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Mr. SMOOT. Mr. President, the first amendment to be taken and all we ask is that they pay one cent on every hundred up this afternoon is found on page 205, section 441, tax on dollars that they gamble in the farmers' products. If I know sales of produce on exchange.
anything about it and if I may judge from what I am told, The House repealed " subdivision 4 of schedule A of Title VIII they do not care about this tax and we might just as well get of the revenue act of 1926, to take effect on the expiration | the $3,000,000 out of the gamblers and the stock exchanges in of 30 days after the enactment of this act.” The Senate com- Chicago and New York, who never take a single penny out of mittee sees no reason why that should be repealed. The tax the farmer, and it might as well go into the Treasury. imposed to-day is 1 cent upon each $100 of valuation by transfer. Mr. CARAWAY. Mr. President, I wish the Senator would There is $3,000,000 involved. Therefore we ask that the Senate make it so high that it would make that business prohibitive. committee action be approved by the Senate.
Mr. SMOOT. That is what the farmers have asked us to do. Mr. WALSH of Massachusetts. Mr. President, what is the Mr. CARAWAY. I do not know of a farmer anywhere who amount of revenue produced by the item?
does not realize not only that gambling is morally wrong but Mr. SMOOT. It is $3,000,000.
that gambling in farm products is destructive. Let us make it The PRESIDING OFFICER. The Clerk will state the pend- so heavy that they will have to quit it. ing amendment.
Mr. SMOOT. It is not a very heavy tax now. The CHIEF CLERK. On page 205 the committee proposes to Mr. CARAWAY. Will the Senator accept an amendment to strike out lines 11 to 14, both inclusive, in the following words: make it heavier?
Mr. SMOOT. We would like to get some revenue out of it. Subdivision 4 of Schedule A of Title VIII of the revenue act of 1926
Mr. CARAWAY. We do not want to get revenue out of is repealed, to take effect on the expiration of 30 days after the enact
crime. ment of this act.
Mr. SMOOT. As long as it is not a violation of law but is Mr. SIMMONS. Mr. President, I see in the report of the Sen- a moral wrongator from Utah the statement that the loss of revenue by the Mr. CARAWAY. I know it is morally wrong. But we have repeal of this amendment would be $3,500,000.
entered into a great period of moral uplift which should encourMr. SMOOT. The Senator must have the wrong report. age us to make the tax so heavy that they will have to quit this
Mr. SIMMONS. I am referring to page 46 of the Senator's gambling. What is the amount of the tax now? report.
Mr. SMOOT. One cent on every hundred dollars. Mr. SMOOT. Whether it is $3,000,000 or $3,500,000 makes Mr. CARAWAY. Would 10 cents on a hundred dollars make very little difference.
it unprofitable to them? Mr. SIMMONS. That is true.
Mr. SMOOT. I have never bought a bushel of grain on the Mr. President, I do not desire to engage in any extensive market and I know nothing about what it would be. discussion of the question. The Senator from Mississippi [Mr.
Mr. CARAWAY. I am going to move to make it 10 cents in HARRISON ] expected to discuss it pretty thoroughly, I think, the belief that it will make the gambling prohibitive. I am sure and may do so before we pass on the amendment. In the mean
the Senator from North Carolina [Mr. SIMMONS] will be glad time, I may say that I do not know whether it is true or not,
to have it made prohibitive. but I think the farmers of the country are under the impres- Mr. SMOOT. Oh, no; the Senator from North Carolina is sion that all of this tax upon their products will ultimately opposed to the 1-cent tax now levied. have to be paid by themselves. It is said that the farmers
Mr. SIMMONS. I wanted to repeal it. have not made their views heard upon this subject. It is to
Mr. CARAWAY. But if we could prohibit this exploitation be regretted that they have not. But that is in conformity to of the farmer, this selling of millions and millions of bushels of the custom among our farmers in this country. Ordinarily corn and wheat that never was in existence and never will be, they are voiceless. Ordinarily they do not complain. Ordi- of millions and millions of bales of cotton that never was grown narily they bear their burdens with patience. It is true that and never will be, destroying the markets by that process, it such a yoke has been imposed upon certain producers of staple seems to me that we ought to be quite willing to tax it out of products in the country, that it has forced the farmers, contrary existence. They sell from 150,000,000 to 200,000,000 bales of to their usual custom, to voice in tones that are heard from American cotton on the exchanges in New Orleans, New York, one end of the country to the other their protest against these and Chicago, when 13,000,000, 14,000,000, and 15,000,000 bales burdens, against these exactions, against these discriminations. covers the total production. I am told that there were sold in
This is a small matter compared with the things about Chicago one day last year more bushels of wheat than were which the farmers have been aroused. With respect to this produced in all America that year. We have just taken testiquestion the average farmer knows nothing. He does not mony on that point. The price of the product can be manipuknow that he has to pay a tax of one cent on each hundred dol-lated on the market by those gambling in futures. lars of the value of his products sold on exchange. The farm- We have testimony from Mr. Palmer, who is in charge of the ers probably have not been able to reach the ears of the chair-cotton division of the future markets in the Department of man of the committee or of the majority. Nevertheless the Agriculture. He said last year, when he was testifying before farmers' representatives are looking more closely to-day than the committee, that they could manipulate the price of cotton en ever before into the multitude of little exactions that are made the future market as much as $7.50 a bale. The testimony in against him. They have not been silent. They have expressed the examination before the committee which has just been had their objection to this tax. It does not raise much revenue. before the subcommittee, composed of the Senator from South It is claimed that the farmers are opposed to it. I know Carolina [Mr. SMITH] and others, shows that they actually that if the farmers believe as they do that this is a tax upon manipulate the price of cotton until they destroy it. One of the sale of their products, they would be as unanimously against them said there was no reason at all why cotton should not have it as the wheat farmers of the West are against the burdens been sold for 20 or 25 cents a pound last year to destroy the which are placed upon them and the discriminations which are future market. They destroyed the wheat market. They abol. leveled against them.
