Northwestern; Bartlett, Frazier & Co. on another road; Counselman on the Rock Island, etc., so that every line of railroad had its rebater to bring the grain into Chicago. What happened when they brought grain there? There must be some object in this rebater having this privilege to go out and handle the crop on a certain line of railroad, so they arranged a plan whereby the public elevator system in Chicago should be dominated by the warehousemen. It was intended by the laws of the State of Illinois which were adopted at the constitutional convention in 1870 to furnish to Chicago an outlet, an opportunity for better facilities for transferring and storing grain. That led up to the passage of what is known as the Illinois warehouse law. One of the important features of that law was to the effect that any man who was the public custodian of grain of others could not himself trade in grain in his warehouse. But these men primarily began trading in grain

Mr. CAMPBELL (interposing). That was the State law?

Mr. GREELEY. That was the State law; yes. Then they began trading in grain, and these men would meet at the close of the trading every afternoon-I have seen them time and time again myself and take a lead pencil and prepare a price and that price they would bid that afternoon to draw grain to Chicago. They could afford to pay more than other buyers could, on account of their facilities, and they would bid on that grain and bring it to Chicago and run it down to the hospital. The hospital is a mixing house in which grain is doctored and cured and put through the process to which Mr. Manahan referred a few minutes ago. When that grain comes into Chicago and is mixed in the private hospital, it is then put into the public elevator, probably situated near by, perhaps some distance away, but within switching distance. When that mixture goes through the process in the hospital and the good grains are mixed with the poor ones they get it inspected and placed in public storage, then sell a future against it at a price higher than cash probably, so that the man who buys that grain for future delivery pays them a carrying charge for that mixture held in public storage, the carrying price being a part of the higher price in the "future." In the meantime the board of trade is skirmishing around the country to bring in the men who are bulls on the price, who expect the price to go up, and buy this mixture from these elevator men who so create this grain in storage. What has been the effect of that mixture, this process of mixing grain in hospitals and putting it in public storage by the proprietor who is allowed under the system to sell ahead for future delivery? When the day of his future delivery comes, the man who has bought the wheat finds that the grain contained in the public elevator was mixed to such a low level that he is afraid to take it and pay for it for fear that it might cause him much greater loss, and he would rather take his loss and sell the future back to the warehousemen, of whom he had bought it, than to take a risk on the mixture which he receives in public storage.

This selling out of the future by the man who was a speculative bull in the market, the man who believed he was going to sell something at a higher price, this liquidation of futures causes millions and tens of millions and in some instances hundreds of millions of bushels of a single future to be sold out, to be liquidated by speculative interests, until those forced liquidations or sales held in public storage

by a violator of the laws of the State of Illinois caused what? From 1887 for a period of 15 years thereafter these constant liquidations of grain held in public storage and sold from month to month by speculators under conditions created by these warehousemen themselves have caused wheat in Chicago, previous to 1900 and about the panic times of 1893, to sell at 40 cents and corn on the Nebraska prairies at 8 cents a bushel. I sold the best grades of corn on the Chicago market at that time for 193 cents and oats at 15 cents a bushel.

The CHAIRMAN. Let me ask you something right there, that I may understand your position clearly. You are an expert on this subject, and I am asking for information. Many good men have told me that "hedging" is necessary in regard to cotton sales and grain sales. Now, what I would like to know is just exactly what is meant by "hedging"; I think I know, but I would like to know what you say about it, and if there is such a thing as legitimate hedging. I wish you would explain that right here, because I want to understand it. Mr. GREELEY. No doubt the banker is perfectly willing for a man having 5,000 bushels of wheat in public storage, having sold it ahead for six months, to put up his security for that transaction and secured by a receipt to carry that stock in storage for delivery at some future time.

The CHAIRMAN. Is it necessary to protect the banker and to protect the trade for him to do it in that way?

Mr. GREELEY. The wheat is the protection. In fact, the condition that exists to-day in the mixture of this grain in public storage, subject to the conditions to which I have referred, makes an undue risk to the banker on account of the quality of the mixture held in public storage.

Mr. GARRETT. May I ask you, is the trouble in the grading?

Mr. GREELEY. Largely, yes; because it is illegally placed there and graded down to the line of the grade usually.

Mr. GARRETT. Of future dealing, where they deal in futures, of course, that prescribes the grain, I imagine; does it?

Mr. GREELEY. I have the mixing and grading and warehousing, all those situations, itemized in different groups, which I will reach in a few minutes.

Mr. GARRETT. I do not want to interfere with your remarks, of

course.

The CHAIRMAN. I will say this, that the committee will run until half past 12 and then take a recess until 2 o'clock and resume the hearings.

