For the last 2 or 3 years for the first time in my knowledge of cotton, all bullish elements-that is, all elements that looked to the rise of cotton-were interpreted as bearish influences. It has been the deadest dead thing for the last 5 or 6 years. It was like the old doctor in predestination:

I can and I can't, I will and I won't,

Be damned if I do and damned if I don't.

Nothing helped it. Nothing hardly depressed it except that break in March, which was a determination-well, I won't say that, but anyhow it got down, it broke down to where it put the Government to shame, at least. They acted like they were particeps criminis, and I don't know-it wouldn't have broken if anybody had been there as friends of the market, because conditions did not justify any such absurd thing as happened. We will get into that a little later on. We don't want a nice bucket of whitewash for this sort of business. We have got to go to the bottom of this thing before we have done with it. There never was a condition, I want to state to my colleagues on the committee-and I won't break out any more until I get hot again [laughter]-there never was a time when everything was more propitious for a rise in the price of cotton. There is the Senator from Tennessee sitting here. He is from a State that not only produces cotton but from one of the great cotton centers of the country. The Government had loaned a certain amount of money on 4 or 5 million bales. The prospects were for not to exceed a crop of 12,000,000 bales of cotton. Exports had gradually increased. Things looked pretty good. Then somebody got tired waiting for cotton to move up from 12 cents, and the poor old dead market just broke and fell down, like an old pair of stables I had out in my field. It didn't have anything in it, and the foundation rotted out from under it and it just fell of its own weight. Nobody pushed it. It just fell down. The idea of a great world market dealing with the greatest commodity the world produces, that just rotted and fell down. Nobody touched it. Nobody had anything to do with it. It just fell down from dry rot, but it recovered splendidly around 10 cents. Yes, sir. They got some new sills and new foundations and uprights and supports around 10

cents.

Go ahead, Mr. Clayton. I beg pardon for butting in, but I will later, I hope, to some effect.

Mr. CLAYTON. Unquestionably the break of March 11 served to put a good deal of American cotton into consumption which otherwise would have remained in stock.

As an example of this, the sales of American cotton by my firm for the 8 days prior to this break totaled 25,276 bales, or an average of about 3,160 bales per day.

Our sales for the 8 days immediately following the break were 90,840 bales, or an average of about 11,355 bales per day.

Mr. WYLLIE. Now that statement, Mr. Clayton, is in substance what was given out to the press, is it not?

Mr. CLAYTON. There are some things-you mean that I gave out to the press?

Mr. WYLLIE. Well, what went out to the press.

Mr. CLAYTON. Yes; there is a good deal in that, Mr. Wyllie, that appeared in the press.

Mr. WYLLIE. You are familiar with the statement that went out to the press, are you not?

Mr. CLAYTON. Which statement?

Mr. WYLLIE. The statement that the press got, whatever it is.
Mr. CLAYTON. After the break, you mean?

Mr. WYLLIE. No; several days ago.

Mr. CLAYTON. Oh, I didn't understand you. Yes; that is sort of a digest of this section 1.

Mr. WYLLIE. Well, as a matter of fact, the statement that went out to the press was prepared by you or under your supervision, was it not?

Mr. CLAYTON. It was not prepared by me.

Mr. WYLLIE. It was under your supervision or with your knowledge and consent?

Mr. CLAYTON. With my knowledge and consent; yes, sir. I will say, Mr. Wyllie, in reference to that, that I had every reason to believe that I would be permitted when I came here on the first day, to present this statement to the committee, and a digest was made of it and given to the press, and it was too late to stop it when it developed hat I would not be permitted to make my statement.

Mr. WYLLIE. Well, in being permitted to make it today we have enabled you to make good with the press, although of a different date. Isn't that right?

Mr. CLAYTON. Yes; thank you, sir. That puts me all right now on section 1.

Mr. WYLLIE. From the statement you have read, Mr. Clayton, I infer that you attribute the decline on March 11 primarily to governmental activities which had already occurred, or fear of governmental activities which might or might not occur in the future? Is that correct?

Mr. CLAYTON. The decline was due, Mr. Wyllie, to speculative longs attempting to liquidate, and their attempt, I judge, was induced by some kind of lack of confidence, and I think The New York Times and Mr. Revere, in the parts which I have read here, have outlined the origin of that fear and lack of confidence.

