The greatest amount of grain that ever came into the Minneapolis terminals was in 1912, and in that year less than 200,000,000 bushels came into that terminal. That was of all kinds of grain. Now, one-half of this grain coming into the Minneapolis terminal was not consigned grain. It was owned by the old-line elevators. The commission men had nothing to do with it. If it was not consigned, no commission was paid for the sale of it, so that all the grain coming in that could possibly be handled by the commission men must have been not to exceed 100,000,000 bushels. And the total commission upon that, if you figure the highest commission-and the commission upon the inferior grain is less than that upon wheat-the total commission would be only $1,000,000, and the total expenses of the commission firms, cutting in two the claim of these two men as to the number of commission firms, amounts to $400,000 more than they could possibly have derived from legitimate commissions on the greatest crop that ever came into the Minneapolis terminal. Now, gentlemen, I ask the privilege of introducing in evidence testimony which shows the facts which I have stated. It is as follows: [Cost to trade of traveling agents. B. F. Benson. House committee, February 21, 1913.] Q. Now, what is about the average salary. I don't mean that you pay particularly, but if you know about what a competent traveling solicitor for a commission house, about what his salary and expense account amounts to every month, what would be reasonable to cover both the salary and expense account?-A. Oh, I should say, salary and expense would probably average in the neighborhood of $300 a month. Q. For each man?-A. For each man. That is a pretty broad statement. Q. Well, I mean just in general terms.-A. Yes. Q. Probably a man that would be competent to do that work, he would expect about $125 to $175 per month and then his expense account?-A. I have always figured, if a man is not worth $100 to start with I don't want him, because it is responsible work, or should be at least. Q. So that a firm running a couple of traveling men would be under an expense of approximately $5,000 a year? A. Yes, I think that is putting it probably low enough. Q. Five to six possibly?-A. Yes. Q. Five or six thousand dollars a year. Mr. LIND. You mean on that item? Q. Yes, I mean on that item alone.-A. Yes. Q. The item of soliciting and checking up. Now Mr. Benson, $5,000 is all of the commission on half a million bushels of wheat, isn't it? All the commission you receive on the sale of a half million bushels?-A. I believe that is correct. (P. 674.) Q. Now then, how many men have you got in your office in Minneapolis?-A. Well, I think our office force is probably between 8 and 10. We sometimes have extra now and then. Q. About 8 or 10 men?-A. Including the stenographic force, in all, about 10. Q. And that excludes the proprietors, that is in addition to the proprietors?—A. Yes. Q. How many of the men of the company are right in active work, yourself and who else?-A. Mr. Newhouse. Q. And Mr. - A. Mr. Engstrom. Q. But in addition to you 3, 8 or 10?—A. About 10. I could give that exactly. Q. That is near enough. Now what about would be your average office expense including help and office rent, and light and so forth, incidentals, postage, and so on?— A. Per month? Q. Yes.-A. Oh, I don't know that I could give you that very certainly without looking it up. Our Duluth office and Minneapolis office is put together on the expense. Q. Well, take it for both, it is all right for both.-A. I should say it will run probably around $2,000 and $3,000 a month. Q. Possibly $2,500?-A. Including salaries and all? Q. Might be about $3,000 a month? That includes both houses?-A. Yes. Q. Your traveling men item you spoke to me about, is that included in that or is that in addition to that?-A. That is all our expenses; that includes the traveling men too. I would want to verify that though. Q. About $36,000 a year. That is the commission on handling 3,600,000 bushels of grain. Now Mr. Benson, approximately how many bushels of grain a year, a season, does your house handle? (P. 675.) [Expense of maintaining office of McCaul-Dinsmore. J. J. McCaul. House committee, p. 713.] Q. Do you think it would be possible for your company or any company situated similarly to handle enough grain so that the commissions fixed by the rules and exacted by the custom of the trade would pay your heavy operating expenses and make any profit on your investment and for your time?