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Senator CARAWAY. What personally do you think about it?
Mr. RADER. What is that?

Senator CARAWAY. What position do you hold?

Mr. RADER. I am secretary of the Merchants' Exchange of St. Louis.

Senator CARAWAY. That is a board of trade in which whatever short selling and long selling occurs takes place?

Mr. RADER. In St. Louis; yes, sir.

Senator CARAWAY. You handled how much purely speculative grain last year? You said you had 70,000,000 bushels, did you not? Mr. RADER. Cash grain.

Senator CARAWAY. How much short selling?

Mr. RADER. In the future trading, between ten and twelve million, I would think, off hand.

Senator CARAWAY. No more than that?

Mr. RADER. No. We do not deal in volume like the other markets, Senator.

Senator CARAWAY. I thought a while ago you said 500,000,000.
Mr. RADER. I was speaking of $500,000,000.

Senator CARAWAY. Your market, then, so far as trading in futures is concerned, is practically negligible?

Mr. RADER. It does not handle a volume like Chicago and Kansas City.

Senator CARAWAY. And you do not find it necessary to handle 70,000,000 bushels of spot-cash wheat? You do not find it necessary to sell three or four times that much futures?

Mr. RADER. It may be and it is probable that our cash people, due to the small volume in our pit, trade in other markets. We have no control over that.

Senator CARAWAY. To support your local market you do not find it necessary to have a great volume of speculative selling?

Mr. RADER. We have been trying to get that volume, but we have not been able to get it.

Senator CARAWAY. What is the reason?

Mr. RADER. Because, frankly, our market is such that it is not broad enough for the great speculative element, and the traders have left our market.

Senator CARAWAY. What do you mean by the speculative element, please, sir?

Mr. RADER. I will say to you, Senator, that there are a number of wire houses throughout the country in every little community— Senator WHEELER. What do you mean by that?

Mr. RADER. They correspond to a brokerage house. We call them wire houses.

Senator CARAWAY. Most States have legislation against bucket shops and brokerage shops. You call them wire houses?

Mr. RADER. You may call them whatever you please. They are simply agencies that take orders and put them into these markets. Every class of people trade from those various houses. It is the great speculative element that

Senator CARAWAY. That is, the country speculative element? Mr. RADER. It is in the cities and the country and everywhere. Senator CARAWAY. But the great traders on the market are the professional traders?

Mr. RADER. Not in St. Louis. I can only speak for St. Louis.
Senator CARAWAY. But you know that of common knowledge?
Mr. RADER. I have heard that.

Senator CARAWAY. You believe it, don't you?

Mr. RADER. Not entirely. I do not believe everything I hear, because I think there are a lot of people that are misinformed.

Senator CARAWAY. What is the volume of speculative trading in Chicago on the board of trade, in wheat, if you know?

Mr. RADER. That was testified to this morning, I think, by Doctor Duvel.

Senator CARAWAY. You believed him, did you not?

Mr. RADER. I have no reason to disbelieve him.

Senator CARAWAY. Well, what was it?

Mr. RADER. I believe he said 12,000,000,000, I think, was about the average. Is that right, Doctor?

Doctor DUVEL. About the average; yes.

Senator CARAWAY. How much is the production in this country? Doctor DUVEL. About 800,000,000 to 850,000,000.

Senator CARAWAY. How much more, then, do they sell than they have? How many times-about 15 times?

Doctor DUVEL. About 15 times?

Senator CARAWAY. You think that is helpful?

Mr. RADER. I will answer you by saying that trading such as you have spoken of there makes a more liquid market; that through that it makes it possible for the producer, first, to have the price published broadcast so that every man in the country knows what it is worth. It gives that liquidity that makes it possible for a farmer to drive up to the elevator

Senator CARAWAY. Oh, just give us credit for knowing "Horn-book" things. Don't just start in like we had just heard about it to-day for the first time. We want information. Does that great volume of trading affect the price?

Mr. RADER. It is affected by the public interest.