ished the myth of future markets representing the world marTherefore there is in my judgment nothing in the argument kets. There was a time last year when cotton futures in which the Senator from Utah, the able chairman of the com- Liverpool sold at $10 less than they sold in New York, although mittee, urges to the effect that the farmers have not pro- they ought to have been $4 or $5 higher. tested. They have not in the sense that they protested against There was a difference of nearly $14 a bale on cotton maniputhe heavy exactions which they could not overlook, because it is lated through the Liverpool market; and Mr. Clayton--who, I small and insignificant. It only amounts on the whole to think, is one of the ablest men who deal on the cotton ex$3,500,000; and yet, finding this little burden imposed upon change-said that that was due to a local condition; that the the farmer, in order to answer the demands of the administra-coal strike and the industrial depression in Great Britain made tion for economy in expenditures, economy in reduction of it impossible for there to be a demand for cotton in Liverpool, taxes, economy in relieving against burdens which are unneces- and therefore that was a local condition. sarily imposed, the majority denies the benefit of this little You can not control a world market nor reflect a world market reduction. I am not surprised that there is a feeling among when a local condition will depress the price of cotton $14 a the farmers of the country that the present administration bale. The greatest economic crime of this century is permitand the Congress of the United States as now constituted have ting people to gamble in the products of the toil of 30,000,000 not been as much of a friend to the farmer as his pitiable of American people. It robs the producer, it robs the consumer, condition of inequality under the law would seem to call for. because, if you will notice, the producer always has to sell on
Mr. SMOOT. Mr. President, this tax is not upon the products the low price. The price of the finished product, whether it is of the farmers at all. Up in New York they will sell 10,000,000 bread or clothes, is always based on the highest price. Therebushels of wheat on the exchange. Not a kernel of it is actually fore, the producer is robbed by this manipulation of prices in transferred. To-morrow they will sell that 10,000,000 bushels what are called future markets, which are nothing but gamsomewhere else. They simply gamble on the stock exchange, 1 bling dens; and the consumer is robbed by the same process.
We have a chance to wipe that out in this bill by putting a Mr. SMOOT. I think it is. I do not think there is any tax on this gambling in the products of the sweat and blood of question about it. 30,000,000 of American producers, and close the exchanges.
Mr. CARAWAY. I have a bill pending into which you can They do not reflect a world's market. They reflect a gambler's write provisions which will stop gambling in American prodmarket. We heard them testify day after day here in the Sen- ucts by American people anywhere on the earth by denying ate Office Building. We heard Mr. Marsh say that Clayton, them the right of communication, which is always under the Anderson & Co. had manipulated the cotton market and control of the Government. squeezed out a lot of people; and Mr. Clayton said, "I had to Mr. SMOOT. That legislation would be effective. carry 172,000 bales of spot cotton to New York and keep it Mr. CARAWAY. Yes, sir; and this will be effective. there to tender on tender days, not because they were going to Mr. SMOOT. No; if we put this tax at 10 cents, which is accept it, but," to use his very words, “ because they would have very much higher than the present law, the trading will be taken my shirt off my back if I had not had it there." In other transferred to England or it will be transferred to Canada. words, by manipulating the market and keeping a lot of un- Mr. CARAWAY. Whenever you can break up gambling in spinable cotton in New York he could break the price of cotton futures in America there will be no opposition to passing a bill and save his shirt and make millions of dollars, although he took that will prevent them from gambling in Liverpool in our the shirt off every cotton grower in America.
