16 speculators that reach 2,000,000 bushels or more. There was one at 16,000,000, and here is another at 8,000,000 or 10,000,000. Mr. HOPE. What is the largest single case? Mr. DUVEL. I beg your pardon? Mr. HOPE. The largest speculative transaction? Mr. DUVEL. That is evidenced here on this chart. At that time two traders had 23,000,000 bushels. That was in 1926. At that time they controlled 32.6 percent of the total contracts in the dominant futures, their combined holdings representing nearly 23,000,000 bushels short. The general public was supporting the market and carrying the extra load occasioned by the selling of these two speculators. They were not carrying "hedges ", as is so frequently claimed for the large speculator, and there is not question but that their selling exerted a very depressing influence on the prices to the detriment to the wheat producers who were at the time in the midst of their market operations. While these large short lines were being accumulated, the price of the December future declined nearly 18 cents per bushel. That was from about the middle of July until the 8th day of September. That was in 1926. The United States wheat crop that year was 831,000,000 bushels. The short sales by these two traders represented nearly 3 percent of the entire crop. The Grain Futures Administration says that in September 1926 one speculator was short at one time as much as 12,545,000 bushels in December wheat alone. He was short over 10,000,000 bushels from August 30 to September 13, 1926. STATEMENT OF ROBERT P. BOYLAN, PRESIDENT CHICAGO BOARD OF TRADE-Resumed Mr. BOYLAN. Mr. Chairman, did you receive this morning a communication from Mr. Farlow? The CHAIRMAN. Not unless it has come in since the hearing started. Mr. BOYLAN. I would like for that to go into the record. The CHAIRMAN. Without objection, it will be so ordered. (The communication referred to is as follows:) FARMERS GRAIN DEALERS ASSOCIATION OF ILLINOIS, Hon. MARVIN JONES, Chairman House Committee on Agriculture, OFFICE OF SECRETARY, February 9, 1935. House Office Building, Washington, D. C. DEAR MR. JONES: Enclosed please find copy of a resolution which was adopted by unanimous vote at the thirty-second annual convention of the Farmers Grain Dealers Association of Illinois at Springfield, Ill., on February 7. Respectfully yours, FARMERS GRAIN DEALERS ASSOCIATION OF ILLINOIS, Whereas, an ever-ready cash market for grain and all other food supplies now prevails and its continuance is vital to the people of this Nation, and Whereas, there is now pending before the Congress of the United States a bill to license and further regulate the activities of handlers of grain and other products known as the Jones Bill, and Whereas, the provisions of said bill jeopardize the existence of a free and open market by arbitrarily placing full control of all marketing activities in the hands of three members of the Cabinet who may not have had practical marketing experience and further interferes with a recognized constitutional right and freedom of our citizens, Therefore, we, the Farmers Grain Dealers Association of Illinois, representing cooperative marketing agencies of farmers who handle more than 50 percent of the grain marketed in Illinois, vigorously oppose the passage of the Jones bill and instruct the officers of this association to present our opposition in no uncertain terms to the Honorable Secretary of Agriculture, to each Member of Congress, and to the public press. The CHAIRMAN. I desire to thank you, gentlemen. The committee will close its hearings. The committee will stand adjourned, to meet at the call of the chairman. (Thereupon, at 11:57 a. m., the hearings in the above-entitled matter were concluded.) EL PASO, TEX., Hon. R. E. THOMASON, House Representatives Office Building, Washington, D. C. Jones H. R. 3009 apparently entering wedge license all brokers dealing commodities and place them subject Secretary Agriculture giving him opportunity crush anybody at variance his ideas speculative markets in my opinion make real markets and should not be stifled. I hope you can consistently oppose it. J. C. PEYTON. EL PASO, TEX., Hon. R. E. THOMASON, M. C., House Office Building, Washington, D. C. H. R. three thousand nine, Jones, placing food products under licensing of Triple A, will place added burden upon such producers and packers and seriously interfere with private business. If consistent with your views our local merchants request your disapproval of this bill. W. R. BLAIR. |