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Mr. WEXLER. Yes.
Mr. ORTH. Making a total advance against the hemp and that freight paid, $6,900,000. Now, in order for the Pan American Commission Corporation to advance the sum of $10,000,000 referred to, would it not be necessary for that quantity of hemp to be increased very materially over 400,000 bales
Mr. WEXLER. Provided we loaned the full amount, yes.
Mr. ORTH. Provided you loaned the full amount. If the quantity of hemp stored in New Orleans, New York, or elsewhere exceed 400,000 bales, do you not believe that the market price for hemp would decline very materially as the result of that accumulation? Mr. WEXLER. I have no opinion on the subject.
Mr. ORTH. Do you not know in the past when there has been an accumulation of, say, 200,000 bales, that the market has declined materially as a result of that accumulation?
Mr. WEXLER. I have no knowledge of that. I have never gone into these questions.
Mr. ORTH. Are you not aware that it is physically impossible for the Pan American Commission Corporation to advance as much as $10,000,000 to the Comision Reguladora under your contract? Mr. WEXLER. No; I do not know that.
Mr. ORTH. In the course of your testimony you specified that the business which the Pan American Commission Corporation engaged in was a commission and factorage question?
Mr. WEXLER. Yes, sir.
Mr. ORTH. Does the business of commission and factorage in sisal hemp differ materially from the business in sisal hemp which we and other merchants conducted in sisal hemp before the Pan American Commission Corporation was formed?
Mr. WEXLER. I should think that it does. This particular arrangement does. It does differ very materially from it, because it is an extraordinary arrangement carrying with it an obligation to lend money over a long period of time, and to lend large sums of money, which you have never done in your commission or factorage business, nor do I know of any other commission merchant who has made such
Mr. ORTH. Are you aware that the firm of Hanson & Orth loaned money almost continuously to shippers of hemp in Yucatan?
Mr. WEXLER. I have no knowledge of the business carried on by Hanson & Orth.
Mr. ORTH. Have you any knowledge of what the customary rates of finance were in the sisal hemp business before you became inter
ested in it?
Mr. WEXLER. I have no knowledge of that whatsoever.
Mr. ORTH. You made no investigation of what had previously been paid to shippers in Yucatan?
Mr. WEXLER. I was not concerned in that at all.
Mr. ORTH. Are you aware that the firm of Hanson & Orth formerly sold hemp for planters in Yucatan for a commission of 1 per cent? Mr. WEXLER. No.
Mr. ORTH. Are you aware that the firm of Hanson & Orth advanced to planters in Yucatan 80 per cent of the market value of their hemp-one-eighth for the first month and one-sixteenth for every month thereafter?
Mr. WEXLER. For what period?
Mr. ORTH. For any period.
Mr. WEXLER. I am asking the question. You do not want to mislead the committee of the terms under which you loaned money. Mr. ORTH. I am trying to bring out merely the conditions which existed in this business before, and the committee will be able to judge of the true situation themselves.
Mr. WEXLER. Don't you think it possible that people who pay a 5 per cent commission might be able to make a great deal more than by paying one-eighth of 1 per cent if they get a better price for their commodity?
Mr. ORTH. That is a matter of opinion, and I can not express myself. You stated in the course of your testimony also that the elimination of the firm of Hanson & Orth as brokers or commission merchants or factors was a process of evolution.
Mr. WEXLER. I think so.
Mr. ORTH. Do you not regard that a process of evolution which does away with the man who works for one person for a moderate fee, in place of the man who charges 5 per cent, is more in the nature of a revolution than an evolution.
Mr. WEXLER. No; I do not. I think that any concern that can arrange for a five-year credit of $10,000,000, irrespective of whether they sell the stuff for them or not, with the credit over a period of five years, irrespective of panics, wars, or any condition that may arise, at a maximum rate of interest of 6 per cent, is worth the price charged for it. I know of many manufacturers in this country who would be very glad to make an arrangement of that kind. I think it is an admirable arrangement for people who have no credit facilities and have to contend with the corporation which these people have had to contend with. I think it is admirable from their standpoint. Mr. ORTH. I think you stated that the Comision Reguladora has not in the past been able to secure advances against hemp? Mr. WEXLER. That is my impression.
Mr. ORTH. Are you aware of the fact that they, from time to time, during the past four years borrowed sums of money running into millions of pesos from responsible and willing parties in Mexico?
