TO INVESTIGATE THE CAUSES OF THE DECLINE OF COTTON PRICES MONDAY, FEBRUARY 17, 1936 UNITED STATES SENATE, COMMITTEE ON AGRICULTURE AND FORESTRY, Washington, D. C. The committee met, pursuant to call, at 10:30 a. m., in the committee room, 324 Senate Office Building, Senator Ellison D. Smith (chairman) presiding. The CHAIRMAN. The committee will come to order. Pursuant to a resolution passed by the Senate this committee was authorized to investigate the cotton situation, particularly as it pertains to the activity of the exchanges, the immediate cause of the resolution being introduced and passed was the break that occurred on March 11, 1935. After the investigation had been begun by those appointed_by the committee to gather the facts, it became apparent that other influences than those suspected by the committee had, perhaps, contributed materially to the condition existing in the market, and which also contributed materially to the decline, the unusual decline on March 11. The committee appointed Mr. Alfred S. Wyllie as their chief attorney, Mr. Levi H. David, and later on, after the resignation of one who had been appointed, Mr. Pickens was appointed. These gentlemen were authorized to investigate all phases that they thought were pertinent to this question. They have done so. They are now present with their findings, and I want to ask the committee as we open this investigation to allow Mr. Wyllie to proceed with his examination of such witnesses as he sees fit on direct examination, in order to have the record conform as nearly as possible to the questions that he will ask and the answers that are made. Later on, of course, there will be an opportunity given to examine the facts and the answers as given. It is not necessary for me to state to this committee or to those present that there is perhaps no production in America that affects the economic and financial life of America in a greater degree than the production of American cotton and its sale and distribution. Now, Mr. Wyllie, you may proceed as you think best. 1 STATEMENT OF ALFRED S. WYLLIE, ATTORNEY FOR THE COMMITTEE ON AGRICULTURE AND FORESTRY, UNITED STATES SENATE Mr. WYLLIE. Mr. Chairman and members of the committee, I first want to offer Senate Resolution 103, Seventy-fourth Congress, first session. This is the resolution under which this investigation was begun, and provides for an investigation into the causes of the rapid decline in the price of cotton on the cotton exchanges on or about March 11, 1935. (The resolution referred to follows:) [S. Res. 103, 74th Cong., 1st sess.] RESOLUTION Resolved, That the Committee on Agriculture and Forestry, or any duly authorized subcommittee thereof, is authorized and directed to investigate the causes of the rapid decline of the price of cotton on the cotton exchanges on or about March 11, 1935. The committee shall report to the Senate, at the earliest practicable date, the result of its investigations, together with its recommendations. For the purposes of this resolution the committee, or any duly authorized subcommittee thereof, is authorized to hold such hearings, to sit and act at such times and places during the sessions and recesses of the Senate in the Seventyfourth Congress, to employ such clerical and other assistants, to require by subpena or otherwise the attendance of such witnesses and the production of such books, papers, and documents, to administer such oaths, to take such testimony, and to make such expenditures, as it deems advisable. The cost of stenographic services to report such hearings shall not be in excess of 25 cents per one hundred words. The expenses of the committee, which shall not exceed $10,000, shall be paid from the contingent fund of the Senate upon vouchers approved by the chairman. Mr. WYLLIE. I next want to offer for the record Senate Resolutions Nos. 125 and 172, Seventy-fourth Congress, first session. These resolutions together broadened and widened the scope of our investigation so as to permit us not only to inquire into the rapid decline in the price of cotton on the exchanges on March 11 but to go further and in a general sense inquire into whether there had been any manipulation or arbitrary influences acting upon the cotton markets, either before or subsequent to March 11, the effect of which was to prevent the orderly marketing of our crops and to prevent the operation of the law of supply and demand. (The resolutions referred to follow :) [S. Res. 125, 74th Cong., 1st sess.] RESOLUTION Resolved, That in addition to the authority conferred upon the Committee on Agriculture and Forestry, or any duly authorized subcommittee, thereof, under Senate Resolution Numbered 103, Seventy-fourth Congress, first session, agreed to March 16, 1935, the committee, or any duly authorized subcommittee thereof, shall have authority to investigate, with a view to determining whether there has been any manipulation, direct or indirect, of the cotton markets, or any undue influence thereupon in connection with the issuance or publication of cotton reports or statements, (1) the causes of the decline of the price of cotton on the cotton exchanges prior to March 11, 1935, and (2) the activities of the Department of Agriculture, cotton exchanges, cotton merchants, cotton millers, bankers, and any other persons, firms, or corporations connected with the cotton business. [S. Res. 172, 74th Cong., 1st sess.] RESOLUTION Resolved, That in addition to the authority conferred upon the Committee on Agriculture and Forestry, or any duly authorized subcommittee thereof, under S. Res. 103, Seventy-fourth Congress, first