products. Besides, Mr. Clayton himself said that you could It ought to be stopped. A moral spasm struck this country not hedge on Liverpool, and therefore you could not gamble on at one time, I remember, and all of you do, because they had a the Liverpool market, because there was a difference of $14 a lottery down in New Orleans. It was a gambling machine, of bale there against American cotton. You can not hedge on it; course; but nobody gambled on that except the man who you can not gamble on it there. gambled with his own money. They did not gamble in the sweat Mr. SMOOT. But that is not the question. This is what and blood of other people. They gambled in their own wealth; they will do: The same people that gamble in this produce and yet the sense of moral justice in this country that desired here will have the sales and the purchases made in England, to shut down public gambling made them close the Louisiana and immediately reflected here, or send them here. That is lottery by denying them the use of the mails. They closed it, exactly what will happen. and nobody has ever complained about it. It was a righteous Mr. CARAWAY. Then the people who have been gambling thing to do; but the Louisiana lottery was mere penny gambling do not know what will happen, because under oath they swore as compared to the futures markets.
that they could manipulate the cotton market in Liverpool, and We talk about the gambling that takes place in the little that they did not dare try to hedge on that market. There is kingdom over on the Mediterranean Sea, Monte Carlo. They certainly some Member on the floor who is a member of that never risk as much there in a year as is bet on the Board of committee. The Senator from Alabama [Mr. HEFLIN] is one, Trade in Chicago in one day, and yet they bet their own money. Mr. SMOOT. That is true where you have a competition These people in Chicago are robbing every wheat grower and between England and the United States; but if it is done from every grain grower in America. If we do not feel any repulsion there directly through an American agency here, then of against gambling, if we are willing to say that gambling is all course it is not true. right, that it is not morally wrong, we ought at least to make
Mr. CARAWAY. The Senator from Utah is not familiar men gamble with their own wealth, and not gamble with other with this gambling process. The Senator from Alabama [Mr. people's wealth. There is not a Senator on this floor who will | HEFLIN] heard Mr. Clayton say that local conditions depressed vote to-day to establish a public gambling house in the District the price of cotton $14 a bale in Liverpool. of Columbia. There is not a man here that would not be driven Mr. HEFLIN. Yes. out of public life if he did it; and yet when you authorize these Mr. CARAWAY. And everybody knows that you can not people to gamble in the price of wheat, which is the bread of hedge on a $14 a bale loss in cotton. Everybody who followed the Nation, and in cotton, which is the clothes of the Nation, that investigation for a minute knows that there is not anything you authorize the biggest gambling institution this world ever
in gambling in futures for anybody except the man who gambles saw, and you permit them to gamble, not in their own wealth
in them. It destroys the farmer. In the interest of common but in the wealth that is produced by the American farmer. You can not do it any longer under the theory that you are their products by people who have no interest in them except
decency, in the interest of protecting people against a raid upon having a market that reflects a world condition and therefore to make money out of them for themselves, let us stop it. If is an advantage, because, of all the people that came before you will stop it by taxing it out of existence, there will be the committee, there was not one who did not say that the no trouble in passing any needed legislation to prevent gambling markets could be and were manipulated. Mr. Clayton him in Liverpool. They can not do it anyway, according to their self said, “There is not any excuse for the cotton market in own statement before the committee: and I shall offer an New York.” He said, “ It is an economic crime to have it amendment to increase the tax to 10 cents. there." He said you could manipulate it, and all of them said he had done it. Ile testified—the greatest buyer and seller of
FARM RELIEF spot cotton in the world--that they manipulated the price of Mr. NEELY. Mr. President, the President is about to make futures in Liverpool last year until it was ruinous; and they a devastating application of the scriptural aphorism, “He that said that cotton would have sold 5 or 6 cents higher if it had hath, to him shall be given; but he that hath not, from him not been manipulated in the future market.
shall be taken even that which he hath.” We owe something to the people who feed us, and we owe
The predestined victims of this application are the American something to the people who make the products out of which farmers, multitudes of whom are in bankruptcy and millions the clothes we wear are made. Therefore let us put a tax on of whom are in the greatest distress that they have ever known. these transactions that at least will give the farmer a chance Again the President is on the verge of vetoing the McNaryunder the economic conditions, as bad as they are, to get what Haugen agricultural bill. And what is the basis of this asserthe world's price is, and not have it destroyed by a lot of tion? The Wall Street Journal, which for a long time has gamblers in New York and Chicago and New Orleans.
played the part of a rhinoceros bird to the President, and which Mr. SMOOT. Mr. President, has the Senator finished? habitually not only warns him of every approaching danger
Mr. CARAWAY. Yes; except that I am going to move to but gratuitously and sometimes obstrusively tells him how to increase the rate to 10 cents.
avert it, says in a front-page article carried in last Monday's Mr. SMOOT. Mr. President, the only reason why the rate in issue, “Why should he sign?" the past has not been increased is the fact that if we put the
Congress has done the expected thing and passed the Haugen bill rate too high all of the dealing will be done in Canada or
for * farm relief." England through telegraphic communication from the offices bill passed by the Senate, the two measures must go to conference.
