1 00:00:01,340 --> 00:00:04,320 Speaker 1: Welcome to Stuff You Missed in History Class, a production 2 00:00:04,400 --> 00:00:14,810 Speaker 1: of iHeartRadio. Hello and welcome to the podcast. I'm Tracy V. Wilson. 3 00:00:15,070 --> 00:00:17,690 Speaker 1: And I'm Holly Frey. A few weeks ago, I was 4 00:00:17,870 --> 00:00:20,770 Speaker 1: on vacation with some friends, and one of my friends 5 00:00:21,050 --> 00:00:23,650 Speaker 1: asked the room if we had ever heard of the 6 00:00:23,770 --> 00:00:29,440 Speaker 1: Onion Futures Act. None of us had. His synopsis of 7 00:00:29,500 --> 00:00:33,400 Speaker 1: this was wild. And then the conversation that followed it 8 00:00:33,440 --> 00:00:36,820 Speaker 1: became very silly, and I emailed myself just the words 9 00:00:36,960 --> 00:00:40,050 Speaker 1: Onion Futures Act, and then I returned to being on vacation. 10 00:00:41,130 --> 00:00:44,229 Speaker 1: And now we have an episode about the Onion Futures Act. 11 00:00:45,450 --> 00:00:48,879 Speaker 1: And the whole wacky story of the Onion Futures Act 12 00:00:49,080 --> 00:00:51,519 Speaker 1: only makes sense if you have an understanding of what 13 00:00:52,060 --> 00:00:55,250 Speaker 1: futures are, at least in a basic sense. So futures 14 00:00:55,310 --> 00:00:59,330 Speaker 1: are essentially contracts. They're agreements to buy or sell something 15 00:00:59,870 --> 00:01:03,780 Speaker 1: at a specific price on a future date. In the 16 00:01:03,820 --> 00:01:07,700 Speaker 1: world of finance, futures are classified as derivatives along with 17 00:01:07,860 --> 00:01:12,120 Speaker 1: options and swaps. These are all contracts whose value is 18 00:01:12,180 --> 00:01:16,180 Speaker 1: connected to the value of some kind of asset. Futures 19 00:01:16,300 --> 00:01:19,940 Speaker 1: traders can take a long position, which is typically meaning 20 00:01:20,190 --> 00:01:24,090 Speaker 1: buying contracts for an asset whose value they think will rise. 21 00:01:24,709 --> 00:01:27,589 Speaker 1: Or they can take a short position, which is selling 22 00:01:27,670 --> 00:01:30,890 Speaker 1: contracts for assets whose value they think will fall. So 23 00:01:30,930 --> 00:01:34,470 Speaker 1: if you're going long, you're trying to buy something for 24 00:01:34,640 --> 00:01:37,090 Speaker 1: less than you would be able to sell it for 25 00:01:37,250 --> 00:01:40,880 Speaker 1: once the price goes up. If you're going short, you're 26 00:01:40,940 --> 00:01:43,620 Speaker 1: selling the asset, often with the hope of buying it 27 00:01:43,700 --> 00:01:46,720 Speaker 1: back at an even lower price after the price falls. 28 00:01:47,760 --> 00:01:50,800 Speaker 1: So short selling in the futures market is a little 29 00:01:50,820 --> 00:01:55,350 Speaker 1: bit different from short selling stocks, Those nuances are not 30 00:01:55,430 --> 00:01:59,410 Speaker 1: really relevant to today's episode. Also not really relevant is 31 00:01:59,470 --> 00:02:03,410 Speaker 1: the fact that a lot of futures contracts trading today, 32 00:02:03,430 --> 00:02:07,870 Speaker 1: a lot of those contracts are liquidated by buying back 33 00:02:08,050 --> 00:02:12,549 Speaker 1: or offsetting the contracts. They're not liquidated by delivering actual assets. 34 00:02:12,610 --> 00:02:14,829 Speaker 1: Like there's a lot of futures trading that goes on 35 00:02:15,190 --> 00:02:19,130 Speaker 1: where no one involved actually owns the asset at any point. 36 00:02:20,310 --> 00:02:23,250 Speaker 1: That also is a whole... other subject. That's not what 37 00:02:23,290 --> 00:02:27,419 Speaker 1: we're talking about today. Whether they're going long or short, 38 00:02:27,620 --> 00:02:31,140 Speaker 1: traders use futures to lock in a price with the 39 00:02:31,180 --> 00:02:33,620 Speaker 1: hopes that it's going to benefit them in the future. 40 00:02:34,220 --> 00:02:37,630 Speaker 1: For example, in the 1950s, before onion futures were outlawed, 41 00:02:38,110 --> 00:02:40,830 Speaker 1: someone trading in onions might offer to buy them at 42 00:02:40,830 --> 00:02:46,180 Speaker 1: $ 1. 60 per 50-pound bag. These contracts were done by the 43 00:02:46,240 --> 00:02:49,280 Speaker 1: car lot or car load, which is an actual unit 44 00:02:49,300 --> 00:02:52,600 Speaker 1: of measure in shipping. In this case, a car lot 45 00:02:52,680 --> 00:02:55,829 Speaker 1: of onions was roughly equivalent to what would fit on 46 00:02:55,870 --> 00:02:58,850 Speaker 1: a freight car on a train. So that's 650 pound 47 00:02:58,870 --> 00:03:03,750 Speaker 1: bags of onions. So if you set the price at 48 00:03:03,750 --> 00:03:08,380 Speaker 1: $ 1. 60 per bag and the price went up to $ 1. 65 49 00:03:08,180 --> 00:03:11,000 Speaker 1: by the delivery date, you would make five cents on 50 00:03:11,040 --> 00:03:15,720 Speaker 1: each of those bags or $ 30 per car lot. When 51 00:03:15,800 --> 00:03:18,370 Speaker 1: you put your newly purchased onions on the market, that's 52 00:03:18,410 --> 00:03:21,190 Speaker 1: how all of that plays out. If the price dropped, though, 53 00:03:21,350 --> 00:03:24,190 Speaker 1: to $ 1. 55 before you could put them on the market, 54 00:03:24,610 --> 00:03:29,340 Speaker 1: you would lose that $ 30. So if the price rose dramatically, 55 00:03:29,900 --> 00:03:32,590 Speaker 1: or if someone had taken a short position and the 56 00:03:32,690 --> 00:03:36,550 Speaker 1: price fell dramatically... that investor could potentially make a whole 57 00:03:36,570 --> 00:03:40,710 Speaker 1: lot of money. It was not just about investors and 58 00:03:40,750 --> 00:03:44,970 Speaker 1: their returns, though. At least in theory, futures could help farmers. 59 00:03:45,230 --> 00:03:47,910 Speaker 1: Farmers could lock in a price on produce they had 60 00:03:47,970 --> 00:03:52,650 Speaker 1: not actually harvested yet or maybe hadn't even planted yet, 61 00:03:53,190 --> 00:03:55,730 Speaker 1: and then they would be protected if the cash price 62 00:03:55,770 --> 00:03:59,690 Speaker 1: of those crops dropped by harvest time. Grocers and other 63 00:03:59,730 --> 00:04:04,280 Speaker 1: merchants who were buying wholesale onions could similarly protect themselves 64 00:04:04,400 --> 00:04:08,720 Speaker 1: from rising prices. There is an argument that these kinds 65 00:04:08,960 --> 00:04:12,470 Speaker 1: of protections can help stabilize markets and make things a 66 00:04:12,530 --> 00:04:17,640 Speaker 1: little less expensive for consumers. Futures can also help predict 67 00:04:17,760 --> 00:04:21,500 Speaker 1: where prices are headed? Like if everybody's locking in contracts 68 00:04:21,580 --> 00:04:25,120 Speaker 1: for around $ 1. 60 for a bag of onions, that suggests 69 00:04:25,420 --> 00:04:28,440 Speaker 1: something extraordinary would have to happen for the price to 70 00:04:28,520 --> 00:04:32,410 Speaker 1: change really significantly once those onions were ready to be 71 00:04:32,490 --> 00:04:36,600 Speaker 1: sold for cash. At least that is the theory. But 72 00:04:36,640 --> 00:04:40,720 Speaker 1: a 1956 report from the Commodity Exchange Authority suggested that 73 00:04:40,740 --> 00:04:45,760 Speaker 1: between 1929 and 1956, there was really quite a lot 74 00:04:45,800 --> 00:04:48,909 Speaker 1: of volatility in onion prices, in spite of the futures 75 00:04:48,970 --> 00:04:52,800 Speaker 1: trading that was going on. Trading in onion futures had 76 00:04:52,860 --> 00:04:56,620 Speaker 1: started to become important in 1948, so they had a 77 00:04:56,700 --> 00:05:00,230 Speaker 1: few years of data to go on. According to this report, 78 00:05:00,460 --> 00:05:04,470 Speaker 1: onion prices were also more volatile than many other commodities 79 00:05:04,529 --> 00:05:07,790 Speaker 1: that were traded on futures markets. I feel you could 80 00:05:07,830 --> 00:05:13,070 Speaker 1: have a whole separate conversation about the intrinsic nature of capitalism. 