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of cotton he pleases, but there has grown up this tacit understanding between the buyers, and it is in vogue in the South, and the competition that is supposed to be encouraged, according to the arguments of the gentlemen on the other side, is simply a nonentity. There is nothing to it. We know for a fact, having lived and grown up in the cotton belt, that the territory is divided, and that competition among local buyers is a farce. Sometimes we have in one town two or three buyers, if there is a considerable amount of cotton sold there, and often two or three of these buyers will be representing the same man, and they go and buy against each other just for the sake of the effect on the mmd of the farmer.

Mr. Chairman, you will be asked to believe, perhaps, or they will attempt to impress upon you, that these local buyers and these heavy cotton merchants are the ones that offer a market for the farmer; that without them there would be no market and that the farmer would be absolutely helpless; that there would be no one to whom he could sell if it was not for them. It does not matter how important they are; it is not a question of our having him for a buyer; we have no animosity whatever to the buyer. When Edison invented the electric light he was not mad at the manufacturers of candles or gas or the producers of coal oil; he simply added another method of doing the same thing more economically and satisfactorily. And in this case, if this bill should become a law, and someone is actually eliminated from the business in which he is engaged, that is merely an incident with which we are not concerned. The man who invented the steam engine put the manufacturer of the stage coach out of business, not because he was mad at him but because the evolution of business simply brought that about. We want to say that the local buyer does not furnish a market for the cotton farmer; the wholesale heavy cotton merchant and exporter does not furnish a market; the spinner does not furnish a market; the jobber that buys from the spinner does not furnish a market; the wholesale men that buy from the jobbers do not furnish a market; the merchants of the world do not furnish the market. Then who does? There is but one answer, the 1,500,000,000 citizens of this earth who consume cotton goods furnish all the market that there is to it, and they will continue to wear cotton goods and buy cotton goods regardless of whether anybody deals in futures or not, and that market will be constant as long as the human race wants that article.

Every man is a consumer, and he only furnishes a market to the

{iroducer to the extent that he consumes what the producer makes. lis occupation does not furnish the market; it is the consumption of the article that furnishes it. But there will be just as much demand, whether you pass this law or do not, upon the part of the consumers for the finished products as there has been, and if they go and buy from the retail merchant, the retail merchant will send his orders to the wholesaler and the wholesaler to the jobber and the jobber to the mills, and the mills are there with their property invested and the hands employed, and they are not going to sit down and quit business because somebody can not gamble on prices; they are going to go to the sources of supply and get their cotton, and the farmers are willing to take the consequences of your prohibiting gambling in prices; we are willing to take the consequences. We are willing to risk the results, and we want it. There are 29 States now organized, and there never has been, so far as I have heard, one single dissenting voie« raised against the demand for this legislation.

Mr. Chairman, we have no doubt but that the gentlemen who are engaged in this future-dealing business are not different from the rest of us by nature. No doubt they are conscientious in their views of business. We have no abuse for anybody. People are the creatures of circumstances and environment. But the fact that a man believes his business is necessary and legitimate does not decide the question. The feudal baron thought he was necessary to his people. He was conscientious in it, perhaps, although he might collect 80 per cent of the fruits of toil and squander it on his army that he might hold his sway. Nevertheless, there came a time when some one hinted that it would be best for the human race to dethrone power from the castle on the hill and place sovereignty by the fireside of the cabin in the valley. Those men who advocated this change were considered political traitors; they were heretics in political economy; but it was done. And this nation is a flagrant example of the result. But for that change there would be no American Republic. Even the slaveowner was conscientious in thinking that his institution was all right, and he proved his loyalty to his faith when the test came; but slavery is gone. Once upon a time there were those who manufactured gods and shrines in the city of Ephesus and furnished them for a price for the people to worship, and they had built one particularly magnificent temple and within that they had placed the Goddess Diana. But one day there came a man to Ephesus preaching the gospel of a God not made with hands, and he began to get converts, and the makers of those gods and shrines became jealous because of the job that was in danger of being taken away from them, and the devotees of the goddess had mobs go up and down the streets of Ephesus crying out "Great is Diana oi the Ephesians!" But the change came. We are asking for a law. We are asking for the abolition of a certain business carried on at certain places. We are sincere in it. We hope that nothing but the purest patriotism and principle actuates us in coming here. It is so arranged in the immutable infinite that when a man works for principle he works for mankind; he can not help it. We believe there is a principle involved in this, and that the men who work for it are working for the American people; and without holding you longer, and thanking you very kmdly, I will now, if you want to ask questions, open the question box.