session, agreed to March 16, 1935, and S. Res. 125, agreed to May 7, 1935, the committee, or any duly authorized subcommittee thereof, shall have authority to investigate, with a view to determining whether there has been any manipulation, direct or indirect, of the cotton markets, or any undue influence thereupon in connection with the issuance or publication of cotton reports or statements, (1) the causes of the decline of the price of cotton on the cotton exchanges on, prior, and subsequent to March 11, 1935, and (2) the activities of the Department of Agriculture, cotton exchanges, cotton merchants, cotton brokers, cotton millers, bankers, and any other persons, firms, or corporations connected with the cotton business, on, prior, and subsequent to March 11, 1935. The said committee shall report to the Senate at the earliest practicable date the result of its investigation together with its recommendations for the enactment of necessary legislation. For the purpose of this resolution and Senate Resolutions 103 and 125, the said committee, or any duly authorized subcommittee thereof, is hereby authorized to hold such hearings, to sit and act at such times and places during the sessions and recesses of the Senate in the Seventy-fourth Congress, to employ such clerical and other assistants, to require by subpena or otherwise the attendance of such witnesses, and the production of such books, papers, and documents, to administer oaths, to take such testimony, and to make such expenditures as it deems advisable. The cost of stenographic services to report such hearings shall not be in excess of 25 cents per one hundred words. The limit of expenditures to be made under the authority of this resolution, as well as under the aforesaid Senate resolutions 103 and 125, is hereby increased by $12,500, and shall be paid from the contingent fund of the Senate upon vouchers to be approved by the Chairman of said Committee on Agriculture and Forestry. Mr. WYLLIE. The next resolution, and the last one, is Senate Resolution 182, Seventy-fourth Congress, first session. This resolution simply provided for an additional appropriation with which to carry on the work, and contains the further provision that the investigation shall not cover transactions beyond July 31, 1935. (The resolution referred to follows:) [S. Res. 182, 74th Cong., 1st sess.] RESOLUTION Resolved, That S. Res. 103, agreed to March 16, 1935, and S. Res. 125, agreed to May 7, 1935, and S. Res. 172, agreed to July 30, 1935, Seventy-fourth Congress, first session, are hereby continued in full force and effect, and that the limit of expenditures that may be made under authority of such resolutions is hereby increased by $50,000 and shall be paid from the contingent fund of the Senate upon vouchers to be approved by the Chairman of the Senate Committee on Agriculture and Forestry: Provided, That the investigation shall not cover transactions beyond July 31, 1935. Mr. WYLLIE. Having offered these resolutions, Mr. Chairman, I desire to proceed directly with the examination of the witnesses. I wish to call Mr. W. L. Clayton. TESTIMONY OF W. L. CLAYTON, COTTON MERCHANT, HOUSTON, TEX. The CHAIRMAN. Mr. Clayton, will you give your name, your address, and occupation? Mr. CLAYTON. W. L. Clayton. I reside in Houston, Tex. I am a cotton merchant. The CHAIRMAN. Now, Mr. Clayton, before you start to give your testimony I want to administer the oath. Each of the witnesses will be sworn. (Mr. Clayton was thereupon sworn by the chairman.) Mr. WYLLIE. Mr. Clayton has already stated his name and residence. Now, Mr. Clayton, I will ask you to give a very brief history of yourself, the date and place of your birth, when you first became connected with the cotton business, what positions and what associations you have had since then, and what are your present associations. Mr. CLAYTON. I was born in Tupelo, Miss., on the 7th of February 1880. My first connection with the cotton business was as stenographer with Jerome Hill Cotton Co. in St. Louis, Mo., in 1895. From there I went to New York a year later, and for the next 4 years, with a break of perhaps a year or 18 months-for the next 8 years, I should say-I was associated with the American Cotton Co. in New York in various capacities. In 1904 I went to Oklahoma City, Okla., and organized the firm of Anderson, Clayton & Co., with a brother-in-law, Mr. F. E. Anderson, and his brother, Mr. M. D. Anderson. A year later my brother was admitted to the firm. Mr. WYLIE. That is the firm of Anderson, Clayton & Co.? Mr. CLAYTON. Yes. Mr. WYLLIE. Have you been connected with other firms or are you now? Mr. CLAYTON. With associated firms; yes. I am a member of the firm of D. F. Pennefather & Co., Liverpool, England. I am a member of the firm of Anderson, Clayton & Fleming of New York. Mr. WYLLIE. Are you connected with any corporation in which you hold a substantial stock interest? Mr. CLAYTON. Yes; I am a stockholder and director in Anderson, Clayton Securities Corporation, in which I hold a substantial stock interest. Mr. WYLLIE. Is that an operating or a holding company? Mr. CLAYTON. It is a holding company. Mr. WYLLIE. Anderson, Clayton & Fleming, I believe, is a partnership? Mr. CLAYTON. It is. Mr. WYLLIE. Through which you handle most if not all of your transactions on the New York Cotton Exchange? Mr. CLAYTON. Yes; we handle most of them through Anderson, Clayton & Fleming, you might say all of them, and they do business with other brokers there. Mr. WYLLIE. What is the set-up of the concern of Anderson, Clayton & Co.? Is that a partnership or an association? |