STATEMENT OF MR. SAMUEL H. GREELEY, OF CHICAGO, ILL. Mr. MANAHAN. Mr. Greeley, what experience have you had in the grain business?

Mr. GREELEY. I have been in the grain business ever since I was 17 years old, in the Chicago market, until the 10th day of last month. I have been a member of the board of trade ever since I was 22 years old, for 28 years and over. I have been in all kinds of business connected with that market, and at this time I am representing a number of farmers' organizations before this committee.

I think it very proper that the farmers of this country should make a statement explaining the situation to this committee so that their position and the arguments advanced in sustaining that position may be clearly understood, and for about 10 minutes I will ask your patience that I may explain their attitude on some of these questions. Representing various organizations of farmers throughout the United States, we herewith petition that you use every legitimate means to secure Federal legislation to prevent the so-called "trading in grain futures" as at present conducted on the board of trade of the city of Chicago and all other exchanges conducting a business of similar nature.

As a basis of this request we submit certain allegations which, to the best of our belief, are true, and subject to verification.

1. Grain is the most necessary natural product of this country. 2. It is the greatest income-producing product of this country. 3. Grain is transferable into money. Therefore any condition which tends to depreciate the value of grain tends to lessen the purchasing power of grain producers.

4. Grain producers and those directly dependent upon such producers form a larger proportion of our population than any other industry.

5. The vastness of this industry and its necessary participation in interstate commerce, subject to transportation, inspection, and warehousing, makes it a proper subject for Federal rather than simply State or local investigation.

Therefore, recognizing the importance of crops as related to the general welfare, it is self-evident that large terminal markets should be so equipped and conducted that, as far as organized society is concerned through its public functions of management, every safeguard should be guaranteed the individual producer, consumer, shipper, receiver, carrier, warehouseman, transporter, and even speculator, which safeguard should be based on fair, equitable, and open competition to any individual, firm, or corporation which may legitimately store or compete for grain; and all monopolistic or unreasonable advantages should be abolished.

We claim that the crops of this country at Chicago are not subject to such fair and open competition because-

1. The systems of grain inspection are incompetent, inadequate, lack similarity, and are not generally standardized or understandable. 2. The public warehousing of grain in Chicago is conducted openly and brazenly in violation of State law, without any organized opposition of State legal authorities, or any commercial exchange or board of trade which receives a State charter for its existence.

3. That on account of such open and brazen violation of law and the usurpation of a public function by private parties, who, as licensed-by-the-State custodians and trustees use their State privileges to crush private enterprise, fair, open crop competition is destroyed. 4. That this destruction of competition not only invades grain but "grain future" trading, or trading in "grain futures"; that it is a factor in what is known as "option trade."

5. That this unfair competition and the systems and methods resulting therefrom deprive the cash and future markets of much substantial legitimate support.

6. That this lack of support is an injury to grain values.

7. That this usurpation of public warehouses by proprietormerchandisers creates larger volumes of grain in public storage than would otherwise exist, the same being created illegally and held illegally to the detriment of crop values.

8. That this system of warehouse prostitution largely enters into the manipulations, fluctuations, artificial sky-rocket and diving performances in "futures" or "options," which are neither legitimate nor conducive to the sound, rational courses of values, as more natural circumstances would direct them.

9. That it is recognized that "futures" or "options" enter largely into the regulation of cash grain values; that "futures" or "options" are largely dealt in and often controlled by the illegal forces under public warehouse control and that 95 per cent at least of the cash grain which has entered public storage for many years past, has been stored by and controlled by the illegally operating warehouse proprietors referred to.

10. That the joint control of the deliverable public warehouse grain receipts and manipulation of "futures," together with questionable inspection systems and practices, closely related thereto, and apparently friendly therewith, all tend to absorb the money of unwary investors.

11. That the enormous solicitation of "margin" deposits from those unfamiliar with these conditions, such deposits to be paid in case the "long" or "short" side of the market suffers an advance or a decline from a given price sufficient to absorb such deposits, embodies a system so manifestly injurious to such large numbers of innocent chance takers, that in the interests of public policy the system should be abolished.

12. That such innocent individuals are subject to many hardships or "odds" or "percentages" in the "game" which are correspondingly in favor of the combined warehouseman-speculator or merchandiser; that such odds and advantages have already been declared illegal; and that such hardships thus handicapping such individuals are almost insurmountable in the ordinary and average course of the business as now conducted, and almost invariably result in loss.