Mr. WEXLER. I have no knowledge of it. If that is true, Dr. Rendon can answer your question. He knows, but I do not.
Mr. ОRTH. In regard to the advance in the price of sisal you have by your testimony indicated that the advance in price was due to an advance in freight?
Mr. WEXLER. Part of it, I said.
Mr. ORTH. Are you aware of the fact that during the month of September, 1915, the highest price at which sisal hemp was sold in the United States was 5 cents in New York and about 5.30 in New Orleans?
Mr. WEXLER. Yes. You were out of the market then. You were not buying any sisal. September, 1915, that is when your boycott
Mr. ORTH. Would you change your statement to that effect if I were to read to you a memorandum of sales in September, 1915, showing that there was constant sales in the market?
Mr. WEXLER. Sales where?
Mr. ОRTH. Both in New York and in Mobile.
Mr. WEXLER. How about sales in Yucatan?
Mr. ORTH. Would it change your opinion if I were to show you that there was a daily market in Yucatan?
Mr. WEXLER. It would not change my opinion. I do not know anything about the facts you are stating, but I think there are gentlemen here that can answer you.
Mr. ORTH. Are you aware that in the month of September, 1915, that charters were made to bring hemp from Progreso to Mobile for the rate of 50 cents a hundred pounds across the Gulf?
Mr. WEXLER. I have no knowledge of that. If you know it to be a fact, state is as a fact.
Mr. ORTH. I state it as a fact. Hanson & Orth chartered a steamer for 50 cents.
Mr. MAYER. Mr. Chairman, I want to cross-examine this witness
Mr. WEXLER. You understand that he is asking questions about things I know nothing about.
The CHAIRMAN. Please continue to ask questions and do not testify. Mr. ORTH. Are you aware of the fact that the increase in freight rates between September and February across the Gulf was one-half cent a pound, whereas the advance in the price of sisal was 14 cents a pound?
Mr. WEXLER. I do not know anything about it.
Mr. ORTH. That is all, Mr. Chairman.
Mr. MAYER. Mr. Wexler, Mr. Fisher has said to you that sisal was selling in February, 1915, at 4 cents a pound in the United States, and asked you to figure out the difference between that and 7 cents a pound. I call to your attention what has been sold in the United States in February in each year beginning in 1900-I speak now, members of the committee, of sisal in the United States, and I read from documentary proof which will be offered in evidence-1900, February, sisal, 8 cents a pound; 1901, February, sisal, 6 cents a pound; 1902, February, sisal, 9 cents a pound; 1903, February, sisal, 7 cents a pound. So that I need not repeat the word "February." The year will indicate the word "February."
The CHAIRMAN. All right. Go ahead.
Mr. MAYER. 1904, 7 cents a pound; 1905, 71⁄2 cents a pound; 1906, 7 cents a pound; 1907, 74 cents a pound; 1908, 5 cents a pound; 1909, 5 cents a pound; 1910, 6 cents a pound; 1911, 4 cents a pound; 1912, 5 cents a pound; 1913, 73 cents a pound; 1914, 5 cents a pound. I just want to ask Dr. Rendon, Are these the prices in New York or in New Orleans?
Dr. RENDON. New York.
Mr. FISHER. At what date in the month, do you know?
Mr. MAYER. The average for February.
Mr. FISHER. The average for February?
Mr. MAYER. Now, take those figures. Instead of 4 cents as the basis of calculation, has sisal gone up or down, even at the prevailing war prices or war freight rates?
Mr. WEXLER. I should say that the price was below the average of the February of the years you mentioned.
The CHAIRMAN. We close with this witness and we will convene at 2.30.
(Thereupon, at 1.03 o'clock p. m., a recess was taken until 2.30 o'clock p. m.)
The subcommittee reassembled at the expiration of the recess. The CHAIRMAN. Senator Curtis is with us, and wishes to make a statement.
STATEMENT OF HON. CHARLES CURTIS, A SENATOR FROM KANSAS.
Senator CURTIS. Mr. Chairman, when this matter first came up, my attention was called to it by the officers of the State of Kansas who had charge of the penitentiary. We have a binding twine plant in the State penitentiary there, which is operated under the management of the prison board, and they use about 4,996 bales of sisal a year; and by correspondence I have gathered a good deal of data which I would like to put into the record. I have no personal knowledge of the matters at all, but the data I use I have taken from letters received some of them personal and confidential, and I have eliminated the parts that were personal, and simply put down the statement as I thought the parties who wrote would like to have it presented to the committee.
