unlawful combinations to obstruct interstate and foreign commerce, which might be proceeded against by injunction, in the proper district or circuit court of the United States, at the suit of the General Government, brought by the district attorney or the Attorney-General, or by any private party on relation of the United States, whenever there was reasonable ground to suspect a violation of the statute on the part of any such exchange, board, or other association; and when such suit was brought at the instance of a private party and was successful, the court should adjudge to the relator full costs and attorneys' fees, together with reasonable compensation for his time spent and expenses incurred in and about such suit.

Section 6 was as follows:

"That any person who shall in the United States by letter or telegram or other communication sent from the United States to any foreign country, or by any agent resident in a foreign country enter into any contract herein before described as 'options' or 'futures,' or who shall do any other act aiding and encouraging the making of such contract in any foreign country, or shall in the United States perform any such contract or pay any damages for nonperformance or do any act in part performance of such contract or in part satisfaction of such damages shall be deemed guilty of a misdemeanor, and be triable and punishable as provided for in section 4 of this act."

Section 7 declared that any "options" or "futures" contract made outside of the jurisdiction of the United States should be held utterly null and void when attempted to be enforced in any court of the United States.

Section 8 was as follows:

66

That when any money or other valuable thing has been paid or delivered on any contract herein prohibited, or in satisfaction of any damages or any part of the damages claimed from a breach of any such contract, the title to such money or other valuable thing shall be held as not having been passed by such delivery or payment, and the same may be recovered back in the proper district or circuit court of the United States at the suit of the party making such delivery or payment, or by his legal representatives if he be dead, and shall be subject to his creditors as his other property; and there shall be no defense against any such proceedings by a creditor to subject said money or property to his debt, arising out of any transaction between the parties to such payment or delivery, except the actual and bona fide return of the money paid or thing delivered before such proceedings had been commenced."

The title of the bill was amended so as to read: "An act to encourage and promote commerce among the States and with foreign nations, and to remove obstructions thereto."

The debate on this substitute was carried on with great vigor for many days. It was ably championed by its author and other Senators who, while they favored legislation suppressing dealings in "options" and "futures," opposed the original bill on constitutional grounds, as being an unwarranted and unauthorized exercise of the taxing power. The arguments used against it were substantially those that were used against the original bill. It was attacked with great ability and learning as unconstitutional, and was declared to be without principle or precedent in its favor.

A digest of the debate on this substitute will be found in its proper place in the digest of the whole debate in Appendix "B."

Mr. Vilas offered an amendment to the fourth section of the George substitute, striking out the first part of the section which declared "options" and "futures" obstructions to interstate and foreign commerce and to be illegal and void, his contention being that the judicial department of the Government, and not Congress, was the proper tribunal to determine what are obstructions to and restraints upon interstate and foreign commerce. The proposed amendment, however, was rejected by a large majority; and afterwards the George substitute met with a similar fate.

The bill as passed by the Senate amended the bill as it came from the House in thirty-four particulars, the amendments not hereinbefore discussed being only of minor importance and mostly of a clerical nature.

As before stated, the bill as amended passed the Senate on the 31st of January, 1893. It came back to the House on the 2d of February, and the next day was referred to the Committee on Agriculture. That committee, through its chairman, on the following day reported it back favorably, and it was referred to the Union Calendar and ordered to be printed.

Nothing further was done in the matter until March 1. On that day a strenuous effort was made to pass the bill as amended under a suspension of the rules, but after a bitter and acrimonious debate of thirty minutes, fifteen to a side, in which eight members soke against the bill and three for it, the motion was lost by the

vote of 172 yeas to 124 nays, 33 not voting, two-thirds not having voted in the affirmative.

Thus ended the efforts of the Fifty-second Congress to enact legislation to suppress "fictitious dealing in agricultural products. As will be observed from an analysis of the votes, a majority of both Houses favored legislation on the lines of the Hatch bill, and but for the fact that those having the bill in charge in the House were apparently never able to secure consideration of the measure except on a motion to suspend the rules, the proposed legislation would certainly have been enacted.

Bills on the same lines were introduced in the Fifty-third Congress, but nothing serious seems to have been attempted toward enacting them into law.

In the meantime, however, the Committee on Agriculture and Forestry of the Senate, composed of Senators George, Bate, Ransom, Peffer, Roach, Washburn, Proctor, and Hansbrough, acting under a resolution of the Senate dated April 19, 1892, made a further investigation of the question of "futures," especially in respect of cotton. This resolution, among other things, provided as follows: "Resolved, That the Committee on Agriculture and Forestry be, and they are hereby, authorized and directed to ascertain in every practical way, and report from time to time to the Senate, the present condition of Agriculture in the United States and the present prices of agricultural products, and if there be any of which the prices are depressed, then the causes of such depression and the remedies therefor."