Mr. GREELEY. To get along to the liquidations. The liquidations of these futures and the results caused thereby are only my personal opinion as to what existed in the market, and the conclusions I reach are not susceptible of proof by absolute facts. When the panic of 1893 came on, the result of 15 years of constant liquidation of these grain futures by the selling out of futures on the board of trade of hundreds of millions of bushels of contracts, the basis, the controlling factor was fear of delivery of the warehouse receipts of grain doctored in these mixing houses, and this led up to the conditions in which these farms in the West were mortgaged, and it led up to the panic of 1893, until the people said, "We will seat Bryan in Washington, if we do not seat him in Denver"-a general cry of discontent.

What are the facts in this liquidation process? When this grain is first received from the farmer, the Illinois State inspection department grades it, and then it goes into one of these mixing houses. When it goes into the mixing house it is mixed to the lowest grade it will stand, as shown by sworn proof of the elevator men. The history of the Chicago market is black with practices committed under the Illinois warehouseman's supervision, and some of the men connected with it are so implicated that if justice were done on that market to-day they would be serving time in the penitentiary. I will give illustrations of conditions that have existed, and I believe that it will appear that at least there is sufficient connection between the interests operating that market to confirm the further belief that Federal inspection and Government elevators should be considered.

This selling out of futures, month by month, and the profits obtained there by the men who hold and maintain a monopoly of this grain in public storage, when we consider the profits which they receive through the board of trade clearing house which they operate the profits which they receive as against the man who speculates against them this is not the big factor involved in this investigation. The big question is this, that if a man can sell, not only the grain he holds in public storage as a warehouseman and can collect by undue charges his collections from others who are opposed to him in future contracts, if he can go into the open market through the power of the possession of warehouse receipts which he holds in his own control and can force the liquidation and selling out of futures and collect the money, even that is not the great point at issue in this case. The main point at issue is that when they do create that condition they create a depreciation in the price of the value of all farm products in this country, and not only that held in their charge. It is that depreciation in price of the entire crop which decreases the purchasing power of agriculture, because the great factor of grain speculation in this investigation is the power of monopoly of cash grain in the hands of four men, holding the power of delivery on the enormous contracts held in futures on that exchange.

The power which they have by the virtue of the actual cash property in storage enables them to go into the future trading proposition, and this monopoly of trade makes their influence in the change of value of the crop an important point in the regulation of the price of grain for the world, and not only for Chicago. Chicago regulates, more than any other influence, the markets of the world, and four men in Chicago to-day, it may be repeated, more than all influences in the world, control the values in the grain food markets, and those men are J. Ógden Armour, J. C. Shaffer, the Bartlett-Frasier outfit, and Joe Rosenbaum. Connected with the J. C. Shaffer outfit, Mr. Stream appears here to-day representing the Chicago Board of Trade in this investigation.

Now, I want to say this, in order to substantiate the fact of the monopoly, that it does exist, that it does control and regulate prices of cash grain, that it does cause liquidation of futures and absorption of margins and the payment of differences by unsophisticated speculators, and in order to prove that proposition I want to start at once into the fact of an absolute proof of this monopoly, that it does exist, that it has existed for 20 years, and that the farmers of this country

have had an uphill fight in their proceedings against it; that it controls 95 per cent of publicly-stored grain and has for over 20 years.

It should be remembered in the consideration of this question by men who are passing judgment upon the large question in the commerce of this country, that one fundamental principle always exists, and that is this: That when these men take this grain out of the hospitals and put it into public storage and sell it ahead for future delivery, that they hold that grain in the possession of themselves while it is in public storage. Then pending the time of future delivery for which they have it sold on these future contracts, they borrow money to carry that actual cash property, and they borrow the money of the banks. They have it sold ahead to some man, for example, whom they expect will sell out again, and thus that grain will come back to them and they will collect the difference through the clearing house and not relinquish possession of the grain, and having received the money which they collect from him, their idea is to perpetuate it in storage so that another new "bull" will buy another future month, and thus repeat the same process of forced sales and liquidations, and thus form an endless chain of forced sales.

Now, then, this warehouse system was in existence, I say, for 15 years, and it is a remarkable fact that for those 15 years wheat was selling in Chicago from 48 to 80 for the best grades, and never exceeded those figures for 15 consecutive years. It has been said that grain is money. W. T. Baker, a former president of the board of trade, said in his magnificent style, "Coin corn and give the producers of this country a purchasing power. That is what they

needed.

