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caused by gambling in wheat futures is appalling; that the members of the Chicago Board of Trade, the Minneapolis Chamber of Commerce, and the Duluth Board of Trade through whom such gambling operations are made cover and hide the record of the losses sustained by speculators and refuse to exhibit their books to the State officials whose duty it is to protect the public; that the Chamber of Commerce of Minneapolis and the Board of Trade of Chicago by virtue of a large membership of wealthy men closely allied with banking institutions, transportation companies, and with certain daily newspapers of their communities, exercise and control an
unwholesome influence in local government and public.opinion; and Whereas it is charged and generally believed that the business of the Chicago Board of
Trade and its operations are controlled by memberships which are owned by a few large operators, particularly Armour, Peavey, J. Rosenbaum, J. C. Shaffer and Company, Bartlett, Frazer and Carrington, who not only direct said board of trade as an exchange, making such rules and by-laws as serve their purpose, but acting in conjunction with the leading members of the Minneapolis Chamber of Commerce and controlling most of the terminal elevators and public warehouses of both cities, exercise and have an unreasonable and unlawful control over the prices paid for wheat in these great terminal markets and therefore in the whole country, and unduly control and restrain the movement, purchase, and sale of wheat to suit their speculative purposes; and Whereas it is generally charged and believed that wheat arriving at the terminal
markets from country points is in the first instance graded with unfair severity and on such grading sold in large quantities by commission companies to whom it is consigned to terminal elevator companies owned by themselves; that a commission is charged to the shipper for such sale; that the wheat thus sold to themselves is taken by such commission companies to their terminal elevators and there mixed and doctored in such a manner as to be afterwards shipped out of such elevators or public warehouses at a grade from one to two points higher and applied, when necessary, in filling future trades at such higher grades; and that over twenty-five million bushels of wheat are thus doctored annually in Chicago and Minneapolis and raised in grade on an average of two points; and Whereas such combination of dealers operating as members of the Chicago Board of
Trade, and such combination of dealers operating as members of the Minneapolis Chamber of Commerce, and such combination of dealers operating as members of the Duluth Board of Trade, and such combinations between these respective groups of dealers and between such corporations as such, under the by-laws, rules and practices now in force in respect to the marketing of wheat and the grading, inspection, and mixing thereof, as well as in the making and publication of the price thereof, and in the future dealing therein, are in violation of the Sherman antitrust law and operate as an unreasonable and unlawful restraint of trade and commerce among the States; Now therefore be it
Resolved, That a select committee of seven members be appointed by the Speaker to investigate the foregoing statements and charges, to ascertain whether any combination in restraint of trade exists between the Chicago Board of Trade, the Minneapolis Chamber of Commerce, and the Duluth Board of Trade, or either of them, or between the members of any or all of said corporations, which in effect restrains or controls the price of wheat or the sale thereof, or in any manner limits the free marketing and selling of wheat shipped from the Dakotas or elsewhere to the terminal markets at Chicago, Minneapolis, or Duluth.
That said committee shall specifically inquire into the organization and method of operation of the Chicago Board of Trade, the Minneapolis Chamber of Commerce, and the Duluth Board of Trade, and each of them, to ascertain from their organization, by-laws, and method of operation whether or not they, or any of them, exercise any unlawful restraint or control over the buying or selling of grain coming to said terminal markets, or any of them, from Iowa, Nebraska, the Dakotas, or any other State, or over the prices thereof.
That said committee shall also specifically inquire into the organization, methods, and practices of the public warehouses and terminal elevators of Chicago, Minneapolis, and Duluth, and into the connection and control of such public warehouses and terminal elevators, and each of them, with the Chicago Board of Trade, the Minneapolis Chamber of Commerce, and the Duluth Board of Trade, and with the individual members of each of said organizations.
That said committee shall also specifically inquire into the methods and practices of grading wheat in vogue in Illinois and Minnesota in and out of said public warehouses and terminal elevators, and the connection and relation of such grading to the buying and selling of wheat and the prices paid therefor.
That said committee shall also specifically inquire into the practice, method, and control of the mixing and blending of the different grades and kinds of wheat prevailing in Chicago, Minneapolis, and Duluth, and the relation of such mixing, grading, blending, and curing to the grading and inspection thereof and the buying and selling thereof and the prices paid on each of said terminal markets.
That said committee shall also specifically inquire into the ownership and control of each of the separate memberships in each of said organizations, the Chicago Board of Trade, the Minneapolis Chamber of Commerce, and the Duluth Board of Trade, with the view of ascertaining the extent of the practice of the members of said organizations in selling grain consigned to them to subsidiary corporations or dummies.
That said committee shall also specifically inquire into all privileges, concessions, or advantages enjoyed by any member of the Chicago Board of Trade or Minneapolis Chamber of Commerce, or any owners of public warehouses or terminal elevators, from
any railroad company by way of rebate or otherwise, or from any demurrage association, transfer company, bank, or newspaper allied with or in any manner exercising control, by way of membership or otherwise, in said board of trade or chamber of commerce.
