The CBOT Lobby

An overwhelming body of evidence supports this study’s view that throughout the interwar years the CBOT was a very powerful lobby group; its Washington representatives remained

19 Ibid.

20 Letter, Charles Brand, Consulting Specialist in Marketing, GFA, to Arthur Capper, 1 June 1925.

NARA/KC, 12, 14-6.

21 Letter, Capper to Carey, 15January 1924. CME III.ss1.9; Letter, Capper to Brand, 4 June 1925.

NARA/KC, 12, 14-6. Capper agreed with GFA’s Brand’s suggestion that no new legislation is necessary.

22 Letter, Capper to Brand, 27 May 1925. NARA/KC, 12, 14-6.

23 Letters between Carey and Gates, 12 May – 22 May 1924. CME III.11.10.

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vigilant therefore it continued to be strong throughout the Coolidge years as it enjoyed practically unlimited access to many top legislators, and even good relations with its supposed enemies, such as by lunching with Capper or relaying Washington gossip.²⁴ The lobby also defended the

Board’s interests at all levels,²⁵ including keeping a close eye on the State legislatures. The failure of the bills in Illinois in 1921 did not discourage a new attempt by Senator Lantz, with similar bills pending in other States, such as Ohio. However, few bills truly threatened. In a letter to the membership encouraging better self-governance, CBOT president Stream reported that bills to control exchanges were ever in their early stages, ‘On December 11^th the Chicago Tribune reported that fifteen bills had already been introduced in Congress to regulate Grain exchanges, some of them to stop speculation in Grain altogether’.²⁶ The CBOT, however, was very careful not to focus too much attention on bills that were unlikely to pass. The conundrum was very real in that

‘the situation is […] almost impossible and hopeless, and it is my opinion that if we come out in the open and oppose the Bill either as a whole or by amendment, that it will simply have the effect of creating later interest in the measure on the part of the state farm bloc’.²⁷ Gates, on behalf of Carey, would often contact key Congressmen to ascertain the level of threat of any new or proposed bills. In at least one instance, Gates performed an extensive analysis of the potential for a favourable vote in the House after obtaining inside knowledge of the intentions of the key Congressmen. He then proposed that the Midwestern representatives should be more heavily lobbied to ensure ‘a comfortable margin’.²⁸

Another example of lobby power appears in a letter from Gates to Carey on 12 May 1924 reporting on the progress of one anti-futures bill, ‘In spite of […] unfavorable factors, we are, confidentially, rather inclined to agree with Congressman Rainey who [believes] that there is still a “splendid majority against [the Bill] in both the House and the Senate”’.²⁹ The CBOT executive was aware enough to be wary of trade-offs in the legislative process, such as logrolling. The CBOT carefully followed the hearings at the various State capitols, especially Springfield, Illinois,

24 Letter, Carey to Arnot, 29 February 1924. CME III.ss1.9; Letter, PP Campbell, Washington Lawyer, to LF Gates, sent on to J Stream, president, CBOT, 13 December 1923. CME III.ss1.9.

25 Letter, J Mauff to FW Upham, 21 June 1922. CME III.ss2.663.4.

26 Open letter, to the Members of the Board of Trade of the City of Chicago, 18 December 1923. CME III.643.7.

27 Letter, Charles Quinn, secretary of Grain Dealers National Association, to J Mauff, 21 March 1923.

CME III.2.650.4,

28 Letter, LF Gates to Carey, 12 May 1924. CME III.11.10.

29 Second letter, LF Gates to Carey, 12 May 1924. CME III.11.10.

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to the point of hiring a stenographer to keep their own records of the debates and testimony.³⁰ This type of information was discussed at the highest level - amongst the CBOT directorate and also at legislative committee meetings.

CBOT president Carey not only did not believe that any anti-futures legislation would be passed, neither could he foresee any pro-futures laws either: ‘If we come out and father such a bill [to correct the Act], I cannot think we will get very far with it’.³¹ On 21 May 1924, in response to Gates’ letter a day earlier, Carey replied very informatively stating that a certain piece of neutral legislation ‘can [not] possibly pass […] we can afford to remain silent’.³² However, there was a sense that support for the cooperative movements, and sentiment against futures trading and grain middlemen in general, was sweeping the Midwest, and the Farm Bloc was assumed to have the votes to ‘do what they like. We must be careful.’³³ As the Secretary of the Grain Dealers National Association wrote on 21 March 1923:

‘You will see just what the situation is. The country is going through a veritable legislative fever and the situation must be handled carefully. We are in the unfortunate position where open opposition from us may only be playing into the hands of our enemy’.³⁴

His advice was to ‘lie low publicly and lobby privately until the fever burns itself out’.³⁵ CBOT president Gates wrote at the same time, ‘I am quite sure that the Secretary of Agriculture will put nothing of this kind unless it is approved by us’.³⁶ Carey, Gates and Barnes had all agreed that the CBOT and/or the Grain Exchange Legislative Committee should not publicly comment on any bill that had a passing connection to the grain trade unless such a bill was truly a threat – i.e. that it had passed the House – and there was good formal support from the grain trade in the form of, for example, a conference.³⁷ Of course, futures markets had indeed fallen off the Farm Bloc’s radar after 1922, and hardly reappeared on the agrarian agendas until the Great Depression.