A subcommittee composed of the chairman and Sentor Bate visited the cities of St. Louis, Memphis, and New Orleans, and took a large amount of testimony both for and against "the present methods of dealing in cotton for future delivery, and their effect upon prices.' The hearings began at St. Louis, November 8, 1893, and ended at New Orleans on the 27th of the same month; and the testimony taken appears to cover every branch of the cotton industry. A digest of this testimony will be found in Appendix C.

The committee also sent out two circular letters to a number of prominent cotton growers throughout the Southern States; another to a number of leading cotton merchants in the South; and another to some of the leading cotton manufacturers of the country, especially in New England-all seeking information on the general lines of the resolution which authorized the investigation. Many replies were received to all these letters, most of which were afterwards printed along with the testimony taken, the final report of the committee, and the report of the secretary of the committee. Mr. A. B. Shepperson, a cotton expert. The printed report is numbered 986 of the Senate, Fifty-third Congress, third session. Part 1 is a large octavo volume of over 500 pages, and is perhaps the most useful report on the subject that was ever made by Congress. It will subserve no useful purpose to digest or analyze the various replies to the letters received to the several circular letters above referred to. No facts or suggestions were obtained that had not already been embraced in the testimony of the many witnesses who had appeared before the subcommittee, and it is not deemed necessary to encumber the record with repetitions.

It will be observed that my report embraces several matters not covered by the specific resolution of your honorable body, under which I was originally appointed. But believing as I do that these additional matters are essential to a full and fair understanding of the general subject of "Fictitious dealings in agricultural products," I have taken the liberty to enlarge upon the work mapped out by the general terms of that resolution, and have done that extra work because I conceived it to be for the best interests of the Industrial Commission in the matter under consideration.

All of which is respectfully submitted.

APPENDIX A.

HARVEY M. FRIEND.

DIGEST OF TESTIMONY TAKEN BY THE COMMITTEE ON AGRICULTURE OF THE HOUSE OF REPRESENTATIVES OF THE FIFTY-SECOND CONGRESS ON THE SUBJECT OF FICTITIOUS DEALING IN AGRICULTURAL PRODUCTS.

[Mr. C. WOOD DAVIS, of Kansas, a farmer and a representative of the Board of Trade of Wichita, in that State.]

Citing statistics, he said that from 1870 to 1884 the food-producing area of the world increased more rapidly than did the population of the bread-eating countries, and since that time the reverse was true; that in 1870, each unit of the breadeating population of the world had for his consumption the product of 0.427 of an

acre of wheat, and the average gold price of that cereal in England at that time was $1.70 per bushel; that in 1880 the product of 0.443 of an acre was the quota of wheat for each bread-eating unit, and the price of wheat had declined to $1.33 per bushel, it naturally appearing therefrom that increased production had caused the decline in the price; but that since 1880, the quota of wheat for such unit was only 0.398 of an acre, while the price, which, on the theory of increased production causing a decline, would logically have gone up, had, as a matter of fact, continued to decline; that as respects both wheat and rye the world has relatively to its bread-eating population 13 per cent less than in 1870; the prices of both of those cereals had gone down; and he maintained, therefore, that the causes of agricultural depression could not be attributed to excess of production. He said transportation rates had been directly in favor of the farmer; and passing by the questions of tariff and finance, to neither of which he attributed the general fall in prices, he contended that such depression had been caused almost wholly by fictitious dealings on the boards of trade, that system of trading having grown up about the time of the beginning of the general depression in prices. By the system of short-selling more money is tied up in margins than would pay for the entire visible and invisible supply of the cereals dealt in. thus withdrawing that money out of the legitimate channels of trade.

The entire sum employed in moving the grain crops, exclusive of that used by railroads, is not believed to be over $500,000,000, while the amount invested by the producer is on an average for the whole year twice that amount. The volume of production, relative to population, is less than formerly, as shown by statistics; hence these methods are not necessary to the proper distribution of products. He maintained that all articles of commerce grown upon the farm which were not dealt in on the boards of trade were easily marketed, which demonstrated the fallacy of the contention that board-of-trade dealings were necessary to properly distribute the products dealt in. He called attention to the great disparity between the actual amount of production of the cereals and the amount sold on the American exchanges, such sales aggregating practically ten times the amount of production of the whole world, and asserted that these figures demonstrated that by far the greater portions of such sales were purely fictitious, and were in fact mere gaming transactions. He referred to a maxim in trade that a deficit of 10 or 15 per cent in any indispensable product will increase the price 100 to 300 per cent, and that a small excess of production will greatly depreciate it; and said that the excessive offerings on the exchanges of illimitable quantities of products would have the same effect on prices as an excess of production.

