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themselves in good company, and thus give their own vocation a respectable standing, and showed that the object and purpose of the bill was not in any manner to interfere with legitimate commerce, but only to wipe out the dealing in futures or “short selling,' a system which he claimed made it possible to juggle with values and practically eliminate from the commercial world the operation of the • law of supply and demand," and which he characterized as “a system of gambling the most unique, insidious, the most pernicious, and bringing with it the most widespread and disastrous results of any scheme of gambling that the wit or skill of man has ever yet been able to devise."
He stated that at least 90 per cent of the business of the boards of trade of the country were transactions in which the property sold was without ownership for future delivery, and without any intention of delivery on the part of either the seller or the buyer, the transactions thus being merely a gamble as to what prices would be in the future, and affirmed that these gambling transactions had for their object the depression of prices. He asserted that in the face of a shortage in the world's production of wheat and rye, with no increase in acreage, and with a large increase in the exportation of these products from this country, prices for the same have constantly depreciated; giving an abundance of statistics and many quotations and comments from newspaper writers and others in support of his statements.
One quotation used by Mr. Washburn from an article by Robert Lindblom, one of the most intelligent and reputable members of the Chicago Board of Trade, is here inserted:
“What stronger argument can be furnished in favor of the Hatch or Washburn bill than the spectacle that few men, having no wheat, can in 1 hour lower the selling price of the wheat crop $24,000,000, when foreign markets were stronger and higher and every legitimate influence pointing to higher prices?
“There are in sight now over 40,000,000 bushels of wheat. The American speculator has bought it all for delivery to him next May. There are over 20,000,000 in .sight in country warehouses, and hedge sales have been made against that in Chicago, so the speculator has to buy that too; and as though that were not enough, the professional short sellers, and the sellers against flour and wheat in foreign countries, have sold at least 50,000,000 bushels of wheat in Chicago, which weigh just as heavy as the sale of actual wheat. In fact, it weighs heavier, for while the seller of May wheat against actual holdings has completed his transaction and has no further interest in it, the pure short-seller has an interest in further depressing the market, and in order to do so he resorts to every iniquity known to the trade.
“Is there in all America one sane man who will assert that it is of advantage to the producer to have the supply artificially increased from 65,000,000 to 115,000,000? Is there really anybody so obtuse as to assert that the sale and constant pressure of 50,000,000 artificial supply on the inarket is of benefit to the producer?
“It seems there is, but it is gratifying to know that these specimens are found only among that generation which has been developed since the short selling' was confounded with speculation.
“The proposed legislation will, without any question, add materially to the selling value of farm products. It will cut off any artificial supply and increase the speculative, while not diminishing the consumptive demand. There can be no real issue as to that.”
He then stated that the contention of the representatives of the boards of trade who appeared before the committees of the House and Senate in support of the prevailing practice of “short selling," might be thus summarized:
First. That it makes a broader and more stable market for the products of the farm.
Second. That an increase in the number of buyers results, and this increased competition creates an active market and brisk demand, thereby insuring a higher level of prices.
Third. That while “short selling" does not depress prices, the farmer is benefited by advances in prices which follow bull speculation.
Fourth. That notwithstanding the offering of illimitable quantities by other than owners, prices are determined by the supply of actual products as related to the demand, and while admitting that prices may at times be affected by “short selling," such disturbances are trifling in amount and temporary in character, supply and demand always being the ultimate arbiter of values.
Fifth. That these methods ren ler it much less hazardous for the merchant and banker to handle the products of the farm, and enable them to do so on much smaller margins than would be necessary but for the insurance available through "short selling."
Sixth. That under this system fluctuations are much less frequent and their range less wide than formerly.
Seventh. That it encourages and induces speculation, thereby aiding in carrying and marketing the crops at low cost.
Eighth. That the short seller” implies the “long buyer," and while the “short seller” may work to depress prices, this is offset by the constant effort of the " long buyer” to advance them, and the forces being equal the
law of supply and demand acts just as freely as it would in the absence of the “ short seller."
Mr. Washburn combated each of these propositions, citing instances of wide fluctuations in prices on the same day, and maintaining that even on the rising prices on a bull market the farmer was not benefited, because the corner was usually broken and the prices depressed below the normal before the farmer had an opportunity to market his products; that no matter how large the range of gambling transactions became, it would not broaden the market for actual products, nor hasten consumption of the same; that such transactions reduce the number of actual investments; that the contending forces of " short seller "and of " long buyers were unequal, because prices were often determined by offers to sell when there is no sale, one man being able to put the price down while two are required to advance the price; that prices are often determined by what are known as “ wash sales," where no delivery is contemplated, the whole transaction being for the expressed purpose of lowering prices in one market so that actual buyers in another market may get the benefit of such depression; that the long buyer,” when he is forced to liquidate, as is always the case when the time for delivery arrives, becomes a depressor of prices as much as the short seller."