Senator CARAWAY. The public interest is the speculative interest.. You do not think that the whole public is interested in your specula-tive market, do you?

Mr. RADER. I think the Supreme Court has said that it was affected with a public interest.

Senator CARAWAY. I know what it said that if you sold and theother fellow bought and neither one of you intended to actually handle it, you were engaged in gambling. You knew that, didn't you?

Mr. RADER. They also said that when a man

Senator CARAWAY. That is not the question I asked you. You know that that is gambling, don't you? The Supreme Court of Missouri said that the other day.

Mr. RADER. That was an individual case. I do not know what that was.

Senator CARAWAY. You just know certain things, and beyond that you do not go.

Mr. RADER. I am trying to answer your questions, Senator.

Senator CARAWAY. Oh, no; you are not, with due deference to you. If a man undertakes to sell what he has not got and never expects to have, and somebody says, "I will buy it, though I never

expect to take it," they are gambling, according to the Supreme Court of Missouri and according to the Supreme Court of the United States. The Supreme Court of the great State in which you live has said that.

Mr. RADER. If the supreme court says so, that is final, I suppose. Senator CARAWAY. If you know anything about it, you know it said that.

Mr. RADER. No; I don't know that it said that.

Senator CARAWAY. Oh; what is the use!

(Witness excused.)

STATEMENT OF JOHN VESECKY, PRESIDENT, THE SOUTHWEST COOPERATIVE WHEAT GROWERS ASSOCIATION, KANSAS CITY,

MO.

The CHAIRMAN. Please state your name and occupation for the record.

City, Mo.

Mr. VESECKY. My name is John Vesecky; I am president of the Southwest Cooperative Wheat Growers' Association, Kansas Senator FRAZIER. Is there any one here representing the Chicago Board of Trade?

Senator CAPPER. They testified previously, and they will put a brief into the record also.

Mr. VESECKY. I live at Kansas City, Kans.

Senator CAPPER. Mr. Chairman, I would like to say that I knew this gentleman first as a wheat grower in Rush County, and for a good many years he has been in the thick of the fight in Kansas. For some time he has been very active in the Farmers' Union and is now manager of the cooperative movement in our part of the country. He has done great work in developing the cooperative move

ment.

I think it is only fair to make that statement.

The CHAIRMAN. You may proceed.

Mr. VESECKY. I shall not take much time. You folks are very busy, I know.

We are in favor of the bill

Senator CARAWAY. I want to ask you why. Because it limits short selling?

Mr. VESECKY. Yes.

Senator CARAWAY. You think that short selling is an evil?

Mr. VESECKY. I do, Senator.

The reason we are in favor of this bill is that we believe there should be some regulation, some public agency that would have something to say about the rules of the board of trade. The folks that are members of the board of trade express the idea that they are not responsible to anybody but themselves, largely. That is a mistake, because the prices that are registered on the Kansas City Board of Trade, for instance, are the prices that are paid for grain all over Kansas and all over Missouri, and it is a matter of public interest and it ought to be regulated more or less by some agency.

Senator CARAWAY. Why ought they to regulate it?

Mr. VESECKY. Because there are many rules that are passed by the board of trade that are not good for the public interest.

Senator CARAWAY. In other words, this buying of something that you never expect to have and selling something you do not have is hurtful?

Mr. VESECKY. Absolutely.

Senator CARAWAY. Why not exterminate it?

Mr. VESECKY. There are other things

Senator CARAWAY. You do not answer my question. If it is an evil, why not stop it?

Mr. VESECKY. Personally, Senator, I think short selling ought to be stopped entirely; but there are a good many members of our association who are still not quite certain of it.

Senator CARAWAY. You would feel sort of sorry for them?
Mr. VESECKY. I do.

Senator CARAWAY. So do I.

Senator CAPPER. You spoke about the rules of the Kansas City Board of Trade. As a matter of fact, how many cooperatives, the producers and the sellers, have anything to say about what the rules are to be in the Kansas City Board of Trade?

Mr. VESECKY. There are about eight memberships in the KansasCity Board of Trade that are owned by cooperatives.

