Dr. DUVEL. Yes, sir.

Mr. SANDLIN. When there is a large crop, and trade conditions are not good, it would be more advantageous to them to bear the market, and they would be more inclined to go in on the bear side. Would that influence them?

Dr. DUVEL. It would not always work that way. The general public is practically always long. They come into the market as buyers. They do not know how to sell short, as a general rule. The professional trader, however, will take either side. He will come in either as a buyer or a seller.

Mr. SINCLAIR. Does he always operate that way, taking either side? The large operations seem to indicate a different condition, and that he nearly always takes the short side, or sells short. In other words, he is a seller and a depresser of the price.

Mr. SANDLIN. The professional trader does not care.

Mr. CANNON. Does wheat lend itself more readily to speculative purposes than cotton?

Dr. DUVEL. I do not know that it does. The information is not available as to cotton.

Mr. CANNON. There is a good deal of cotton sold in the speculative market.

Dr. DUVEL. Yes, sir; from what we know of it, we have every reason to believe that the situation as to cotton is exactly the same as to wheat in that respect. A while ago you mentioned large traders. I have here an old report, going back to 1926, covering the operations of a single trader. At this point [indicating] he was short about 4,000,000 bushels. Then he reversed his position and in a few days was long nearly 9,000,000 bushels. A few days later he took a short position of nearly 10,000,000 bushels. A few more days later he switched again, and was long 6,000,000 bushels. Then he dropped down to 6,000,000 bushels short. Those two or three days operations represented the sale of about 12,000,000 bushels. Then again, within a few days, he was long over 8,000,000 bushels, and then dropped down into a short position of nearly 8,000,000 bushels.

Mr. CANNON. Do you consider that typical?

Dr. DUVEL. I would not say that was typical. I would say that is an extreme case of market operations on a large scale of speculation, switching from one side to the other.

Mr. HART. There are only two or three speculators of that type operating on the Chicago Board of Trade, are there not?

Dr. DUVEL. There are not a great many. Over a period of 8 years

Mr. HART (interposing). I mean at any one time.

Dr. DUVEL. No, sir; not at any one time. You mean that we have two or three?

Mr. HART. At this time you have only one.

Dr. DUVEL. There are times when we have only one.

Mr. HART. The largest speculator you have had since 1931 has been the Government, through the use of Government money, through the Stabilization Corporation and the Farmers' National. They have greater resources than any speculator who has ever operated in the grain market.

Dr. DUVEL. Yes, sir. They undoubtedly had greater resources. Mr. HART. And they lost money, did they not?

Dr. DUVEL. Yes, sir; they lost money, too.

Mr. HART. They paid good salaries, and employed the best talent they could find.

Dr. DUVEL. According to the reports, they paid some good salaries. Mr. HART. They paid as high as $50,000 a year.

Dr. DUVEL. I am not familiar with that part of it.

Mr. HART. The public records show that they paid as high as $50,000 a year.

Dr. DUVEL. Yes, sir.

Mr. HART. I do not know what they made on the side as private speculators, or whether they speculated privately, or not. As a matter of fact, they lost money operating on the board.

Dr. DUVEL. I think the reports show that.

Mr. HART. The report also shows that the Farmers' National was managed by the same individual that the Stabilization Corporation was managed by. It was wholly a Government institution.

Dr. DUVEL. Yes, sir.

Mr. HART. The report shows that within two or three days of operation, the Farmers' National took several hundred thousand dollars out of the Stabilization Corporation.

Dr. DUVEL. I cannot say as to that.

Mr. HART. Have you not seen their reports?

Dr. DUVEL. Yes, sir; I have seen them, but I have not read them. very carefully.

Mr. HART. It is disclosed in the McNary report that they took $300,000 during the last week out of the Stabilization Corporation by buying and selling to themselves.

Dr. DUVEL. I am not prepared to discuss that in any way. Mr. SINCLAIR. That was not speculation, or real speculation. Mr. HART. Yes; they were going in and out of the market continuously.