81 00:05:14,650 --> 00:05:17,430 Speaker 1: That is another completely other subject than what we are 82 00:05:17,450 --> 00:05:21,529 Speaker 1: talking about today. In the United States, futures trading started 83 00:05:21,570 --> 00:05:26,630 Speaker 1: with agricultural products in the mid-19th century. Prominent grain merchants 84 00:05:26,830 --> 00:05:32,010 Speaker 1: in Illinois established the Chicago Board of Trade in 1848, 85 00:05:32,010 --> 00:05:36,030 Speaker 1: and its purpose was to facilitate trading in grain, including 86 00:05:36,150 --> 00:05:39,270 Speaker 1: grain that had not been grown or harvested yet, so 87 00:05:39,310 --> 00:05:43,710 Speaker 1: this was an early version of futures trading. The board 88 00:05:43,770 --> 00:05:47,020 Speaker 1: still exists today as part of CME Group, which is 89 00:05:47,100 --> 00:05:51,520 Speaker 1: a derivatives marketplace. Over the next few years, other trade 90 00:05:51,560 --> 00:05:54,520 Speaker 1: boards were established in other parts of the U.S., and 91 00:05:54,580 --> 00:05:59,300 Speaker 1: they started to develop standard terminology and practices around what 92 00:05:59,320 --> 00:06:03,770 Speaker 1: would become futures contracts. The first formal rules for futures 93 00:06:03,810 --> 00:06:08,490 Speaker 1: trading were established in 1856. Three years later, the Chicago 94 00:06:08,570 --> 00:06:11,990 Speaker 1: Board of Trade made its first known attempt to discourage 95 00:06:12,070 --> 00:06:16,460 Speaker 1: market manipulation by banning what are called corners. It defined 96 00:06:16,500 --> 00:06:19,760 Speaker 1: a coroner as, quote, making contracts for the purchase of 97 00:06:19,800 --> 00:06:23,770 Speaker 1: a commodity and then taking measures to render it impossible 98 00:06:23,890 --> 00:06:27,090 Speaker 1: for the seller to fill his contract for the purpose 99 00:06:27,230 --> 00:06:31,610 Speaker 1: of extorting money from him. By the 1880s, bills were 100 00:06:31,630 --> 00:06:36,030 Speaker 1: being introduced in Congress to regulate futures trading or to 101 00:06:36,089 --> 00:06:39,560 Speaker 1: ban it outright or to tax it. The first federal 102 00:06:39,620 --> 00:06:44,550 Speaker 1: tax on futures was established in 1898. In the 19-teens, 103 00:06:44,830 --> 00:06:50,270 Speaker 1: Congress started passing laws regulating various futures, which were challenged 104 00:06:50,350 --> 00:06:53,060 Speaker 1: before the Supreme Court and then struck down and then 105 00:06:53,120 --> 00:06:57,479 Speaker 1: rewritten and then passed again. Then the Grain Futures Act 106 00:06:57,540 --> 00:07:01,150 Speaker 1: was enacted in 1922, and the Supreme Court upheld it 107 00:07:01,290 --> 00:07:07,950 Speaker 1: as constitutional. In 1936, the Commodity Exchange Act amended the 108 00:07:07,990 --> 00:07:11,330 Speaker 1: Grain Futures Act, and it expanded the idea of grain 109 00:07:11,840 --> 00:07:15,780 Speaker 1: to the broader label of commodities, and then made other 110 00:07:15,880 --> 00:07:20,040 Speaker 1: additions and adjustments to that earlier law. The list of 111 00:07:20,260 --> 00:07:25,660 Speaker 1: regulated commodities under this act grew over time. The Commodity 112 00:07:25,720 --> 00:07:28,739 Speaker 1: Exchange Act and the Grain Futures Act that it amended 113 00:07:29,180 --> 00:07:32,760 Speaker 1: prohibited contracts that were meant to cheat or defraud or 114 00:07:32,880 --> 00:07:37,260 Speaker 1: attempt to cheat or defraud another person. It was illegal 115 00:07:37,360 --> 00:07:39,940 Speaker 1: to deceive people in relation to these contracts, and it 116 00:07:39,980 --> 00:07:43,060 Speaker 1: was illegal to make false reports to a party who 117 00:07:43,100 --> 00:07:46,980 Speaker 1: was entering into a contract. The Secretary of Agriculture was 118 00:07:47,060 --> 00:07:51,750 Speaker 1: empowered to serve complaints to anyone who manipulated or attempted 119 00:07:51,930 --> 00:07:55,390 Speaker 1: to manipulate the market price of a commodity or tried 120 00:07:55,430 --> 00:07:58,710 Speaker 1: to corner a commodity. That person could then be ordered 121 00:07:58,750 --> 00:08:01,520 Speaker 1: to attend a hearing to determine whether they would be 122 00:08:01,620 --> 00:08:06,260 Speaker 1: stripped of their commodity trading privilege or perhaps face other penalties. 123 00:08:07,300 --> 00:08:09,920 Speaker 1: People who were found to be violating these and other 124 00:08:09,960 --> 00:08:14,560 Speaker 1: terms of the act could be fined up to $ 10, 000 125 00:08:13,080 --> 00:08:16,290 Speaker 1: or imprisoned for up to a year and would also 126 00:08:16,380 --> 00:08:19,600 Speaker 1: have to pay the costs of prosecution. On July 16th, 1955, 127 00:08:19,590 --> 00:08:25,280 Speaker 1: the Commodity Exchange Act was amended to add onions to 128 00:08:25,320 --> 00:08:30,400 Speaker 1: the list of regulated commodities. In the 1950s, onion futures 129 00:08:30,440 --> 00:08:33,720 Speaker 1: were being traded on the New York Mercantile Exchange and 130 00:08:33,820 --> 00:08:38,190 Speaker 1: on the Chicago Mercantile Exchange, also called the MERC. The 131 00:08:38,230 --> 00:08:40,929 Speaker 1: MERC had been founded as the Chicago Butter and Egg 132 00:08:40,990 --> 00:08:45,330 Speaker 1: Board in 1898, and it still exists today also as 133 00:08:45,429 --> 00:08:49,770 Speaker 1: part of CME Group. Most of the onion futures trading 134 00:08:49,990 --> 00:08:53,240 Speaker 1: in the U.S. was happening in Chicago, and the Chicago 135 00:08:53,320 --> 00:08:59,599 Speaker 1: Exchange had four delivery months on onions futures. Those are November, January, February, 136 00:08:59,760 --> 00:09:04,670 Speaker 1: and March. But trading actually happened year-round, with trading for 137 00:09:04,710 --> 00:09:09,210 Speaker 1: the November futures starting the previous winter and trading for 138 00:09:09,250 --> 00:09:13,110 Speaker 1: the March futures starting the previous late summer or early fall. 139 00:09:14,059 --> 00:09:17,640 Speaker 1: Trading continued as long as there were open contracts to 140 00:09:17,660 --> 00:09:21,309 Speaker 1: be traded. In the years that led up to the 141 00:09:21,450 --> 00:09:25,570 Speaker 1: incident that led to the Onion Futures Act, onion trading 142 00:09:25,610 --> 00:09:29,610 Speaker 1: futures volume typically peaked in January and February, and that 143 00:09:29,650 --> 00:09:33,010 Speaker 1: was for the March future. The events that led to 144 00:09:33,050 --> 00:09:37,590 Speaker 1: the Onion Futures Act started in October and November of 1955, 145 00:09:37,590 --> 00:09:40,280 Speaker 1: with onions that were being delivered. And we're going to 146 00:09:40,290 --> 00:09:42,240 Speaker 1: get into all of that after we pause for a 147 00:09:42,260 --> 00:09:55,929 Speaker 1: sponsor break. The person most associated with the events that 148 00:09:55,970 --> 00:09:59,190 Speaker 1: led to the Onion Futures Act was Vince Kasuga of 149 00:09:59,290 --> 00:10:02,740 Speaker 1: Pine Island News. New York. He was born in 1915 150 00:10:02,740 --> 00:10:07,060 Speaker 1: and started working as a sharecropper in 1928. Eventually, he 151 00:10:07,100 --> 00:10:10,699 Speaker 1: saved up a $ 100 down payment and bought his own farm. 152 00:10:11,600 --> 00:10:15,190 Speaker 1: At first, he grew lettuce on that farm. By the 1930s, 153 00:10:15,240 --> 00:10:18,580 Speaker 1: he was also growing onions, and eventually he grew celery 154 00:10:18,679 --> 00:10:22,110 Speaker 1: as well. In addition to that, he was a commodities 155 00:10:22,230 --> 00:10:26,490 Speaker 1: trader and a registered floor broker on the Chicago Mercantile Exchange. 