The Chairman. The time has come for the committee to take a recess, and I believe I will ask the members who might wish to question Mr. Brooks to withhold their examination until after the adjournment.

(At 12.45 o'clock p. m. the committee took a recess until 2 o'clock p. m.)

AFTER RECESS.

At the expiration of the recess the committee resumed its session, Hon. Charles F. Scott in the chair.

The Chairman. At the morning session Mr. Brooks finished his statement in chief, but the committee adjourned before any questions were asked him. Mr. Brooks will remain here, I understand, and will be glad to submit to any questions at a later hour. But for the present he has yielded to any Lewis W. Parker, of Greenville. S. C, who would like to be heard now for the reason that be is obliged to leave town this afternoon.

TESTIMONY OF ME. LEWIS W. PAEKER, OF GREE1TVILLE, S. C.

(Mr. Parker was duly sworn by the chairman.)

The Chairman. Mr. Parker, will you state your full name, residence, and business, and then proceed with whatever statement you wish to make?

Mr. Parker. My name is Lewis W. Parker. My address is Greenville, S. C. My business is cotton manufacturing.

Mr. Chairman, I understand that this morning a rule or suggestion was made that you would not interrupt the speaker. I wish to say that I really would prefer interruptions if any member of the committee desires to ask questions in the progress of what I shall say. It will not disconcert me a particle. And if my friends of the cotton exchanges—whose position I may somewhat combat—desire the same privilege in the midst of my remarks I have no objection, if it meets with the approval of the chair.

The Chairman. Such an arrangement will be entirely satisfactory to the committee, I am sure. I think, perhaps, in the interest of orderly procedure, it might be better for the members of the committee to examine the witness until they have asked all the questions they desire to; and then any other gentlemen who desire to question him will be given that privilege.

Mr. Lever. Mr. Chairman, Defore Mr. Parker begins his statement I should like him to introduce himself a little more fully to the committee. In order to have that done I will ask him what mills he is connected with, and the spindles represented, and if he holds any official position with reference to the cotton manufacturing business of the South?

Mr. Parker. I am the managing officer—president and treasurer, one or both—of 8 mills, viz, the Olympia cotton mills, Columbia, S. C.; the Granby cotton mills, Columbia, S. C.; the Richland cotton mills, Columbia, S. C.; the Capital City mills, Columbia, S. C.; the Monoghan mills, Greenville, S. C.; the Victor Manufacturing Company, Greers, S. C.; the Apalachee mills, Arlington, S. C.; and the Beaver Dam mills, Edgefield, S. C. Those are eight mills of which, as I say, I am either president or treasurer, or both; and I am director in quite a number of others. I am at this time president of the American Cotton Manufacturers' Association. Personally I represent and control about 350,000 spindles.

The Chairman. How long have you been in the cotton manufacturing business?

Air. Parker. I have been in the cotton manufacturing business thirteen years. I am a reformed lawyer, sir. [Laughter.] I am by profession a lawyer, but I have seen the error of my ways.

Mr. Lever. Is there any other man in the South who controls as many spindles as you do?

Mr. Parker. No, sir; I think I control more spindles in the South than any other person. I wish to have it understood, though, that I do not appear in my capacity as president of the American Cotton Manufacturers' Association. While I believe that what I will say will meet with the approval of a large proportion of the members of the association, I have no authority as president to appear before you. I am here in my individual capacity as a citizen and as a manufacturer.

I wish also to make it clear that I have no fight against exchanges. I believe that a cotton exchange (like exchanges in other characters of produce) legitimately and fairly conducted, with rules which make the future contracts responsive to the stock conditions, can be of service at times not only to the producer but to the manufacturer. I do believe that with the exchanges of this country conducted as they are to-day, they are a positive menace and a curse to both the manufacturer and the producer. And feeling that way, I have responded to the suggestion or invitation of Representative Lever (who is the Representative, not of my home district, but of the district in which some of my mills are) to appear here.

I might introduce what I have to say by reading part of the report made by a committee of the American Cotton Manufacturers' Association at its May meeting, 1908, when we took up this question (as we had in previous meetings) of the cotton exchanges, and their effect upon us as manufacturers. I can not emphasize too greatly to the committee the very serious effect that the exchange has had in times past, and is havmg to-day, upon the manufacturers. We are left in a condition where we are "damned if we do and damned if we don't." The effect of the exchanges upon the product in which I am interested—cotton—is such that it is simply impossible for a manufacturer with any assurance whatever to know the price at which he is going to buy his raw material.

