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Hudspeth.

BILLS SIGNED.

The Chair, President Pro. Tem. Warren, gave notice of signing, and did sign in the presence of the Senate, after their captions had been read, the following bills:

H. B. No. 2, mileage and per diem bill. S. B. No. 3, contingent expense bill.

ADJOURNMENT.

On motion of Senator McNealus, the Senate, at 1 o'clock p. m., adjourned until 10 o'clock tomorrow morning.

APPENDIX.

COMMITTEE REPORTS.

(Floor Report.)

Austin, Texas, August 24, 1914. To the Honorable President of the Senate.

Sir: Your Committee on Contingent Expenses, to whom was referred

S. B. No. 3, A bill to be entitled "An Act making appropriation of the sum of $15,000, or so much thereof as may be necessary, to pay the contingent expenses of the Second Called Session of the Thirty-third Legislature of the State of Texas, convened August 24, 1914, by the proclamation of the Governor, providing how accounts may be approved, and declaring an emergency,"

Have had same under consideration, and beg to report same back to the Senate with the recommendation that it do pass, and be not printed.

Warren, Chairman; Cowell, Real, Conner, Carter.

(Floor Report.)

Austin, Texas, August 24, 1914. To the Honorable President of the Senate.

Sir: Your Committee on Finance, to whom was referred

Governor's Office, Austin, Texas, August 24, 1914.

Gentlemen of the Senate and House of
Representatives:

S. B. No. 2, A bill to be entitled MESSAGE FROM THE GOVERNOR. "An Act making appropriation to pay the per diem pay and mileage of members, and the per diem pay of officers and employes of the Second Called Session of the Thirty-third Legislature of the State of Texas, convened August 24, 1914, by proclamation of the Governor, providing how accounts may be approved, and declaring an emergency," Have had same under consideration, and beg to report same back to the Senate with the recommendation that it do pass, and be not printed.

Willacy, Chairman; Real, Cowell, Lattimore, Nugent, Warren, Wiley, McGregor, Taylor, Brelsford, Johnson.

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I regret the necessity for calling you from your homes and pleasant vacations at this season of the year. Nothing but considerations of the highest obligations induced me to convene the Legislature in extra session. I trust your labors will soon be completed, and that under the duty we owe the people, it will be a pleasure for us to discharge it.

Extraordinary events beyond our control have produced a crisis in our business affairs, which our State and nation is but poorly prepared to meet. During the last twenty days the most powerful and progressive nations of Europe have engaged in war, thus practically stopping our intercourse and commerce

Sir: Your Committee on Finance, to with them. whom was referred

H. B. No. 2, A bill to be entitled "An Act making appropriation to pay the per diem and mileage of members and the per diem of the officers and employes of the Second Called Session of the Thirty-third Legislature of the State of Texas, convened on the 24th day of August, 1914, by proclamation of the Governor, providing how accounts may be approved, and declaring an emergency,'

Have had same under consideration, and beg to report same back to the Senate with the recommendation that it do pass, and be not printed.

Willacy, Chairman; Cowell, Lattimore, Nugent, Real, Astin, Brelsford, McGregor, Wiley, Taylor, Johnson.

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Sir:
Your Committee on Engrossed
Bills, to whom was referred

S. B. No. 3, A bill to be entitled "An Act making appropriation of the sum of $15,000, or so much thereof as may be necessary, to pay the contingent expenses of the Second Called Session of the Thirty-third Legislature of the State of Texas, convened August 24, 1914, by the proclamation of the Governor, providing how accounts may be approved, and declaring an emergency," Have carefully compared same, and find it correctly engrossed.

BRELSFORD, Chairman.

Great Britain, France, Germany, Russia, Austria-Hungary and Belgium are the biggest buyers of American cotton, as well as the principal owners of the ships which have carried it from our shores to theirs for manufacture. These nations are now at war, and their ships for the most part have been impressed for national service, and those not in are refusing to take cargoes such use on account of the war hazard. Our cotton crop for this year is practically made, and the harvest season is upon cotton markets are us; the world's closed against us, and cotton is unsalable except in small lots and at prices that will be ruinous to farmers, and to bankers, and business generally. A condition exists which must be met by practical and effective measures; theories will not meet the needs of the people under the present emergency.

Cotton Exported.

In 1913 the United States produced 14,159,078 bales of cotton. We exported 8,800,966 bales that year, and our domestic spinners used 5,786.330 bales. The total value of the cotton exported for the year 1913 was $547,357,195, and the average price received for upland cotton was about 12 cents per pound. Of cotton exported, Great Britain took 3,563,216 bales; Germany, 2,350,761, and France 1,014,834 bales-these three countries taking almost four-fifths of the total quantity exported. In addition, Russia took 70,625; Belgium, 214,245, and 109,292 Austria-Hungary,

bales; in fact, all the cotton we exported went to the countries now at war, except 1,391,695 bales.

Other Farm Exports.

