We have a chance to wipe that out in this bill by putting a tax on this gambling in the products of the sweat and blood of 30,000,000 of American producers, and close the exchanges. They do not reflect a world's market. They reflect a gambler's market. We heard them testify day after day here in the Senate Office Building. We heard Mr. Marsh say that Clayton, Anderson & Co. had manipulated the cotton market and squeezed out a lot of people; and Mr. Clayton said, "I had to carry 172,000 bales of spot cotton to New York and keep it there to tender on tender days, not because they were going to accept it, but," to use his very words, "because they would have taken my shirt off my back if I had not had it there." In other words, by manipulating the market and keeping a lot of unspinable cotton in New York he could break the price of cotton and save his shirt and make millions of dollars, although he took the shirt off every cotton grower in America.

It ought to be stopped. A moral spasm struck this country at one time, I remember, and all of you do, because they had a lottery down in New Orleans. It was a gambling machine, of course; but nobody gambled on that except the man who gambled with his own money. They did not gamble in the sweat and blood of other people. They gambled in their own wealth; and yet the sense of moral justice in this country that desired to shut down public gambling made them close the Louisiana lottery by denying them the use of the mails. They closed it, and nobody has ever complained about it. It was a righteous thing to do; but the Louisiana lottery was mere penny gambling as compared to the futures markets.

We talk about the gambling that takes place in the little kingdom over on the Mediterranean Sea, Monte Carlo. They never risk as much there in a year as is bet on the Board of Trade in Chicago in one day, and yet they bet their own money. These people in Chicago are robbing every wheat grower and every grain grower in America. If we do not feel any repulsion against gambling, if we are willing to say that gambling is all right, that it is not morally wrong, we ought at least to make men gamble with their own wealth, and not gamble with other people's wealth. There is not a Senator on this floor who will vote to-day to establish a public gambling house in the District of Columbia. There is not a man here that would not be driven out of public life if he did it; and yet when you authorize these people to gamble in the price of wheat, which is the bread of the Nation, and in cotton, which is the clothes of the Nation, you authorize the biggest gambling institution this world ever saw, and you permit them to gamble, not in their own wealth but in the wealth that is produced by the American farmer.

66

You can not do it any longer under the theory that you are having a market that reflects a world condition and therefore is an advantage, because, of all the people that came before the committee, there was not one who did not say that the markets could be and were manipulated. Mr. Clayton himself said, There is not any excuse for the cotton market in New York." He said, "It is an economic crime to have it there." He said you could manipulate it, and all of them said he had done it. He testified-the greatest buyer and seller of spot cotton in the world-that they manipulated the price of futures in Liverpool last year until it was ruinous; and they said that cotton would have sold 5 or 6 cents higher if it had not been manipulated in the future market.

We owe something to the people who feed us, and we owe something to the people who make the products out of which the clothes we wear are made. Therefore let us put a tax on these transactions that at least will give the farmer a chance under the economic conditions, as bad as they are, to get what the world's price is, and not have it destroyed by a lot of gamblers in New York and Chicago and New Orleans.

Mr. SMOOT. Mr. President, has the Senator finished? Mr. CARAWAY. Yes; except that I am going to move to increase the rate to 10 cents.

Mr. SMOOT. Mr. President, the only reason why the rate in the past has not been increased is the fact that if we put the rate too high all of the dealing will be done in Canada or England through telegraphic communication from the offices in New York.

Mr. CARAWAY. Mr. President, let me ask the Senator a question: There is a good deal of gambling in Monte Carlo because we have not got a public gambling place here in the District of Columbia. If it is a good idea to keep your gambling at home, why do you not introduce a bill to open a public gambling place here, so that people will not have to go to Monte Carlo to gamble? The Senator says that if we do not let the people gamble at home they will gamble in Canada. Mr. SMOOT. That is quite true, Mr. President. I think the sales will be made there.

Mr. CARAWAY. That is not the belief of the people who gamble in these products, Mr. President.

Mr. SMOOT. question about it. Mr. CARAWAY. I have a bill pending into which you can write provisions which will stop gambling in American products by American people anywhere on the earth by denying them the right of communication, which is always under the control of the Government.