Mr. SINCLAIR. They were going in to sustain a definite policy with reference to the stabilization of the grain. It was not the same as an operator on the market. The Grain Board or Farm Board decided to do that when the crash came, or about that time. They started right at the time of the stock-market crash. In fact, they were not organized when the stock-market crash came. They started to peg the price of wheat at $1.25 per bushel, and they did peg the price of wheat.

Mr. HART. As long as the money lasted.

Mr. SINCLAIR. For 1933.

Mr. HART. As long as the money lasted.

Mr. SINCLAIR. They had some money left. They found that the depression was of far greater magnitude than anybody suspected. Mr. HART. They found wheat in greater supply.

Mr. SINCLAIR. Then they turned around and pegged it at 85 cents per bushel.

Mr. HART. 83 cents, I think.

Mr. SINCLAIR. 83 cents in January. They held that price for a full year.

Mr. HART. All the time they were operating

Mr. SINCLAIR (interposing). I am frank to say that they were operating under a definite Government policy.

Mr. HART. They were not operating under a definite Government policy.

Mr. SINCLAIR. The Farmers' National was an instrumentality of the Farm Board.

Mr. HART. They denied that. You will find that testimony before the Senate Agricultural Committee.

Mr. SINCLAIR. They went to work, and were set up in business by the Farm Board. They were given all the capital they had to start with, and it was given by the Farm Board.

Mr. HART. Do you still say they are an instrumentality of the Government?

Mr. SINCLAIR. No; I do not say that. They did owe the Government a considerable sum of money. The Government Farm Board was not able to go on

Mr. HART (interposing). They had the Stabilization Corporation. Mr. SINCLAIR. They had this corporation.

Mr. HART. It was the Wheat Stabilization Corporation.

Mr. SINCLAIR. The Grain Corporation took over, as a secondary affair, the holdings of the Stabilization Corporation.

Mr. HART. The theory that the Government worked on was that they would have a supercorporation to buy up the small independent cooperatives throughout the country. They were going to handle cash grain.

Mr. SINCLAIR. Yes.

Mr. HART. As a matter of fact, they became speculators on the Board of Trade. They bought a bucket shop at Omaha with Govern

ment money.

Mr. SINCLAIR. They started out to stabilize the market.

Mr. HART. The manager of the Stabilization Corporation was the manager of the Farmers' National.

Mr. SINCLAIR. Yes. I happened to have discussed that with the late Alexander Legge. Since he is dead, I do not know that I ought to say anything about that. He said the reason the Farm Board tried to fix the price at $1.25 for wheat was because of the business interests that demanded it.

Mr. HART. Of which his was the largest.

Mr. SINCLAIR. Perhaps so. He said there would have been a good many closed banks, and, in fact, that the banks in every grain center would have been closed if they had not maintained that price. Mr. HART. That was a fine alibi.

Mr. SINCLAIR. You can take that for whatever it is worth, but subsequent developments showed that a good many of those banks did close.

Mr. HART. They did close.

Mr. SINCLAIR. Yes; because they were carrying large grain interests. Mr. HART. Now, with reference to your statement that the Government had a definite policy, when the short seller goes into the Chicago market, it is his definite policy to sell the market down, is it not? Mr. SINCLAIR. Yes.

Mr. HART. If he is not able to do it, he loses his money.

Mr. SINCLAIR. Yes.

Mr. HART. Then, the speculator has just as definite a policy when he goes into the market as the Farm Board or Stabilization Corporation.

Mr. SINCLAIR. I do not know what the motives of the Farm Board are, but I do know this, that they were operating in the most distressing times in the business of this country and the business of the world. I know that. I happen to have had some wheat at that time on which I lost considerable money.

Mr. CANNON. Does the Government in any way, either directly, or indirectly, affect transactions on the exchanges in corn and wheat? Dr. DUVEL. On the grain exchanges, we require reports. These have some check on the extent to which they will trade. We have had, for example, a working agreement with the Chicago Board of Trade to put a check on them at 5,000,000 bushels.

Mr. CANNON. That has had what affect?

Dr. DUVEL. It prevents sometimes excessive selling or excessive buying, when they get too large a line.