He cited other crops, such as ħay and wool, etc., that were moved without any inconvenience, and in which the boards of trade have nothing to do, as an illustration of the fallacy of the argument that futures were essential in the moving of wheat, cotton, etc., and the other products dealt in on the board of trade.
He contended that nearly all the embezzlements, defalcations, bank wreckings, and robberies and kindred crimes, on a large scale, were traceable to this species of gambling, and cited numerous instances in support of it. He pointed out that the great fortunes of the country, in most instances, were made in this sort of speculation upon the ruin of the many who invested in the bucket shops.
He closed his address with a constitutional argument in favor of using the taxing power of the Government for purposes other than the raising of revenue, and contended that it ought to be used for the suppression of this species of gambling, citing decisions of the Supreme Court and the opinions of eminent text writers on constitutional law in support of the position maintained.
July 19, Mr. STEWART addressed the Senate.
He contended that the proposed legislation did not furnish a remedy for the "disease” of low prices, but said he would support it because it appeared to be desired by the agricultural interests of. the country. It woull be found, however, that no benefits would accrue. He then made an elaborate argument for the free coinage of silver, contending that that was the only solution for remedying low prices.
July 20, Mr. VEST addressed the Senate.
He characterized the proposed legislation as pernicious, unconstitutional, and class legislation. He said it was a use of the taxing power of the General Government for the purpose of usurping the po.ice powers of the States, and was a mere police regulation. “Has Congress the right, without collecting revenue, to police the people of the United States?” It was a police regulation masquerading under the revenue clause of the Constitution; an attempt to steal away the rights of the States under the guise of the taxing power to support the Government.
He said the bil was for the benefit of the milling interests and pork packers of the country. He asserted that a speculative market makes high prices; that the Liverpool market fixes the price of wheat all over the world, and that this statute would drive the trading in futures to foreign countries, and would put the American producer in the hai ls of the foreigner, the price of his product to be fixed in a foreign port. He submitted figures to show that from 1897 to June, 1892, wheat ha fluctuated in New York from 887 cents to 1093 cents, whereas if futures had a depressing tendency the result would have been a constant decline. He asked, “If it be possible for the sellers of options and futures to put down the market, why is the market ever permitted to go up? If it is to the interest of the bears to put it down, and they have it in their power to put it lown by selling phantom wheat and phantom cotton, why do they not follow the inevitable result of their own selfish interest and continue the depression?
He characterized the bill as “a bold, naked, legislative highwayman, booted, spurred, and marked as a revenue collector, when in reality it is a police officer ; and said, "there is no pretense that the 11 ope ating sections of the bill would raise a dollar, they are framed for the purpose of stamping out what is considered
a deleterious practice in the States of the Union. If that can be done, lotteries, faro banks, brothels, infectious diseases, all subjects of police power can be taken ap by Congress and disposed of without consulting the States." Mr. DANIEL addressed the Senate.
He opposed the bill as a false pretense by which jurisdiction is claimed over a subject-matter over which Congress has no concern. He asserted that the bill was disgenuous and dishonest; that it did not denounce or interdict fictitious transactions, but licensed them, and that it overrides and wipes out State lines; that if the bill was correct, in principle, then, under the guise of granting license to realestate agents and under the avowed declaration that the selling of lots and the indulging in booms depreciate the price of land, Congress may take charge of all the real estate in the country; that it taxes bona fide sales of agricultural products by actual owners thereof, and its result would be to permit a corner of all food products, and thus make bigger differences in prices than any of the ordinary transactions of the stock exchange would ever effectuate.
He assented that the bill was unconstitutional, and quoted Cooley's Constitutional Limitations, page 57, as follows: " Constitutionally a tax can have no other basis than the raising of revenue for public purposes, and whatever governmental exactions have not this basis are tyrannical and unlawful.” He contended that the policy of “protection" and the demonetization of silver had caused the fall in prices of agricultural products and lands, and that dealings in options and futures had nothing to do with it.
He referred to “futures," as defined in the bill, and said many of such transactions were perfectly proper and legitimate, giving illustrations. He called attention to the several exceptions contained in the bill to the operation of the definitions of "options" and "futures,” and remarked that “the very insertion of so many exceptional cases * recognized the fact that in the daily transactions of human life, permeating the marts of business all over this land, such transactions as these that are interdicted here are legitimate and wholesome, and that they are according to the manners and customs of trade.” He pointed out that while in one portion of the bill the business of dealing in “options” and “futures” was legalized by requiring the payment of a license tax, by another section of the bill a violation of any of the provisions of it,
was punishable by a heavy fine or imprisonment, or both; and sententiously remarked:
“From what code of penal statutes does this free American Republic gather the idea of piling up fines and imprisonments upon trivial transactions which are acknowledged in the body of the act to be legitimate, and which are licensed by the Government and favored by its patronizing power?”
