stand at the race track and lay them 5 to 0 or 5 to 2, and so forth— identically the same proposition.

Now, you may say that if the bucket shop takes these bets, as you call them, where does he get off if the market goes against him? I would say to you that once in a while he finds somebody that is a member of the exchange who will handle some of his business. The member will do it for him under cover and give him a chance to get off, but if a member does it and is found out he never does it the second time; he is expelled. That supports what I have said that the rules stand for integrity on the board of trade in the city of Chicago, and the same applies to every other exchange. During my term as vicepresident and during my term as president I voted aye every time for the expulsion of 21 men. Expulsion from our institution means not as it does in some-only the forfeiture of membership, thereby permitting the culprit to retain the monetary interest, but it means in our exchange absolute confiscation; that is, your fine, besides losing your business standing.

Just one more word in regard to the grain dealer taking advantage of that insurance that exists. At the present time tributary to Chicago are millions of bushels of corn that are what we call soft corn. The state inspection department of the State of Illinois demands that corn of No. 2 or No. 3 grade, or better, must have not to exceed 19 per cent of moisture; the consequence is that not only the Chicago market, but St. Louis, Omaha, Kansas City, and other markets are being flooded at the present time with what is known as the soft grades of corn. That corn, on account of its condition when it comes into the market, is sold at a discount, is not a standard grade of corn, and is bought by people who have what we call, in grain parlance, the hospitals, where they put the corn in shape, put it in the driers, extract the moisture from it, and they put that corn in a condition where it will keep.

If anybody has ever seen corn out of condition you will know what that means. Now, what is the man in Kansas City or Chicago, who is accumulating thousands of bushels of this corn, going to do in regard to financing it with his banks? What is the banker going to say? I can walk over to the banks in La Salle street in Chicago and say, "I want to borrow half a million dollars; I am taking in this offgrade corn that is coming in on the market; I am drying it out and putting it in merchantable shape; buying it at a discount, getting the corn at 6, 7, or 8 cents a bushel, and it costs me 4 or 5 or 6 cents to dry it out, and I have got a possible profit of a couple of cents a bushel." My banker says: "Yes, if the price don't go down," and I say to him, "I have got every bushel of it sold against for delivery in the month of May," and the minute I show that statement my banker will not only loan me half a million, he will loan me four or five times that amount if I want it; I speak knowingly because I have done it so much. It is the same as insurance.

Mr. MERRILL. May I ask you right at that point to show the value of that corn, or what it would be in the market but for the buying of it to dry and thereby making it safe to keep?

Mr. FITCH. There is no telling; that would be hard to answer; however, I might say that it would probably be between seven-eighths and nothing. This vast system of insurance that has come up, as I

stated before, from the difference of opinion of the people of the world, has been sixty years building, and, gentlemen, I do not believe this committee or any other committee or any Member of Congress wants to disturb the grain commerce of this country by tearing down or attempting to tear down in sixty days what it has taken sixty years to build up. It may not be perfect. I do not know if you gentlemen are aware of the fact that many of the States have their bucketshop laws, at the same time making legal the transactions upon the exchanges. I am informed that the District of Columbia and the following States, Indiana, Missouri, Iowa, Michigan, Pennsylvania, New York, Massachusetts, Kansas, and Tennessee, have passed stringent laws against bucket shops, at the same time legalizing trades made on regular and legitimate exchanges.

Gentlemen, I might take up your time for hours; the subject is almost inexhaustive. It is a subject, of course, that is dear to us, because it is our business, and we have grown up in it. I am not going to infringe upon your patience any longer. There is nothing in this world that is perfect; there are defects in almost everything; but the careful diagnostician and the careful surgeon determines how the operation may be performed with the least pain or the least disturbance. We are not perfect; we have things hanging onto our business that we are just as anxious to shove off as you are; we can see, perhaps, where an operation would be for the benefit of all: but we can not see where a capital operation is necessary. There never was a carload of fruit shipped that did not arrive at destination with a few specks on the peaches; you never send a battle ship around the Horn but that when she gets to San Francisco or Monterey she is not covered with barnacles; but you do not throw away the carload of fruit, nor do you dynamite the battle ship. Not all legislators are worthy of the trust that the people put into them. We have seen those that have gone wrong and those that are not right; they are not all perfect, but it does not damn the system of legislation in the main. Gentlemen, I thank you for the time you have given me. Mr. LEE. How many grades of winter wheat are sold on the Chicago board?

Mr. FITCH. There is a No. 2, there is a No. 3, and a No. 4.

Mr. LEE. Suppose a miller in Atlanta, Ga., buys ten carloads of wheat, can he specify the grade of wheat which

Mr. FITCH. No, sir.