That said committee shall also specifically inquire into the method, extent, and effect of buying and selling wheat in the future, and operations “in the pit,” and especially into the profits resulting therefrom to members of the said Chicago Board of Trade, Minneapolis Chamber of Commerce, and Duluth Board of Trade, and into the losses suffered and sustained by speculators and investors outside of the membership of such organizations.
That said committee shall in such investigation inquire into and enumerate such other rules, by-laws, and practices of the Chicago Board of Trade, the Minneapolis Chamber of Commerce, and the Duluth Board of Trade, and of the members of such organizations, respectively, as may be deemed by the committee prejudicial to the free marketing of wheat or detrimental to the interests of the producers of wheat or the consumers of bread.
That such committee as a whole, or by subcommittee, is authorized to sit during the sessions of the House and during the recess of Congress; that its hearings shall be open to the public; that the committee as a whole or by subcommittee is authorized to employ counsel, experts, clerical, and other assistants, to summon and compel attendance of witnesses and the production of books and papers, and may administer oaths to witnesses.
That said committee as a whole or by subcommittee shall have the authority to send for persons and papers and to take testimony in Washington, District of Columbia, or elsewhere.
That said committee shall report to the House of Representatives all of the facts ascertained by it and the testimony taken by it under the investigation herein provided, with such recommendations as it may deem advisable for legislation, and if at any time during such investigation the committee ascertains facts that in its judgment warrant criminal prosecution the committee is authorized to make representation of such facts to the Attorney General of the United States for such action as he may deem advisable to take.
The CHAIRMAN. We will now proceed with the hearing.
STATEMENT OF HON. JAMES MANAHAN, A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF MINNESOTA.
Mr. MANAHAN. Mr. Chairman, and gentlemen, I will not take the time to read the resolution, which goes into considerable detail, but will introduce the evidence which we desire to submit in support of it by a brief preliminary statement. At the outset I wish to assure the committee that I have no pride of authorship or personal interest in this resolution. I make this statement because of some of the comments appearing in the press purporting to be statements by representatives of the Board of Trade of Chicago, and the Chamber of Commerce of Minneapolis, to the effect that I have a personal interest or personal ambition in this matter, due doubtless to the fact that I was the attorney for the committee of the lower house of the Minnesota Legislature during its last session, which committee made an investigation, so far as the facilities would permit, of the Chamber of Commerce of Minneapolis; and to the fact that also, about the time the legislature met shortly before—and possibly in a few small matters since I have had nominal connection with what is known as the Equity Cooperative Exchange of Minneapolis, which was attempting--and is, as I understand it, still attempting—to get a part of the business and trade of that city in opposition to the chamber of commerce members. In order to relieve this investigation from any possibility of being diverted from the real issue, I wish the committee from the outset to eliminate me in the matter and hear the question upon its merits.
I make this statement because I know that the committee otherwise might be subjected to an attempt on the part of those concerned to divert the investigation into some sort of a question as to my motives in introducing the resolution. I would have no fear of such an investigation or inquiry, because, as I say, I have no personal interest in a real and legal sense in the Equity Cooperative Exchange, this rival concern. I have been nominally their lawyer, and my sympathies are of course with them in their struggles, but I never received à dollar of fee from them and never had any interest in that corporation-any ownership or interest of any kind. My connection has been nominal and in sympathy.
I wish to read from a letter that I received this morning from the Farm, Stock and Home. I read this because it so clearly expresses the importance of the matter, and so aptly states my own views. This letter is written by Mr. H. J. Hughes, the editor of the Farm, Stock and Home, one of the leading agriculture papers of the Northwest:
The Farm, Stock and Home wishes you to emphasize in every possible way the importance of the investigation of grain exchanges which you have proposed. It wants to point out the fact that only by such an investigation, made by a board of absolutely unprejudiced and fearless men, men who will go down the line and investigate thoroughly all sides of the question, can we arrive at the solution of the present unsatisfactory arrangement, misunderstanding, and business anarchy surrounding matters relative to the grain trade of the world.
That very tersely and aptly expresses my personal opinion in the matter.
Before introducing those who will speak for this resolution, I wish to call the attention of the committee to one or two of the facts, as I understand them, which impelled me to introduce this resolution. In the first place, the opening paragraph of the resolution states: “Whereas the world demand for wheat and the consumption thereof so closely balance its production from year to year that there is no legitimate occasion for violent fluctuations in the price of that necessity.”
Now, in that connection I make this deliberate statement to the committee, that the price of wheat in Chicago and in Minneapolis is not made by the so-called world supply and demand. Nor is it made by the amount of the so-called cash wheat arriving at those markets. It is made by the operators in future options. I call the attention of the committee to statistics taken from the United States Statistical Abstract and from the Tribune Almanac of 1914, the last edition, which is a compilation of tables taken from the same source, and I ask the attention of the committee and of those who appear for these grain exchanges—if they take an opposite veiw of this matter—to a comparison of the production and price of wheat for the years 1909 and 1911.