156 00:10:27,390 --> 00:10:31,790 Speaker 1: There are a lot of really over-the-top sounding stories about 157 00:10:31,830 --> 00:10:34,790 Speaker 1: this man, and from what I can tell, they mostly 158 00:10:34,850 --> 00:10:38,490 Speaker 1: trace back to the book The Futures, The Rise and 159 00:10:38,590 --> 00:10:41,510 Speaker 1: Fall of the Speculator and the Origins of the World's 160 00:10:41,770 --> 00:10:45,050 Speaker 1: Biggest Markets by Emily Lambert, which came out in 2012. 161 00:10:45,030 --> 00:10:50,170 Speaker 1: It seems like Various articles and podcasts and whatnot that 162 00:10:50,250 --> 00:10:53,660 Speaker 1: came out since 2012 are all kind of tracing back 163 00:10:53,700 --> 00:10:56,560 Speaker 1: to that book. This is not the kind of book 164 00:10:56,600 --> 00:11:01,440 Speaker 1: that includes footnotes about where individual details came from. And 165 00:11:01,460 --> 00:11:04,070 Speaker 1: there's a note at the end on sources that says 166 00:11:04,130 --> 00:11:08,550 Speaker 1: that most of the information came from interviews with 100-plus people, 167 00:11:09,010 --> 00:11:13,130 Speaker 1: which frequently, quote, disagreed with and contradicted each other. The 168 00:11:14,250 --> 00:11:18,780 Speaker 1: individual people? Of these 100-plus interviews are not individually named, 169 00:11:19,330 --> 00:11:22,030 Speaker 1: and when it comes to today's episode, these interviews would 170 00:11:22,070 --> 00:11:26,230 Speaker 1: have happened 50 years or more after the events in question. 171 00:11:27,210 --> 00:11:30,590 Speaker 1: For example, there is a story that Kasuga flew his 172 00:11:30,650 --> 00:11:34,730 Speaker 1: plane until he ran out of gas, crashed, barely survived, 173 00:11:34,809 --> 00:11:37,800 Speaker 1: and then insisted on going home from the hospital even 174 00:11:37,840 --> 00:11:41,420 Speaker 1: though he was in a full-body cast. But reporting from 175 00:11:41,460 --> 00:11:45,500 Speaker 1: multiple newspapers in September of 1948, when this is said 176 00:11:45,520 --> 00:11:48,370 Speaker 1: to have happened, say that he was a passenger when 177 00:11:48,410 --> 00:11:51,929 Speaker 1: a small airplane crashed. The pilot of that plane had 178 00:11:51,950 --> 00:11:56,030 Speaker 1: a concussion and a possible skull fracture, but Kasuga's injuries 179 00:11:56,110 --> 00:11:59,410 Speaker 1: and those of another passenger were described as being minor. 180 00:12:00,130 --> 00:12:04,030 Speaker 1: Did Kasuga also survive another plane crash that doesn't seem 181 00:12:04,070 --> 00:12:07,089 Speaker 1: to have been reported in newspapers at all? Or did 182 00:12:07,130 --> 00:12:11,230 Speaker 1: this story become more grandiose over time? It's actually hard 183 00:12:11,270 --> 00:12:15,190 Speaker 1: to say. Did he really lose all his money on 184 00:12:15,290 --> 00:12:18,819 Speaker 1: wheat futures in the 1930s and then swear off ever 185 00:12:18,880 --> 00:12:22,780 Speaker 1: trading wheat futures ever again, only to decide later that 186 00:12:22,820 --> 00:12:25,839 Speaker 1: his knowledge of onion farming might make him do a 187 00:12:25,860 --> 00:12:29,829 Speaker 1: better job trading onion futures? Did he really have such 188 00:12:29,850 --> 00:12:33,150 Speaker 1: a good year one year that he bought cars for 189 00:12:33,190 --> 00:12:36,819 Speaker 1: a bunch of other brokers? Did he really bribe a 190 00:12:36,880 --> 00:12:40,420 Speaker 1: weatherman to put out a fake frost warning to drive 191 00:12:40,590 --> 00:12:44,930 Speaker 1: up the price of his onions? All of that is 192 00:12:45,150 --> 00:12:48,770 Speaker 1: also hard to say, but is in this book and 193 00:12:48,890 --> 00:12:52,720 Speaker 1: other stuff that has followed the book. He clearly is 194 00:12:52,760 --> 00:12:56,740 Speaker 1: a big character who, you know, enjoyed embellishments to his lore. 195 00:12:57,120 --> 00:13:01,370 Speaker 1: I think that is safe to say. Yeah. Another person 196 00:13:01,410 --> 00:13:05,130 Speaker 1: who was involved in this 1950s onion scheme was Sam Siegel, 197 00:13:05,410 --> 00:13:09,099 Speaker 1: who was another member of the Chicago Mercantile Exchange and 198 00:13:09,280 --> 00:13:14,200 Speaker 1: president and general manager of National Produce Distributors. He was 199 00:13:14,280 --> 00:13:18,540 Speaker 1: also vice president and stockholder of the Dakota Chief Sales Company, 200 00:13:18,940 --> 00:13:24,319 Speaker 1: which operated a cold storage warehouse in Franklin Park, Illinois. Together, 201 00:13:24,620 --> 00:13:28,220 Speaker 1: Kasuga and Siegel tried to corner the market on onions 202 00:13:28,300 --> 00:13:33,840 Speaker 1: at the Chicago Mercantile Exchange in late 1955. They discreetly 203 00:13:33,920 --> 00:13:39,240 Speaker 1: bought up 928 futures contracts for the November delivery, which 204 00:13:39,280 --> 00:13:43,780 Speaker 1: was about 45% of the total open interest in onion 205 00:13:43,840 --> 00:13:48,140 Speaker 1: futures for that month. By November 30th, as the contracts 206 00:13:48,160 --> 00:13:51,839 Speaker 1: were being settled and onions were being delivered, Kasuga wound 207 00:13:51,960 --> 00:13:56,280 Speaker 1: up with 262 car lots, and that was about half 208 00:13:56,480 --> 00:14:00,380 Speaker 1: of all the onions that were available in Chicago. We 209 00:14:00,460 --> 00:14:04,740 Speaker 1: said earlier that a car lot was about 650 pound bags, 210 00:14:04,840 --> 00:14:08,970 Speaker 1: so that is more than 7.8 million pounds of onions. 211 00:14:09,830 --> 00:14:12,360 Speaker 1: But that wasn't even all the onions they had coming in. 212 00:14:13,280 --> 00:14:16,920 Speaker 1: They were still trading while there were open contracts to trade, 213 00:14:17,000 --> 00:14:19,920 Speaker 1: and by the start of the year, Kasuga, Siegel, and 214 00:14:19,980 --> 00:14:24,700 Speaker 1: National Produce Distributors had a combined total of about 1,000 215 00:14:24,700 --> 00:14:30,730 Speaker 1: carlots of onions, or 30 million tons. For all practical purposes, 216 00:14:30,890 --> 00:14:35,010 Speaker 1: this was the entire supply of cash onions, meaning onions 217 00:14:35,070 --> 00:14:39,950 Speaker 1: available for sale in Chicago. In an interview that aired 218 00:14:39,990 --> 00:14:46,470 Speaker 1: on NPR in 2015, Kasuga's nephew, Harvey Paffenroth, remembered Kasuga 219 00:14:46,610 --> 00:14:50,650 Speaker 1: having a big corrugated aluminum shed in New York with 220 00:14:50,710 --> 00:14:52,810 Speaker 1: a conveyor belt going into it, which was where he 221 00:14:52,870 --> 00:14:56,530 Speaker 1: stockpiled all of these onions. It is absolutely possible that 222 00:14:56,550 --> 00:14:59,750 Speaker 1: he had exactly such a warehouse, but that might have 223 00:14:59,770 --> 00:15:03,030 Speaker 1: just been an ordinary part of his New York onion farm. 224 00:15:03,810 --> 00:15:07,390 Speaker 1: The various federal reports about this incident suggest that all 225 00:15:07,410 --> 00:15:09,970 Speaker 1: of the onions that were part of this scheme were 226 00:15:10,050 --> 00:15:14,489 Speaker 1: stored in and around Chicago, not in New York. It 227 00:15:14,530 --> 00:15:18,290 Speaker 1: seems like Kasuga and Siegel hoped that their futures contract 228 00:15:18,340 --> 00:15:22,739 Speaker 1: buying spree would drive up prices. But this created a 229 00:15:22,800 --> 00:15:26,620 Speaker 1: glut of onions in Chicago, and so prices started to dip. 230 00:15:27,340 --> 00:15:30,700 Speaker 1: This was also more onions than anyone could really deal 231 00:15:30,760 --> 00:15:34,380 Speaker 1: with at once. Onions are more shelf-stable than a lot 232 00:15:34,400 --> 00:15:37,170 Speaker 1: of other produce, but they can't just sit around forever. 