Mr. WYLLIE. Lack of confidence and fear of what?
Mr. CLAYTON. In the price level of cotton.

Mr. WYLLIE. Due to what?

Mr. CLAYTON. Due to numerous statements emanating in Washington from different Senators and different officials of the Agricultural Adjustment Administration regarding Government policies, in many cases of a contradictory nature, and as a matter of fact at that time and for some time prior thereto the market was a Government affair. There was no market in the traditional sense that a market is made by trading which comes from a study of the law of supply and demand. The market was made largely on moves and statements by the Government and Government officials.

Senator NORRIS. Mr. Wyllie, will you let me ask a question there? Have you any knowledge as to the accuracy of these purported statements coming from the Government?

Mr. CLAYTON. No; I have not, Senator.

Senator NORRIS. It may have been, then, for all you know about it, that these statements were unwarranted?

Mr. CLAYTON. Quite so. It may have been that they were mere

rumors.

Senator NORRIS. So that, as far as that influenced the market, it might have been beyond the power of the Government to stop it? It might have been made by someone who was interested in breaking the market?

Mr. CLAYTON. It is barely possible, Senator Norris.

Senator NORRIS. I don't know.

Mr. CLAYTON. I don't either. But in many cases these statements were interviews giving the name of the gentleman who was making

the statement.

Senator NORRIS. Even that, I have found from my experience, cannot always be relied on, and sometimes the persons who are purported to have been interviewed do not correct it afterward because they hate to get into a controversy. It may be, as I understand it, that whatever influence that may have had, if any, on the break, it may have come from sources that are unreliable or from someone who had an interest in trying to bring about the break.

Mr. CLAYTON. That is conceivable, Senator Norris; but I want to call your attention to this fact: That the main thing that unsettled confidence at that time, and the thing about which there was the greatest amount of discussion and speculation in that sense, was the question as to whether the Government would extend the 12-cent loan, or, rather, renew the 12-cent loan, on cotton for the season

1935-36.

Senator NORRIS. There was no definite authority that could give authoritative information on that subject, was there?

Mr. CLAYTON. I don't think there was. There were a good many statements of opinion here and there by people more or less in authority to express themselves, but there certainly was nothing authoritative that was announced at that time. And I will point out to you also that in the end the Government did not renew the 12cent loan in the following season. Of course, throughout that whole period, beginning about the middle of February, I think, the discussion in the cotton trade among the mills, speculators, and so on, was largely centered on that question: Will the Government lend 12 cents on cotton next season? Because everybody understood that it was the 12-cent loan which was holding the market at that time, and they feared that if the 12-cent loan would be discontinued or perhaps dropped to 10 cents, the market would drop to 10 cents. So that there was existent in the trade the deepest concern about that matter, and everybody was talking about it and wondering about it.

Mr. WYLLIE. Mr. Clayton, you referred to having a scrapbook in which you have collected a number of newspaper clippings and probably some other memoranda relative to the reports that were coming out about or before March 11.

Mr. CLAYTON. Yes, sir.

Mr. WYLLIE. Have you that book with you?

Mr. CLAYTON. I believe I have it at the hotel-one of them, any

way.

Mr. WYLLIE. Would you allow our organization to look over that? Mr. CLAYTON. Yes, sir; certainly.

Mr. WYLLIE. Now, there are one or two questions that I want to ask you, Mr. Clayton, with reference to certain portions of your testimony on Monday, February 17, one of which was the question of farm operations, which you clarified in your testimony this morning. In connection with that, will you tell us what would be the approximate acreage which you have under lease in Brazil, and the approximate production of that acreage?

Mr. CLAYTON. We have none under lease in Brazil.

Mr. WYLLIE. In Mexico. I beg pardon.

Mr. CLAYTON. I think it is about 6,000 acres, and they grow cotton and wheat.

Mr WYLLIE. I only referred to the cotton.

Mr. CLAYTON. I think the largest crop of cotton has been around 3,000 bales, 3,200-something like that.

Mr. WYLLIE. Another question I asked you on Monday was what, if any, bank-stock holdings you may have had, and you answered 10 shares in some southern bank.