I think it is. I do not think there is any

Mr. SMOOT. That legislation would be effective. Mr. CARAWAY. Yes, sir; and this will be effective. Mr. SMOOT. No; if we put this tax at 10 cents, which is very much higher than the present law, the trading will be transferred to England or it will be transferred to Canada. Mr. CARAWAY. Whenever you can break up gambling in futures in America there will be no opposition to passing a bill that will prevent them from gambling in Liverpool in our products. Besides, Mr. Clayton himself said that you could not hedge on Liverpool, and therefore you could not gamble on the Liverpool market, because there was a difference of $14 a bale there against American cotton. You can not hedge on it; you can not gamble on it there.

Mr. SMOOT. But that is not the question. This is what they will do: The same people that gamble in this produce here will have the sales and the purchases made in England, and immediately reflected here, or send them here. That is exactly what will happen.

Mr. CARAWAY. Then the people who have been gambling do not know what will happen, because under oath they swore that they could manipulate the cotton market in Liverpool, and that they did not dare try to hedge on that market. There is certainly some Member on the floor who is a member of that committee. The Senator from Alabama [Mr. HEFLIN] is one. Mr. SMOOT. That is true where you have a competition between England and the United States; but if it is done from there directly through an American agency here, then of course it is not true.

Mr. CARAWAY. The Senator from Utah is not familiar with this gambling process. The Senator from Alabama [Mr. HEFLIN] heard Mr. Clayton say that local conditions depressed the price of cotton $14 a bale in Liverpool. Mr. HEFLIN. Yes.

Mr. CARAWAY. And everybody knows that you can not hedge on a $14 a bale loss in cotton. Everybody who followed that investigation for a minute knows that there is not anything in gambling in futures for anybody except the man who gambles in them. It destroys the farmer. In the interest of common decency, in the interest of protecting people against a raid upon their products by people who have no interest in them except to make money out of them for themselves, let us stop it. If you will stop it by taxing it out of existence, there will be no trouble in passing any needed legislation to prevent gambling in Liverpool. They can not do it anyway, according to their own statement before the committee; and I shall offer an amendment to increase the tax to 10 cents.

FARM RELIEF

Mr. NEELY. Mr. President, the President is about to make a devastating application of the scriptural aphorism, "He that hath, to him shall be given; but he that hath not, from him shall be taken even that which he hath."

The predestined victims of this application are the American farmers, multitudes of whom are in bankruptcy and millions of whom are in the greatest distress that they have ever known. Again the President is on the verge of vetoing the McNaryHaugen agricultural bill. And what is the basis of this assertion? The Wall Street Journal, which for a long time has played the part of a rhinoceros bird to the President, and which habitually not only warns him of every approaching danger but gratuitously and sometimes obstrusively tells him how to avert it, says in a front-page article carried in last Monday's issue, "Why should he sign?

Congress has done the expected thing and passed the Haugen bill for "farm relief." As in some details it differs from the McNary bill passed by the Senate, the two measures must go to conference. When the revamped bill finally gets to the President a veto is expected. Political wailing may follow such action by the Executive, but what else could be expected of a President who is not afraid to do his duty? What other course is there for him to take?

The Wall Street Journal is the duly chosen and profusely anointed journalistic apostle of big business. If it has ever favored anything that the common people wanted, or ever opposed anything that the favor-hunting privilege-seeking few have demanded, that fact has escaped my attention. But, in spite of the journal's zeal to serve only those whose incomes are in the "highest brackets," it must, as a matter of simple justice, be admitted that it is the greatest financial publication

in the country. As a forecaster of the ebb and flow of Wall Street's turbulent financial tide, and the predictor of the price movement of stocks and bonds, and President Coolidge's actions, if any, the Wall Street Journal is without a peer.

In the circumstances, I hazard my reputation as a political prophet upon the prediction which I now make, that within a few days the Senate will receive a veto message that will prove that the article which I have read from the Wall Street Journal is but the record of a stern master's imperious voice, and that the President has unhesitatingly obeyed it.

As to the poverty-stricken farmers of the Nation, may a benign Providence have mercy on their souls!

TAX REDUCTION

The Senate, as in Committee of the Whole, resumed the consideration of the bill (H. R. 1) to reduce and equalize taxation, provide revenue, and for other purposes.

Mr. BRATTON. Mr. President, I ask unanimous consent for the immediate consideration of a bill which I think will lead to no debate whatever.

Mr. SMOOT. I hope the Senator will not do that. We have had about 15 minutes to-day devoted to the consideration of the revenue bill. Let us proceed with it.