233 00:15:37,350 --> 00:15:40,750 Speaker 1: So Kasuga and Siegel were putting them in cold storage. 234 00:15:41,530 --> 00:15:45,310 Speaker 1: But cold storage onions were seen as inferior quality because 235 00:15:45,370 --> 00:15:48,550 Speaker 1: of the effects of refrigeration. So putting that much of 236 00:15:48,570 --> 00:15:52,460 Speaker 1: the onion supply into cold storage was yet another damper 237 00:15:52,600 --> 00:15:57,680 Speaker 1: on the price. However, it wasn't like people had another 238 00:15:57,780 --> 00:16:00,460 Speaker 1: supplier to turn to if they wanted to buy some 239 00:16:00,660 --> 00:16:05,750 Speaker 1: fresh onions. non-cold storage onions or any other onions, really. 240 00:16:06,090 --> 00:16:08,810 Speaker 1: Kasuga and Siegel had bought up basically all of them, 241 00:16:08,990 --> 00:16:11,650 Speaker 1: and so they could decide how much to sell them for. 242 00:16:12,350 --> 00:16:15,690 Speaker 1: Kasuga and Siegel apparently wanted to do more than just 243 00:16:15,770 --> 00:16:17,930 Speaker 1: sell their onions at the price they set on the 244 00:16:18,010 --> 00:16:22,170 Speaker 1: open market. They went to 13 grower shippers who were 245 00:16:22,210 --> 00:16:25,430 Speaker 1: selling their onions on the Chicago market and told those 246 00:16:25,470 --> 00:16:28,100 Speaker 1: grower shippers that unless they agreed to buy some of 247 00:16:28,120 --> 00:16:31,870 Speaker 1: these onions... At the price that Kasuga and Siegel demanded, 248 00:16:32,270 --> 00:16:34,910 Speaker 1: Kasuga and Siegel would then flood the market with their 249 00:16:34,970 --> 00:16:38,820 Speaker 1: hoarded onions and drive the price down for everyone. They 250 00:16:38,880 --> 00:16:43,920 Speaker 1: had multiple meetings in and around Chicago about this. These 251 00:16:44,160 --> 00:16:48,140 Speaker 1: growers and shippers and people who did both, they normally 252 00:16:48,220 --> 00:16:52,460 Speaker 1: sold onions that they grew or shipped rather than buying 253 00:16:52,560 --> 00:16:56,320 Speaker 1: them to resell. But they all agreed to buy a 254 00:16:56,360 --> 00:17:01,090 Speaker 1: total of 287 carlots of onions at $ 1. 60 a bag 255 00:17:01,210 --> 00:17:07,909 Speaker 1: or $ 960 per carlot. That was a total price of $ 275, 000. 256 00:17:06,830 --> 00:17:11,270 Speaker 1: And then they would be reselling those onions through the 257 00:17:11,330 --> 00:17:16,369 Speaker 1: regular channels of trade. In return, Kasuga agreed not to 258 00:17:16,430 --> 00:17:19,770 Speaker 1: deliver any more of his onions for the remainder of 259 00:17:19,810 --> 00:17:22,030 Speaker 1: the onion season, which would end at the end of 260 00:17:22,109 --> 00:17:27,280 Speaker 1: March of 1956. Instead, he and Siegel would just keep 261 00:17:27,460 --> 00:17:32,260 Speaker 1: acquiring more onions where they could, creating an artificial onion 262 00:17:32,359 --> 00:17:37,659 Speaker 1: scarcity and keeping prices higher. During their talks, Kasuga assured 263 00:17:37,700 --> 00:17:40,840 Speaker 1: the grower shippers that the price on onion futures would 264 00:17:40,859 --> 00:17:44,690 Speaker 1: go up substantially because of this secret agreement. In the 265 00:17:44,730 --> 00:17:48,410 Speaker 1: words of the Commodity Exchange Authority's decision on this matter, quote, 266 00:17:48,770 --> 00:17:52,990 Speaker 1: Kasuga and Siegel suggested, and it was generally understood by 267 00:17:53,190 --> 00:17:57,020 Speaker 1: all the parties, that the restrictions against delivery assumed by 268 00:17:57,100 --> 00:18:02,100 Speaker 1: respondents Kasuga and Siegel were not to be publicized. But 269 00:18:02,420 --> 00:18:07,050 Speaker 1: in January and February of 1956, some of the grower-shippers 270 00:18:07,250 --> 00:18:10,990 Speaker 1: started to think that Kasuga and Siegel were not holding 271 00:18:11,130 --> 00:18:14,170 Speaker 1: up their end of the deal. Most of them had 272 00:18:14,210 --> 00:18:18,260 Speaker 1: made partial payments and had taken partial delivery on the 273 00:18:18,380 --> 00:18:21,260 Speaker 1: onions they had agreed to buy. And at that point, 274 00:18:21,500 --> 00:18:24,219 Speaker 1: all but one of them refused to pay for or 275 00:18:24,359 --> 00:18:29,280 Speaker 1: accept any more onions. So Kasuga and Siegel started discreetly 276 00:18:29,380 --> 00:18:34,220 Speaker 1: selling March Onion Futures, now from a short position, expecting 277 00:18:34,260 --> 00:18:36,940 Speaker 1: the price to fall. They sold 858 car lots of 278 00:18:36,960 --> 00:18:42,640 Speaker 1: March Onion Futures, and they wound up holding 44.3% of 279 00:18:42,800 --> 00:18:46,490 Speaker 1: the open interest in Onion Futures for the month. Kasuga 280 00:18:46,550 --> 00:18:50,090 Speaker 1: and Siegel were in fact the only people holding advantageous 281 00:18:50,130 --> 00:18:54,800 Speaker 1: short positions on Onion Futures for March. Everyone else who 282 00:18:54,840 --> 00:18:58,740 Speaker 1: had a futures contract was on the long position. Of course, 283 00:18:59,140 --> 00:19:03,180 Speaker 1: onions that had been delivered to market in November were 284 00:19:03,300 --> 00:19:07,090 Speaker 1: not exactly fresh by March, So in January and February, 285 00:19:07,150 --> 00:19:10,570 Speaker 1: Kasuga and Siegel started shipping their onions out of Chicago 286 00:19:10,630 --> 00:19:14,280 Speaker 1: to be reworked. So they were culling the unsalvageable ones 287 00:19:14,400 --> 00:19:17,800 Speaker 1: and then sorting and repackaging the rest before sending them 288 00:19:17,859 --> 00:19:21,439 Speaker 1: back to Chicago to be sold. Around this time, it 289 00:19:21,480 --> 00:19:24,139 Speaker 1: seems like Kasuga might have started to have second thoughts 290 00:19:24,260 --> 00:19:28,100 Speaker 1: about this whole plan. According to testimony at a Commodity 291 00:19:28,160 --> 00:19:32,110 Speaker 1: Exchange Authority hearing, one of the grower shippers, Dave Slinger, 292 00:19:32,190 --> 00:19:36,060 Speaker 1: got a call from Kasuga about it. His testimony is 293 00:19:36,260 --> 00:19:38,520 Speaker 1: pretty amazing. So we're just going to read it. Quote, 294 00:19:39,080 --> 00:19:42,220 Speaker 1: along about the 20th of January, I had onions. I 295 00:19:42,260 --> 00:19:44,320 Speaker 1: had my onions all hedged and I got rid of 296 00:19:44,550 --> 00:19:46,490 Speaker 1: all of them. And then I went on a ski 297 00:19:46,530 --> 00:19:48,550 Speaker 1: trip and broke my leg and I was confined to 298 00:19:48,570 --> 00:19:51,920 Speaker 1: the hospital in Wausau. And along about the 1st of February, 299 00:19:51,980 --> 00:19:54,740 Speaker 1: I received a call from Mr. Kasuga and he wanted 300 00:19:54,780 --> 00:19:58,040 Speaker 1: me to call William Goering and suggest to him that 301 00:19:58,080 --> 00:20:01,650 Speaker 1: he go short the market. I was completely dumbfounded because 302 00:20:01,730 --> 00:20:03,810 Speaker 1: I thought they were on the long side of the market. 