He said the most mischievous of all the transactions from which the farmers conceive they suffer was the cornering of the market in any commodity, and yet that was not interdicted by the bill, but was made more easy of accomplishment.
He termed the bill an abuse of the power of taxation, and argued in favor of the repeal of the tax upon State bank issues.
July 21, Mr. White addressed the Senate.
He characterized the bill as pernicious, vicious, flagrantly unconstitutional, and tending to undermine and destroy the foundations of the Republic. He contended that if the bill passed the effect would be to reduce the price obtained by the producers. He criticised the inquisitorial features of the bill, and declared that the contract which the bill strikes at in the second section is a lawful contract, as decided by the Supreme Court of the United States and the courts of last resort of the States. He said if the theory of this bill is true, every vestige of State autonomy has been wiped off, and the Federal Government thus becomes the most unlimited and arbitrary government on the face of the earth. He argued extensively against the constitutionality of the bill, saying it was an abuse of the taxing powers seeking to abrogate and destroy every limitation found in the Constitution and every reservation in favor of the States; that it was a lie upon its face, because no revenue was expected to be raised from it, and the courts would therefore declare it unconstitutional. He further claimed that it was discriminating legislation.
He said the prohibition of gambling in the products mentioned in the bill would result in a wider range of gambling in all other products, and maintained that stability and uniformity of price were only possible in those articles dealt in on the boards of trade. There was cheating in other lines. Why leave out the New York Stock Exchange and other stock exchanges if the object is to stop gambling where the values traded in were greater than anywhere else?
He referred to the protests of boards of trade of various cities, of the banks and bankers of New York, Chicago, and New Orleans, and commercial bodies throughout the country protesting against the passage of the bill, and said the system of futures prevails all over the world.
The benefits which futures confer upon the cotton planter were thus stated : 1. It gives him a wider, safer, relatively higher, and less fluctuating market.
2. It cheapens the rate at which the producer obtains the money to make his crop by enabling the factor and all who deal with the producer to sell by fụtures the product with which the producer is to pay them, thus diminishing their risk and enabling them to reduce their charges to the producer.
3. It has diminished the charge of the middlemen by drawing the producer and consumer together, by enabling the buyer to sell for future delivery, and buy the producer's crop to fill his future sale already made.
4. It has multiplied buyers and brought them to the door of the consumer,
5. It has multiplied investors by enabling them to buy actual cotton and sell futures against it at a small advance to cover interest and charges, thus making the investments safe. The investor, having sold for future delivery against his purchase of actual cotton, is absolutely safe, is submitted to no risk of fluctuation in the market, and therefore can afford to pay a better price to the producer.
6. It has enabled the spinner to pay a better price to the consumer. He buys his cotton for consumption by means of a future contract, thus obviating the risk of a decline in the market. He sells the goods which he is to make from the cotton by a future contract, thus insuring a profit and thus enabling the spinner to do his business on a narrower because a safer margin of profits. It has brought the cotton fields of the South nearer to the great centers of American and European consumption by diminishing the risk, thus reducing the difference in the price which formerly existed between cotton in the field of the producer and that cotton at the door of the consumer.
7. It has relieved banking capital, thus leaving more money to assist the planter in making his crop.
He supported these statements by a comparison of the state of the cotton trade before the existence of futures with subsequent conditions, and contended that futures had been a “merciful blessing" to the cotton planter and the cotton trade.
He filed a telegram from the cotton factors of New Orleans (the sellers of cotton) protesting against the passage of the Hatch bill, and cited statistics of cotton production and exports of the same to show the benefits of futures.
Referring to a table showing the total sales of futures in New York and New Orleans from 1880 down, he argued that the figures demonstrated that the greater the values are of “future” sales to the volume of the crop, the lighter the average price was for spot cotton, and claimed that this demonstrated that prices vere always higher in an active market, and that the more trading there is, the more is received for the thing traded in.
He controverted the argument that the effect of future dealing is to cause the farmer to sell at low prices, and as soon as his products are all sold the price is then boosted up, and asserted that it was untrue, citing statistics in support of his views.
He said futures have relieved the American producer from the grasp of the British spinner; have decreased the shipping margin between the New York and Liverpool markets, thus, to that extent, assisting the producer.
July 23, Mr. HANSBROUGH addressed the Senate.
He said the producers were in favor of the bill, and also the commission merchants, who were satisfied with small profits.
