that the board and clock represent as being bid for futures on same grain, same kind of grain? A. It is usually the case; not always.

Q. I mean that is the general rule?-A. Yes.

Q. There will be curcumstances and times due to local conditions or something that will vary that general rule?-A. Yes.

Q. But the general rule is true?-A. I would say that; yes.

[Future transactions-Influence of price of cash wheat. F. L. Doherty, chamber scalper. House committee, vol. 4, p. 1192.]

A. The way it appears to me, the scalper usually works on extreme points on a market, whether it is up or down. He might figure an extreme point; for instance, if he has a rapid decline of half a cent on account of an avalanche of selling orders from various quarters, the scalper might think it was low enough and buy himself some wheat. It may be his judgment was wrong about that, although it looked cheap. [Future transactions-Dealing in "phantom" wheat. F. L. Doherty, chamber scalper. House committee, vol. 4, pp. 1193-1194.]

Mr. MANAHAN. You have no idea of ever getting the actual grain; in fact, scalpers, some of them, don't pretend to be judges of grain, do they?

WITNESS. Well, it is not necessary for a man to be a judge of the various grades of grain, because of course he only trades in one grade, one commodity.

By Mr. MERCER:

Q. You must take it, if you don't sell it out; the rules require it?—A. Yes, sir. Q. And the practice is that way? A. Yes, sir.

Mr. MANAHAN. But you wouldn't say—for instance, you bought some yesterday that you intended, except in the legal sense that you must, if you couldn't sell it— but you didn't really intend yesterday on any purchase you made to wait and actually get the May wheat in wheat?

WITNESS. I must contemplate the delivery of grain when I buy it.

Mr. MANAHAN. Of course, in case you couldn't sell it.

WITNESS. I Wouldn't want to state I wouldn't intend to take it, Mr. Manahan.

Mr. MANAHAN. But you wouldn't want to state you actually did have the mental intention to take wheat.

Mr. MERCER. He would have to, unless he sold out.

WITNESS. Yes.

Mr. BENDIXEN. Did you ever take any wheat?

WITNESS. Take delivery of it personally?

Mr. BENDIXEN. Yes.

WITNESS. No; I have not personally; not for my own account.

Future trading-Influence upon price of cash grain. W. A. Gregory, member of chamber. House com

mittee, vol. 4, p. 1202.]

Q. You wouldn't say, in your judgment, from all your experience, that the trading by the scalpers to the extent a trade either actually does stop a rising price or checks a lowering price?-A. I would say it had a strong tendency in that direction; yes.

Q. Then the scalpers bidding backward and forward, and also the bidding by hedgers and brokers generally, can and does affect the market price?-A. Oh, it has an effect; yes. I wouldn't say it had a permanent effect, you understand.

Future transactions not based on intelligent knowledge or forecast. V. S. Ireys, pit trader. House committee, Vol 5, p. 1425.]

Q. Can you demonstrate, I say, by your own records and your own books when you have been able to forecast with sufficient accuracy future markets to show that you have made money on that score?—A. I have never had occasion to forecast, therefore I have never done it.

Q. Then you have not attempted to make money in that way?—A. No.

Q. So that all the knowledge you have acquired of the pit and its operations and the market and the character of crops, and so forth, as the result of your 16 years of work in the business you have at no time felt that you would be justified in venturing your own money in speculation to any large extent on future markets, have you?_ A. No.

Q. Your intention is to buy as much as you sell, and sell as much as you buy? So as not to carry over to the next day?—A. Yes, sir.

Q. I will ask you, within the observation and experience of pit traders like yourself and your own operations, whether they do affect the market price of futures at all? other words, whether your operations make the market to any extent?-A. WellQ. Or whether you simply take advantage of a- -A. I quite often do make quotations myself. My bids offered make a quotation quite often.