303 00:20:04,430 --> 00:20:06,629 Speaker 1: I do not know exactly what was said after he 304 00:20:06,670 --> 00:20:09,470 Speaker 1: made that suggestion, but I was left with the impression 305 00:20:09,490 --> 00:20:12,460 Speaker 1: that he had reversed his position, that he was short 306 00:20:12,500 --> 00:20:16,000 Speaker 1: the market and possibly his conscience was bothering him and 307 00:20:16,040 --> 00:20:18,800 Speaker 1: he wanted Gehring also to get in on the short side. 308 00:20:19,660 --> 00:20:22,190 Speaker 1: I told him that I didn't think that, I thought 309 00:20:22,250 --> 00:20:24,290 Speaker 1: if they were going to reverse their position and go 310 00:20:24,369 --> 00:20:27,109 Speaker 1: short the market, the group should be called together and 311 00:20:27,170 --> 00:20:31,040 Speaker 1: should do it together. Mr. Kasuga answered that that would 312 00:20:31,080 --> 00:20:33,480 Speaker 1: never do. It would wreck the market in a matter 313 00:20:33,520 --> 00:20:36,760 Speaker 1: of minutes and go down to 50 cents. That the 314 00:20:36,880 --> 00:20:39,110 Speaker 1: only way to do it was to control it somewhat 315 00:20:39,270 --> 00:20:42,590 Speaker 1: and only one person know about it. I said, all right, 316 00:20:42,710 --> 00:20:45,130 Speaker 1: I will call William Gehring, and so I called him, 317 00:20:45,450 --> 00:20:48,580 Speaker 1: and William Gehring absolutely wouldn't have anything to do with it. 318 00:20:49,030 --> 00:20:51,730 Speaker 1: He said, I won't do anything unless all the group 319 00:20:51,869 --> 00:20:56,340 Speaker 1: acts together. William Gehring, for context, had agreed to buy 320 00:20:56,380 --> 00:20:59,780 Speaker 1: more onions than the other growers, 60 car lots, and 321 00:20:59,820 --> 00:21:02,139 Speaker 1: aside from a couple of growers who only agreed to 322 00:21:02,180 --> 00:21:04,859 Speaker 1: buy a few, he was the only one who had 323 00:21:04,920 --> 00:21:09,990 Speaker 1: paid for and collected the entire promised amount. When March 324 00:21:10,130 --> 00:21:14,670 Speaker 1: arrived and the Onion Futures contracts were settled, the market 325 00:21:14,730 --> 00:21:19,520 Speaker 1: was flooded with onions. According to Paffenroth's NPR interview, the 326 00:21:19,600 --> 00:21:23,200 Speaker 1: mesh bags that the onions were packaged in cost 20 327 00:21:23,200 --> 00:21:26,899 Speaker 1: cents apiece, and a bag full of onions was selling 328 00:21:27,010 --> 00:21:30,629 Speaker 1: for 10 cents. At least the onion price part of 329 00:21:30,650 --> 00:21:34,320 Speaker 1: this absolutely holds up. According to documents from the hearing 330 00:21:34,480 --> 00:21:37,320 Speaker 1: that followed this, on the last day of trading in 331 00:21:37,380 --> 00:21:41,320 Speaker 1: March Onion Futures, the price reached a low of 10 332 00:21:41,320 --> 00:21:46,020 Speaker 1: cents before closing at 15 cents, which was the lowest 333 00:21:46,119 --> 00:21:50,440 Speaker 1: price ever recorded on the exchange. That was down from 334 00:21:50,480 --> 00:21:54,240 Speaker 1: a price of about $ 2 earlier in the year, and 335 00:21:54,300 --> 00:21:57,800 Speaker 1: the lowest ever price before this was 43 cents a bag. 336 00:21:59,690 --> 00:22:04,030 Speaker 1: But this colossal price drop was not solely because of 337 00:22:04,109 --> 00:22:08,330 Speaker 1: Kasuga and Siegel's market manipulations. There was also an early 338 00:22:08,390 --> 00:22:11,310 Speaker 1: harvest of onions from Texas that hit the market at 339 00:22:11,350 --> 00:22:13,369 Speaker 1: about the same time all of this was going on. 340 00:22:13,910 --> 00:22:17,590 Speaker 1: That harvest was both larger and earlier than expected. But 341 00:22:18,070 --> 00:22:21,260 Speaker 1: this attempt to fix the prices by Kasuga and Siegel 342 00:22:21,300 --> 00:22:26,100 Speaker 1: was definitely a factor. According to Harvey Pathanroth's NPR interview, 343 00:22:26,300 --> 00:22:32,330 Speaker 1: Kasuga made $ 8. 5 million on this market manipulation. That doesn't 344 00:22:32,369 --> 00:22:35,010 Speaker 1: seem to line up with the numbers in case files 345 00:22:35,090 --> 00:22:38,730 Speaker 1: on the matter, which includes various transactions in the hundreds 346 00:22:38,830 --> 00:22:42,950 Speaker 1: of thousands of dollars. Various write-ups of this also claim 347 00:22:42,970 --> 00:22:46,850 Speaker 1: that multiple onion growers went bankrupt and that some farmers 348 00:22:46,890 --> 00:22:50,330 Speaker 1: took their own lives, but Tracy didn't find any mention 349 00:22:50,530 --> 00:22:53,320 Speaker 1: of this in the reporting from the time. She also 350 00:22:53,340 --> 00:22:55,910 Speaker 1: didn't find anything to confirm the story that there were 351 00:22:55,970 --> 00:22:59,429 Speaker 1: so many worthless onions in Chicago that people started throwing 352 00:22:59,470 --> 00:23:02,489 Speaker 1: them into the river. Yeah, that seems like something there 353 00:23:02,510 --> 00:23:05,730 Speaker 1: would be at least one newspaper article mentioning, and it's 354 00:23:05,830 --> 00:23:08,530 Speaker 1: possible there is one that I just could not find 355 00:23:08,590 --> 00:23:12,359 Speaker 1: in all of my various searching of various newspaper databases, 356 00:23:13,260 --> 00:23:16,399 Speaker 1: but I did not. We'll talk about what happened next 357 00:23:16,540 --> 00:23:29,940 Speaker 1: after a sponsor break. As we said earlier, market manipulation 358 00:23:30,160 --> 00:23:34,040 Speaker 1: and deceptive contracts were illegal under the Commodity Exchange Act. 359 00:23:34,800 --> 00:23:38,350 Speaker 1: In June of 1956, as he was empowered to do 360 00:23:38,470 --> 00:23:42,530 Speaker 1: under the act, Earl L. Butts, Assistant Secretary of Agriculture, 361 00:23:42,650 --> 00:23:47,810 Speaker 1: issued a complaint against Vincent Kasuga, Sam Siegel, and National 362 00:23:47,890 --> 00:23:54,200 Speaker 1: Produce Distributors. Quote, the complaint charges attempted manipulation and manipulation 363 00:23:54,220 --> 00:23:57,060 Speaker 1: of the price of onion futures on the Chicago Mercantile 364 00:23:57,119 --> 00:24:01,369 Speaker 1: Exchange and attempted manipulation of the price of cash onions 365 00:24:01,790 --> 00:24:04,930 Speaker 1: in violation of Section 6B and 9 of the Commodity 366 00:24:04,990 --> 00:24:09,210 Speaker 1: Exchange Act. Included in the complaint are charges that the respondents, 367 00:24:09,410 --> 00:24:12,840 Speaker 1: after first entering into a conspiracy with a group of 368 00:24:12,920 --> 00:24:16,240 Speaker 1: growers and shippers to increase or prevent a decrease in 369 00:24:16,260 --> 00:24:21,740 Speaker 1: the price of onions, engaged in A separate conspiracy among themselves, 370 00:24:21,880 --> 00:24:24,840 Speaker 1: by means of which they depressed the price of the 371 00:24:24,880 --> 00:24:29,869 Speaker 1: March 1956 onion future. Kasuga and Siegel were ordered to 372 00:24:29,950 --> 00:24:34,690 Speaker 1: appear at a public hearing in Chicago on July 24, 1956, 373 00:24:34,690 --> 00:24:40,210 Speaker 1: before the Department of Agriculture's judicial officer. Fifteen witnesses testified 374 00:24:40,250 --> 00:24:43,970 Speaker 1: at this hearing, and attorneys filed briefs and made oral arguments. 