Mr. BRATTON. This will lead to no debate.

Mr. SMOOT. I do not know whether it will or not.

Mr. BRATTON. If it does, I will withdraw the request.
Mr. SMOOT. I do not know what the bill is.

Mr. BRATTON. I can tell the Senator in a moment.

Mr. SMOOT. I wish the Senator would let us go on for a little while to-day with the bill. It can be taken up in the morning at some time.

Mr. BRATTON. I think we are taking more time than it will take to pass the bill if the Senator will withdraw his objection.

Mr. SMOOT. Let it go over to-night. Let us go on with the bill.

Mr. BRATTON. Does the Senator object to it?
Mr. SMOOT. Yes; to-night.

Mr. HARRISON. Mr. President, the pending amendment relates to the tax of 1 cent per $100 in value of merchandise that is dealt in on produce exchanges. In 1917, I believe, Congress put a tax of 2 cents upon every hundred dollars' worth of value dealt in on exchanges and boards of trade. That was reduced to 1 cent some time later, in the act of 1924, I think. Of course, it was a war tax. There had been no such tax prior to that time.

I do not care to get into a discussion of whether or not the exchanges should be abolished. I do not think this has anything to do with that particular controversy. There can be no doubt that a lot of these gamblers speculating on the cotton exchange and on the grain exchanges have manipulated the price; but this goes deeper than that.

The Congress has recognized these exchanges. We have passed laws to regulate these exchanges. There are a lot of people who deal upon these exchanges in a purely legitimate way. I read from the testimony before the House committee of a Mr. Sturtevant, of Omaha, Nebr., in which Mr. Sturtevant discusses this proposition as it affects grain. He says:

I also represent the Omaha Grain Exchange, at Omaha, Nebr., a corporation which maintains in the city of Omaha a market place where its members engage in the merchandising of grain. That is a similar organization to the Chicago Board of Trade, except that we do not deal in futures, as defined by Congress in the grain futures act. I receive no remuneration for my services to these two organizations.

So very often they deal on these exchanges and boards of trade not in futures but in the legitimate sale of their products. In talking to a gentleman from my State only night before last I learned that they raise some 25,000 bales of cotton on his plantation each year. He told me that he had just sold, and it was the policy there to sell, one-fourth of the cotton they expect to raise on the plantation this year for delivery in October. On that sale that he was making he said that the price to-day was such that he thought perhaps he could make some money out of selling a fourth of it. If it went up, he would sell another fourth, perhaps, and when October came and he made his crop he would make delivery, an entirely legitimate proposition.

Mr. CARAWAY. Mr. President, is he a staple grower?
Mr. HARRISON. He is a staple grower.

Mr. CARAWAY. This exchange does not deal in staple cotton at all.

Mr. HARRISON. There is some staple cotton and some short staple also.

Mr. CARAWAY. affected by this. future delivery.

You know what he is doing. That is not He is selling to mills or to merchants for

Mr. HARRISON. Yes; for future delivery in October. Mr. CARAWAY. That is altogether different from selling futures.

Mr. HARRISON. On that sale he had to pay a tax of 1 cent for every $100 of valuation on that particular crop. I suppose they do that with wheat, with corn, and with every other product. I suppose that, without question, in the cotton-manufacturing States, such as South Carolina and Georgia and North Carolina any number of the cotton mills buy for future delivery. I imagine that the millers buy for future delivery their wheat and corn and so on. That is an entirely legitimate proposition. There is no question but that on the New York Cotton Exchange and on the boards of trade there is a certain percentage of the transactions which are gambling transactions; it may be a very large per cent. The way to stop that is not by imposing a tax of 1 cent or 10 per cent a hundred of valuation but by legislating them out of business, and I understand the Senator from Arkansas has offered a bill looking to that end, the committee has reported it, and it is on the calendar.

I submit that in these legitimate transfers this war nuisance tax ought to be abolished. It is a troublesome proposition. It does not do any good, and it is merely a burden upon trade and

commerce.

It was upon that theory that the House acted. The action was unanimous over there. There was not even a division on eliminating this tax on these exchanges. So the Democrats of the Finance Committee felt that the provision ought to be retained in the law.