Senator CAPPER. Out of about how many?

Mr. VESECKY. Oh, somewhere about two or three hundred. I do not know just how many there are.

Take, for instance, December 24: There was a ruling made by the clearing house association that the margins put up on all trades in May wheat-and that is what the Farm Board is working onthat the margins should be increased over what they generally had been up to 10 cents a bushel on trades above a certain amount. This was not done to protect the public interest. This was done, I am positive, to fight the Farm Board because it would do the very thing that was spoken about a while ago. It was this higher margin that would tend to keep the public out of the speculation that they talk about, because they could not put up sufficient margins. I understand the Chicago Board of Trade has a rule that the margin should be 25 per cent after you buy a certain amount. That would tend to reduce buying and keep the public from helping the Farm Board raise the price. It was not done, certainly, to help raise the price; it was done to help lower the price and keep it down.

Senator NORRIS. I am curious to know why you pay a larger margin after you reach a certain point than you do at a lower point. Why not have the same margin all the way through?

Mr. VESECKY. The excuse is that a man, if he carries a heavy line, should have more money deposited in case the market should go up or down, so he could cover it.

Senator NORRIS. He would have it if he put up the same amount per bushel. In other words, if you and I were both buying and I bought a million bushels and you bought ten thousand bushelsthere may be a reason; I am only seeking information-why should I be required to put up 25 cents a bushel margin and you only 10 cents a bushel?

Mr. VESECKY. The only thing I see would be that they would suppose, with a membership in the Kansas City Board of Trade worth $8,000, and certain financial statements showing the worth of a person, that I or you or some one might be able to put up additional

margin in case the market should swing up or down a certain amount, and we might not be able to put it up for a million, or two million.

Senator NORRIS. What would be the evil if we were not able to put it up, except as it applies to us that would lose our money? How would the public interest be affected?

Mr. VESECKY. The clearing house would be affected. The clearing-house association stands in the position of a buyer or seller as to the other fellow on the other side, and the clearing house collects these margins both ways, and they would be affected.

Senator NORRIS. They would not lose any money, would they? Mr. VESECKY. They might.

Senator NORRIS. If a man did not put up his margin, they would sell him out. If 10 cents a bushel is enough, as a matter of fact, for a hundred bushels, why would not 10 cents a bushel be enough for 200 bushels?

Mr. VESECKY. As a rule, they do not make a practice of calling on you during the session. If your standing is sufficient, they will call on you at the end of the session to make a report and deposit in the clearing house or withdraw from the clearing house whatever amount of money you have coming

Senator WHEELER. They do not do that with the little fellows around over the country.

Senator NORRIS. No; they sell them out.

Mr. VESECKY. Of course, I never handle the futures business. That is not our line. We handle cash wheat and do not bother about future business.

Senator NORRIS. Do you hedge?

Mr. VESECKY. We do sometimes, Senator.

Senator NORRIS. I am interested to know why you hedge at one time and not at another.

Mr. VESECKY. It depends entirely on the market and what you want to do.

Senator WHEELER. What you think is going to happen?

Mr. VESECKY. If we take our wheat in and operate a pool, that is sold to be hedged. At any time we have cash wheat to sell, we sell cash. But the seasonal pool is spread over a whole year and is sold through the year.

Senator FRAZIER. When you sell cash wheat, it is sold as a hedge or takes the place of a hedge?

Mr. VESECKY. Yes.

Senator FRAZIER. As I understand it, the rates that went up from 2 cents a bushel to 10 cents a bushel were to compel the Farm Board or anybody else that bought in large amount to put up more money, five times as much money as they used to.

Mr. VESECKY. The excuse was that it would be more hazardous to go into the May option now than it was then; but that is just an excuse, because since the bottom is set entirely, it should not be hazardous to buy the May option now. If the Farm Board means what it says, or the Farmers' National or the Grain Stabilization Board, they will not permit Chicago May to go below 81; and what hazard is there in buying at 81, or above, more than it used to be before?

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