NEAPOLITAN NOBILITY IN THE SPANISH MONARCHY: THE PARLIAMENT OF THE KINGDOM OF NAPLES (1598-1642)

In 1921 the CBOT was confronted with a classic collective action problem, and exchanges struggled to present a united lobbying front. The ‘private wire’ question is one of the best examples of how the lack of unity at the CBOT could frustrate the Board’s lobby from achieving fully captured regulation in the interest of the exchanges. From the earliest days of the futures markets and the telegraph, offices were opened in the exchanges’ hinterland to solicit orders mostly from small speculators and sometimes small elevators who were hedging. This business was often funneled to the regional futures exchanges, but the largest commission merchants wanted to see the orders come directly to Chicago.

George McDermott, lawyer for the Kansas Grain Dealers’ Association, had complained about the wire ‘houses’, firms that took the orders in the countryside and filled them on the exchange floors, in the 1921 hearings, faulting such ‘private wires’ for encouraging gambling outside the major grain centres.⁵¹ Capper seized on this idea, blaming the private wire houses for

encouraging the small gamblers, who were playing in a rigged game.⁵² Internally, the Board was divided on the issue. An anti-private wire group at the CBOT had sent an amendment with over 200 member signatories – including some important members – for the approval of CBOT president Griffin, limiting private wire offices to major grain centres, but the Board took no action. ⁵³ These rebel members seized upon the statement by Representative Tincher that ‘95% of the pure gambling is done in the private wire houses which dot every State [...] Eliminate them and 95% of the pure gambling is done away with’.⁵⁴ They appealed directly to the chairman of the House Committee on Agriculture on 8 June 1921. The CBOT executive then became

concerned that the private wire question was dividing the membership, and – more importantly – that a ban on country wires would be bad for the overall business prospects of the exchange.

Consequently the executive coordinated a delegation to the Senate Agricultural Committee’s

51 US Congress, Senate, Futures Trading: Hearings of the Senate Committee on Agriculture and Forestry, 67^th Cong.

1^st Sess. p. 90.

52 New York Times, 19 August 1921.

53 Telegram, Gates to Griffin, 6 July 1921. CME III.ss1.7; Letter, Committee of Hoyt et al. to Honourable Geo W Norris, chairman, Senate Committee on Agriculture, 8 June 1921.

54 Ibid.

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hearings.⁵⁵ Before the official testimony, however, Gates privately communicated to the Committee the official stance of the executive. Gates provided evidence to the effect that country elevators and other grain men in the hinterland were supportive of the country wires in that they were more trusted as commission merchants than the Chicago-based membership,⁵⁶ and that:

The only discordant element to this official view is a self-constituted group of five or six members who [… for] purely competitive reasons are attempting to drive out the private wire, despite the admitted fact that it is a great modern facility used to expedite business.⁵⁷ Though the private wire ‘Hoyt’ group had garnered significant support, Gates countered that a pro-wire petition had been signed by almost twice as many members.⁵⁸ Partially due to the disunity amongst exchange lobbyists, the private wire section disappeared, reappeared and then disappeared again. Gates mounted a lengthy formal defense of country wires in a letter to the Senate Committee on Agriculture and Forestry dated 6 July 1921. He cited government reports as evidence that the country wires supported markets rather than contributed to

over-speculation:

The whole question of Private or Leased wires and their uses, has been the subject of two exhaustive investigations, one by the Interstate Commerce Commission, […] the other by the Federal Trade Commission Private or leased Wires are the principal avenue through which outside speculative support reaches the Grain Markets.⁵⁹

Gates further argued to the Senate Committee that the anti-wire house petition was ‘not in harmony with the avowed intent’ of legislators who wanted the Bill to favour farmer interests, and added that ‘the Secretary of Agriculture has testified in these hearings, that he considers interference with this leased wire system inexpedient at this time’.⁶⁰

The Senate Committee accepted the CBOT’s proposals almost entirely.⁶¹ Soon after, the House Committee removed the private wire section that Capper had somehow sneaked back into the

55 Ibid.

56 Handwritten letter, JJ Guild & Son, Illinois, to the CBOT president, 15 April 1921. CME III.ss1.7.

57 Letter, Griffin to Gates, Hotel Washington, 1 July 1921. CME III.ss1.7.

58 Letter, Gates to Senate Committee on Agriculture and Forestry, United States Senate, 6 July 1921. CME III.ss1.7.

59 Ibid.

60 Ibid.

61 Telegram, Gates to Griffin, 7 July 1921. CME III.ss1.7. Details in Letter, Gates, 1020 Munsey Building, Washington D.C., to Griffin, 7 July 1921. CME III.ss1.7.