375 00:24:44,910 --> 00:24:47,250 Speaker 1: It was clear that Kasuga and Siegel had bought up 376 00:24:47,310 --> 00:24:51,650 Speaker 1: a massive number of futures contracts, had various secret communications 377 00:24:51,690 --> 00:24:55,330 Speaker 1: with the grower's shippers, and flooded the market with onions. 378 00:24:55,930 --> 00:24:59,880 Speaker 1: But their actions were still seen as open to interpretation. 379 00:25:00,650 --> 00:25:03,560 Speaker 1: In the words of the Commodity Exchange Authority decision, quote, 380 00:25:03,820 --> 00:25:06,800 Speaker 1: at this final stage of the proceeding, it is apparent 381 00:25:06,840 --> 00:25:09,659 Speaker 1: that there is little or no dispute about the basic 382 00:25:09,720 --> 00:25:14,000 Speaker 1: facts put in evidence. The inferences and conclusions to be 383 00:25:14,020 --> 00:25:19,520 Speaker 1: drawn from the basic facts are, however, subjects of controversy. Ultimately, 384 00:25:19,580 --> 00:25:23,460 Speaker 1: the Commodity Exchange Authority decided that there was not clear 385 00:25:23,680 --> 00:25:26,899 Speaker 1: evidence that Kasuga and Siegel had tried to manipulate the 386 00:25:26,940 --> 00:25:31,210 Speaker 1: market upward in November of 1955, when all they were 387 00:25:31,270 --> 00:25:34,550 Speaker 1: doing was buying up lots and lots of futures contracts. 388 00:25:35,220 --> 00:25:39,780 Speaker 1: But Kasuga, Siegel, and national produce distributors had tried to 389 00:25:39,820 --> 00:25:43,530 Speaker 1: manipulate onion prices in November and December when they started 390 00:25:43,590 --> 00:25:47,709 Speaker 1: making these secret agreements with the grower-shippers. And they had 391 00:25:47,910 --> 00:25:51,990 Speaker 1: also tried to manipulate the price downward in March. That 392 00:25:52,050 --> 00:25:55,730 Speaker 1: was an unlawful market manipulation, all of that under the 393 00:25:55,800 --> 00:25:59,100 Speaker 1: Commodity Exchange Act, even if their only goal was to 394 00:25:59,160 --> 00:26:04,880 Speaker 1: try to stabilize onion prices, which Kasuga and Siegel claimed... 395 00:26:04,869 --> 00:26:07,090 Speaker 1: was all that they were trying to do as part 396 00:26:07,130 --> 00:26:10,590 Speaker 1: of their defense. Regarding the lack of evidence for trying 397 00:26:10,630 --> 00:26:13,129 Speaker 1: to manipulate the market upward by buying up all the 398 00:26:13,190 --> 00:26:17,179 Speaker 1: futures contracts, the decision said, quote, drawing a line between 399 00:26:17,240 --> 00:26:21,060 Speaker 1: legitimate trading and trading with manipulative intent is sometimes a 400 00:26:21,320 --> 00:26:25,149 Speaker 1: very difficult task. We have here the physical facts of 401 00:26:25,210 --> 00:26:29,690 Speaker 1: Kasuga's trading in the November 1955 future and some statements 402 00:26:29,750 --> 00:26:32,429 Speaker 1: by Kasuga to grower shippers, at the time of the 403 00:26:32,490 --> 00:26:35,530 Speaker 1: events leading to the second charge of the complaint, to 404 00:26:35,570 --> 00:26:38,850 Speaker 1: the effect that he had received more deliveries in November 405 00:26:39,170 --> 00:26:43,230 Speaker 1: than he had expected. Moreover, from the record, it appears 406 00:26:43,290 --> 00:26:47,500 Speaker 1: that manipulations in Onion Futures upon the exchange were not uncommon. 407 00:26:48,359 --> 00:26:52,379 Speaker 1: On the other hand, Kasuga's statements to the grower-shippers could 408 00:26:52,460 --> 00:26:55,939 Speaker 1: be interpreted to mean that Kasuga had not forecast market 409 00:26:56,000 --> 00:26:59,400 Speaker 1: movements correctly, as well as being open to the inference 410 00:26:59,580 --> 00:27:03,990 Speaker 1: argued by complainant. We also have Kasuga's case for trading 411 00:27:04,050 --> 00:27:08,250 Speaker 1: long in the November future, principally extensive flood damage to 412 00:27:08,310 --> 00:27:12,770 Speaker 1: harvested onions, and his defense for taking deliveries, namely that 413 00:27:12,810 --> 00:27:16,129 Speaker 1: for him, a large long to do otherwise would have 414 00:27:16,150 --> 00:27:20,919 Speaker 1: demoralized the market to his financial detriment. We conclude that 415 00:27:20,940 --> 00:27:23,840 Speaker 1: the evidence falls just a bit short of tipping the 416 00:27:23,900 --> 00:27:28,159 Speaker 1: scale enough to warrant an inference of manipulation intent in 417 00:27:28,200 --> 00:27:33,050 Speaker 1: a quasi-judicial proceeding such as this. Consequently, the charge in 418 00:27:33,090 --> 00:27:38,290 Speaker 1: this connection should be dismissed. So that one charge was dismissed, 419 00:27:38,430 --> 00:27:44,230 Speaker 1: but the others were not. The decision was announced in 1960. Kasuga, Siegel, 420 00:27:44,330 --> 00:27:47,650 Speaker 1: and National Produce Distributors, Inc. were all stripped of their 421 00:27:47,730 --> 00:27:52,740 Speaker 1: trading privileges in all contract markets for 10 months. Once 422 00:27:52,900 --> 00:27:55,720 Speaker 1: their ban was lifted, though, Kasuga and Siegel went back 423 00:27:55,760 --> 00:27:58,199 Speaker 1: to trading, but they did not go back to trading 424 00:27:58,240 --> 00:28:03,630 Speaker 1: in Onion Futures Onion futures trading specifically had been outlawed 425 00:28:03,670 --> 00:28:08,120 Speaker 1: at the federal level on August 28, 1958 under legislation 426 00:28:08,190 --> 00:28:12,800 Speaker 1: introduced by Gerald Ford, who was then representing Michigan in 427 00:28:12,840 --> 00:28:15,860 Speaker 1: the House of Representatives that had then been signed into 428 00:28:15,920 --> 00:28:20,570 Speaker 1: law by President Dwight Eisenhower. Onion growers in Michigan who 429 00:28:20,609 --> 00:28:24,830 Speaker 1: had been affected by this 1955 market manipulation had gone 430 00:28:24,910 --> 00:28:29,010 Speaker 1: to Ford about it Congress took up the legislation, even 431 00:28:29,050 --> 00:28:33,760 Speaker 1: though those market manipulations had already been illegal under the 432 00:28:33,840 --> 00:28:38,080 Speaker 1: existing Commodity Exchange Act. Some of the people who advocated 433 00:28:38,120 --> 00:28:40,240 Speaker 1: for this law were also of the opinion that it 434 00:28:40,280 --> 00:28:43,500 Speaker 1: wasn't just this one thing that Kasuga and Siegel had done, 435 00:28:44,010 --> 00:28:47,610 Speaker 1: but that futures trading hurt farmers in general and should 436 00:28:47,650 --> 00:28:51,470 Speaker 1: be outlawed. This law reads in part, quote, be it 437 00:28:51,510 --> 00:28:54,130 Speaker 1: enacted by the Senate and House of Representatives of the 438 00:28:54,170 --> 00:28:58,860 Speaker 1: United States of America, in Congress assembled that A, no 439 00:28:58,920 --> 00:29:01,980 Speaker 1: contract for the sale of onions for future delivery shall 440 00:29:02,020 --> 00:29:04,900 Speaker 1: be made on or subject to the rules of any 441 00:29:04,960 --> 00:29:08,440 Speaker 1: board of trade in the United States. The terms used 442 00:29:08,480 --> 00:29:10,610 Speaker 1: in this act shall have the same meaning as when 443 00:29:10,740 --> 00:29:15,270 Speaker 1: used in the Commodity Exchange Act. B, any person who 444 00:29:15,330 --> 00:29:18,250 Speaker 1: shall violate the provisions of this section shall be deemed 445 00:29:18,350 --> 00:29:21,970 Speaker 1: guilty of a misdemeanor and upon conviction thereof be fined 446 00:29:22,110 --> 00:29:27,750 Speaker 1: not more than $ 5, 000. The Chicago Mercantile Exchange filed suit 447 00:29:27,870 --> 00:29:31,210 Speaker 1: in the U.S. District Court for the Northern District of Illinois, 448 00:29:31,810 --> 00:29:36,970 Speaker 1: arguing that this law was unconstitutional. The court found against 449 00:29:37,070 --> 00:29:39,490 Speaker 1: them they did not pursue an appeal and this law 450 00:29:39,510 --> 00:29:44,100 Speaker 1: was unconstitutional. still stands today. Another legal action that's connected 451 00:29:44,120 --> 00:29:47,080 Speaker 1: to all of this was a lawsuit Kasuga filed against 452 00:29:47,200 --> 00:29:50,800 Speaker 1: one of the growers, Jack Kelly, who had paid Kasuga 453 00:29:50,860 --> 00:29:54,090 Speaker 1: for only 13 of the 50 car lots that Kelly 454 00:29:54,110 --> 00:29:57,590 Speaker 1: had agreed to buy. Kelly had agreed to buy more 455 00:29:57,690 --> 00:30:01,110 Speaker 1: onions than anyone else other than William Gehring, and he 456 00:30:01,170 --> 00:30:04,730 Speaker 1: had a bigger outstanding debt to Kasuga than any other grower. 