As in some details it differs from the McNary in New York. Mr. CARAWAY. Mr. President, let me ask the Senator a
When the revamped bill finally gets to the President a veto is exquestion: There is a good deal of gambling in Monte Carlo be pected. Political wailing may follow such action by the Executive, cause we have not got a public gambling place here in the Dis
but what else could be expected of a President who is not afraid to trict of Columbia. If it is a good idea to keep your gambling do his duty? What other course is there for him to take ? at home, why do you not introduce a bill to open a public The Wall Street Journal is the duly chosen and profusely gambling place here, so that people will not have to go to anointed journalistic apostle of big business. If it has ever Monte Carlo to gamble? The Senator says that if we do not favored anything that the common people wanted, or ever oplet the people gamble at home they will gamble in Canada. posed anything that the favor-hunting privilege-seeking few
Mr. SMOOT. That is quite true, Mr. President. I think the have demanded, that fact has escaped my attention. But, in sales will be made there.
spite of the journal's zeal to serve only those whose incomes Mr. CARAWAY. That is not the belief of the people who are in the “highest brackets,” it must, as a matter of simple gamble in these products, Mr. President.
justice, be admitted that it is the greatest financial publication Mr. HARRISON. Yes ; for future delivery in October. Street's turbulent financial tide, and the predictor of the price Mr. CARAWAY. That is altogether different from selling movement of stocks and bonds, and President Coolidge's actions, | futures. if any, the Wall Street Journal is without a peer.
Mr. HARRISON. On that sale he had to pay a tax of 1 cent In the circumstances, I hazard my reputation as a political for every $100 of valuation on that particular crop. I suppose prophet upon the prediction which I now make, that within they do that with wheat, with corn, and with every other a few days the Senate will receive a veto message that will product. I suppose that, without question, in the cotton-manuprove that the article which I have read from the Wall Street facturing States, such as South Carolina and Georgia and Journal is but the record of a stern master's imperious voice, North Carolina any number of the cotton mills buy for future and that the President has unhesitatingly obeyed it.
delivery. I imagine that the millers buy for future delivery As to the poverty-stricken farmers of the Nation, may a their wheat and corn and so on. That is an entirely legitimate benign Providence have mercy on their souls !
proposition. There is no question but that on the New York TAX REDUCTION
Cotton Exchange and on the boards of trade there is a certain The Senate, as in Committee of the whole, resumed the con- it may be a very large per cent. The way to stop that is not
percentage of the transactions which are gambling transactions; sideration of the bill (H. R. 1) to reduce and equalize taxa - by imposing a tax of 1 cent or 10 per cent a hundred of valuation, provide revenue, and for other purposes.
tion but by legislating them out of business, and I understand Mr. BRATTON. Mr. President, I ask unanimous consent for the immediate consideration of a bill which I think will lead end, the committee has reported it, and it is on the calendar.
the Senator from Arkansas has offered a bill looking to that to no debate whatever.
I submit that in these legitimate transfers this war nuisance Mr. SMOOT. I hope the Senator will not do that. We have
tax ought to be abolished. It is a troublesome proposition. It had about 15 minutes to-day devoted to the consideration of the
does not do any good, and it is merely a burden upon trade and revenue bill. Let us proceed with it.
commerce. Mr. BRATTON. This will lead to no debate. Mr. SMOOT. I do not know whether it will or not.
It was upon that theory that the House acted. The action
was unanimous over there. There was not even a division on Mr. BRATTON. If it does, I will withdraw the request. Mr. SMOOT. I do not know what the bill is.
eliminating this tax on these exchanges. So the Democrats of
the Finance Committee felt that the provision ought to be reMr. BRATTON. I can tell the Senator in a moment.
tained in the law. Mr. SMOOT. I wish the Senator would let us go on for a
Mr. CARAWAY. Mr. President, just a moment. I do not little while to-day with the bill. It can be taken up in the morning at some time.
care to get into a discussion, but the difference between the Mr. BRATTON. I think we are taking more time than it
man who sells a product which he himself expects to have for will take to pass the bill if the Senator will withdraw his delivery and the man who sells it who does not have it and objection.
never expects to have it to somebody who never will receive it Mr. SMOOT. Let it go over to-night. Let us go on with
and never expects to receive it, is perfectly plain. There is the
most conclusive answer that we do not need the exchange. the bill. Mr. BRATTON. Does the Senator object to it?