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Senate version, and on 7 July the Capper-Tincher Bill was ordered out of the Senate Agricultural Committee with a unanimous favourable vote.⁶² In Washington, Gates reported to Griffin that Senator Capper had reneged on his agreement with the CBOT lobby and re-introduced the private wire section even after it had been removed when reported out of the House, as Capper wanted to appease the Kansas Grain Dealers Association and a group known as the ‘Kansas City boys’. Kansas City had ‘already gone on record […] against private wires’.⁶³ Wells wondered

‘whether all Kansas men are liars[…] I cannot see that Capper was in any way warranted in breaking his word and introducing the private wire feature into the Bill’.⁶⁴ Capper’s intention, however, was not to shut down markets or even eliminate speculation, but to reduce the harm that gambling could inflict on inexperienced smaller traders in the countryside. The private wire section could have, in his opinion, helped accomplish that goal.

In the event, the fight was not as difficult as expected. After examining the Bill just before the Senate convened on 8 July, Gates found that Capper’s last private wire amendment had little in common with the one so vilified by the exchange lobby. The new clause was:

As innocent and harmless as a new-born babe […] We figure that by making a general opposition to the Section and not calling attention to its form, will lead either to the

elimination of the paragraph or to its incorporation in the Bill in the form in which it appears above, either of which would be entirely satisfactory to us’.⁶⁵

The CBOT had won the fight on private wires, whether or not the clause was included.

The private wire Bill as amended by the so-called ‘anti-futures’ Capper was so benign as to have no impact on the CBOT’s business. Still the Board continued to lobby hard to ensure that the previous more restrictive language was not somehow re-incorporated. The CBOT was also pleased with other outcomes that stemmed from their aggressive lobbying. Certainly, the CBOT had a power base amongst Washington legislators, and it could count on Illinois Senator McCormick and Senators Nelson and Reed to work on its behalf.⁶⁶ Senator McNary, for

62 Newspaper clipping, Associated Press, “O.K. Given to ‘Futures’ Bill,” CME III ss1.7.

63 Letter, LF Gates to J Griffin, 7 July 1921. CME III.ss1.7.

64 Letter, FB Wells, Chamber of Commerce, Minneapolis, Minn, to Gates, 1020 Munsey Building, Washington, D.C., 8 July 1921. CME III.ss.1.8.

65 Letter, Gates to FB Wells, copies to J Griffin, and preceded by similar telegram to Griffin, 8 July 1921.

CME III.ss1.7.

66 Letter, Mauff to Patten, 12 July 1921. CME III.2.640.1.

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example, ‘made a very good fight for us’, according to Gates.⁶⁷ As a result Gates concluded that

‘the Bill in the form in which it leaves the committee, is immensely improved’.⁶⁸

The CBOT pulled most of the regional exchanges into line in public – if not always in private – on the private wire issue, even if the executive could not completely control its own membership.

The Toledo Produce Exchange, for example, though strongly against the existence of country wires soliciting speculative businesses from small towns:

Refrained from going on record as [being] against the private wire systems, as in the Exchange Committee Meetings it was decided that we would allow the Chicago Representatives to take care of the private wire subject.⁶⁹

Later, however, the Toledo exchange quietly demanded that the CBOT forbid its members to reopen private wires in the smaller towns of the exchange’s hinterland of Ohio and Indiana.⁷⁰ Because the final Act did not include the private wire amendment, the Board executive had notched up a very illustrative victory in the final hour. Romano stated that the private wire section might have been removed due to Wallace’s testimony at the hearings,⁷¹ but the evidence points to a more complex and informative story. The archival record reveals that lobbying by the CBOT resulted in both a watered down private wire clause and the clause’s eventual removal, even though it would have helped accomplish the goals of the Bill’s sponsors. The Committees of the time had neither the strength nor the desire to impose real restrictions on futures markets.

The next section documents the only successful control feature of the Act, although it, too, was diluted through exchange lobbying.