13. That the warehousemen usually take "the other end" of trades made for grain held in public storage as against outside investors, such grain being held and controlled by such warehousemen; that such possession is a great leverage in causing what is known in the trade as "freeze outs" or "exhausts of margins" in the "pit," and in the culmination and settlement by the payment of differences" through a clearing house established and maintained for the purpose.

14. That such warehousemen to evade the law have and do compensate "dummy" substitutes to assist them in the monopolization of cash grain and in the collection of such differences in "futures" or "options."

15. That leased telegraph facilities from public-service corporations are now used to aid and abet the warehousemen in the conduct of their business, in that such wires are used to solicit orders in small towns through the use of blackboard quotations and other means, which are transmitted through such leased telegraph service, the result of which prevails upon unsophisticated traders to "invest in grain," but which really invites and actually does cause them to take a chance on market fluctuations, and the consequent absorption of their margins in the payment of the differences between two quotations, the settlement being made through the clearing house above referred to and the so-called trades in grain for future delivery, subject to the conditions heretofore described.

16. That such leased-wire service in many instances is interstate, and much of the business connected therewith in reference to confirmations and written matter is carried through the mails, and therefore subject to Federal investigation.

17. That certain boards of trade or chambers of commerce permit such trading in "futures" or "options" which is subject to such warehouse domination and control and on which boards of trade such warehousemen are among the largest clearing house users and "difference" collectors, and, indeed, are frequently the absolutely dominating factor in control of the deliverable property which may settle contracts in grain "futures" or "options" under the rules and regulations of such boards of trade or chambers of commerce.

18. That the allegations herein set forth in most instances are not based upon surmises or inferences or suspicion, but many of them have already been tested in court, which makes sworn testimony available, which sets forth clearly the bold methods of market usurpation and law violation, which are "running daily with the doors wide open."

We therefore respectfully petition the President and Congress of the United States to use every means possible to enact such legislation as will abolish the present system of monopolistically controlled or influenced future trading in grain as a necessary requirement of the general public welfare.

And, furthermore, we will agree to assist in securing information which will guide in properly shaping such legislation.

And we ask the support of all Senators and Representatives in securing this necessary legislation.

NOTE No. 1.-It should be distinctly understood that the organizations subscribing to this petition are not opposed to legitimate trades in cash grain which are unhampered by illegal influences. The necessity for such trades is apparent, but when countless millions of bushels in contracts are made and tied up with marginal cash backing, which contracts are largely dominated and manipulated by illegal control of those forces which vitally enter into "artificial" manipulation of values, then all "settlement by differences" systems should be abolished.

NOTE NO. 2.-The relation of "speculation" or "trading in futures" or "options" to cash grain is more or less intricate to the casual observer, and hence not quite understandable; and it is this intricate relationship or marriage which, as a noted writer remarked, "has begat many bad brats," and has permitted the system to grow to its present large proportions.

It is not difficult, however, to determine what should be done to eliminate from each of them the dominating forces of evil, when men will be fair enough to give sufficient scope to an honest and impartial investigation of all the facts from all sources. NOTE No. 3.-Many students of market conditions believe that agricultural prosperity will be best conserved by some method of elimination of all "future" trading which does not carry with it a fulfillment of the contract by an actual delivery of grain. We concur in this belief as a general proposition as long as any other "settlement' plan may exist in the nature of a payment based upon differences in prices and such differences "forced" and "margins" absorbed by the usurpation and control of the facilities and goods held in the hands of a monopoly, which should be normally available and scattered among the general trade in a free and open market. It is the power of control lodged in the hands of the few, exercising State powers, which, in the interstate business of the country, demands, to say the least, Federal investigation.

NOTE NO. 4.-Pertinent to this subject matter the question arises as to the expediency of the Government exercising the operation, management, and control in grain inspection at terminal markets as well as the operation, management, and control of public warehouses. We submit that these questions should be carefully investigated. NOTE No. 5.-Closely associated with the questions herein involved should be considered the manufacture of so-called “contract" grades of grain from mixtures of the lower grades with better grades in "hospitals" or mixing houses, not public but controlled by State-licensed public custodians. Such mixtures, illegally placed in public storage by various subterfuges, are easily discovered and understood, and no doubt are known to exist by our State authorities, who should but do not properly control the warehouse business of Illinois. The effect of such mixtures, carried indefinitely in public storage, as related to general crop values; the relation of such mixtures to the exhaust of margin" or "liquidation of futures" or selling out of "options" or discouragement of truly legitimate market support, or the tendency to discourage capital from entering the grain trade and caring for the surplus arrivals at market points when temporary supply exceeds demand, are questions of vital moment.