There never was a future market for staple cotton in the hisMr. SMOOT. Yes; to-night.
tory of the world. They never sold a bale on the future market, Mr. HARRISON. Mr. President, the pending amendment re
and never will. That shows it is not necessary to have a future lates to the tax of 1 cent per $100 in value of merchandise that market to sell that product. The woolgrowers of America is dealt in on produce exchanges. In 1917, I believe, Congress were in bankruptcy until they got rid of the wool exchange. put a tax of 2 cents upon every hundred dollars' worth- cf value The hay producers got rid of the hay exchange, and when the dealt in on exchanges and boards of trade. That was reduced
German farmer once found himself in economic control of the to 1 cent some time later, in the act of 1924, I think. Of
German Empire he abolished the Berlin exchange, which was course, it was a war tax. There had been no such tax prior to the greatest grain market in the world. Before the war in that time.
Germany, as any of the Senators who have been there will I do not care to get into a discussion of whether or not recall, instead of cursing Wall Street, when somebody wanted the exchanges should be abolished. I do not think this has
to “cuss out" something he picked on the farmers, because anything to do with that particular controversy. There can be they were in control of the industry of the empire as was no no doubt that a lot of these gamblers speculating on the cotton other single class. When the farmer was in control and could exchange and on the grain exchanges have manipulated the
make his will felt, he abolished the Berlin exchange, which was price; but this goes deeper than that.
the greatest grain market ever established on earth. It was The Congress has recognized these exchanges. We have reestablished because the industrialists and speculators got conpassed laws to regulate these exchanges. There are a lot of
trol in Germany. people who deal upon these exchanges in a purely legitimate
Mr. MAYFIELD. Mr. President, will the Senator yield?
Mr. CARAWAY. I yield. way. I read from the testimony before the House committee of a Mr. Sturtevant, of Omaha, Nebr., in which Mr. Sturtevant
Mr. MAYFIELD. It is true that the Senator's bill, which discusses this proposition as it affects grain. He says:
would prohibit gambling in the prices of farm products, has
been reported favorably by the Comunittee on Agriculture and I also represent the Omaha Grain Exchange, at Omaha, Nebr., a
Forestry to the Senate, and is now upon the Senate Calendar, corporation which maintains in the city of Omaha a market place but we are so near the close of this session of the Congress that where its members engage in the merchandising of grain. That is a
it is very doubtful whether we will be able to enact that bill similar organization to the Chicago Board of Trade, except that we do
into law, even should it pass the Senate. That is very true, is not deal in futures, as defined by Congress in the grain futures act. I
So very often they deal on these exchanges and boards of Mr. MAYFIELD. This tax bill has passed the House, and is
to stand and take a position for the farmers of our country, Mr. CARAWAY. Mr. President, is he a staple grower? who feed and clothe the people of the country. Have we not Mr. HARRISON. He is a staple grower.
an opportunity right now by the adoption of this amendment Mr. CARAWAY. This exchange does not deal in staple cotton to render them the greatest service that we could possibly at all.
render? Mr. HARRISON. There is some staple cotton and some short Mr. HARRISON. Mr. President, may I say, if the Senator staple also.
from Arkansas will yield, that the chairman of the Ways and Mr. CARAWAY. You know what he is doing. That is not Means Committee of the Ilouse, in presenting the matter, said affected by this. He is selling to mills or to merchants for he wanted to take this tax off in the interest of the producers future delivery.
of the country.
Mr. CARAWAY. I say to the Senator from Mississippi that one who has a very keen sense of the value of his own money when Mr. Gates, who at that time was the president of the and not much regard for other people's. Grain Exchange and Board of Trade in Chicago, came before Mr. HARRISON. As I understand the Senator, then, he the committee his whole concern was to save the exchange for does not think there are any legitimate transfers on the board the farmer. I sat in the committee and heard all those men of trade or on these exchanges at all? testify, until I could tell what they were going to say before
Mr. CARAWAY. I think there may be some, but they are so they opened their mouths. They just wanted to maintain these overwhelmingly overshadowed by the economic crime that the gambling marts for the farmer.
exchanges ought not to be permitted to exist. The Senator a I do not know a man who gambles on the exchange any moment ago referred to 50 per cent of the exchanges where who does not want to keep it up. I do not know a farmer Mr. HARRISON. That was a guess. whose sole business is farming anywhere who does not want to Mr. CARAWAY. It was such a wild guess, that I hope the destroy it. That is the difference.
