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Prepared under the direction of the Industrial Commission by Harvey M. FRIEND.

To the Industrial Commission:

Pursuant to the resolution of your honorable body, dated June 10, 1899, appointing me an expert agent" to make a digest of certain bills of the Fifty-second Congress, together with amendments adopted and proposed, and certain testimony taken by committees of the House and Senate of that Congress in the matter of ** fictitious dealings in agricultural products,” I have the honor to submit the following report:

The subject matter under consideration had engrossed the attention of the agricultural, milling, and some of the manufacturing and commercial interests of the country for a number of years prior to the assembling of the Fifty-second Congress, but until that Congress no serious attempt had been made to enact general legislation the avowed purpose of which was to suppress such dealings. The continuous decline in the value of farm products generally, and especially

of some of the leading staples, such as wheat, corn, and cotton, during practically the entire period of about 20 years, commencing in the early seventies, had caused great disaster in many quarters, and had given rise to a belief, pretty generally prevailing among the producers of the country, that one of the prime causes of this general depression in the prices of their products was what is commonly known as dealing in "options" and "futures” on the boards of trade of Chicago, New York, and New Orleans, and some other cities where such dealings were carried on to a lesser extent.

It was claimed that, regardless of the law of supply and demand, the prices of all the products of the farm which were dealt in on these boards of trade were fixed absolutely by manipulations in the interest of the speculators and to the detriment of the producers, and that such lowering of the prices of those products had a necessary tendency to depress the prices of all other products of the farm. This line of argument carried one step farther logically led to the conclusion that this same cause was the predominant one in lowering the price of land during the same period.

It was further contended that this practice of fictitious dealing in agricultural products had ruined the market for actual products of the soil by diverting large sums of money from the channels of legitimate trade and business to the baser uses of purely gaming transactions, and it was asserted with much vigor and emphasis that such practices were undermining the morality of the country, were making gamblers out of the men of business, were the fruitful causes of a large majority of the failures in business, embezzlements, and other large financial crimes, and were a serious menace to the State.

Petitions had gone up to the legislatures of the States in which such transactions were carried on praying the enactment of laws to prohibit them, and Illinois, at least, had already passed a pretty stringent statute to that end, which, it was apparent, had had little, if any, effect toward accomplishing the desired result. The subject-matter was believed by the opponents of options" and futures " to be too vast anu too closely interwoven with the general business interests of the whole country for the States in their individual capacity to successfully grapple with it, and the sentiment in certain quarters that these options" and " futures dealings on the boards of trade were fraught with nothing but evil to the producing classes was very strong. Hence, it was, that appeals had begun to come up to Congress for a general statute to suppress those dealings. A bill had been introduced in the Fifty-first Congress by Representative Butterworth, of Ohio, which sought to accomplish this result by the exercise of the taxing power of the General Government, but nothing had come of it.

The question was thus ripe for consideration when the Fifty-second Congress assembled in regular session in December, 1891. Both Houses were at once deluged with petitions and memorials from private citizens, agricultural associations, and many other bodies interested in the subject, including memorials from the legislatures of sonie of the States, the majority of them asking legislation on the lines of the Butterworth bill. The memorials of the boards of trade, chambers of commerce, banking and other kindred commercial interests of the country, were, as a rule, opposed to such legislation.

By the middle of February, 1892, 5 “anti-option " bills had been introduced in the House, and 3 in the Senate. The several House bills were numbered 394, 479, 2699, 3870, and 6012, and were introduced by Messrs. Brosius, Wise, Hatch, Alexander, and Hatch (by request), respectively. All of them sought to suppress “ fictitious dealings in agricultural products" on the boards of trade by taxing them out of existence.

In the Senate Mr. Washburn introduced 2 bills, numbered 685 and 1757, respectively, drawn on substantially the same lines, and Mr. Peffer introduced a bill, No. 1268, which declared such dealings impediments of interstate commerce and felonies punishable by imprisonment in the penitentiary for a period of not less than 2 years or more than 10, the U.S. district courts being given jurisdiction over such offenses.

The House bills were referred to the Committee on Agriculture, which almost immediately began a series of hearings lasting from February 3 until February 16, at which a large amount of testimony was taken both for and against the proposed legislation. The testimony was, of necessity, almost wholly of an expert nature. The witnesses were asked to state their views at length on the general subject and to make suggestions as to whether legislation was necessary in the premises; and if so, to state what, in their opinion, such legislation should be. An abstract or digest of the material portions of that testimony will be found in Appendix A.

At the same time the committee solicited correspondence from persons, associations, organizations, and others interested and conversant with the generai subjectmatter under investigation and received a number of replies, most of which were printed along with the testimony.

The substance of those replies was substantially to the same effect as the testimony taken before the committee, those favoring the bill doing so on practically the same grounds as did those who appeared before the committee, and the same being true in respect of those opposing the proposed measure. It is not deemed essential therefore to make a separate digest thereof.

On the 4th of April, 1892, the cominittee reported a bill (H. R. 7845), as a substitute for the bills formerly introduced. The report of the committee (No. 969, Fifty-second Congress, first session), set out the objects sought to be accomplished by the enactment of this bill into a law, explained in detail the several sections of the bill, and argued strenuously in support of it, quoting liberally from newspapers and other sources that favored legislation of the character proposed.

The title of the new bill was: “A bill defining options' and 'futures,' imposing special taxes on dealers therein, and requiring such dealers and persons engaged in selling certain products to obtain license, and for other purposes.'

The objects sought by the proposed legislation were stated by the committee to be as follows:

* First. To obtain revenue.

“Second. To relieve the producer of the destructive competition to which he is now subjected by the offering, upon the exchanges, of illimitable quantities of fiat or fictitious products by those who do not own and have not acquired the right to the future possession of the articles which they pretend to offer and sell.

• Third. To restore to the law of supply and demand that free action which has been destroyed by the practice of short selling,' which practice has of recent years become the one mode of determining the price of such agricultural staples as can be graded, while the ordinary methods of commerce are found to suffice for those which can not. By the practice of short selling,' now so common upon the

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