as a balance wheel of the market that is performed by the speculator in grain, regardless of what his motive may have been in making the transaction.

I have been in the business of actually handling cash grain from the farmer all my life, and I firmly believe that speculation is just as necessary in the economic handling of any crop of the magnitude of the wheat and corn crops as the railroads are, and I believe that the greatest injustice that would be suffered from the abolition of future trading on the various exchanges of this country would be that suffered by the producer and, next to him, that by the country elevator man and small miller, and the very least would be that suffered by the larger wealthy elevator men and millers.

The CHAIRMAN. The committee will now adjourn until half past 10 o'clock to-morrow morning.

(Thereupon, at 5 o'clock p. m., the committee stood adjourned to meet to-morrow, March 7, 1914, at 10.30 o'clock a. m.)

COMMITTEE ON RULES,
HOUSE OF REPRESENTATIVES,
Saturday, March 7, 1914.

The committee this day met, Hon. Robert L. Henry (chairman), presiding.

Mr. SIMPSON. With the permission of the committee, we have agreed to yield 10 minutes to Mr. Shorthill this morning, within which time he thinks he can finish his remarks.

STATEMENT OF MR. J. W. SHORTHILL Continued.

Mr. SHORTHILL. I offered the statement of the position of our people on the question before this committee last evening, but had no opportunity for explanation. I want to consume the 10 minutes' time in doing what I can toward explaining the situation of our people on these questions now before the committee. But before doing that I wish to state to the committee that I want to submit to the Chamber of Commerce of Minneapolis and the Board of Trade of Chicago, through their secretaries, eight or nine questions which I wish them to consider at this time. Those questions pertain to the questions that are being considered here. I have given them copies of those questions and will ask that when they answer them they read the questions and read the answers in connection with them, and in order to avoid duplication I will not read the questions at this time.

Now, I said that we were not asking anything from this committee on the line of Federal inspection of grain. I said that for this reason: We come here with the understanding that this resolution asks for an investigation in order to determine the advisability of legislation. We, who represent the country end of the matter, feel that we have ample facilities and have obtained information at first hand sufficient for us to base our opinion as to what we want in the line of Federal inspection. Our people desire that we stand for the Federal inspection of grain, and the only reason I am mentioning this is because it has been brought before the committee. However, I realize there is a close relation between all of these four questions-the inspection

of grain, the dealing in futures, the conducting of public warehouses, and the conducting of grain exchanges. They are intimately connected, because they now enter into every transaction, and they can not be entirely separated.

Our people are affected by this inspection of grain in this manner: At the present time there is a lack of uniformity; there is a lack of fixed standards; there is a lack of prescribed methods for arriving at those standards, which leaves the country grain dealer in an uncertain situation. Consequently, in order to be safe under contracts which he makes to deliver grain, it is necessary for him to deliver grain of a quality superior to the quality which his contracts require. The dealer at the terminal market has at his elbow an inspector who may be called in to inspect at first hand the grain which he ships out of his elevator, and for that reason this item of uncertainty which the country man must contend with is eliminated in favor of the dealer at the terminal market.

I just want to mention two things in connection with the relation of the elevator interests to the handling of grain. I will cite one instance: In one market at one time there was a rule passed which was in the nature of reforming transactions on that exchange. It was passed by a majority of the membership of that exchange; when the rule went into effect the grain merchants appeared on the floor with their grain to sell, but the elevator people who had control of the elevator capacity in that market, said, "We do not want to buy this morning, we are not in the market." And I am told that for two or three days there stood those opposing forces-the grain men wanting to sell grain according to the rule and the elevator men not in the market, and the elevator men stood out until they established the new rule and bought the grain on the terms they desired. In that case those rules were absolutely controlled by the elevator interests.

Now, there is another point which we must take into consideration in an investigation of this kind, and that is the possibility of limiting the amount of elevator capacity that will make grain available on future contracts. It was not very long ago that Mr. Armour went down to Kansas City and bought up the entire elevator capacity of the Kansas City market, and it became necessary for the Kansas City Board of Trade to pass a rule which made grain deliverable in cars on the railroad tracks in order to prevent a corner being made in that grain market.