Mr. CARAWAY. Mr. President, just a moment. I do not care to get into a discussion, but the difference between the man who sells a product which he himself expects to have for delivery and the man who sells it who does not have it and never expects to have it to somebody who never will receive it and never expects to receive it, is perfectly plain. There is the most conclusive answer that we do not need the exchange. There never was a future market for staple cotton in the history of the world. They never sold a bale on the future market, and never will. That shows it is not necessary to have a future market to sell that product. The woolgrowers of America were in bankruptcy until they got rid of the wool exchange. The hay producers got rid of the hay exchange, and when the German farmer once found himself in economic control of the German Empire he abolished the Berlin exchange, which was the greatest grain market in the world. Before the war in Germany, as any of the Senators who have been there will recall, instead of cursing Wall Street, when somebody wanted to cuss out" something he picked on the farmers, because they were in control of the industry of the empire as was no other single class. When the farmer was in control and could make his will felt, he abolished the Berlin exchange, which was the greatest grain market ever established on earth. It was reestablished because the industrialists and speculators got control in Germany. Mr. President, will the Senator yield?

Mr. MAYFIELD. Mr. CARAWAY. I yield. Mr. MAYFIELD. It is true that the Senator's bill, which would prohibit gambling in the prices of farm products, has been reported favorably by the Committee on Agriculture and Forestry to the Senate, and is now upon the Senate Calendar, but we are so near the close of this session of the Congress that it is very doubtful whether we will be able to enact that bill into law, even should it pass the Senate. That is very true, is it not?

Mr. MAYFIELD. I was surprised to hear the Senator from Mississippi say that this proposition to eliminate this tax entirely passed the House of Representatives unanimously, and that there was no one from the South on the floor of the House to stand and take a position for the farmers of our country, who feed and clothe the people of the country. Have we not an opportunity right now by the adoption of this amendment to render them the greatest service that we could possibly render?

Mr. HARRISON. Mr. President, may I say, if the Senator from Arkansas will yield, that the chairman of the Ways and Means Committee of the House, in presenting the matter, said he wanted to take this tax off in the interest of the producers of the country.

the exchange would be a legitimate institution. But now they deal in this fictitious stuff. It has the same relation to cotton that a mock orange has to a juicy orange that is produced in Florida. They call it cotton, but it is not cotton. They do not have to have cotton at all to deal in it. They sell in the United States probably 100,000,000 bales of cotton a year where we are producing 12,500,000 bales.

Senators, there is a weak place in this business. The same thing applies to grain. Grain growers may organize. They may start a holding movement through the grain-growing section and agree not to sell wheat for less than $1.50 and corn for $1 or $1.25. As they sit back holding their grain off the market, what are they confronted with? The stock exchange right in front of them is hammering the market to death, and yet it has not got a bushel of grain to deliver. The dealers on the exchange have a supply they keep on hand so they can go through the motion of having tendered something. Nobody accepts it, but it is poured back in the jug and the next day it is poured out again and then poured back again. They are using the power furnished on the exchange to fluctuate and fix the prices, and the farmer becomes demoralized. The merchant he deals with tells him he believes he had better go to selling. The banker tells him there is no telling what is going to happen, that the price is breaking and going lower. What price? It is a fictitious price brought about by a gambling process allowed in the United States. That is what happens to the cotton farmer and the grain grower under this law. Some drastic legislation has got to be had.

Before you can speculate in Pennsylvania Railroad stock you have to get them to list it, agree to it, and then you can take it on the exchange. Before you can speculate in motor stock or automobile stock you have to get the concerns that manufacture them and who hold the stock to give their consent so you can go upon the exchange and deal in it. Why not require them to consult the farmers of the West and of the South and get their consent before they are permitted to gamble in their cotton or grain? That is something for us to think about.

It has been developed in the hearings that with the accumulation of 200,000 bales of cotton in New York out of a crop of 12,000,000 to 15,000,000 bales, they could control the price and break it to pieces. We have some counties in the Cotton Belt that will produce 200,000 bales. I think there are one or two big counties in Texas perhaps that do it. But they accumulate that much cotton in New York and keep it there. The testimony is that it would have an effect on the market. The testimony showed that Mr. Clayton and his company shipped cotton up there and shipped it at a loss, because the difference in price is $4 or $5 a bale when they take the freight into consideration, and after they got it there it was a dead weight on the market but it controlled the market. Various witnesses testified that its presence there helped to beat the prices down and hold them down.

Mr. CARAWAY. Mr. President, will the Senator yield?
Mr. HEFLIN. Certainly.

