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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.