NOTE No. 6. In a question of this magnitude, involving as it does the values of products annually running into the billions of dollars, we do not expect all to agree on all minor details as related to the opinions or beliefs herein contained; but that an investigation will fully confirm in a general way the existence of the evils referred to, and the necessity for their correction, is firmly believed by your petitioners.

Mr. CHAIRMAN. I believe that statement in a general way outlines a number of things which have been spoken of by Mr. Manahan. His natural modesty as a Member of this House no doubt leads him to speak in a very conservative manner, but when he tells you they deal in one hundred times more futures in the Chicago market-if I heard him mention Chicago-than cash wheat handled in Chicago, I voluntarily make the assertion that there is not a day in the year goes by but what in these futures there are traded in, in the wheat pit alone, upon an average of 25,000,000 bushels a day, all told; and if there are 300 days in the year, the amount of future trades and speculations, as related to the cash grain received in Chicago-and I think the statistics will substantiate the fact that although they trade in 25,000,000 bushels a day in futures, Chicago does not receive on an average over 25,000,000 bushels a year.

The crops of this country, the aggregate of the wheat, corn, and oats, is about 5,000,000,000 of bushels annually, and every cent per bushel fluctuation in the market value of grain on the Chicago Board of Trade sets the price in this country either up or down $50,000,000. Every one-eighth of a cent per bushel fluctuation in the price of grain futures created by the .Chicago Board of Trade creates a difference in the values of the grain of this country-provided the crop equals 5,000,000,000 bushels-every one-eighth of 1 cent per bushel creates a difference in value to the producers of this country of over $6,000,000.

Mr. CAMPBELL. Do you favor a Federal law that will effectually prohibit future gambling by anybody and everybody in grain?

Mr. GREELEY. Yes; gambling, surely.

Mr. CAMPBELL. Or dealing in futures? It is all gambling.

Mr. GREELEY. A distinction must be drawn as related to certain trades in grain. What you determine as future trading in grain might apply to my selling five carloads of No. 1 Northern wheat for delivery 10 days ahead. That is a future trade in grain, of course, which is permissible. That is the kind of future trading which is legitimate. But, as our petition states, when any system of future trading exists by which a large share of the settlements of the future trades are made by the payment of differences, and that these future trades are dominated largely by a monopolistically controlled combine operating on the floor of the Chicago Board of Trade-any contracts thus made for future delivery, which are supposed to be and are intended to be settled by the payment of differences-any of these contracts which are controlled or influenced by illegal conditions whereby people are forced to lose money by artificial conditions, such contracts should be abolished. Now, in leading up to that question I want to say this

Mr. CAMPBELL (interposing). Let me understand your position. Mr. GREELEY. I will explain that to you as I go along. I am going to lead right into that.

Mr. CAMPBELL. I want to get your position. You are not objecting to the dealing in futures, so long as the dealing is open to everybody alike?

Mr. GREELEY. No; I would not say that.

Mr. CAMPBELL. I wish you would make clear just what your position is. You speak of monopoly in dealing in futures and of freezing out others who were dealing in futures.

Mr. GREELEY. It is that kind of business that I want to describe, and I am leading right into it. If you will permit me to go into that subject, I will explain it this way. There resides in Chicago the greatest monopoly in the world the Chicago public warehouse grain monopoly. That grain monopoly handles 95 per cent of all the grain held in public storage and going through public elevators in that market, and does and has controlled that grain for many years. That monopoly began its existence about the year 1887, and to show its present position as related to our markets, the men who control their methods of operation, its relation to future trading and its relation to cash grain, I will go very rapidly from 1887 to date, and explain the growth and entrenchment of this monopoly.

When Congress passed the interstate commerce law the original intention was to prevent railroad rebates. Grain was being shipped to Chicago and rebates were being extended to individual shippers all over the country. For my own employer I have made up many a rebate bill and received a check from the Rock Island road for it. It was customary to extend this to all large shippers. When that system was prevented and broken up by the interstate commerce law, then, in order to draw grain to Chicago on the different lines of railroads, the railroads evidently thought it necessary to secure one secret rebater on each line, to draw grain into Chicago against competition that might take it to another market. So an arrangement was made by which the public warehouse equipment of the city of Chicago was turned over to the chief railroad rebate getter for each road, so that Armour had the St. Paul; Weare Commission Co. the