The CHAIRMAN. Will you present the statement, Senator?
The CHAIRMAN. Proceed in your own way.
Senator CURTIS. I would like to make the statement and then read the affidavit.
The CHAIRMAN. Yes.
Senator CURTIS. During the entire history of the penitentiary twine plant of the State of Kansas they have purchased sisal in the open market and have paid usually under $6 per hundredweight, f. o. b. Lansing. In the autumn of 1914 it was as low as $3.60 and a year ago they purchased some at $4.40. In April, 1915, they purchased at $4.29. Since then the price has gradually increased until last September, when it was $5.83. In November they were notified that they could purchase sisal only through the Comision Reguladora, which is a division of the Government of Yucatan. All individual brokers were out of the business and since then the price has been increased steadily until their last purchase on February 2, at $7.35. Just what happened to bring this about was related to a member of the Board of Corrections of the State of Kansas and to others, who are interested in the buying end, last week by Mr. Leo C. Browne, of New Orleans, assistant secretary of the Pan American Commission Corporation. He visited Kansas with letters of recommendation from Sol Wexler, of New Orleans, and David R. Francis, of St. Louis, and said he was the organizer of the combination which controls the entire sisal output of Yucatan, the only source of sisal supply for the American farmer. A synopsis of his report will give the facts as they are understood, and is as follows:
The sisal producers were selling to a number of brokers and last summer an effort was made to control the market. He stated that he was the agent who worked out the plans. It was arranged with the governor of Yucatan and soon after that governor was deposed and the second governor was approached, and it was under way
when he was succeeded by Gen. Alvarado, the present governor. Mr. Browne stated that he went to New Orleans and organized a company backed by bankers with a million dollars capital, and the New Orleans bankers agreed to finance the purchase of sisal to the extent of $10,000,000. He returned to Yucatan and the Comision Reguladora was appointed by the governor, who issued an order that all sisal should be sold to this Comision and to no one else. Later, he states, that after certain procedures had been carried on it was made voluntary instead of compulsory, but that every planter entered the agreement so that all sisal amounting to about 960,000 bales a year is marketed through this Comision, which obtains its money for purchase from the New Orleans bankers. The sisal is warehoused at New Orleans and money loaned on warehouse receipts. The bankers through the company receive 6 per cent interest on the money and 5 per cent commission on the amount of sisal sold.
The price is fixed by the Reguladora Comision and it is planned so they distribute the output that no firm can warehouse any considerable amount in advance, thus making it easy to control the distribution. He also stated, that when he went to Gov. Alvarado and proposed the matter to him he was authorized to pay the governor $500,000 in gold for his cooperation, but also added that the governor refused to accept the money. His argument was, that by thus controlling the price the producer would receive more for his sisal on the farm than he would before and would be the beneficiary from the increase in price. He professed, however, not to be familiar with the price the producer is now receiving, but said that in September the producer received 4 cents per pound. He predicted that the price would be made yet higher and that there was no limit to the figures the commission might fix. He also presented the argument that if Congress upset the financial arrangements of the company at New Orleans the comision could finance the sisal trust through London and place the American farmer absolutely at the mercy of the Mexican Government. His mission seemed to be to visit all those who have been active in opposing the sisal trust and convince them that it would be wise to accept the new situation and to look upon it as a necessary condition growing out of the general rise in prices for all kinds of products. In this he was not particularly successful so far as advices come from people with whom he talked. He made a special trip to Kansas and said that the interviews there had caused them more annoyance than anywhere else.
From Browne's talk the impression he left in Kansas was that New Orleans bankers are nervous over the agitation and are very anxious to have things quieted. It is also evident that they look for a very handsome profit. It is not believed that the producers on the farms of Yucatan are receiving any increase in price for their sisal. That should be easily a matter of proof. On the face of it, it appears, to some at least, that the Carranza government is making a handsome income from the arbitrary increase in price to the American farmer. Practically all the Yucatan sisal comes to America, only a few thousand bales go abroad.
The International Harvester Co. has two mills in Europe to which it ships raw material. Its South American trade is furnished the manufactured material, twine. It is impracticable for American farmers to use Manila twine because of its expense and they must