To illustrate to you, take the conditions of the last month: Within the last thirty days cotton futures were quoted on the New York Cotton Exchange at approximately 16£ cents, that representing about the high-water mark. Those same contracts during that month have fallen slightly over 3 cents a pound, or about 3J cents, I believe^ as the minimum. During that period the price of spots has remamed practically unchanged. The producer who was able to hold his spots has held on to them, unwilling to sacrifice them, not recognizing the extreme reduction in price, and has not been able, therefore, to get the price at which ho was holding them. He is now about able to get the price at which he has been holding them. Cotton futures fluctuate, as I have said, very greatly. At the time that the contracts were selling in New York at approximately 16£ cents, spot cotton in the South was not selling at over 15 to 15 J cents.

The Chairman. What would be a legitimate difference?

Mr. Parker. Of course it all depends upon the cost of transportation. . The legitimate difference between South Carolina ancf New York cotton should be about 75 points. In other words, I should legitimately expect to buy spot cotton in the South, middling grade, at about 75 pomts under the quotation in New York. As a matter of fact, during the last three years, the price has ranged from a condition in which at times futures would be 2£ cents under spots to a point where they were 1£ cents over spots. There has been no response of one to the other, and there can not be under my view of the cotton exchange rules, particularly in New York. I wish to say bere that while I shall use New York in my discussion as an illustration, and I think an extreme illustration, of the disadvantage (and I may almost use the word "curse") of a cotton exchange, at the same time the same complaint in a lesser degree applies to New Orleans. But it applies in an exaggerated degree to New York.

Mr. Burleson. Mr. Chairman, may I ask Mr. Parker a question?

The Chairman. Certainly.

Mr. Burleson. If future contracts can depreciate the price of cotton $15 a bale, or 3 cents a pound, and the holder of the spots in the South will not "turn loose," why do not the manufacturers go to the New York Cotton Exchange and buy contracts and demand the delivery of the cotton?

Mr. Parker. I am coming to that in a few moments, Mr. Burleson. If you will allow me to keep that in mind, I expect to come to that.

To return, therefore, to the line of argument I was on: There has. been this extreme fluctuation. What has been the effect upon the producer? As I have said, during this period he has been unable to sell his own product, because the manufacturer was able to buy elsewhere cheaper. Now, why?

When cotton futures, through the influence of speculation, were forced to the extreme price of 16£ cents—a price above that which the spot cotton could be sold at—such spot cotton as was sold was bought by the intermediate man, who, as we say, "hedged" the sale. That is, he bought the spot cotton, we will say, at 15 cents, and sold futures against it at 16£ cents. In other words, he bought his spot cotton in the South at from a cent and a quarter to a cent and a half under futures. There is a condition where futures have run away from the market, or gone above the market.

A large quantity of cotton was bought during December by the intermediate man under those conditions at about a cent, we will say, under the price of futures. A break occurs; it goes down 3 cents a pound on futures. What does the spot man do who has bought his cotton in the intermediate condition? After having bought his spot cotton a cent under futures ho advances his spot cotton, and demands a cent on futures. The result is that during the last month the producer himself has not been able to market his crop, or such portions as he has had left in his hands, because the intermediate man, using the exchange as a hedge, has been able to undersell him, and undersell him at the same time to a very great profit to the intermediate man.

To illustrate: If the intermediate man bought spot cotton a month ago or three weeks ago at a cent and a half under futures, and then had a decline of 3 cents, lie was at an advantage of 3 cents a pound in his hedge on the futures. In other words, he had a profit on his futures of 3 cents. The spot man in the South, the producer, stood pat for his 15 cents. He said: " I won't sell my cotton at less than 15 cents." The intermediate man says to himself, therefore, "All I have got to do is to so fix it that I can sell my cotton which I have previously bought and hedged at 1 cent on futures, and undersell the spot producer about a quarter of a cent." Therefore, if futures had declined, we will say, to 13£ cents, he will ask me 100 points on futures, and I will have to pay him 14 £ cents for the spot cotton he has bought as against the farmer who is holding for 15 cents. Very naturally under those conditions I have been buying from the intermediate man. I

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