In addition to cotton, those engaged in productive agriculture supplied the

be able to buy all they need at the reduced price, but they will be willing to pay for the "distress" cotton that is forced upon the market, but it will leave the part of the crop not otherwise subject to export, as surplus and a drug upon the market.

Emergency Currency.

home markets in 1913, and furnished for export $28,800,500 worth of corn; $13.206,247 worth of oats; $53,171,537 Of course the issuance of currency is worth of flour; $89,060,428 worth of a function of the Federal and not of wheat; $17,338,117 worth of beef prod- the State government. But we should ucts: $114,853,303 worth of hog prod-use all the influence we can possibly ucts, a total of $316,440,136, as against exert to induce the Federal government $547.353,195 worth of cotton exported. to co-operate with the State, by proper These figures show that cotton consti- amendments to currency legislation, to tutes 63 per cent of the productive ag- help meet the crisis now upon us. This ricultural exports of the United States. we can do by the prompt passage of Our cotton has been the means of the laws providing for a system of public United States maintaining the balance warehouses and bonded warehouses, bills of trade in her favor for many years. for which have been carefully prepared, Yet the growers of this commodity have and submitted herewith, and which will had but scant consideration, out of the be referred to further. great avalanche of legislation, for their protection against such a crisis as is now pending.

Texas to Do Its Duty.

To aid in meeting this crisis is the object of your coming together at this time. It is proper for Texas to take the lead in any effort to do this, as she has taken the lead in other great movements in recent years, and point the way to other States and to the nation. The statesman who can not see that

the State, and the nation, must make provision to care for such situations as now confronts us, is blind to the prog ress of events, and their requirements and remedies, and will have to give way to those who can see and have the courage to meet and provide for such emergencies.

The Home Market.

I deem it not out of place to refer to present currency laws, and what is known as the amendment of August 24 to the "Aldrich-Vreeland law." This amendment provides that national banks may organize "currency associations" and for emergency purposes such banks may issue bank notes to the extent of stock and surplus, on certaia bonds be125 per cent of their unimpaired capital ing deposited with the treasury. It permits the issuance of only 30 per cent increase, or emergency currency, on the unimpaired capital stock and surplus of banks, upon the deposit of commercial have very few bonds and therefore would paper. Texas banks, national and State, have to rely upon the other provision of the law to increase their issue of

emergency currency.

The National Banks.

The capital and surplus of Texas naOur domestic spinners take but a lit-tional banks amounts to $78,191,408; tle more than one-third of our cotton capital, $52.046.580, and surplus of $26,production. Of course, it is to be ex- 626,780, and currency to the amount of pected that they will consume more of 125 per cent of this total would give the raw material under existing condi- them the right to issue bank notes to tions than otherwise, because the nations the extent of $97,739,408. They have at peace will have to look to us to sup- already issued, on bonds of the United ply what they have heretofore been buy- States, $23,626,780, and if they had ing of the manufactured product from bonds to deposit as required, could issue the nations now at war. Even under emergency currency to the extent of $74,this condition it is estimated that we 112.480 increase. But as they have only will not have a home market for more $5,637,942 of bonds available and can than one-half of this year's crop. Un- only issue 30 per cent of their capital less we can provide a way to store and and surplus by the deposit of commerhold that portion of our cotton crop cial paper, the maximum amount of which domestic spinners will not re-emergency currency the national banks quire, these home buyers will not only of Texas could issue under existing cur

rency laws would be $20,995,364. It will cost an average of $10 per bale to have the cotton picked, and if picking three million bales is paid for, at this price it will take thirty million dollars-or more than the emergency currency the national banks can issue under existing law, to pay for the picking of threefourths of the Texas crop. This serves to show how little relief we can expect from the present currency law to meet the present crisis in taking care of the cotton crop in Texas. If we produce four million bales the crop at the lowest ought to be worth 10 cents per pound to the producer, or a total of two hundred million dollars.

The State Banks.

Some ten days or more ago the Secretary of the Treasury advised the Dallas Currency Association that State banks would not be allowed to issue emergency currency under the AldrichVreeland act, and amendments, though the Act of August 4 provides that eligible State banks-those having a cap ital of $25,000 or over-might avail themselves of the act if they joined a currency association within fifteen days after the passage of the act. On the 18th instant we telegraphed to the Secretary of the Treasury asking this privilege for Texas State banks. On the 201 he replied saying these banks could have taken advantage of the act within fifteen days after the amended act was approved, and that he was not to blame if they had not done so. We called his attention to his telegram to the Dallas Currency Association, and on Saturday last I received a further telegram from the Secretary of the Treasury saying that "there is nothing to preclude eli gible State banks from applying for membership in Federal reserve system and no time limit for doing so." State banks are eligible to membership in the Federal reserve system, which provides for regional banks, but our State banks are cut off from the benefits of the Act of August 4, but they ought not to be.

Capital Should Be Available.