Senator will pardon me for what I am about to say. If we put this in this bill, inasmuch as the people who are Mr. HARRISON. I based that upon the statement of one going to get the benefit of this tax reduction are people who are of the men connected with the board of trade. I asked him the not farmers, they will possibly push it through, but every question, and that is what he said. I never knew him to tell blessed one of them would be against it if you put it in an in-an untruth, so I can not say that it is incorrect. dependent measure. For once we have a chance to tie up their Mr. CARAWAY. If the Senator will just look at the amount desire to escape paying taxes with a righteous effort to get rid of gambling in one day, he will get an idea. I have been told, of an incubus that has sat upon the agricultural interests and I have seen the figures, that in one day on the Chicago Board since the Civil War.
of Trade they have sold more wheat than has been grown in One of the most prominent of the gamblers in farm products America during the year. They have sold more cotton on the on the Chicago exchange after a long period of study picked exchanges in New Orleans and New York in a week than Amerout his occupation as farming. His only farming interest was ica ever produced in any year of its history. If they sell a bale cornering the market
, beating down the producer on the one more than there is in existence, it is not a legitimate trade. is hand and pilfering from the men and women who eat bread. it? Therefore, instead of about 50 per cent of them being wild, The activities of such people are gambling activities, and noth- it would be safe to say that nine hundred and ninety-nine out ing more. The courts have so decided. The Supreme Court of every thousand deals are pure gambling. I am conscious of of Georgia not a great while ago said these things were the fact that some people think gambling is not a crime, although gambling. Every time the question has been before courts, the strange thing about it is that every State in the United States they have said it is nothing but gambling. If you would not makes it a crime. There was one of the Western States that had want to set up a gambling concern here under the roof of the a gambling proposition connected with it; I recall the name of it, Capitol, where people have to gamble only in their own wealth, but I do not care to mention it; but a few years ago they shut it are you willing to maintain gambling marts where people gamble out. There is not a legalized gambling place, except the exin the products of other people? There is all there is in it.
changes, in any State in the United States. There is not a MemMr. HARRISON. Mr. President, I regret to see this partic-ber of either House who would stand up and vote for public ular proposition confused with the matter presented by the gambling; yet how infinitely less hurtful it is if a man gambles Senator from Arkansas.
with his own money, and does not affect anybody else's welfare Mr. CARAWAY. It is involved in it.
but his own, in comparison with gambling with the very life of Mr. HARRISON. I was just going to answer that sugges- people who produce the things we eat and wear. We all undertion. The Senator has a bill which, I understand, would pre stand it. There will be no mistake. . We will know what we are vent short selling on the exchange. It would prevent legitimate voting for. selling on the exchange, as I understand it.
Mr. HEFLIN. Mr. President, the Senator from Arkansas, Mr. CARAWAY. That word “legitimate"
speaking about the number of bales one is required to buy in Mr. HARRISON. There are some people who sell legitimately order to get in on the exchange at all-100-bale lots. It has on the exchange. I thought everybody admitted that.
been suggested that the exchange should be used and could be Mr CARAWAY. No; everybody does not admit it.
used to protect the producer. Mr. HARRISON. As much as I respect the judgment and I am a member of the subcommittee of the Committee on ability of the Senator from Arkansas, I say that there are a Agriculture and Forestry which is investigating the cotton great many people of ability in the country, and fine people, exchanges and the conduct of the Agricultural Department in who believe the exchanges are necessary.
connection with the market manipulation last year. I asked Mr. CARAWAY. Why not extend it to staple cotton, then? the exchange president and the ex-president why, if the ex
Mr. HARRISON. Because the price of long-staple cotton is change could be used to protect the farmer, they did not permit influenced by the price of short-staple cotton. I think that is them to deal in 10-bale lots. They said that would not do; conceded generally. If we imposed a tax of 10 cents on every that it would resolve itself into a bucket-shop arrangement. hundred dollar's worth of value that would not stop the gam- The average production of cotton by the farmer is about 8 bling feature. That would only be 50 cents for a bale of cotton. or 9 bales. So, if the farmer has to buy a hundred bales in a But that would not stop the fellow who wanted to indulge in lot, he can not begin to go into the market when he is making gambling. If you really want to stop trading in these products only 10 bales. He has to put up between a thousand and twelve by taxation, the tax ought to be more than 10 cents for every hundred dollars to get in on a 100-bale lot transaction. Therehundred dollars of valuation.
fore he is shut out. It is prohibitive, so far as he is concerned. Mr. CARAWAY. If I remember correctly, the brokerage is I think if the exchanges are going to be permitted in this $12.50 on a thousand, and that is 100 bales of cotton. If the tax country, farmers who can furnish the margin for 10 bales were 50 cents a bale, we would get $50, so that the tax would be ought to be allowed to come in and deal. If you will not let four times as much as they would make on their gambling. him get any, he is not protected at all, but he is in this pre
Mr. HARRISON. I do not think it would stop the fellow who dicament. He does not desire to sell cotton, because the price wanted to indulge in gambling.
is not adequate, is not profitable. He says, “I will refuse to Mr. CARAWAY. He would lose 75 cents.