Mr. LEE. He will have delivered?

Mr. FITCH. No, sir; he can have one of three grades, because there is always a scarcity in the high grade, and that always commands a cash premium. For instance, if I should sell to-day 10,000 bushels of wheat for delivery in the month of May, agree to deliver that wheat in the month of May, I, as the seller, have one of three ways of delivering that wheat; I can deliver you No. 2 Kansas hard or deliver you No. 1 northern, which is northern spring wheat, or I can deliver you the No. 2 red.

Mr. LEE. You give one of three grades?

Mr. FITCH. Deliverable on contract.

The CHAIRMAN. One of the three you have mentioned?

Mr. FITCH. One of the three.

Mr. MERRILL. At the pleasure of the seller?

Mr. FITCH. At the pleasure of the seller.

The CHAIRMAN. Is it under a contract such as is made on the cotton exchange?

Mr. FITCH. No, sir. For instance, you come in my office and say, "I want to pick up some No. 2," and I will say, "I will see what I can do for you. I would go around to the different elevators having it in store and for sale and ask at what price they would ship the No. 2. I would get the price and come to you and say, "I can get that shipped loaded on the cars for you, at one twenty-eight," and you say, "Buy it," and you would buy that No. 2 red winter right out.

Mr. BURLESON. This is right on the exchange?

Mr. FITCH. Yes, sir; absolutely.

Mr. BEALL. On one of the exchange contracts?
Mr. FITCH. Yes, sir.

Mr. BEALL. An ordinary exchange contract?

Mr. FITCH. An ordinary exchange contract.

The CHAIRMAN. If Mr. Smith had 10,000 bushels of wheat at Springfield and he sold it to be delivered in May, what would he send up to Chicago?

Mr. FITCH. He could send any of the three grades, just to fill his contract. Suppose he had No. 2 red, No. 2 hard, and No. 1 northern; foxy John Smith from Springfield would look at the market and say, "If No. 2 red winter is selling at a premium of 12 cents, I will not send that, I will send the cheapest I have;" and when he sends that wheat up there, to be delivered upon the contract he has made, we have nothing to do with that; the state inspectors enter that car and look it over and determine the grade, and then the State issues a receipt. for that wheat which is stored in the elevator, and it is registered; the receipt is delivered to him for his wheat and that receipt is the best collateral to borrow money on in the United States.

Mr. LEE. Will you tell me how many grades are recognized on the Chicago Board of Trade-grades of winter wheat?

Mr. FITCH. You mean on contract?

Mr. MERRILL. There is a little booklet as to the official inspection that is gotten out by the State showing just what the grades have got to be [handing booklet to Mr. Fitch].

Mr. LEE. I want it in the record, that is all; how many grades there are of winter wheat recognized on the Chicago Grain Board of Trade.

Mr. FITCH. Of grades recognized?

Mr. LEE. How many?

Mr. FITCH. Under the deliverable contract, for instance?

Mr. LEE. I mean how many grades you handle.

Mr. FITCH. You mean, for instance, different grades that come on the floor, the number of samples of wheat, and how many grades are liable to be in a sample of wheat?

Mr. LEE. Yes.

Mr. FITCH. You mean, supposing you ship a carload of wheat, how many different grades are we liable to find?

Mr. LEE. Yes.

Mr. MERRILL. Show Mr. Lee the booklet I handed to you.

Mr. FITCH. That is not the idea; he is asking for recognized grades. I know what the gentleman means; he means grain deliverable on contract. You have a perfect right, you know, in buying wheat of

me, to specify a certain wheat or a certain grade, and if I agree to give it to you I have got to give it to you.

Mr. LEE. I understand that; but you don't seem to catch my idea. I want to know how many grades you handle. For instance, as to cotton, they have twenty or twenty-five grades. Now, I want to know how many grades of wheat you have.

Mr. FITCH. We have three grades of wheat deliverable upon contract, and it never changes. Most of our red wheat, which is a winter wheat, is grown in the States of Illinois, Indiana, and so forth; the No. 2 hard winter is grown in Kansas, and the spring wheat No. 1, northern, is grown in the Dakotas.

The CHAIRMAN. Your statement is, then, to the effect that the grades deliverable on future contracts are well defined and always easily understood?

Mr. FITCH. Absolutely; because they are grown in different parts of the country, and the smallest miller can tell you the difference by looking at them; where one miller would pay a certain price for No. 1, northern, another miller would not look at it for that price.