As to dealing in futures, we are uninformed; we do not know; we are undecided upon it. We believe there are evils connected with it, and possibly manipulations, but we believe there are also some good features connected with it. What we want is information on those things. As it appears to us in the country, we want to know if narrowing the transactions in connection with dealing in futures is going to decrease or is going to increase the power of the great moneyed interests to manipulate transactions; and, further, we want to know whether the abolishment of futures will tend to throw the control of the cash grain market into the hands of the moneyed elevator interests. We are interested in knowing those things. Our people are divided on those questions. Take, as an illustration, the actual condition that exists in the country stations. Some of the directors of these companies which I represent are permitted to deal in futures in the way of hedges, while others absolutely prohibit it, and will

not allow hedging. So there is a division of sentiment. But taken as a whole, and from the people who have the best opportunity to have a knowledge, we believe that there is a doubt in the minds of the majority as to the advisability of abolishing the trading in futures. But do not miss the idea that our prime object here is to ask for information along these lines which I am suggesting. Now, another thing

The CHAIRMAN (interposing). What would you think of a proposition like this: The creation of a joint commission, similar to the Aldrich Currency Commission, of, say, there Senators, three Representatives, and three from the outside, making nine in all, to investigate not only the question of speculating in grain but in cotton, and charging them with the sole responsibility of looking into that one question, speculation in the products of the farm.

Mr. SHORTHILL. In regard to the question of dealing in futures? The CHAIRMAN. Yes.

Mr. SHORTHILL. Our position on that is just exactly this: We would not want to say that we believe that should not be done. The only thing is we want an investigation of this proposition. We want it to be made thoroughly and impartially, and we want it to be as broad as it is possible to make it. On that ground I could see no good reason for objecting to that suggestion.

The CHAIRMAN. As I said the other day, I think it is generally agreed that there will be legislation during this Congress on the question of speculating or gambling in cotton futures. However, we must get information upon which to base our legislation, and it has occurred to me that probably that would be the best way to get it.

Mr. SHORTHILL. I should say that, so far as I know, that would have our approval. I should say that it would. The industrial commission has made a report, and in their report they have mentioned the fact that the chief objection to dealing in futures was the question of speculation.

Now, I just want to drop a suggestion along that line in regard to what we have seen in the country end. That is all we know anything about the country end of this proposition. We are not familiar with the inside workings of any other part of the grain trade; that is, intimately familiar with them. We have seen evils result from the operations of private warehouses in that farmers and others have been induced to invest their money in this proposition, and in which they have lost. We also know it to be true that it would not have been possible for those men to carry on these transactions in futures if they had not been extended credit for that purpose, and knowingly for that purpose, by their local banks.

We offer this as a suggestion: Would it be a valuable feature to consider the relation of the banks in this connection as to advancing money to people knowingly for the purpose of pure speculation in futures?

Another thing we should like to see demonstrated conclusively, if possible, is whether there can be any possible relation between the grain operators and the banks with respect to the question of dealing in futures; that is to say, do the banks really consider property in the shape of grain or cotton of more stable value or more safe when it is hedged than other investments? We are anxious to know the relation between the two elements. I am only offering these suggestions.

Now, here is one thing which I believe is a thing that should receive important consideration in this investigation. I want to give it to you in the light that it appears to us in the country end. For the past few years it has seemed that the tendency of the market has been largely in the direction of track bidding, and this track bidding has been done in this way. I will not take the time to explain it, unless you have some questions to ask, but I will say this, that the track bids have universally, for the past two years or more, exceeded the amount the country shipper could get out of the grain to be sold on the floor of the exchange. I hope you get the idea. That is, the prices that were offered in the country have been so much above the prices that could be received on the exchange floor that the stuff has been bought on those track bids. Now, the result has been that it has been more difficult for the commission merchants to make a profitable business out of handling grain on commission than it has been at any other time. The suggestion I wish to offer here is that it be ascertained whether any combination exists, of one kind or another, between the track bidders which has for its object the ultimate elimination of the commission merchants, and, if so, would it be a good thing to eliminate them? That is a question I would like to see investigated, because of the condition that exists now.