-A. Not with the expense account we have now, because this buying and selling business entails a great deal of expense. Our company is at an expense of $300 a day in maintaining a force in Omaha, an office in Helena, Mont., an office in Aberdeen, S. Dak., and possibly in Sioux City, Iowa, and also a kind of an office at Bismarck, N. Dak. And they are principally engaged for instance, the Omaha office does very little except to deal with winter wheat, and buy it from dealers from Nebraska and sell it to millers throughout the East or Southeast who are in the market for that class of grain. And, of course, we could eliminate all that expense in connection with the buying and selling business, cut it down to the actual expense of conducting a commission business. Q. And possibly make some money?—A. And possibly make some money out of the commission business. [Expenses of commission firms. Gov. Lind, attorney for commission men. House committee, February 28, 1913.] Mr. MANAHAN. Pursuant to the call of the committee, Mr. Lind for the commission men whom he represents has made the following statement. The following is a statement in the aggregate of expenses, grain handled, and commissions received by 33 firms represented in the membership of the Minneapolis Grain Commission Men's Association for the crop years of 1910 and 1911 and 1911 and 1912. 1910 and 1911, expenses, $519,065.28; commissions, $624,239.11; bushels, 75,277,812. 1911 and 1912, expenses, $443,722.21; commissions, $702,656.37; bushels, 83,766,506. Owing to the method of accounting employed in grain trade, it is impossible to separate switching and demurrage charges without an exhaustive audit which would take several weeks of labor. Signed Minneapolis Grain Commission Merchants' Association, J. H. McInery, secretary. Mr. ELMQUIST. It don't show the total expense per bushel. Mr. LIND. No; but I computed it. It makes a net profit of twenty-three onehundredths of a cent per bushel. Mr. MERCER. To the commission men? Mr. LIND. To the commission men. Mr. MANAHAN. Now, this purports to be 33 firms. Mr. LIND. There are 38 members of the association. Two men didn't desire to submit any statement. One man became a member of the association this current crop year, so that he could. That is 35 out of 37 who have anything to report. The question is, Where do they get the money? The commission ot 1 cent per bushel for wheat, three-fourths of a cent for rye, one-half a cent for oats, and so forth, by actual demonstration, the most prosperous year ever had, will not pay the expenses of these commission firms, admitted by themselves. Where then, do they get the money? I will tell you where they get the money. In the first place, they get it by a system of repeated sales. It is not a rule, it is not a regulation of the chamber, but it is a custom followed religiously, except in one instance. In every instance, practically, where a commission man of the chamber of commerce receives consigned grain, unless he turns that grain over directly to a consuming interest, a mill, or elevator in which he is interested, or which owns his commission house-unless he does that, he does not sell directly to the consumer. No; he sells to his brother member, A; A, the commission man, sells to B, the commission man; B, the commission man, sells to C, possibly, and then, having accumulated three commissions instead of one, C may possibly sell to the interest which actually consumes the grain. So that by this system of repeated and useless sales, selling from one to the other of the members of this close corporation, the members of this close club eke out enough to bear those expenses-not only to bear those expenses, but to become in some instances enormously rich. This is one method by which they pay their expenses. Mr. MANAHAN. How are those additional commissions tacked on to the producer? Mr. DRAKE. Those additional commissions are simply a burden on the trade. You can not have men engaged in this kind of chicanery, piling up commission upon commission, without taking it out of the price which the man gets who raises the commodity, or which the consumer pays who buys it. I say that is a matter so patent that I will not stultify the intelligence of the committee by discussing it. There is another method -and I want to say right here that in my judgment it is the most important thing in this entire discussion. This is the crux of the whole situation, as was said by Mr. Greeley. There is another method which is the great, the important, method, by which this private combine gets enough money out of the grain to pay the expenses of operating this complicated machinery. I refer to future transactions. I have here, gentlemen -and I ask the privilege of introducing it in evidence a considerable quantity of testimony taken at the Minnesota investigations upon the subject of future transactions. This is all exceedingly instructive and directly in point. The quotations-it would take me an hour to read themthe quotations show conclusively, from members and officials of the chamber of commerce, these facts. --- In the first place, the price of the future determines the price of cash grain. That is admitted time and time again by those sworn statements which I introduce in evidence. Mr. McHugh