30 Letter, J Mauff to Stream, 17March 1923. CME III.660.8.

31 Letter, LF Carey to Gates, 21 May 1924. CME III.11.10.

32 Letter, LF Gates to Carey, 20 May 1924. CME III.11.10.

33 Letter, Charles Quinn to J Mauff, 21 March 1923. CME III.2.650.4.

34 Ibid.

35 Ibid. CME III.2.650.4; Letter, PW McMillan to CBOT Secretary, 22 Dec 1923. CME Archives III.667.2;

Memorandum, Dies to Carey and Bunnell, 9 January 1926 with attached article: “Farming Bill Wins Support of President”. Chicago Tribune. 9 January 1926. CME III.15.14.

36 Letter, Gates to Carey, 5 Nov 1925. CME III.11.9.

37 Letter, Gates to Carey, 20 May 1924. CME III.11.10.

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Similarly, soon after the benign oversight Act of 1922 and a regulatory regime of 1923 was established, there was no opportunity for the CBOT to propose even more benign legislation in the form of industry-led amendments.³⁸ Capper regularly met with CBOT executives, including president Carey³⁹ and soon after an exchange of letters with Capper, Carey wrote to Arnot from his Florida convalescence that he was ‘very strong of the opinion that we should let matters rest in Washington this year […] I am not willing to get behind any move that asks for any radical change in the Capper-Tincher Bill at this time’.⁴⁰ Gates was in full agreement.⁴¹

The key representatives of the CBOT believed that they had an Act they could work with, with rules that mandated little more than information disclosure of a few ‘Special Accounts’, together with a legitimised and supported product. There was no reason to engage Congress. CBOT representatives regularly met with the US President and the Secretary of Agriculture, even to the point where politicians found the lobbying egregious. When the Secretary of Agriculture met with CBOT lobbyist Barnes and his grain men, Barnes was hauled before a Senate committee for it.⁴² Nevertheless, the CBOT was able to successfully influence the 1922 Act, many of the 1923 Rules, and the staff responsible for administering it.

The CBOT executive wanted to limit the amount of pressure it put on the legislative process, if only because ‘it would be a waste of good ammunition’.⁴³ But there was always a risk of rogue interests in the membership advocating a suicidal idea. It is very clear from the Carey-Gates correspondence in 1924 that the membership as a whole rarely agreed on anything – i.e. ‘I am sure this market is not a unit and there is considerable argument’.⁴⁴ In 1924, a minority of powerful members led by a director, Mr Brosseau, had formed a committee that made arrangements with a lobbyist in Washington to establish their own parallel lobby group. This shows that even if there would have been a window for legislative change, the Board’s membership could not agree on what changes to propose: ‘such suggestions […] for

modifications have been in the most general terms. What is needed is a well worked out program

38 Letter, Capper to Carey, 15January 1924. CME III.ss1.9.

39 Ibid.

40 Letter, Carey to Arnot, 29 February 1924. CME III.ss1.9.

41 Ibid.

42 Memorandum to the Exchanges from PW MacMillan, republishing Senator Caraway’s open letter to Julius Barnes, 23 December 1929, CME III.16.15.

43 Letter, Gates to Carey, 22 November 1924. CME III.11.9.

44 Letter, Carey to Gates in Washington, 12 May 1924. CME III.11.9.

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[…] Simple general statements are not sufficient’.⁴⁵ A united front never materialised during the interwar years. The CBOT remained on the lookout for an opportune time to introduce amendments to the Act, or push through new legislation, but the Cutten corner of 1925 and the general support for farmers’ cooperative marketing efforts meant that there was never a good moment.⁴⁶ As Carey wrote to Gates on 12 May 1924, ‘There has been no time […] up to now when I thought it would be advisable to propose any changes to the Act’.⁴⁷ For example in 1924 and 1925 there was the Presidential election to worry about, as well as an attempt to solve the farm problem with such bills as McNary-Haugen.⁴⁸

Legislators were wary of the power of the exchange lobby to the extent that GFA head Duvel noticed in 1929 ‘a hesitancy on the part of the senatorial leaders to incorporate proposed amendments to the Grain Futures Act in the so-called farm relief bill, as to do so […] would bring down on them the entire forces of the Grain Exchanges in opposition to the […] bill’.⁴⁹ The GFA wanted to make changes to increase their power to fight manipulation, but they were regularly thwarted.⁵⁰ However, due to extensive lobbying the legislators were less likely to press for changes to the regulatory regime. As will be shown in Chapter Five, this lobby remained dominant until 1936. In fact, the CBOT was so prominent in Washington that it even managed to roll back the 1923 Rules on occasion.