Mr. CLAYTON. Yes, sir.

Mr. WYLLIE. Did that include any holdings that might have been held by your holding corporation and other interests?

Mr. CLAYTON. Anderson, Clayton Securities Corporation is a holding corporation only of the stock of Anderson, Clayton & Co., jointstock association. Anderson, Clayton Securities Corporation does not now and never has owned any stock in any other corporation.

Mr. WYLLIE. I just wanted to clarify the proposition as to whether your answer included every firm or association or corporation in which you hold a controlling interest?

Mr. CLAYTON. It does, sir. So far as I know, none of them own a single share of bank stock, and the only stock I have, or any member of my family has, is 10 shares in the Second National Bank of Houston.

Mr. WYLLIE. I just wanted to get that clear. And from now on, Mr. Clayton, wherever the word "you" is applicable to your corporations, firms, and associations, I wish you would so understand it, and in answering questions include any holdings or other activities of your corporations and firms.

Mr. CLAYTON. Very well.

Mr. WYLLIE. I do not, every time I ask the question, want to ask the same question with reference to your corporations, your associations, or your firms.

Mr. CLAYTON. Yes, sir; I understand you.

Mr. WYLLIE. Getting back to the question of the break of March 11 and the statement which you have just read, and in which you expressed your reasons for the causes of the decline on that date, I will ask you now to state whether you have any suggestions to offer as to what could be done to prevent a recurrence of a similar situation in the future.

Mr. CLAYTON. Mr. Wyllie, as long as there is a cotton market there will be fluctuations and at times severe breaks. Of course, we can go back through the history of the cotton business and you will find numerous breaks of that extent and greater. Of course, one that comes to us all at once is the break about February 1, 1917, when Germany announced her unrestricted submarine warfare, and the market went down 5 or 6 cents a pound.

Mr. WYLLIE. Those were more economic conditions rather than temporary conditions.

Mr. CLAYTON. Of course, that was a war condition. I am just making the point that a break really of 2 cents a pound in the market, which is a little over 10 percent, while it is a severe break and is regrettable, and so on, it is likely to occur in the future no matter what you do. We have advances also of the same amount. We have had them. I don't think that we are going to have a healthy cotton market until the Government gets out of it. We will never have a healthy cotton market again until it is left to the law of supply and demand, and to the free and open trading of people, of sellers and buyers and consumers of cotton.

Mr. WYLLIE. Well, you would not go so far as to say that the Government is the only obstruction to a free and open market, would you?

Mr. CLAYTON. It is the only obstruction of which I am aware. And I make this point to you, that even if there were other trading by large traders which might affect the market, trading by private interests never disturbs the market so much as trading of a government or actions of a government, which influence the market because the Government is so powerful that, as we saw in the Farm Board, losses of $50,000,000 or $100,000,000 are nothing. I mean they can go right on. That would, of course, stop any private individual. And not only that, but people who are interested in the market, interested in the commodity and would like to trade, can never appraise the motives of Government. The Government has no policy. They are liable to have one thing today and another next week. With private concerns operating in the market, people who are trading can form some idea about what the object is or what the trend is, but you can't do that with the Government.

Mr. WYLLIE. Well, private operators also have the right and privilege of changing their minds and reversing their operations.

Mr. CLAYTON. Indeed, yes; but they usually have some very good reason for doing it.

Mr. WYLLIE. That is not always published, however.

Mr. CLAYTON. No; it is not always published.

Mr. WYLLIE. So after all it is more a question of size than it is a question of who is carrying on the operation?

Mr. CLAYTON. I don't think so. Of course, it is a question of size too, but from my point of view a government has no business in the cotton market, and I think that is the point of view of most men.

Senator NORRIS. Do you think the Government ought not to have made the loan, for instance?

Mr. CLAYTON. I certainly think they should not have, Senator Norris.

Senator NORRIS. They ought to have stayed out entirely?

Mr. CLAYTON. I think so.

Senator NORRIS. Of course, you do not dispute the fact that the Government went into it honestly, with a good motive?

Mr. CLAYTON. Absolutely, of course. And I say I do not dispute it. I agree that they had the best motives in the world.

Senator NORRIS. But you think it was a failure and ought not to have been done?