457 00:30:05,530 --> 00:30:08,430 Speaker 1: But Kelly alleged that this sale was in violation of 458 00:30:08,470 --> 00:30:11,860 Speaker 1: the Sherman Antitrust Act, so he should not have to 459 00:30:11,900 --> 00:30:14,540 Speaker 1: pay for the rest. This went all the way to 460 00:30:14,580 --> 00:30:19,440 Speaker 1: the Supreme Court. Associate Justice William J. Brennan Jr. authored 461 00:30:19,480 --> 00:30:24,980 Speaker 1: the court's opinion, which was delivered on February 24, 1959. 462 00:30:24,980 --> 00:30:28,660 Speaker 1: he found in Kasuga's favor in a decision that said 463 00:30:28,700 --> 00:30:31,890 Speaker 1: in part, quote, petitioner evidently is willing to take the 464 00:30:31,950 --> 00:30:35,050 Speaker 1: bitter as well as the sweet from this passage. If 465 00:30:35,090 --> 00:30:38,650 Speaker 1: the defense of illegality is to be allowed as a 466 00:30:38,730 --> 00:30:43,290 Speaker 1: collateral method of enforcement of the antitrust laws, as the 467 00:30:43,390 --> 00:30:47,480 Speaker 1: breadth of the petitioner's argument suggests, it must be said 468 00:30:47,520 --> 00:30:51,440 Speaker 1: that his theory creates a very strange class of private 469 00:30:51,540 --> 00:30:55,910 Speaker 1: attorneys general. This case has been part of the precedent 470 00:30:55,970 --> 00:30:58,910 Speaker 1: for a couple of other court cases about the limits 471 00:30:59,110 --> 00:31:04,140 Speaker 1: of antitrust defenses. There have been other crimes in the 472 00:31:04,180 --> 00:31:09,440 Speaker 1: world of commodities futures since then. For example, the December 473 00:31:09,440 --> 00:31:14,130 Speaker 1: 1963 Great Salad Oil Swindle. Anthony DeAngelis, known as Tony, 474 00:31:14,330 --> 00:31:18,890 Speaker 1: owned Allied Crude Vegetable Oil Refining Corporation. He filled a 475 00:31:18,910 --> 00:31:22,860 Speaker 1: warehouse with fake soybean oil by doing things like putting 476 00:31:22,920 --> 00:31:25,470 Speaker 1: a layer of soybean oil at the top of tanks 477 00:31:25,510 --> 00:31:29,810 Speaker 1: that were otherwise filled with water. He used that non-existent 478 00:31:29,970 --> 00:31:33,850 Speaker 1: oil as collateral to trade in various vegetable oil futures, 479 00:31:34,250 --> 00:31:37,460 Speaker 1: and he tried to corner the soybean market. He was 480 00:31:37,540 --> 00:31:41,770 Speaker 1: convicted and sentenced to 10 years in prison. There have 481 00:31:41,830 --> 00:31:45,830 Speaker 1: been various other laws about futures trading in the U.S. 482 00:31:45,930 --> 00:31:49,210 Speaker 1: since the 1950s as well. A major one was in 483 00:31:49,210 --> 00:31:54,520 Speaker 1: 1974 when Congress passed the Commodity Futures Trading Commission Act, 484 00:31:54,960 --> 00:31:58,780 Speaker 1: which was signed into law by President Gerald Ford. This 485 00:31:58,920 --> 00:32:02,660 Speaker 1: overhauled the Commodity Exchange Act and established the Commodity Futures 486 00:32:02,780 --> 00:32:07,900 Speaker 1: Trading Commission, which replaced the Commodity Exchange Authority. And then 487 00:32:07,960 --> 00:32:12,150 Speaker 1: the Dodd-Frank Wall Street Reform and Consumer Protection Act was 488 00:32:12,210 --> 00:32:14,610 Speaker 1: enacted in 2010, and that was in the wake of 489 00:32:14,650 --> 00:32:20,790 Speaker 1: the 2008 financial crisis. Speculative trading and derivatives played a 490 00:32:20,830 --> 00:32:24,650 Speaker 1: part in that financial crisis, although there is debate around 491 00:32:24,710 --> 00:32:28,890 Speaker 1: exactly how large a part. Dodd-Frank led to new regulations 492 00:32:28,970 --> 00:32:33,020 Speaker 1: for financial markets, including derivatives markets, and it established the 493 00:32:33,150 --> 00:32:38,010 Speaker 1: Consumer Financial Protection Bureau, among other reforms. There have been 494 00:32:38,150 --> 00:32:41,690 Speaker 1: other attempts to outlaw trading in specific futures since the 495 00:32:41,730 --> 00:32:44,450 Speaker 1: passage of the Onion Futures Act, but the only one 496 00:32:44,490 --> 00:32:48,540 Speaker 1: that has been successful was also in 2010. The Motion 497 00:32:48,580 --> 00:32:52,780 Speaker 1: Picture Association of America lobbied to have trading in box 498 00:32:52,860 --> 00:32:56,620 Speaker 1: office futures banned. The relevant part of the U.S. Code 499 00:32:56,680 --> 00:33:00,000 Speaker 1: now reads in part, quote, no contract for the sale 500 00:33:00,100 --> 00:33:04,400 Speaker 1: of motion picture box office receipts or any index, measure, value, 501 00:33:04,480 --> 00:33:08,360 Speaker 1: or data related to such receipts or onions for future 502 00:33:08,400 --> 00:33:11,720 Speaker 1: delivery shall be made on or subject to the rules 503 00:33:11,780 --> 00:33:15,620 Speaker 1: of any board of trade in the United States. Violation 504 00:33:15,760 --> 00:33:18,940 Speaker 1: of this law is still classified as a misdemeanor with 505 00:33:18,980 --> 00:33:23,440 Speaker 1: a fine of up to $ 5, 000. If you're wondering what 506 00:33:23,560 --> 00:33:27,880 Speaker 1: happened to Kasuga and Siegel after this, I don't know 507 00:33:27,920 --> 00:33:30,719 Speaker 1: what happened to Siegel. Was not able to find that out. 508 00:33:30,960 --> 00:33:34,490 Speaker 1: But Kasuga went back to both farming and futures trading 509 00:33:34,550 --> 00:33:37,920 Speaker 1: once his ban was lifted. He sold his farm in 510 00:33:37,980 --> 00:33:42,750 Speaker 1: Pine Island, New York in 1966 for a reported $ 2 million. 511 00:33:43,630 --> 00:33:46,870 Speaker 1: By that point, he had started a restaurant, the Jolly 512 00:33:47,070 --> 00:33:50,330 Speaker 1: Onion Inn, which his wife Polly said they started because 513 00:33:50,410 --> 00:33:52,270 Speaker 1: they felt like there was not a restaurant in the 514 00:33:52,370 --> 00:33:55,060 Speaker 1: area that could really cater to the drivers who hauled 515 00:33:55,100 --> 00:33:59,100 Speaker 1: the produce from all the region's farms. Kasuga also had 516 00:33:59,220 --> 00:34:02,940 Speaker 1: other businesses, including a cold storage facility, and he made 517 00:34:03,000 --> 00:34:06,790 Speaker 1: various donations to the Catholic Church, including his local St. 518 00:34:06,850 --> 00:34:11,850 Speaker 1: Stanislaus Catholic Church. By some accounts, he gave so much 519 00:34:11,930 --> 00:34:15,089 Speaker 1: money to the Catholic Church that he had private audiences 520 00:34:15,210 --> 00:34:19,109 Speaker 1: with three different popes. That also seems like the kind 521 00:34:19,160 --> 00:34:23,299 Speaker 1: of thing that might get publicly mentioned somewhere. I just 522 00:34:23,320 --> 00:34:27,780 Speaker 1: didn't find it. He was named Citizen of the Year 523 00:34:27,900 --> 00:34:30,819 Speaker 1: by the Pine Island Chamber of Commerce in 1987, and 524 00:34:30,840 --> 00:34:38,510 Speaker 1: he died in 2001 at the age of And that's 525 00:34:38,590 --> 00:34:44,560 Speaker 1: the Onion Futures Act. If you have documented knowledge about 526 00:34:44,739 --> 00:34:48,960 Speaker 1: all of the exploits of Vince Kasuga and his potential 527 00:34:49,060 --> 00:34:52,200 Speaker 1: three different audiences with three different popes, I mean, I 528 00:34:52,239 --> 00:34:55,710 Speaker 1: would love to see that. I know. I'm like, which 529 00:34:55,850 --> 00:34:58,870 Speaker 1: popes would those have to be, right? What a great question. 