The CHAIRMAN. I have a letter from a miller at Neosho, Mo., the Neosho Milling Company, from which I read the following statement: These future contract grades are very meaningless and give a varying latitude of grade, variety, and quality of wheat; hard wheat, yellow berry wheat, spring wheat, or soft wheat may be delivered with varying admixtures of damaged wheat of all grades and kinds as suits the seller, whichever is the cheapest. So you can readily see that the miller that buys a future contract and expects the grain to be delivered to him will be sorely disappointed.

Do

you think that is an accurate statement?

Mr. FITCH. No, sir; I do not. If the gentleman from Neosho would send any grade of wheat to the markets of Chicago, to be sold there, the State of Illinois says what that wheat is, just the same as if the State of Texas should say what the grade of cotton is; the State of Illinois states what that wheat is, and after they state what it is, then it is sold upon the market.

Mr. MERRILL. And that state law has been in effect thirty-nine years?

Mr. FITCH. Yes.

Mr. BURLESON. I would like to ask you one question. Suppose the miller to which Mr. Lee referred could only use in his mill the grade of wheat which you spoke of as a red winter wheat, could he go to the Board of Trade in Chicago and buy a contract for the delivery of 10,000 bushels of red winter wheat that he wanted?

Mr. FITCH. Yes, sir; he could go on the Chicago Board of Trade and get it as every other man can.

Mr. BURLESON. Could he use the ordinary contract of the Chicago Board of Trade?

Mr. FITCH. What do you mean by the ordinary contract?

Mr. BURLESON. I mean the ordinary contract for the future delivery of grain?

Mr. FITCH. If he bought 10,000 bushels of wheat, is that what you mean, for the month of May delivery?

Mr. BURLESON. I am quite sure that you want to be understood. Mr. FITCH. Absolutely, Mr. Burleson."

Mr. BURLESON. And I do not want to be misunderstood. Now, here is a miller in Georgia who wants 10,000 bushels of red winter wheat; he can not use any other kind of wheat in his mill, he can not

sell the flour, the product of any other kind of wheat than red winter wheat; could he send an order to the Chicago Board of Trade for 10,000 bushels of wheat?

Mr. FITCH. May wheat?

Mr. BURLESON. Well, red winter wheat.

Mr. FITCH. That is where you will have to specify in your question. Mr. BURLESON. All I want to get is-well, I will say May wheat, then; I want to know if, under the ordinary contract, the buyer would know, with any certainty, that he was going to get the red winter wheat?

Mr. FITCH. No, sir; because the man who sells that 10,000 bushels of wheat in May, under our rules, has the right-that is perfectly understood by the buyer and the seller, there is no chance of getting away from that-the man who sells that wheat, the elevator man in Chicago, has the right, the seller has the right, in the month of May to deliver to your Atlanta friend one of three grades of wheat, which are specifically stated, No. 1 northern, No. 2 red, or No. 2 hard. Now, may I go a bit further; suppose the gentleman in Atlanta wants No. 2 red winter wheat; the gentleman in Atlanta is familiar with the ruling price of No. 2 red winter and finds it is selling way above him, he may have bought the 10,000 bushels of May wheat at some previous time

Mr. BURLESON. No, not back at any previous time; he is running a mill and he wants

Mr. FITCH. Let us put it this way, that he sold 2,000 barrels of flour

Mr. BURLESON. Oh, no.

Mr. FITCH. And he wants to buy wheat

Mr. BURLESON. That is not my man; this miller in Georgia wants 10,000 bushels of wheat to use in his mill, and I want to know if he can go to the Chicago Board of Trade and buy a contract for its delivery, with any certainty of getting that character of wheat? Mr. FITCH. No, sir; he can have one of three varieties.

Mr. BURLESON. Have you more than one contract on the Chicago Board of Trade for wheat?

Mr. FITCH. Just one contract; of course, we have hundreds of contracts, but I am talking of the May contract.

Mr. BURLESON. That is right, the May contract. As a matter of fact, you say the primary function of your exchange is to bring the buyer and the seller together, yet if the Georgia man wanted to get 10,000 bushels of winter wheat he could not go to the Chicago Board of Trade and get it.

He

Mr. FITCH. Absolutely he could. I have said to you that if you will let me do so I will tell you the procedure. If he wanted wheat he would look at the prices in St. Louis, in Kansas City, and Chicago. He would see the price was one twenty-eight in St. Louis, one twenty-five in Kansas City, and one twenty-three in Chicago. would write me or come up to see me and say he wanted 10,000 bushels of No. 2 red winter wheat and ask me to see what I can buy it for. I would go to the different elevator concerns and would find somebody that had No. 2 winter wheat and tell them I wanted 10,000 bushels of No. 2 red winter, at one twenty-three, loaded on the cars; and if I found it I would tell the gentleman I could buy it for him, and he would say to go ahead and buy it.