states hereMr. McHugh admitted that every time a future transaction is made upon the floor of the chamber of commerce that that operation influenced the price of the future, and, of course, influenced in that way the price of cash grain. Why, the president of the chamber of commerce, Mr. Wells, in response to the question by the author of this resolution, admitted that under this system now in vogue the Chamber of Commerce of Minneapolis, the gamblers and speculators, by conclusive and concerted action in the various markets of the United States, by producing a flood of buying, or buying and selling orders, in any market, that they could at any time arbitrarily raise or lower the price of cash wheat. And the only limitation he put upon it was that they could not do it permanently. Great God, gentlemen, a necessity of life-the necessity, the staff of life, the principal product-almost the sole product of the great States of North and South Dakota, and the price of that commodity fixed by the gambling speculations of a crowd of gamblers! Do we not need any remedial legislation? Does the plank in the Democratic platform mean anything? That is why we are here to-day: that is the big proposition in this case. (The testimony referred to is as follows:) [Futures. F. A. Hallett, chamber commission merchant. House committee, vol. 4, p. 1066.] Q. So you represent outside customers in dealing in futures?---A. Yes, sir. Q. Is the bulk of your business filling the orders of outside customers in futures?— A. Yes, sir. Future transactions in foreign exchanges-Influence upon price of cash wheat at Minneapolis. F. A. Hallett, chamber commission merchant. House committee, vol. 4, pp. 1075-1076.] Q. Now, you wouldn't want to give the committee the impression, Mr. Hallett, that this information for which such a large sum is paid was not valued and considered right along by you traders?-A. Yes; it is considered, and the information is valuable for not only our traders, but for all that are interested or engaged in the grain business, outside of our exchange as well as inside. Q. I know; but what I am getting at is the simple fact that traders in their bidding on the pit in futures are either to a greater or less extent influenced by the quotations appearing on the board as coming through the wire from other markets, Chicago, New York, and other places?-A. Well, yes, I would say that they are. Q. So that if the quotations from New York and Chicago on any day as coming over the wire show that prices dropped, dropped, dropped every few minutes, it would depress your market?-A. Well, not always, Mr. Manahan. Q. I am talking about the general proposition.-A. Yes, it would; the chances are it would; yes. Q. That is what I mean. We are trying to get at the ordinary and not the exception. That would depress your market? So, also, it is true that if either immediately afterwards or the next day the prices on those outside markets raised an eighth or a quarter at a clip, successively, up and up, that would raise your bidding on your market, wouldn't it?--A. Well, often it would; not always. Q. I am talking about the rule.--A. Well, I think so; yes. [Future trading-Influence upon price of cash grain. W. A. Gregory, member of chamber. House committee, vol. 4, p. 1203]. Q. So, I say the power of the men in the pit to buy and sell grain under future contracts as exercised by them in the chamber of commerce does affect the price of wheat?-A. Temporarily it does. Q. From day to day? A. Yes; that is during the day it does have an effect. [Futures-Influence upon price of cash wheat. F. A. Hallett, chamber commission merchant. House testimony, vol. 4, pp. 1085–1086.] Q. You have already testified that, generally speaking, the price paid for cash grain was fixed by the futures?-A. Yes. Q. So far as your observation and experience on the board goes, Mr. Hallett, the principal influence that you have directing you in future bidding is the other markets of the world? That is the principal thing, isn't it?—A. It is one of the chief things. [Trading in futures. E. L. Welch. House committee, vol. 3, p. 885.] Q. Do you get large orders from Chicago?—A. Yes, sir. Q. Very large orders, do you?-A. Yes, sir. Q. How large is the largest you get, you have ever got?-A. Oh, possibly 100,000. Q. You get a hundred thousand a clip from Chicago?—A. We have. Q. Frequently?-A. Not frequently. Q. But occasionally you get large orders from Chicago, do you?—A. Well, from 10 up to 100. Q. Well, from Chicago?-A. Yes, sir. Q. And other commission men, to your knowledge, get the same thing?-A. I presume they do. Q. So far as you know?-A. Yes, sir. Q. Now, Mr. Welch, that shows, doesn't it, that Chicago and New York and the other big markets of the world can, by throwing in these enormous orders of 100,000 at a clip, affect the market price, affect the market both here and in Chicago?