I hope it will be understood that the facts I stated yesterday were prepared before this hearing commenced and they have not been changed. They were delivered in that form in order that you might get the true sentiment of the people I represent. If anything has appeared at this hearing which would in any way answer any of the demands we have made or the requests we have been making, we are entirely satisfied that they be accepted by the committee.

A point which we would like to see determined is whether the abolishment of trading in futures would affect the commission merchant; that is to say, under the present conditions could a commission merchant, with an elevator capacity, use a hedge on which he might base his contract price, or whether the countryman could hedge or could bring his grain in on the flour and sell it, or sell it for future delivery himself? These things ought to be determined in any investigation that may be made.

In conclusion let me say that we find ourselves in need of an investigation, and I find a great many grain men who are expressing the same opinion. I came up here and I have found that there are a lot of Congressmen who say that they would not vote on legislation along certain lines until they have more information. So there is a desire all along the line for an investigation. I do not see how we can get out of that situation; that is, without having this investigation. But the thing that I want to impress on this committee is that our people feel that this thing should be done in a big, broad, and impartial way; that it should not be confined to the people that I represent, because any evil that might affect them or any advantage that they might get out of that, if it were not based on a fair consideration of all interests, would only bring temporary advantage. We feel that this grain question is an important matter and that all uncertainties that now exist in it ought to be disposed of, so that we can get down to a sane, simple basis and go ahead properly.

I thank you, gentlemen, for the time, and I want to especially thank the gentlemen from Minneapolis for yielding this much of their time to me.

STATEMENT OF MR. DAVID F. SIMPSON.

Mr. SIMPSON. We feel that the gentleman has used the time to as good advantage as we could have used it by presenting very fairly his position before this committee. Of course, that is what we are all anxious to have done here.

I appear here, Mr. Chairman and gentlemen, representing the Chamber of Commerce of Minneapolis. At the very outset we would like to make our position reasonably clear upon this question. In this discussion I shall, as will other members representing the Minneapolis Chamber of Commerce, go into some matters that we deem to be strictly matters of local or State regulation. By doing that I would not like it to be understood that we disagree in any way with the position taken by Mr. Robbins in his very clear presentation of what he deemed to be the limitations of the power of Federal regulation. That position having been defined once, we are perfectly willing to discuss matters in reference to the grain exchanges regardless of whether these matters are properly subjects for Federal legislation or for State legislation.

As to the question of an investigation, as the Chair has said, that the basis of an investigation by Congress would be the possibility or probability of some legislation upon the subject investigated, and we recognize that it is a matter entirely for Congress to determine whether or not there is a reasonable likelihood of, or a feeling among the members that there should be, legislation upon the subject of the marketing of grain, and if there is that feeling we do not for a moment stand here to oppose an investigation on the part of Congress. In fact, if an investigation is made, started on broad lines, started in response to a pledge contained in the platform of one of the leading national parties, or for any other fair reason, I think that the grain exchanges of the country would welcome it, because they feel that their business is being conducted in a way that the more information that is obtained about it the less feeling of distrust there will be on the part of the people who are shipping and sending their grain to the terminal markets. The grain exchanges, I think, feel that way. As the production and marketing of grain has increased there have been devised facilities for handling that grain-particularly through State legislation on regulating warehouses, providing for inspection, and providing for the weighing of grain, so that it may be standardized by fixed or absolute rules, through the building up of great warehouses both in the country and at the terminals, for the purpose of accommodating and holding that grain from the time it is marketed until the time it may be consumed, through the organization of these markets, these exchanges.

As far as their internal affairs and the regulation of their members within the society is concerned, they are private corporations, but as to the purpose for which they are organized, affording a market for grain, they serve a public purpose. public purpose. The exchange itself has no interest in the transactions there taking place, except to see that they are honestly and fairly conducted, that the members engage in free competition, and that the buyer and seller meet upon these markets in fair competitive trading. And in that connection, as an essential part of that system, an opportunity should be afforded by future trading to the men who are carrying on these economic pro