Says prices of grain are not made in Liverpool, but in Chicago, and the market there is generally controlled by the "short seller," whose interest it is to depress prices, quoting newspaper articles in support of his statement. In such sales very few deliveries are made or are even contemplated. The farmer has nothing to do with fixing the prices of his products, and is materially injured by the competition of the fictitious dealer who has practically little invested, comparatively speaking. Believes any of the bills introduced in the House, if enacted into law, would stop such dealings. The sales of futures are the predominant, potent, and controlling factors in depressing prices. Says the world is producing less wheat than it

consumes.

Replying to the argument that every seller presupposes a buyer, he said that there were many more times the amount of grain sold than were offered for sale, and that the offerings regulated the price, and the offerings of fictitious products might be illimitable. The principal ones favoring these transactions are the brokers and commission merchants, who make large sums simply as commissions. Since 1884 the ratio of consumption of breadstuffs of the world has increased over their production, and since that time the reserve of such products which had then accumulated has been drawn upon for consumption.

[H. H. ALDRICH, representing the Chicago Board of Trade, a trader of more than twenty years' experience.]

Chicago Board of Trade favors the bill so far as it relates to "options," as defined in its first section. Such dealings are illegal, and are not recognized by the board. They are contrary to the laws of the State, and the board has spent several thousand dollars in trying to have the law enforced.

The system of futures has come as an evolution to facilitate business, just as the clearing-house for the banks came; and the boards of trade and chambers of commerce are clearing-houses for this business.

States that the offers to buy are equal almost any day to the offers to sell, and believes that a decline in prices comes as a rule only when it is legitimate, when the supply is greater than the demand. Does not think, in the long run, short selling has any effect on the market; it may affect it at times, but only temporarily, just as buying would temporarily advance prices, but eventually the law of

supply and demand will adjust prices. Believes if the bill should pass it would be most disastrous to the farmers.

Called attention to the fact that by the census of 1880 the agriculturists numbered 47 per cent of the population of the country, and that since that time they had decreased to 45 per cent, and said that if the bill would have the effect claimed for it, it would be detrimental to the consumers, who comprise 55 per cent of the population. Said that the farmer's product was the foundation of wealth and prosperity, but maintained the producer could not be prosperous unless the consumer was also prosperous. Said labor organizations of the country had favored legislation of this sort, urging as a reason for the same that the existence of the boards of trade and produce exchanges caused higher prices for food products. "If the farmer is to be the distributor of his products he must be a capitalist." Denies the statement made by Mr. Davis that more money was tied up in margins than was required to move the crop, and said not over $5,000,000 were up in margins in Chicago, and it requires $138,000,000 to move the grain crops. Futures system not new, and was not a new system 20 years before, but then not on so large a scale. A large part of the grain that comes to Chicago is sold without going through the elevator; sold by sample, saving expenses and charges for rehandling.

Prosperity of the country depends upon the farmer securing a profit on what he raises. Seven hundred thousand bushels actual grain upon the Chicago market daily. Futures much larger. No sales of grain on board of trade recorded. Never knew of that matter having been discussed by the board. Every contract for future delivery is represented by a written contract, whose terms must be complied with. No contract as to "options," which the board will enforce, such trading being simply gambling transactions, and not carried on in the board, but in the corridors or in the street-hence called curb trading.

The actual supply and demand regulate the value of farm products. In futures the same quantity of grain may be actually sold many times over in the same day, which will account for the large sales reported. A party with large capital can, by putting up enough money, temporarily advance or depress the price of wheat, but in the end it will regulate itself. If a large number of "puts" should be sold on any day after the close of business on the exchange it might raise the price the next day somewhat, and "calls" might depress it.

[A. J. SAWYER, Minneapolis, a dealer in wheat.]

Explains the mode of moving the wheat crop of the Northwest. The Northwest produces 150,000,000 bushels of spring wheat, the bulk of which has to be handled in 3 or 4 months. He furnishes money for at least 175 country elevators in Minnesota and the two Dakotas. Sends out $500 to $1,000 to each elevator, making the first day $100,000 to $150,000. Wheat is threshed from the shock and is delivered at the elevators at once for cash to the producer, and as it takes sometimes several days to get the wheat to a realizing market, elevators often have 5 or 6 days' receipts on hand at once. Grain can not be sold to foreign consumers as rapidly as it is delivered at the elevators, and future sales thus become necessary, otherwise the elevators would have to close down. Futures contracts are used by elevatormen for insurance purposes. Farmer gets an elevator receipt when he puts his wheat in the elevator, in case he does not then desire to sell it, and he can always borrow 90,per cent of the value of the wheat on that receipt. Thinks illegitimate trading in wheat should be suppressed. In country elevators the charges are 2 cents a bushel, including insurance for 20 days, and one-half cent every 15 days; 5 cents carries it 6 months, and another 5 cents carries it another 6 months. In terminal elevators the first cost is 74 cents for the first 15 days, without insurance, then one-half cent for every 15 days, without insurance. Elevator receipts are negotiable paper.