In 1909 the production of wheat, the world production, according to these tables, was 3,581,519,000 bushels. In 1911 it was 3,540,717,00 bushels, or 40,802,000 bushels less than in 1909.
The same Statistical Abstract and almanac shows that in the United States for those years the 1909 production was 737,189,000 and the 1911 production 621,338,000, which was 115,851,000 bushels less in 1911 than in 1909. So that the world production of wheat and the production in the United States also for the year 1909 was largely in excess of that for 1911. And yet, in spite of that fact, the price of wheat as given in this Statistical Abstract-rather, the value of wheat on December 1, 1909—was 99 cents a bushel, and in 1911, the year of less production, it was only 87.4 cents per bushel.
Mr. LENROOT. Where is that value?
Mr. MANAHAN. That is the value on the farm, according to the Statistical Abstract, taking into consideration the cost of marketing, etc., made by the statisticians of the department.
Mr. Pou. I would like to ask a question there, if it will not interrupt you.
Mr. MANAHAN. Certainly.
Mr. Pou. You say, in 1911, I believe, that wheat was 87 cents a bushel and that the crop in that year was less than in 1909 ?
Mr. MANAHAN. Yes.
Mr. Pou. At that time, when it was 87 cents a bushel or 97 cents a bushel, whichever it was, in Chicago, what was the price of it in Europe?
Mr. MANAHAN. This is the price given in the United States on the farm as prepared by the Statistical Abstract of the United States, my proposition being that the price of wheat to the farmers of this country, as shown by the statisticians of your Government, is not controlled at all by the world supply nor the Nation's supply, because the world supply in 1909, when the price was 99 cents upon the American farm was much larger than the world supply in 1911; and also the Nation's supply in 1909 was much larger-115,000,000 larger than it was in 1911, when the price was over 11 cents lower than it was in 1909.
Mr. Pou. If you have the figures of what the price was in Europe, I would like to have them.
Mr. MANAHAN. I have not the figures of the price in Europe.
Mr. LENROOT. Is the difference in quality an important factor there?
Mr. MANAHAN. This was the price of the standard grade of wheat. I did not take into consideration the off grades, but the regular grades, which is subject to future trading, which I think is No. 1 and No. 2. That is supposed, of course, to be the average price of standard-grade wheat.
Now, it occurred to me that possibly this enhanced price in 1909 over 1911, although there was a larger crop in 1909, was due to failure in some other crops, some other staple articles like corn, oats, barley, or something like that, so I consulted the statistics and I found that the production of corn in 1909 exceeded the production of 1911 by 102,396,000,000 bushels in the world supply, and by 240,888,000 bushels in the supply of this country. The production of oats and other staple articles of food was also larger in 1909 by 527,076,000 bushels than it was in 1911, in the world supply, and in the United States it was 850,551,000 bushels larger than was the production of 1911. In 1909 the excess of barley over 1911 was 182,852,000 bushels. For rye, the excess of 1909 over 1911, was 168,576,000 bushels. call the attention of the committee to these figures, to show, so far as such figures will show, that the price of these three articles—the price of these grains in the United States on the farm is not controlled at all by the world supply, nor the supply of the Nation, but results solely from the so-called future trading of speculators and gamblers in the pit.
These grains—wheat, corn, and oats-are subject to future trading, and it is my belief that the thorough investigation of future trading will show that prices for the world are made by the traders in the pit at Chicago, Minneapolis, and other markets operating more or less in concert and combination.
I hardly think it necessary, but possibly it might make clear the testimony to follow if I briefly stated to the committee the way in which the grain in the Northwest is handled by these exchanges. I say "grain,” because while this resolution refers to wheat alone, any legislation controlling the marketing and dealing in wheat would necessarily cover that of corn, oats, and other staple articles.
If the marketing of grain in the Northwest was simply a matter of marketing, uninfluenced and uncontrolled by the machinery for distribution in the great terminals, the machinery for inspection grading, elevation, storage, etc., it would be quite a simple proposition. But it is not a simple proposition, gentlemen; it is greatly complicated, because it is impossible to consider any one of these things alone and come to an intelligent conclusion as to the effect upon the market of all the conditions in the aggregate. Minnesota markets in the neighborhood of 200,000,000 bushels of wheat annually. Not all—not one-half- of that wheat is raised in Minnesota. Montana and the Dakotas produce much of the wheat that is marketed in Minnesota, and any legislation in Minnesota affecting markets could not be participated in by those interested in the Dakotas. Some of our wheat goes to Chicago, and a small part of what we use comes from Canada. Wheat is raised all over that Northwest country, in Iowa, Nebraska, Minnesota, the Dakotas, Montana, Illinois, Wisconsin.
We were confronted in our investigation in Minnesota, when considering the effect of future trading, by the difficulty of learning the scope and the significance of that trading, for two reasons. In the first place, those engaged in the business would not exhibit their books to the committee, to show with whom they were dealing in futures and the magnitude of the deals made and the character of them, saying that they would not disclose the business of their customers, and so forth. Furthermore, any legislation in Minnesota forbidding future trading in wheat and grain would be futile unless