Public versus private political spheres

What politicians say publicly and what they do "in the room where it happened" are rarely identical.

Everyone I think would agree that the public comments of politicians often differ substantially from what goes on behind closed doors. As the private record is often difficult to ascertain, however, explicit historical evidence of divergence between rhetoric and action is rare.

On my very first trip to archives as a PhD student, however, I stumbled across one of the greatest pieces of smoking gun evidence of very real consequences of industry lobbying efforts on new regulatory initiatives.

A letter from the President of the Chicago Board of Trade (CBOT), the dominant grain exchange in the world, to the Board secretary responds to concerns that Washington was about to shut down their grain futures markets, to some a fait accompli after a blustery tirade from a key lawmaker on the bill's passing in August 1921.

Senator Arthur Capper of the 1921 Capper-Tincher bill, the close ancestor of the current Commodity Futures and Trading Commission (CFTC) Act, announced when tabling the final version of what he called "anti-futures" legislation that

the grain gamblers have made the exchange building in Chicago the world's greatest gambling house. Monte Carlo or the Casino at Habana are not to be compared with it.

Such statements were consistent with his previous public criticism of futures trading. Capper publicly had stated on many occasion that he sought to close down the exchange, calling the CBOT the "biggest gambling hell in the world."

But, as the CBOT President admitted in the letter shown below

the plain and simple facts are... that the bill is drafted substantially as we wished.

The politicians wanted to to be seen to be controlling "gambling" on the commodity exchanges, but in fact wanted to do no such thing. When drafting so-called controlling legislation they were guided by industry insiders, and in the end

yielded to substantially to [the CBOT] on the substance of the measure

which was

as innocent an harmless as a new-born babe.

Indeed the Act

for the first time legalizes future transactions by statutory enactment.

The President exhorted his colleagues from speaking out against the "captured" bill, as the so-called regulation will preclude any actually harmful or even controlling legislation from passing in the future.

In private, Capper was not anti-futures at all, and was known to meet with futures industry leaders seeking ways to grow the markets, rather than constrain them. He acknowledged that futures markets were extremely useful, and pointed to the ignorance that drove neo-populists to call for real control, stating privately that

much to my amazement, I find a good many folks want to go farther than the position I have taken so far

The result of the deep bonds between politicians, bureaucrats at the Department of Agriculture and industry leaders, a law purporting to control the markets actually formally legalized, protected and legitimized them, and bestowed upon the CBOT a near-monopoly that would last over fifty years.