Submitted protests against the bill from the Minneapolis Clearing Association, the Minneapolis Union, and the Minneapolis Chamber of Commerce.

[JOHN WHITTAKER, of St. Louis. Merchant for 30 years, senior member of the firm of Francis Whittaker & Sons, packer of beef and hog products at St. Louis and Wichita, Kans. Not largely a wheat dealer.]

Only within the last 8 or 10 years that short sales have seriously affected prices. The main object in selling what one has not got is to depress the market. The short selling of farm products is one of the greatest evils that have befallen the United States. Up to 1884 or 1885, for 5 years wheat sold in Chicago on an average at $1.04 a bushel. In the 5 years after 1885 wheat has averaged in Chicago 81 cents. Only one or two things that would justify that decline in price: overproduction at home or abroad or a large lessening of the consumption by foreign people or our own people. Statistics show no overproduction in wheat, I C-VOL XI-2

and the bread-eating populations of Europe and America have increased; hence, short selling is the evil that has reduced prices. No record of short sales kept in Chicago, but one kept in New York. În January, 1892, wheat receipts in New York amounted to about 3,250,000; exports were 4,250,000 bushels, while short sales amounted to nearly 84,000,000 bushels, and undoubtedly depressed the price of actual wheat. In the past 5 years this country has sold its farm products at $150,000,000 to $200,000,000 per annum less than they would have sold for had it not been for short selling. Speculator has made this sum. Approves the House bill. It will not affect legitimate trade. Short seller is the American anarchist. The men who own wheat ought to control the sale of it, and not the nonowners or sellers of wind wheat. Supply and demand ought alone to regulate prices. If shorts were eliminated from the market prices would advance. Market of futures of actual wheat will not be interfered with by the passage of the bill under consideration; on the contrary, actual buyers would become more numerous.

Fictitious sales of meat products constantly depress the prices of live stock from 5 to 20 per cent. The law of supply and demand operates only when conditions are normal, and the abnormal conditions created by short sales defeat this law. Professional operators always work on the "bear" side. Thinks if there were no "bears" on the New York or New Orleans Cotton Exchanges cotton would not have gone below 8 cents a pound, and that there is no overproduction of cotton. Incorporated into his remarks an editorial from the Minneapolis Tribune and one from the San Francisco Examiner sustaining the views he has expressed.

"We often have letters from Europe saying that they could afford to pay us better prices for the hog product if we would only hold our market steady, but we can not hold our market steady when every Tom, Dick, and Harry is selling his promises to deliver in the future."

News that would send the market up will not work to the same extent that news of a very large crop would work to put it down. Does not think the abolition of short sales would result in the formation of great trusts of packers or grain dealers. Boards of trade appear to be anxious to close out "bucket shops," but they permit the same kind of dealings on their own floors. The buying of the short sales does not have the effect to advance prices or to sustain them. There are more sellers of grain than buyers, and prices are thus depressed because the quantity offered for sale is unlimited. A buyer has got to look out before and prepare to receive wheat when the time for delivery comes around.

"Wash" sales are such as do not contemplate any delivery but are between friends, and are wiped out when the parties meet. Their object is simply to affect the market one way or the other.

Every man who buys on the exchange has the right to demand an actual delivery of the article; and he can, if his capital is sufficient, get control of the market and advance prices, but this seldom occurs. An "option" is a mere bet on what the price of an article will be at a certain time.

[A. J. SAWYER, of Minneapolis, resumed his remarks.]

An "option," which means the privilege to deliver at any time from the first to the last of the month, gives an opportunity of selling cash wheat and buying that privilege back again. Without that privilege we would be compelled to force the cash wheat on the market already supplied, which would force prices down. Can also borrow money on the surplus wheat in the elevators upon elevator receipts. The receipts are attached to notes, and the loans are usually floated in New England through the New York banks, the receipts being regarded as collateral of the best kind. The surplus wheat may be moved to Duluth, under the borrowing contract, a terminal receipt is then obtained which may be exchanged for the first receipt. These transactions enable the grain to be moved. The principal object of options is to insure against a decline in prices. Twenty or 25 years ago the farmer had a tariff on everything exported, which was the premium on gold, and that kept prices up. As the premium on gold decreased prices went down. Labor did not decrease in price as rapidly as did the products of the soil. Consequently the farmer can not make as much on the same capital as he could before. Labor is higher now than it was 20 and 25 years ago.

Wheat is sold at the country elevators for cash. Does not believe that the offering of options lessens the value of the product, because nearly all offerings are made with a limit as to price.

[H. H. ALDRICH, of Chicago.]

Replying to the statement of Mr. Whittaker, that low prices were due to short selling, he quoted from David A. Wells and Edward Atkinson, recognized economic experts, to the effect that overproduction was the principal cause of the