Mr. CANNON. While at the World's Fair last summer, I went down to the stock exchange and bought a carload of corn to feed some cattle I had. I had been buying corn at 60 cents; I bought this at 46 cents, and felt that I was stealing it. I found out afterward, however, that they were taking me for a ride. The day I was there, they did an unprecedented thing. They closed the exchange, and held an executive session to which outsiders were not admitted. I took it for granted that the Government had some hand in it, and I was wondering if it was done on the initiative of the Federal Government.

Dr. DUVEL. I think not. The impression has been given out that that was done on the Government's order, but I think that is not correct.

Mr. CANNON. What is supposed to have transpired in the executive session after they excluded visitors from the floor and gallery?

Dr. DUVEL. The exchange was closed on July 21. That was the day following the drastic break. It broke about 12 cents, I think, on the 19th and an equal amount on the 20th. On the 21st the exchange was closed. On the 22d it was closed except for 15 minutes when they cleaned up privileges.

Mr. CANNON. What was the purpose of that?

Dr. DUVEL. That is about as much of a mystery to me as it is to you. Mr. SANDLIN. Perhaps they were looking over the books to see where they were at.

Dr. DUVEL. They had that situation in the market. There had been very large speculative activity over a period of several weeks, particularly during the last few days prior to the collapse. Until the middle of July there had been a very sharp advance in prices, and the market was overbought. When it collapsed on those 2 days, there was a good deal of wheat in distress. If that market had not been closed, and an opportunity given to clean up those matters and make adjustments, the prices could have gone almost anywhere, and probably there would have been a lot of people who would have gone along with them.

Mr. HART. Going back to the subject of short sellers, do you think that an operator who is taking the short side of the market, when that side is not justified by the statistical position of the grain he is handling, and not justified by the economic conditions, will come to grief? Do you not think he will come to grief very quickly?

Dr. DUVEL. Yes, sir; the chances are that he will.

Mr. HART. No matter how long a line he sells short?

Dr. DUVEL. That would depend again on how much he sells, what the condition of the market is, and to what extent the public is in. Let me illustrate that this way: I asked one of the largest speculators in wheat to what extent he watched the supply and demand and the general situation. His answer, as I recall it, was something like this: "Not a great deal; that does not interest me very much; the only thing I am particularly interested in knowing is where the general public is in the market." He said, "Then, I know what to do."

Mr. HART. If he general public is on the short side of the market, it has been said that a million Frenchmen cannot all be wrong. If the general public is on the short side

Dr. DUVEL (interposing). They do not come in on the short side, but they are on the long side.

Mr. HART. Then, this man must be a bull operator.

Dr. DUVEL. He was one of those who operated either way. It made no difference to him.

Mr. HART. He did not go with the general public on the short side, because the general public does not go on the short side. Therefore, he is always against them.

Dr. DUVEL. He usually was a short seller.

Mr. HART. Then, he took the opposite side from the general public, did he not?

Dr. DUVEL. As a general rule, that is what they do.

Mr. HART. He takes the opposite side from the general public, no matter which side they are on.

Dr. DUVEL. For the period from April 30

Mr. HART (interposing). That would show a down market.

Dr. DUVEL. Yes, sir; that was a down market. During that period the big speculators were on the short side.

Mr. HART. Do you not think that the general public was on the short side, too?

Dr. DUVEL. No, sir.

Mr. HART. I go on the exchange, and we handle the commodities as cash because we have to. We are dealing with them, and I am bound to be on the long side when I use it as a straight merchandising busiNow, unless I get out and start back on the short side of the market, I am always long.

ness.

Dr. DUVEL. I am speaking of the general public. They are usually long. They are about 80 percent long.

Mr. HART. Eighty percent were wrong, then, were they not?
Dr. DUVEL. Usually about 80 percent are wrong, too.

Mr. HART. What I an trying to develop here is this: If the statistical position of grain as it is indicated to exist at the time, should show a decline, and all the economic factors indicate a down market, the short sellers would not reap a harvest, would they?

Dr. DUVEL. A lot of times they do not.

Mr. HART. Whether or not they are successful depends largely on whether they are going with the tide. In other words, if they judge which way the tide is flowing, and go along with it, they make money. Dr. DUVEL. They do. That is what they do.

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