Mr. CARAWAY. As I recall, they have paid in interest, freight, and other charges about $9,000,000 to maintain their cotton there. Is not that the price?

Mr. HEFLIN. It was some tremendous amount. Mr. CARAWAY. And yet the only use they have for it is to break the market whenever it rises.

Mr. HEFLIN. Not only that, but the law provides that a man can not tender any cotton on a contract unless it is seven-eighths-inch long staple. We have had this cotton resampled in New York. There are hundreds of bales that are not tenderable and the spinners do not want it. What happens? This is dog-tail cotton, as we call it. When a man buys a contract, delivery day approaches and they say to the seller, "What are you going to do for me?" "I am going to tender you some cotton out of that supply." The testimony showed that that supply was low-grade cotton and not up to the requirements of the law. Therefore it was not permissible to tender it under the law, but they were tendering it anyway. Some Government official had certified it as being proper and right and eligible to be tendered.

times. He is a very able man. He has been president of the New York Cotton Exchange. He said this thing was happening over there. He said that the presence of this character of cotton was a dead weight on the market.

Something ought to be done to relieve the cotton farmer of this embarrassing situation. The grain grower ought to be relieved, too. I have nearly reached the point where I would vote to abolish the exchange outright. I have said here before, and the proposition can not be answered, that when we deal in real estate if we sell a lot we deed that lot to whoever buys it. He sells it and he deeds it. The man who buys it sells it and deeds it. It may be sold one hundred times in a month, but there is always a lot back of the transaction, and only one lot. If that man would undertake to sell 100 lots when he did not have more than one, he would be guilty of obtaining money under false pretenses and they would put him in the penitentiary. But the same man may go upon the exchanges and sell 100,000,000 bales of cotton, damaging the property of the farmer that he is holding for the market, and not be guilty of any crime at all. The man does not have any cotton at all; he does not own any cotton at all; but is selling cotton that is not in existence. It is an outrage. The practice ought to be outlawed.

The woolgrowers do not have to go on an exchange and fare better than the cotton producer. How do they dispose of their supply of wool? They get together and organize. They say, "It costs us so much to produce it. We ought to have this price." The producer is using his power to help fix the price and he ought to do so. It is a God-given right. The buyer meets with the producer and he talks about how much he can afford to pay. He has the mill, and the woolgrower can not spin the wool into cloth. The wool spinner is the only one who can do that, and he can not spin anything unless the woolgrower will furnish the wool.

The woolgrower wants to sell his supply, the wool manufacturer has to have it, and so they get together, with no exchange confusing the situation and misleading them and causing fluctuation of prices. They come together on a business basis, each one of them possessing some price-fixing power, and they reach the point where their minds come together, the deal is closed, the producer gets a profit and the spinner is satisfied with what he has to pay.

Mr. SMOOT.

Mr. President, will the Senator yield?

In a moment.

Mr. HEFLIN. Mr. SMOOT. The Senator is mistaken about wool. Mr. HEFLIN. I want to reach the point where the producer has got to be consulted. He is not now consulted at all. The producer may hold every bale of cotton off the market that he has and yet they sell millions and hundreds of millions of fictitious cotton on the market and fix the price of the actual cotton which the producer is holding for a better price. It is an outrageous thing and a scandal that it is done.

Mr. MAYFIELD. Mr. President, will the Senator yield to me?

Mr. HEFLIN. I yield to the Senator from Texas, Mr. MAYFIELD. I call the attention of the Senator from Alabama to the fact that when the wool manufacturer purchases wool enough to run him for a year or to meet his needs and demands, he has no exchange into which he can go and hedge.

Mr. SMOOT. There is no exchange that handles wool. Mr. MAYFIELD. That is the point I am making, and the manufacturer does not have to hedge his purchases.

Mr. SMOOT. Certainly he does. The Senator does not know the wool business. Does he think the woolen manufacturer can go to work and sell goods unless he knows what his wool

is going to cost him?

not do it.

Mr. MAYFIELD.

He would be broke if he did. He could

How does he do it?
Mr. SMOOT. He buys his wool.
Mr. HEFLIN.
Mr. SMOOT.
Mr. HEFLIN.

He buys the actual wool.
Absolutely.

And he stores it away.

Mr. SMOOT. That is what I said.

Mr. HEFLIN. That is what I want the cotton factors to get together with the farmers and do, to buy the cotton and store it and have it.