530 00:34:58,930 --> 00:35:01,350 Speaker 1: I did not go look into the timeline. I'm gonna. 531 00:35:01,410 --> 00:35:05,410 Speaker 1: I'll have it ready for Friday. Okay. Okay. I have 532 00:35:05,450 --> 00:35:12,950 Speaker 1: some listener mail. This listener mail is from Janine. Janine 533 00:35:12,989 --> 00:35:19,100 Speaker 1: wrote an email titled, Lightning Safety Standards, which I am 534 00:35:19,160 --> 00:35:22,000 Speaker 1: in favor of knowing as much as we can about 535 00:35:22,120 --> 00:35:25,580 Speaker 1: lightning safety standards. So Janine wrote, hi, Holly and Tracy. 536 00:35:26,260 --> 00:35:29,750 Speaker 1: I just listened to the court cases episode. Great episode. Fascinating. 537 00:35:30,230 --> 00:35:32,469 Speaker 1: and had to write about the listener mail. I was 538 00:35:32,510 --> 00:35:35,790 Speaker 1: really interested to hear about the drop in lightning deaths. 539 00:35:36,610 --> 00:35:38,630 Speaker 1: I wouldn't have guessed it, but it makes total sense. 540 00:35:38,770 --> 00:35:41,549 Speaker 1: I have kids and volunteer with youth organizations, and the 541 00:35:41,590 --> 00:35:45,730 Speaker 1: standard here now is that everyone goes inside when the 542 00:35:45,810 --> 00:35:50,210 Speaker 1: lightning strikes are within 10 miles. Depending on conditions, you 543 00:35:50,270 --> 00:35:53,830 Speaker 1: often can't even hear thunder at 10 miles away. This 544 00:35:53,890 --> 00:35:57,780 Speaker 1: is only possible because of the prevalence of lightning apps 545 00:35:57,860 --> 00:36:00,620 Speaker 1: on everyone's phones. I don't know what the official rule 546 00:36:00,660 --> 00:36:02,760 Speaker 1: was when I was growing up, but I'm sure adults 547 00:36:02,800 --> 00:36:06,279 Speaker 1: were calculating distance by watching the lightning and counting till 548 00:36:06,300 --> 00:36:09,820 Speaker 1: they heard thunder. So storms got a lot closer to 549 00:36:09,920 --> 00:36:13,560 Speaker 1: us before we started for cover. Furthermore, the standards for 550 00:36:13,600 --> 00:36:17,800 Speaker 1: what constitutes acceptable shelter have gone up. Just as one example, 551 00:36:17,840 --> 00:36:20,060 Speaker 1: when I was a teen, I volunteered for a day 552 00:36:20,100 --> 00:36:22,779 Speaker 1: camp held at a local park. As an adult, I'm 553 00:36:22,840 --> 00:36:25,950 Speaker 1: still volunteering with that day camp. But we can't hold 554 00:36:25,989 --> 00:36:28,650 Speaker 1: it at the park anymore because there's no true indoors. 555 00:36:28,750 --> 00:36:31,510 Speaker 1: There are picnic shelters and gazebos, but not a fully 556 00:36:31,570 --> 00:36:34,880 Speaker 1: enclosed area. And that's simply not up to standard anymore. 557 00:36:35,320 --> 00:36:37,700 Speaker 1: It can be frustrating to interrupt activities or have to 558 00:36:37,739 --> 00:36:40,520 Speaker 1: go pack it in over a storm passing just inside 559 00:36:40,560 --> 00:36:43,680 Speaker 1: the 10-mile radius. But I can't argue with the results. 560 00:36:43,680 --> 00:36:49,430 Speaker 1: 450 annual lightning deaths to nearly none is amazing progress. 561 00:36:49,590 --> 00:36:51,950 Speaker 1: Thanks for the show. It's always a pleasure to listen 562 00:36:51,969 --> 00:36:55,450 Speaker 1: to you. For Pet Tax, I've attached pictures of my kitties, 563 00:36:55,610 --> 00:36:58,650 Speaker 1: Walnut the Tabby and Hildegard All Black, looking sweetly at 564 00:36:58,690 --> 00:37:01,670 Speaker 1: me from various places on the stairs. They are very 565 00:37:01,750 --> 00:37:05,690 Speaker 1: picturesque when lurking on the staircase. Janine. Thank you so 566 00:37:05,730 --> 00:37:09,070 Speaker 1: much for this email, Janine. We do have pictures of 567 00:37:09,150 --> 00:37:12,390 Speaker 1: two kitty cats sitting on stairs. Babies. Mine love to 568 00:37:12,450 --> 00:37:16,629 Speaker 1: sit on the stairs. We have a banister railing, and 569 00:37:16,790 --> 00:37:18,810 Speaker 1: Onyx in particular likes to get on a very high 570 00:37:18,850 --> 00:37:21,620 Speaker 1: step and stick her head out through it. And look 571 00:37:21,640 --> 00:37:26,080 Speaker 1: at the world below. I also definitely remember adults when 572 00:37:26,140 --> 00:37:29,470 Speaker 1: I was a child seeing the lightning in the distance 573 00:37:29,530 --> 00:37:33,170 Speaker 1: and counting a number of seconds to decide whether we 574 00:37:33,190 --> 00:37:36,620 Speaker 1: should go inside. I learned that from the movie Poltergeist. Yeah? Yeah, 575 00:37:37,219 --> 00:37:39,939 Speaker 1: because they do it in that. I don't remember that, 576 00:37:40,020 --> 00:37:42,930 Speaker 1: but sure. Sure. That movie traumatized me deeply as a child, 577 00:37:43,000 --> 00:37:49,040 Speaker 1: but also is brilliant, so, you know, combo burrito. I 578 00:37:49,080 --> 00:37:53,239 Speaker 1: was reading an article recently about how, in addition to 579 00:37:53,300 --> 00:37:57,549 Speaker 1: it being an enclosed space, if you are trying to 580 00:37:57,650 --> 00:38:02,230 Speaker 1: shelter from potential lightning, it's also important that there is plumbing, 581 00:38:03,330 --> 00:38:10,930 Speaker 1: because the plumbing pipes redirect the electricity away from the 582 00:38:11,010 --> 00:38:15,049 Speaker 1: interior of the structure. Otherwise, if you are in just 583 00:38:15,230 --> 00:38:17,950 Speaker 1: a shed that has no sort of plumbing or anything 584 00:38:17,989 --> 00:38:21,130 Speaker 1: like that to redirect the electricity away and the lightning 585 00:38:21,410 --> 00:38:27,130 Speaker 1: strikes that structure, it just goes from the structure into 586 00:38:27,170 --> 00:38:31,550 Speaker 1: a person's body, potentially. So, yeah, those standards have evolved 587 00:38:31,610 --> 00:38:37,810 Speaker 1: a lot since my childhood, for sure. So, thank you, Janine. 588 00:38:38,239 --> 00:38:42,520 Speaker 1: for that email and for the adorable cat pictures. If 589 00:38:42,580 --> 00:38:44,380 Speaker 1: you would like to send us a note, we are 590 00:38:44,420 --> 00:38:48,549 Speaker 1: at historypodcasts at iheartradio.com. If you would like to see 591 00:38:48,570 --> 00:38:51,930 Speaker 1: the show notes for this episode or many of our 592 00:38:51,969 --> 00:38:54,830 Speaker 1: other recent episodes, that's at our website. You can get 593 00:38:54,870 --> 00:38:59,510 Speaker 1: to that by typing in missedinhistory.com. Today's show notes include 594 00:38:59,570 --> 00:39:03,460 Speaker 1: links to the various federal decisions on the matter of 595 00:39:03,520 --> 00:39:08,870 Speaker 1: this large onion market manipulation issue. 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