Now this condition became apparent on the board of trade and finally led up to an investigation as to conditions which related to this monopoly, and the board of trade decided that there was a monopoly and instituted a suit through the Attorney General before Judge Tuley of the circuit court of Cook County, based upon this theory that any public warehouseman who held any grain for the public could not trade in grain in the public elevators where he was the custodian of the property of others. After a suit lasting six weeks, one of the most prominent lawsuits ever conducted in Cook County-conducted by one of the ablest lawyers this country ever produced, Mr. Henry S. Robbins, the present attorney of the board of trade, and sitting in this room at the present time-Judge Tuley decided that a monopoly in grain did exist, and the contention of the board of trade was sustained, the same position which I take to-day. If my position is correct, the same application of the decision of Judge Tuley would apply now, as applied then, and I would introduce as a part of the testimony in that case the two paragraphs of the decision of Judge Tuley, which I will refrain from reading at this time, but will turn over to the stenographer to be incorporated in the hearings. This is called Bulletin No. 2, and Judge Tuley's remarks appear on page 4.

Mr. MANAHAN. What is the substance of it?

Mr. GREELEY. This is the decision of the court granting an injunction against this warehouseman from trading in grain. Here is the judge's opinion.

Mr. LENROOT. Was that decision final?

Mr. GREELEY. No, it went to the Supreme Court and Judge Tuley was sustained.

[Extracts from decisions of Judge Tuly, in the case of Adolph L. Lichstern v. J. Rosenbaum Grain Co. et al.]

The great weight of the evidence is to the effect that the warehousemen of Chicago did not commence to so deal in grain to any general extent until about the year 1885, but the practice has grown so rapidly that now and for two or three years last past, they are the principal buyers and sellers on the Chicago market and upon the board of trade. That by reason of the advantages they possess and by reason of such changes in the grain trade they have practically driven out of business the class of men who were before engaged in buying and selling grain on the Chicago market. And it is admitted that they have dealt in grain to the extent that they now hold at least three-quarters of all the grain stored in the public warehouses of the city of Chicago, and it also appears by the evidence that they are fast monopolizing the business of dealing in grain in the Chicago market.

The defendant is created and licensed to carry on the specific business of a public warehouse and to use its property for that purpose. Being licensed for one purpose, created by the Constitution and the law for a specific business, is it not opposed to public policy that this defendant should carry on in competition with the general public another business in which its interests must necessarily be brought in conflict with its duties in exercising this "sort of public office"?

It is, however, contended that the warehouseman gets the grain because he pays more for it than other bidders, and the constitution of the State requires a law passed in pursuance thereof to be construed "in the interest of producers"; therefore it is to the interest of the producer that the warehouse be allowed to enter into the grain business.

No monopoly in grain dealing can operate in the long run to the interest of the producer. There is no truer maxim in the economics than "competition is the life of trade." The warehouseman may be able to pay more than the outside buyer until he has been driven out of the market. When he has succeeded in so doing (and the evidence shows that that time has nearly arrived) and he has no practical competition, then the producer must suffer. The law should not be so construed as to give the warehouseman the right to use his privilege, his public business as a warehouseman to crush out competition against himself as a dealer in grain.

It is also contended that every man has a right to trade in grain. This may be true as to every individual, but he is exercising a kind of public employment and is licensed to carry on business impressed with a public use, with certain duties and privileges by reason of such license. The question is, is it not, against public policy that he be permitted to use such public employment, such public business, and such privileges to aid him in carrying on in competition with the public another and different business and in such a way as to create in himself a virtual monopoly of such latter business? It appears to the court that there can be but one answer to the question, and that is in the affirmative.

I want to call your attention to the following, from an outside trader in the Chicago market:

But even these dishonest practices have been but minor evils compared with the methods of that "brainy" elevator combine, who have accumulated a stock of over 20,000,000 bushels of a hybrid grade of so-called contract wheat in their houses, when less than 5,000,000 would have been their stock under normal conditions. This interest uses its large storage capacity for mixing purposes. They mix, and when it suits their purpose to depress prices, deliver on contracts, which is inspected as No. 1 northern spring wheat. It consists of about 40 per cent of the real article. No. 1 northern, about 30 per cent of No. 2 soft Nebraska, and about 30 per cent No. 2 and No. 3 hard Kansas winter wheat. This mixture is run through cleaning machinery and delivered out as pure No. 1 northern spring wheat. Why should we pass laws to prevent the sale of oleomargarine and butterine as pure butter and still permit such a gigantic swindle as this to exist? By accumulating this immense stock of adulterated wheat and keeping control of it in their own hands, this elevator interest has been enabled to dictate prices not only for the producers of this country, but practically for the markets of the world. The system so long in vogue of trading in distant futures and settling trades through a clearing house has given the market entirely into the hands of this elevator monopoly, and they seldom make deliveries on contracts when they know the wheat is actually wanted and will be