In

Q. In other words, your own bidding frequently has the effect of being a quotation?— A. Yes, sir.

[Trading in futures-St. Paul office of E. L. Welch. E. L. Welch. House committee, vol. 3, p. 918.]

Q. Then, do you know any business men in Minneapolis dealing in futures at all?-A. No, sir.

Q. Not at all?—A. No, sir.

Q. Are you sure of this?-A. I can't recall any.

Mr. BENDIXEN. Here in this office in St. Paul anybody that wants to drop in and wants to take chances on the grain market you speculate for; ain't that the idea? WITNESS. Yes, sir.

[Transaction in futures-Manipulation of market. E. L. Welch. House committee, vol. 3, pp. 928-929.]

Q. I say you said—now, if we are going to have that modified or changed, let us have it now. You said in answer to my question that large dealers in the great markets by acting in concert had the power by this instrumentality of future sales to temporarily affect the market price on grain, didn't you?

Mr. MERCER. Had the power, he said.

WITNESS. They might affect the market temporarily.

Q. That is my point. And affect it in the direction to serve their concerted purpose, of course, temporarily?—A. Temporarily; yes.

Q. Is it not true, Mr. Welch, that stupendous trades are made within that period of time which you might call temporary on account of the smooth-running machinery of the business?-A. I don't recall any. I don't know of any.

Q. Don't you know that in the course of a minute or less trades of stupendous magnitude can be actually consummated, contracts made and closed within a period of a minute or less?-A. Well, I don't know that can be done that quick. It takes a little time to execute orders.

Q. Well, within five minutes, say?-A. Yes; there could be some large trades executed in five minutes, depending a good deal on the conditions of the market.

Mr. MANAHAN. Is there any connection between the future trading in Chicago and Minneapolis?

Mr. DRAKE. Yes; I will cover that point right now.

Mr. CANTRILL. You are here, then, because you feel that the Democratic Party will carry out its promises in the platform?

Mr. DRAKE. I am. I am a Republican, but I voted for Mr. Wilson and I am proud of it. I have faith in this administration. The question has been asked a number of times by a member of this committee why does not the State of Minnesota handle this situation? Why come to the National Legislature? Why does not the State do it? The evidence which I have offered and which I have not had time to read-there is the sworn testimony of repeated witnesses to the effect that the price of the future in any marketany grain market is not decided by the operations in that market. It is the result of the joint operations of all markets, not only of the United States but perhaps of the entire world, so that legislation against futures-State legislation is almost futile. It would simply drive the gamblers into another market. Now, I do not need to argue that point; it is admitted by the grain combine, and I will not take up any time upon it except to read their admission. In the Minnesota investigation some progress was made in showing up the evil of futures, in spite of the suppression of information demanded, and then as a sop to the-I may say the infuriated public-the members of the chamber of commerce-the directors I

should say got together and passed this resolution. I quote from the official transcript:

TO MEMBERS:

MARCH 31, 1913.

At a meeting of the board of directors held this date the following resolution was unanimously adopted:

Resolved, That the president and secretary of the chamber of commerce be instructed by the board of directors to mutually confer with the officers of other grain exchanges upon which grain is sold for future delivery, and endeavor to secure an agreement on the part of the leading grain exchanges that a rule or regulation be adopted which would make it necessary for members of the various exchanges to require an initial margin of at least 10 per cent on all speculative purchases or sales of grain or seed for future delivery in lots of not less than 5,000 bushels.

That is the resolution.

Now, Mr. F. B. Wells, then president of the chamber of commerce, said in his testimony:

It would do no good for any one market to take this stand. It would simply drive the trade to another market, but I feel very strongly that if the matter were taken up with all the exchanges in this country such a regulation could be enforced, and if put in force it will prevent the small speculator from dabbling in the market and fosing his money, as he is almost sure to lose it without experience or reasonable financial backing.