—A. I don't know as they have ever affected it very much. [Influence of future trading on price of cash grain. F. A. Hallett, chamber commission merchant. House committee, vol. 4, p. 1073.] Q. But with the exception of that, as I understand you, now usually and as a general proposition, the cash price responds to the bidding of the pit? A. Yes. Q. Either up or down. Now the bidding in the pit for grain is influenced largely by large orders, isn't it?-A. No; not always, Mr. Manahan. Q. No; but I mean largely?—Á. No; I wouldn't say that. In cases of this kind the pit Q. Let us get at the element that does influence it. Is it the number of orders that are given for a little higher price that causes it to go up, or is it the number of bushels purchased that brings the price up?-A. That depends upon the market to some extent. At times the market is advanced very quickly on a very small order. I have seen a market advanced a half cent on an order for 50,000 bushels; then I have seen a market depressed in the same way. Other times I have seen Future transactions-"Scalping and spreading" influence of selling orders on market. V. S. Ireys, pit trader in chamber. House committee, vol. 5, p. 1405-6.] Q. And then sell later? Well, that is called scalping, isn't it?-A. Of course, the more buying you have the more readily it will absorb the hedges. Q. Yes; I understand. So that it occurs occasionally that a bunch of hedging orders will come in early in the day and depress the market, put it down below what it is in other places. Is that the idea? [No answer.] Q. Or do you want to convey to the committee the idea that occasionally the market will actually open less than it does in other markets without regard to the orders?— A. Yes; the opening, I will state, is based on the selling and buying orders. Q. The opening price then reflects largely in your judgment- -A. The difference between the buying and selling orders in volume. QYou might say the weight of the buying and selling orders as compared with each other?-A Yes. Q. If the buying orders were more numerous and vigorous the price would immediately respond and go up. If the selling orders were more numerous the price would immediately sag?-A. That is it. Q. And just the minute that price would sag as a scalper would take as much as you thought you could handle quickly and immediately sell in Chicago or wherever you thought the better opportunity was? A. Yes. Your market is now made, the price of cash wheat is made by the price of futures. If you abolish futures the price of cash wheat is made by what the miller or some group of men will pay for it. It restricts your trade. Future trading-Magnitude of scalping transactions. F. G. Holbrook, pit trader. House committee vol. 5, p. 1476.] By Mr. MANAHAN: Q. Mr. Holbrook, I understand since you have testified yesterday you have checked over your memorandum of business and desire to make some corrections as to your oestimony? A. Yes, sir; my remembrance is I testified in response to your question as to the volume of trading, that it ran from ten thousand to twenty or thirty thousand and upwards some days. I find in looking over there was some days as low as 10, 20, and 30, and upward, and the average since the first of the year amounts to 67,000 bushels. [Trading in futures-Manipulation of market. E. L. Welch. House committee, vol. 3, p. 936.] Q. So I go back to my original proposition on that if men desire the large dealers can act together and by crossing their orders, crossing their orders and crossing them again in large quantities they can boost the prices right up. Three or four of the large dealers, of you men in Minneapolis, with an understanding with three or four of the large dealers in Chicago can at the same moment or at same hour of the day wire your orders to buy, large orders, 100,000 at a clip, and start a little temporary boom, and if you are quick enough to get rid of it after you have got the boom going up, you rake off a nice little profit. Isn't that something like the game?-A. I said it might affect the market temporarily if there was a large bull made like that. Influence of future trading on price of cash grain. F. A. Hallett, chamber commission merchant. House committee, vol. 4, p. 1071-1072.] Q. You have notices, I presume that the price paid for cash grain from day to day on the floor follows the ups and downs of future trading very faithfully, that is true, isn't it?-A. To a certain extent; yes. Q. I am not stating it is always the same margin between them, but what I mean is, if the futures go up or down on any certain day of trading a half to a cent, or even more, that the cash market that day would immediately reflect that same rise in price?-A. That is usually the case. Q. I mean that is the general rule? And therefore it is true, is it not, that the prices paid on the floor for cash grain are largely and usually determined by the prices |