put my cotton on the market.” The exchange man says, “We Mr. HARRISON. This was never intended, as I understand will see whether you do or not." He goes upon the exchange it, to operate as a prohibition against gambling at all. If we and sells cotton in 100-bale lots. It is not really cotton. He concede that 50 per cent of the transactions of the Board of sells only the name of cotton. He does not deliver cotton. Trade of Chicago and of the many exchanges in the country are The spinner does not get his cotton through the exchange. gambling transactions, we would be imposing a burden on people While the farmer is retiring to his home with his actual cotwho were legitimately buying and selling on the exchanges. It ton to keep it off the market, here is a fictitious market dealseems to me that since it was never intended to be a prohibition i ing in fictitious cotton, and it governs the price of the actual or a penalty, merely a tax, small as it is, of 1 cent on a hundred cotton. While the farmer is holding his actual cotton for a dollars, it is just a troublesome, cumbersome proposition. If price that will yield profits, the exchange is clubbing him over the Senator wants to get at the proposition by closing up the the head and using fictitious cotton in unlimited quantities to exchanges, he ought to make the tax in such an amount that it beat down the price of the actual cotton. would really render some service along that line.
What happens next day? The New York quotation, as fixed Mr. CARAWAY. I think the Senator will agree that $12.50 by these transactions, is wired to my town in Alabama and all is the brokerage on 100 bales of cotton. That is $1,000. The over the South. “ Cotton was 1742 or 18 cents yesterday. It gambler must buy on the exchanges in 100-bale lots. That is broke to 17 cents." The farmer who sells his cotton in the $1,000. The brokerage is $12.50. This would yield $50, and I market place in my town gets that figure. Suppose we regudo not much believe that even a gambler would care about | lated the exchanges so that every time a man sold a hundred losing the difference between $12.50 that he received and $50 bales of something he would have to go to the farmer and get tax he would pay. My idea of a gambling man is that he is 100 bales of the actual stuff and deliver to that person; then the exchange would be a legitimate institution. But now they times. He is a very able man. He has been president of the deal in this fictitivus stuff. It has the same relation to cotton New York Cotton Exchange. He said this thing was happenthat a mock orange has to a juicy orange that is produced in ing over there. He said that the presence of this character Florida. They call it cotton, but it is not cotton. They do not of cotton was a dead weight on the market. have to have cotton at all to deal in it. They sell in the Something ought to be done to relieve the cotton farmer of United States probably 100,000,000 bales of cotton a year where this embarrassing situation. The grain grower ought to be we are producing 12,500,000 bales.
relieved, too. I have nearly reached the point where I would Senators, there is a weak place in this business. The same vote to abolish the exchange outright. I have said here before, thing applies to grain. Grain growers may organize. They and the proposition can not be answered, that when we deal in may start a holding movement through the grain-growing sec- real estate if we sell a lot we deed that lot to whoever buys it. tion and agree not to sell wheat for less than $1.50 and corn He sells it and he deeds it. The man who buys it sells it and for $1 or $1.25. As they sit back holding their grain off the deeds it. It may be sold one hundred times in a month, but there market, what are they confronted with? The stock exchange is always a lot back of the transaction, and only one lot. If that right in front of them is hammering the market to death, and man would undertake to sell 100 lots when he did not have yet it has not got a bushel of grain to deliver. The dealers more than one, he would be guilty of obtaining money under on the exchange have a supply they keep on hand so they can false pretenses and they would put him in the penitentiary. go through the motion of having tendered something. No- But the same man may go upon the exchanges and sell 100,000,body accepts it, but it is poured back in the jug and the next 000 bales of cotton, damaging the property of the farmer that day it is poured out again and then poured back again. They he is holding for the market, and not be guilty of any crime at are using the power furnished on the exchange to fluctuate and all. The man does not have any cotton at all; he does not own fix the prices, and the farmer becomes demoralized. The mer- any cotton at all; but is selling cotton that is not in existence. chant he deals with tells him he believes he had better go to It is an outrage. The practice ought to be outlawed. selling. The banker tells him there is no telling what is going The woolgrowers do not have to go on an exchange and to happen, that the price is breaking and going lower. What fare better than the cotton producer. How do they dispose of price? It is a fictitious price brought about by a gambling their supply of wool? They get together and organize. They process allowed in the United States. That is what happens say, “It costs us so much to produce it. We ought to have to the cotton farmer and the grain grower under this law. this price." The producer is using his power to help fix the Some drastic legislation has got to be had.
