Newspaper Page Text
THE JEFFERSONIAN
Vol. 111. No. 23.
Nell? York Cotton Exchange a "Gambling Institution”
Operates Under ” Debased and Fraudulent Contracts, ” Says Official Report—Work to Depress Prices,
Washington, May 28, —The charges that £he
New York Cotton Exchange is a gambling
institution and not a mercantile exchange is
practically sustained in the report submitted
to President Roosevelt by Commissioner of
Corporations Herbert Knox Smith, and made
public today.
Mr. Smith’s report is based on an exhaus
tive investigation begun shortly after the
adoption by the House of a resolution intro
duced by Representatives Burleson and Living
ston on February 4, 1907. That resolution
was aimed to ascertain why contracts sold on
the New York and New Orleans exchanges
brought about such violent fluctuations in the
price of cotton, and also to learn whether the
members of the exchange, by combining among
themselves, brought about depression in prices
because, under the terms of the contracts,
they could deliver any one of thirty grades of
cotton.
The House resolution followed close upon
the filing of charges of fraud against the
New York Cotton Exchange with Postmaster
General Cortelyou by Representative Living
ston and Harvie Jordan, president of the
Southern Cotton Association, of Atlanta, on
which a fraud order against the officials and
members of the Exchange was asked.
The charges, which seem to be upheld, in
part at least, by Mr. Smith, include the fol
lowing :
New York a “Gambling Exchange.’’
“That New York City has ceased to be a
commercial spot cotton market, and that the
New York Cotton Exchange, operating under
its present debased and fraudulent contracts,
has developed into a purely speculative or
gambling exchange, and that the grades of
cotton shipped to New York and tenderable
on the contract under the rules of the New
York Cotton Exchange cannot be used for
commercial spinning purposes, and that such
grades of cotton are used solely to depress
the price of spinnable grades in the South, to
further the speculative features of the New
York Cotton Exchange, to the heavy detriment
of the entire legitimate trade of the Uuited
States.”
The care with which Mr. Smith modifies
his findings seems to have been forecasted
by Representative Burleson, who, in a letter
to Mr. Jordan on April 30, this year, wrote:
“I do not believe that the President has
any idea of making recommendations along
the line” on which I think legislation should
be had. The report from the Bureau of
Corporations on the resolution written and
introduced by me has not yet been sent to
A Weekly Paper Edited by THOS. E. WATSON and J. D.
Atlanta, Ga., Thursday, June 4. 1908.
the House. I understand it is in the hands
of the President, and that he is holding it for
some purpose. On Saturday I had adopted a
resolution by me, directing that said report
be sent to the Congress at once.
Even Bucket Shops Do Less Injury.
“Recently the Secretary of Commerce and
Labor gave out an interview, in which he
stated that the President was not opposed to
the legitimate cotton exchange, but was op
posed to bucket shops, etc. I, too, am op
posed to bucket shops, but the injury to the
cotton producer coming from bucket shop op-
is nil compared with the great hurt
done kim b y operations on the so
callod cotton exchanges. ’ ’
in his report indicates that he
will liaste Much more to’ say later on. What
he gave publication today was two
parts — <wjth cotton exchange methods
of of cotton and with the range
of contract grajlpsc Subsequent parts, he
says, will take up the effects of exchange rules
and, other conditions- upon the price. In the
report made public today he says: U
“So far as spinners are concerned, the J
practical certainty of receiving several
ent kinds of cotton on one contract makes it®
impossible for them to buy their cotton on®
the exchanges.
“The contract must be broad enough to®
induce general trading thereon, and thus fur-0
nish the broad market necessary to fulfil theE
true functions of an exchange. There is no®
reasonable obligation, however, to take careß
of that part of the crop which is for most®
purposes unspinnable, and the admission of®
very low grades of such unmerchantable or®
unspinnable cotton into the exchange stocks®
creates several evils. The effect of such cot-B
ton is to depress the price of future contracts.®
and this tends t.o affect unfavorably the value®
of the entire crop, the great bulk of which is®
of much better quality.
Stock Held Till It’s “Rubbish.’’
“The investigation has shown that many ex-®
treme charges regarding the stock of cotton®
at New York cannot be fully sustained.
“A prevailing impression that many thou-B
sands of bales of cotton in the New York®
market have been carried for many years, uri-®
til the stock is little more than an accumula-ffl
tion of rubbish, is disproved by the fact that®
the entire stock at New York has on several®
occasions in recent years been reduced to affi
very small quantity. Thus, in October, 1900.®
the total certificated stock was only a trifle®
over 5,000 bales, and as recently as Septem ®
ber, 1904, it was only 15,600 bales. At the 1
latter date a considerable part of the stock
was apparently of fairly high grade. Conse
quently it is certain that the amount of very
low grade cotton earned over in New York
for any considerable period of years cannot
be extremely large. On the other hand, there
is some cotton which has thus been carried
over from year to year.
“The president of the New York Cotton
Exchange, in November, 1907, stated to the re
vision committee that some cotton had been
in the New York stock for four years, and
that the reason it had not been purchased for
consumption was that it was of such poor
quality as to be undesirable at the grade dif
ference
‘‘While charges against the grad-
ing of cottdfLafr N&w York have undoubtedly
exaggerated conditions, nevertheless it
is certain that series overclassification has
frequently occurred market.
“Not, only has cotton really belo.w the
standard prescribed for bpntract delivery been
certified at New but such cotton was
for a time virtually the New York
stock in pursuance of & ruling of the Board
-of Appeals of the New Exchange,
: one of the highest corntfiittees of the ex
rchange, and against the jußjnftnt-. of members
■of the Classification
ffl. “A Deliberate Policy’’ of Exchange.
g “This certification of cotton actually below
gtenderable grade is especially important be-
Ecause it was not due to the carelessness of the
|Classifieation Committee, or to the dishonesty
iof any individual employe, but was the expres-
Ssion of a deliberate policy of one of the high-
Best committees of the exchange, which should
■have taken every precaution to protect the
■integrity of the contract.
“Members of the New York Cotton Ex
■change have also attempted to excuse this ex
traordinary ruling of the board of appeals on
■the ground that only a few hundred bales of
■rejectable cotton were thus deliberately al
jjlowed to go into the certificated stock. They
■have further attempted to defend the classi
■fication of the exchange generally on the
■ground that the amount of certificated cotton,
■which was really below tenderable grade, or
■even the amount which, although tenderable, is
■of exceptionally low grade, is but a small per
racentage of the total certificated stock. They
Sgargue that the buyer of a future contract
| would therefore be indifferent to the possibil
®ity of receiving some of this cotton.
“This argument is so absurd as hardly to
| call for discussion. It would be about as
F logical for a man to say that he would b«
I (Continued on Page Thirteen.)
xiice Five Cents.