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These have a combined capital and surplus of $21,587,936. Adding the two together would give $55,328,911 of banking capital in Texas which is denied participation in the benefits of the Act of August 4th, which could be utilized to increase the circulating medium for the present emergency to almost as great an extent as the national banks. An amendment to the Act of August 4th amending the Aldrich-Vreeland act is now pending before the Committee on Banking in the United States Senate, and it proposes to allow banks to issue emergency currency based on commercial paper to the extent of 75 per cent of the unimpaired capital and surplus of banks. If this were passed and the State banks that are eligible were admitted to the benefits of such an amendment, the emergency currency the national banks could issue under it would be $47, 677,665, and $41,526,681 by the State banks, or a total of $89,204,346, whereas under existing law the most that can be issued is less than thirty million-not enough to pay for picking the cotton crop.

Needed Federal Legislation.

I recommend that the Legislature memorialize Congress to pass such an amendment to the Aldrich-Vreeland Act as amended by the amendment approved by the President August 4, 1914.

In fact, personally, I think the Federal currency legislation should be so amended as to provide that the government would allow banks to issue emergency currency on warehouse receipts for cotton, and elevator receipts for wheat, where guaranteed by the State, or secured by bonds and insurance. A bill has passed Congress appropriating twenty-five million dollars to charter ships to carry commerce, and another appropriating five million dollars to pay insurance on same, and I can no reason in principle, or good policy, why the same care should not be taken to aid the producer of our wealth in

see

a crisis like this. A bill with this object in view, too, is pending in Congress, and if it should be passed would solve the whole difficulty we in the agricultural States are now laboring under.

The act amending the Federal Reserve Act, approved August 4th, imposes a tax of 3 per cent on the emergency issued by any bank under the provisions of said amendment. Warehouse receipts for cotton and wheat, endorsed by the State government, or secured by bond

and insurance, is certainly as good security as ordinary commercial paper. and better, and it would be within good sound business discretion to provide that banks might issue emergency currency, on such warehouse receipts, at rates of interest not to exceed 4 per cent.

I have recited the foregoing facts, and tried to elucidate them briefly, that you might better understand the urgent need of the legislation you have been convened to consider and hereinafter recommended.

would have a wholesome influence upon the Congress of the United States in considering these changes in the emergency currency act now pending before their committees.

is what is needed now. We cannot afford to depend upon one which will wait for the voluntary association of individuals with their capital, in establishing them.

Carefully Considered.

Foreseeing this need, the Legislature was called in extra session to consider it. For several years I have given the question careful consideration. Eight years' service on the Railroad CommisIts prompt enactmentsion, in dealing with the rate problem, the compressing and handling of cotton, brought me into full realization of the poverty of our laws relating to the care of and handling of the greatest money crop in the country. Legislation on this subject of its protection, safe handling and warehousing, has been shamefully neglected, and if we do not profit now by the practical lesson before us, shall lose opportunity to be of the greatest service to our glorious State and her people.

Public Warehouses.

To meet the emergency for warehouse protection and guarantee, I recommend that a system of public warehouses be provided for and established without delay. This will, as already suggested, in view of the situation, greatly relieve the situation by furnishing a safe warehouse system under State protection. It will inspire confidence by banks in the security and besides will aid largely in securing a change in the currency laws so as to make such ware

house receipts the basis for issuing

emergency currency.

It may be urged by some that the State ought not to go into the warehouse business. Why should it not do so now to meet this emergency? Can not the State itself do what it creates corporations to do? A corporation is but an artificial person, created by law, to do that which the government itself has the power to do. The policy of it. under different circumstances, might furnish grounds for argument, but there is no question of the State's power and right to do so. The policy of it ought not to be questioned at this time, for is there not urgent need? Has not the State failed in the past to provide any adequate warehouse system? Any system intended for immediate benefits, now, without the State behind it to push it, would fall short of the public emergency which must be considered. The dependent farmer must be considered; the banker lending money upon cotton and grain must be considered; security of the receipts issued against them must be taken into account-the general welfare calls for action, not quibblings over pride of individual opinion. A law which will force the establishment of safe places to store cotton

we

If we come to the rescue now, with adequate guarantees by the State, and then the Federal government closes its credit to the security we offer it, and to banks chartered by Federal and State authority, and calamity follows, by the sacrifice of values in our staple product, done its duty, and the blame for disasthe State government will at least have ter will rest elsewhere.

Emergency Bill.

After a most careful consideration of the question, at my request, the Attorney General's Department has prepared an emergency warehouse measure, which I submit herewith as part of this message. I also attach an opinion of the Attorney General reviewing the main provisions of the proposed law, and this was done, not that I expect the members of the Legislature to accept the details of a bill embodying my views, however carefully prepared, but that they might have a measure at least worthy of thoughtful attention by them, upon which they could at once proceed to deliberate, with the hope of speedier action and conclusion of their labor. The measure is by no means intended as "dictation," but "recommendation."

The bill provides that the law shall be administered by the Commissioner of Banking and Insurance. The proposed statute follows in large measure the lines of the State banking law, and clothes the Commissioner of Banking and Insurance with ample power and

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