price and he ought to do so. It is a God-given right. The Before you can speculate in Pennsylvania Railroad stock buyer meets with the producer and he talks about how much you have to get them to list it, agree to it, and then you can he can afford to pay. He has the mill, and the woolgrower take it on the exchange. Before you can speculate in motor can not spin the wool into cloth. The wool spinner is the stock or automobile stock you have to get the concerns that only one who can do that, and he can not spin anything unless manufacture them and who hold the stock to give their con- the woolgrower will furnish the wool. sent so you can go upon the exchange and deal in it. Why
The woolgrower wants to sell his supply, the wool manufacnot require them to consult the farmers of the West and of the turer has to have it, and so they get together, with no exchange South and get their consent before they are permitted to gamble confusing the situation and misleading them and causing fluctuin their cotton or grain? That is something for us to think ation of prices. They come together on a business basis, each about.
one of them possessing some price-fixing power, and they reach It has been developed in the hearings that with the accumu- the point where their minds come together, the deal is closed, lation of 200,000 bales of cotton in New York out of a crop of the producer gets a profit and the spinner is satisfied with what 12,000,000 to 15,000,000 bales, they could control the price and he has to pay. break it to pieces. We have some counties in the Cotton Belt Mr. SMOOT. Mr. President, will the Senator yield? that will produce 200,000 bales. I think there are one or two Mr. HEFLIN. In a moment. big counties in Texas perhaps that do it. But they accumulate
Mr. SMOOT. The Senator is mistaken about wool. that much cotton in New York and keep it there. The testi- Mr. HEFLIN. I want to reach the point where the producer mony is that it would have an effect on the market. The testi- has got to be consulted. He is not now consulted at all. The mony showed that Mr. Clayton and his company shipped producer may hold every bale of cotton off the market that he cotton up there and shipped it at a loss, because the difference has and yet they sell millions and hundreds of millions of fietiin 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 which the producer is holding for a better price. It is an out
tious cotton on the market and fix the price of the actual cotton on the market but it controlled the market. Various witnesses
rageous thing and a scandal that it is done. testified that its presence there helped to beat the prices down Mr. MAYFIELD. Mr. President, will the Senator yield to and hold them down.
me? Mr. CARAWAY. Mr. President, will the Senator yield?
Mr. HEFLIN. I yield to the Senator from Texas.
Mr. MAYFIELD. I call the attention of the Senator from As I recall, they have paid in interest, Alabama to the fact that when the wool manufacturer purfreight, and other charges about $9,000,000 to maintain their chases wool enough to run him for a year or to meet his needs cotton there. Is not that the price? Mr. HEFLIN. It was some tremendous amount.
and demands, he has no exchange into which he can go and
hedge. Mr. CARAWAY. And yet the only use they have for it is to break the market whenever it rises.
Mr. SMOOT. There is no exchange that handles wool. Mr. HEFLIN. Not only that, but the law provides that a
Mr. MAYFIELD. That is the point I am making, and the man can not tender any cotton on a contract unless it is manufacturer does not have to hedge his purchases. seven-eighths-inch long staple. We have had this cotton re
Mr. SMOOT. Certainly he does. The Senator does not know sampled in New York. There are hundreds of bales that are
the wool business. Does he think the woolen manufacturer not tenderable and the spinners do not want it. What happens? is going to cost him? He would be broke
if he did. He could
can go to work and sell goods unless he knows what his wool This is dog-tail cotton, as we call it. When a man buys a
not do it. contract, delivery day approaches and they say to the seller, " What are you going to do for me?” “I am going to tender Mr. MAYFIELD. How does he do it? you some cotton out of that supply." The testimony showed Mr. SMOOT. He buys his wool. that that supply was low-grade cotton and not up to the re
Mr. HEFLIN. IIe buys the actual wool. quirements of the law. Therefore it was not permissible to
Mr. SMOOT. Absolutely. tender it under the law, but they were tendering it anyway.
Mr. HIEFLIN. And he stores it away. Some Government official had certified it as being proper and
Mr. SMOOT. That is what I said. right and eligible to be tendered.
Mr. HEFLIN. That is what I want the cotton factors to The buyer said when he was told that, as shown by the get together with the farmers and do, to buy the cotton and testimony, "No; I do not want it. I will settle the difference store it and have it. with money." What occurred? Clayton & Co. kept it. If you Mr. SMOOT. The wool manufacturer to-day may want three bought a contract the next day, they offered it to you, but you or four grades of wool. Nobody can say that a certain clip of would not take it. You settled the difference in money. They wool will shrink 662 per cent, another will shrink 65 per cent, kept that supply in New York for nearly two years. It never a third 45 per cent, and still another 30 per cent. That can not reached the spinner, but it was accumulated in the market place be determined. Cotton is not that way. Cotton has no shrinkand used as a crop to beat down the price. Expert cotton men age at all. Wool has the shrinkage and it has the grade as testified to that. The ex-president of the cotton exchange tes- well. There are seven grades of wool. tified to it. He has been before our committee a number of Mr. CARAWAY. There are more grades of cotton than that.