The chamber of commerce

We do not need to argue that point. officials admit the claim that in order to have successful regulation of trading in futures, you must have a national law. Now, my time is drawing to a close

Mr. CANTRILL (interposing). You ask for a law to regulate trading in futures, or do you ask for a law to prohibit absolutely trading in futures?

Mr. DRAKE. Either, as far as we are concerned.

Now, after complete discussion of this question, the chamber of commerce officials refused absolutely to disclose any information as to their future transactions—any information which could be, as they considered, of value to the public. But, unwittinglyBut, unwittingly as I hear some laughter in the other part of the room I will cite this instance of what actually occurred. On one of the last days of the session of the House committee, that committee sent over to the Chamber of Commerce Building, where they were to furnish them with this information about futures, where they were to show the books; and when they got there and were seated in that room-the official investigating committee of the State of Minnesota—when they got there, the first thing that was done was to exclude the stenographer, the man who was making a transcript of the testimony. They did not want a record of the testimony, and the stenographer was excluded. Then they brought in a witness, a chamber of commerce man. They swore him, but they did not give his name. He was sworn as "John Doe." The committee did not know him, and they would not let the committee discover his identity. When John Doe was called upon for evidence, and when his books were produced, gentlemen, what was produced? A set of books; a set of books wherein the names of the individuals dealing in grain, the date and every item of information of importance to that committee was covered with stickers, so that the names of the individuals, the nature of the transactions everything except a row of figures 2 feet long was excluded from that committee.

But, in spite of that, gentlemen, we can show to-day through the evidence given, approximately and accurately enough the volume of

the future transactions of the member upon the floor of the chamber of commerce. We can show it in this way. I offer in evidence the testimony given before the House committee by one W. S. Williams, a member of the chamber of commerce, the secretary of what is known as their clearing-house association. Now, Mr. Williams testified that his organization existed simply and solely for the purpose of clearing future transactions of members of the chamber. He testified in effect, that it was a wheel within a wheel, an organization or corporation within a corporation within the general corporation of the chamber of commerce. It was more secret even than the parent organization. There was nobody in the entire organization except himself who knew the amount of the future transactions of the members of this organization, and he was not allowed, under the rules and by-laws of the organizations-he was not allowed to disclose that information even to a director of the organization, and he refused to give any information to the committee. But he unwittingly gave the information nevertheless. This man Williams testified, as is shown by the exhibit which I offer, that the total revenue of this organization, the clearing house, was derived by charging the members of the association onehalf a cent for every thousand dollars of volume in their future transactions. This was the consideration for his services in clearing the obligations of one member as against another. Remember that figure, one-half cent per thousand volume on future transactions.

He testified further that the expense of maintaining the organization was $2,000 per month, $24,000 per year, and that they had in the past paid two dividends. He testified, as the transcript shows, on one occasion that they had accumulated a reserve and held it at that time of $200,000, and in the next line the amount is mentioned as $20,000. Which amount is correct I do not know. Now, I will ask you to follow me closely, as the prestidigitator says. It is a little complicated, but perfectly accurate. It takes $1,000 in future transactions to produce one-half a cent of revenue to the clearing house on the floor of the chamber of commerce. One thousand dollars to make one-half a cent of revenue, and it therefore takes $200,000 to make $1 in revenue to that clearing-house association. It therefore-following it up in the same way-takes $400,000,000 of future transactions each month to pay $2,000, the monthly expenses of that organization, and it takes $4,800,000,000 of future transactions to pay the total expenses of that organization in one year. And that organization, what does it represent? The future trading of the chamber of commerce? No; the trading of 37 members only; and, as I understand the proposition, the pit traders in futures, the acknowledged traders the pit traders, the men who buy and sell nothing at all but wind, the men who deal exclusively in phantom grain-are not members of that association at all. As I understand it, it represents the 37 of the so-called legitimate dealers in grain. The testimony of W. S. Williams is as follows:

[Clearing house of chamber-Volume of future transactions. W. S. Williams, member of chamber. House committee, IV; 1279.]