He called attention to the legitimate demand for wheat created by the failure of the Russian crop, and stated that on the strength of that demand the manipulators advanced prices 10 cents per bushel, after which it was suddenly decreased below the normal rate, the farmers not getting any of the benefits of the advance, and said the profits on the advance were reaped by the speculators.
He said that Pardridge and others in December, 1891, began beating down the market froin 95 cents to 75 cents, making immense fortunes thereby.
Replying to the argument that “futures” and “options" were necessary for the marketing of the products of the farm, he said that of the $1,000,000,000 worth of produce, the annual output of the American farms, only about 30 per cent of such staples are sold by options, and that the option dealer handles less than 10 per cent of farm produce; yet he fixes prices by making fictitious sales of amounts 500 times greater than the actual output.
He controverted the argument that the production of the country is increasing so rapidly that only by the modern methods of options can the products be handled and marketed, by citing statistics to show that such were not the facts, the acreage not increasing but decreasing, while population is increasing. He maintained that the chief cause of depression was dealings in options and futures, and not the demonetization of silver, as contended by some, citing tables and statistics in support of his assertion.
Mr. HISCOCK addressed the Senate.
He said the bill invades the rights of the States. If the evils complained of exist, legislatures of the States were competent to deal with them. He defended the men engaged in the business of “futures" and " options, " and contended that because evils were possible under the system of future dealings was no reason why the system should be anathematized, illustrating by saying that because counterfeiting was possible and was often resorted to was no reason for abolishing the currency; that because embezzlements by young men often occurred was no reason for not employing the young; that because men were often teinpted into wild speculations and ruined themselves and others, was no reason for suspending business; and that because in the Harper corner at Chicago the Fidelity Bank was wrecked, was no reason for striking down the Constitution or evading the rights of the States. He said, “ If business methods are to remain the same for all time, then do away with railroads, telegraphs, telephones, and other modern inventions for the facilitating of business;" and that ** Every Senator who votes for the bill invokes a constitutional provision unconstitutionally to suppress what he thinks is wrong."
He contended that the taxing power can not be carried to the extent of enacting a law which does not tax, can not tax, was not intended to tax, but to prohibit lawful contracts; and that the bill was unconstitutional,
He said that commerce from the earliest ages has grown upon the contracts for future delivery, and continued: “ Whenever you limit the dealings in wheat or corn to the actual article in existence, and whenever you provide that it must be collected at great shipping points to meet our foreign commerce; whenever you provide, as this bill does in theory, that it must go into elevators somewhere, as it must, where it can repose in large volume that large transactions may be made in it, I say that you lay the foundation for one of the most gigantic, cruel and rapacious trusts which could exist.” The whole product would be controlled by a syndicate. The bill is the basis of the most gigantic trust that ever was conceived by human intelligence. Put it into the power of the elevators of this country, from Buffalo to Chicago and Mi waukee and Minneapolis, to collect the wheat of the country, and their line will be that of a great anaconda stretching from the East to the West, destroying whatever is within its folds.”. He said that futures were an insurance, and were beneficial to the producer; that prices are made at the point of larg st distribution for consumption, and that if boards of trade were abolished in this country, prices would be fixed abroad.
July 25, Mr. GEORGE addressed the Senate, confining his remarks to the cotton industry.
He said the bill was unconstitutional as written, because on its face the object was not to raise revenue but to prohibit certain practices. He called attention to the distressed state of the cotton industry in the South, and contrasted it with the prosperous period between 1850 and 1800, before fui ures were heard of. He said that options and futures in cotton were carried on only in five places in the world: New York, New Orleans, Liverpool, Havre, and Bremen; and that there were only 300 members in the New Orleans exchange, many of whom do not trade in futures-noone else but members of theexchangecan trade. The exchange is composed of 9 classes:
1. Commission merchants who sell cotton for planters.
4. Bankers through whom all bills of exchange drawn against cotton are negotiated.
5. Ship agents who represent the great fleet of steamers and sailing vessels by which the cotton is carried abroad and to domestic ports.
6. Insurance agents who arrange the insurance on the bulk of the cotton seeking a market through this port.
7. Cotton brokers. 8. Expert judges of the raw material, who buy the cotton from representatives of the planters for the merchants who ship to Europe and to American spinners.
9. Future brokers, who buy and sell contracts for forward delivery for account of members of the exchange, or for merchants and spinners in Europe and the United States.
He maintained, consequently, that there was no restriction upon the natural rights of freedom of contract and trade. He asserted that there were 270,000 bales of spot cotton sold in New York for the year ending May 31, 1891, to 26,389,500 bales of futures or—100 to 1-and practically the same for other years; that the ratio of futures to spots ran as high as 2,100 to 1 in a day; and that this was not commerce. but gaming; that there were 40 bales of middling cotton soid
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