Q. I would like to have you give us a copy of that statement, Mr. Williams. Will you undertake to do so a certified copy of the last annual statement showing the resources and liabilities of the clearing house association as a corporation?-A. I will try to.

Q. How much, approximately, has the association on hand now, in money?-A. about $200,000; a little over, I think.

Q. That is its own property?-A. Yes, sir.

Q. It doesn't owe any debts so far as you know?-A. No, sir.

Q. Expense may be current incidental expense?-A. No, sir.

Q. Now, that $20,000 in addition to the dividends that have been paid has been earned by the commissions solely, hasn't it? The association doesn't buy or sell itself, and didn't earn any of that by speculation?-A. No, sir; no, sir.

Q. Every bit of it is earned by these commissions on futures?—A. Yes, sir.

Q. And about how much is earned every month, approximately?—A. We always pay expenses, Mr. Manahan, and a little more, usually.

[Chamber of commerce clearing house-Volume of future tradings. W. S. Williams, member of chamber. House committee, vol. 4, p. 1278.]

Q. What does the clearing house association get for keeping this record and making these checks?-A. Half a cent a thousand.

Q. Half a cent a thousand?-A. Yes, sir; the clearing house.

Q. What are the expenses of the clearing house?-A. The office expenses?

Q. What are the office expenses; what do they pay for office expenses to the chamber of commerce association?-A. Why, I think our rent is something like $182.50. Q. A month? A. Yes, sir.

Q. That is the rent to the chamber?—A. That is rent to the chamber; yes.

Q. What other office operating expense has the clearing house, your salary and your assistant's salary? A. Yes, sir.

Q. Any bookkeepers? A. Yes, sir.

Q. How many?—A. I have two bookkeepers and a boy.

Q. A messenger boy?-A. Yes, sir.

Q. What is the total operating and salary expense in bulk of the clearing house association, approximately, if you can't tell exactly, a month?—A. Oh, I should think a thousand dollars, Mr. Manahan.

Q. Now, has your association ever paid any dividends on its stock?—A. Yes, sir. Q. How much is it capitalized for?-A. For $50,000.

Q. And about what has been its average dividends since you have been connected with it?-A. Well, I think we have only paid two dividends, Mr. Manahan.

[Clearing house of chamber-Secrecy in operations. W. S. Williams, member of chamber. House com

mittee, vol. 4, p. 1272.]

Q. I asked you to bring over, you remember, the records for the past week—the original records for the past week-so as to exhibit them to the committee and show just the method of operation. You didn't do that.-A. I didn't understand that is what you wanted, Mr. Manahan. It was not clear to me at all.

Q. You would have no objection to my going with you, this afternoon, through these current records, to see how these records are kept, would you?—A. Why, I will say that all my records are simply the cash and the carried-over sheet.

Q. That is what I want to see myself, and take some blanks, just how the machinery is operated?-A. I will say, Mr. Manahan, that I am not allowed even to tell the directors about it. That shows the private accounts of many of the individuals there, and I am, in fact, a trust officer.

Q. You say this record of yours shows the private account of individuals?—A. Yes; it shows the long and short, you know, for each trader.

Q. From day to day?-A. From day to day.

[Clearing house chamber of commerce. W. S. Williams, member of chamber. House committee, vol.

p. 1270.]

4,

Q. What office do you hold in connection with the operations on the floor of the chamber of commerce?-A. I am treasurer and manager of the clearing-house association, which is a separate institution.

Q. State to the committee just what that clearing association is.-A. It is an association to simplify the matters of doing business, especially in connection with future trading.

Q. Who are members of it?-A. Anybody who is a member of the chamber of commerce is entitled to become a member.

Q. By paying how much?-A. The value now is about $2,400, I think.
Q. $2,400?-A. For membership; yes, sir.

Q. It is a corporation? A. Yes, sir.