The CHAIRMAN. Are there questions of these gentlemen?
Mr. SPENCE. Mr. Chairman.

The CHAIRMAN. Mr. Spence.

Mr. SPENCE. I judge from what you say that you feel that the existing law in its present state would not be sufficient to furnish the accommodations received by the farmers under the present act; is that

true?

Mr. SMITH. The proposed amendments, Congressman, relate more to the volume of business rather than the type of business.

Mr. SPENCE. But without the amendments you suggest, there would be no adequate relief for the farmers, as provided by the Farmers' Home Administration?

Mr. SMITH. The Bankhead-Jones Farm Tenant Act has adequate provisions from the standpoint of the type of loan, to assist with the rural housing problem, but these amendments would enable the Department to step up the volume of business under the Bankhead-Jones Farm Tenant Act.

Mr. SPENCE. What provisions do you recommend for amending the Bankhead-Jones Act to make it adequate to meet the needs?

Mr. SMITH. Three provisions; one is that the interest rate be adjusted

Mr. MULTER. You mean increased, don't you?

Mr. SMITH. Yes; increased so that more private lenders would be invited into the insured mortgage field. That is one proposed amendment.

The second is that the Department be given authority to make direct loans or to insure loans on a second mortgage basis. At the present time it is limited to first mortgages.

The third provision is that the Department be given authority to insure mortgages up to 100 percent of the fair and reasonable value of the farm on which the loan is being made.

Mr. SPENCE. How would that differ from the present act, if you had those three amendments? What advantages would be given to the farmer over those contained in the present act?

Mr. SMITH. The advantage, Congressman, would be that with those changes in the Bankhead-Jones Farm Tenant Act it was felt that the volume of loans would be greater and greater assistance could be rendered bona fide farmers under the Bankhead-Jomes Farm Tenant Act, and the Department would be in a better position to serve more farmers, from a housing standpoint, from a farm buildings standpoint. Mr. SPENCE. In other words, the law would be comparable to the present law?

Mr. SMITH. Yes.

Mr. SPENCE. But the law hasn't yet been amended, and it is uncertain whether it will be amended. The process of legislation is uncertain.

Mr. SMITH. At the present time we estimate that approximately 65 percent or 70 percent of the housing loans that are being made under the title V provision of the Housing Act are being made on the same type farm, same size and character farm, that is also being served under the Bankhead-Jones Farm Tenant Act. So actually and essentially the Department's position amounts to this: That there is, in essence, no need for the duplicate lending authority. It is preferable to make the needed changes in the Bankhead-Jones Farm Tenant Act,

to make it more adaptable to this rural credit problem. That would make it possible, then, to eliminate the duplicate lending authority. That is, in essence, the Department's position on it.

Mr. MULTER. Mr. Chairman.

The CHAIRMAN. Mr. Multer.

Mr. MULTER. I may misunderstand your statement, sir, but there would appear to me to be several inconsistencies. Possibly you can straighten me out and we can eliminate them, if I misunderstand what

you say.

Let us take, first, S. 1276. I understand you are in a somewhat embarrassing position with reference to that because the Budget Bureau has not yet said that they approve of that. Now, then, are you merely calling those two things to our attention, or are you recommending that those two changes be made which appear at the bottom of page 2 and the top of page 3 of your statement?

Mr. SMITH. The Department of Agriculture is recommending those two changes, sir. But they have not been finally approved by the Budget Bureau.

Mr. MULTER. Of course, after you refer to the fact that the Budget Bureau has not approved, you say "as soon as these questions are resolved drafts of legislation will be submitted."

Mr. SMITH. Yes, sir.

Mr. MULTER. Are you suggesting that we wait until those proposed revisions are sent up, or should we nevertheless act on your suggestion without the approval of the Budget Bureau?

Mr. SMITH. We are merely explaining to you what position we are in today, Congressman, on the point.

I would like to make this point, though, in connection with that. Senate bill 1276 only has 1 of these 3 features in it, sir. That Senate bill only includes the matter of adjusting interest rates. The two additional proposals are the proposals now pending with the Budget Bureau.

Mr. MULTER. Let us take the interest question. Your Department is recommending an increase in the interest rate to 4 percent.

Mr. McLEAISH. Congressman, that legislation, S. 1276, passed the Senate at the last session, and on insured mortgages, particularly, an interest rate of 3 percent is purely idealistic. It is not realistic at all. It is not producing any money. And a 4-percent net is certainly not too high, a 5 percent interest rate. I have been paying it all my life, and am paying it now.

Therefore, if we can get money at 4 percent, and I have been assured by a group of bankers that 4 percent would attract quite a bit of money into this farm-mortgage program.

Mr. MULTER. Do you think these farmers can afford to pay the additional 1 percent?

Mr. McLEAISH. I don't know what they are doing over the country. At home they pay 5, 6, 7, and 8.

Mr. MULTER. Can you burden them now with an additional 1 percent of interest when they are earning less than before, to rehabilitate their farms and make them more productive? Can we afford to increase their expenses any more?

Mr. McLEAISH. If the lower rate is not producing any mortgage money at all

Mr. MULTER. What good is more mortgage money to a farmer who is getting less income and can hardly live today? Don't you think we should improve that condition, first?

Mr. McLEAISH. I think we better improve his earning capacity. Mr. MULTER. That is what we are talking about.

Mr. McLEAISH. Nevertheless, if you want to finance a farm-the Government's funds are limited, we come up and guess each year, as has been done in the past-to cover the services of the Farmers Home Administration among more farmers who need it, we need to attract more money into the picture.

Mr. MULTER. Maybe this city boy just cannot understand the economics of the farm situation. We are told that warehouses are bursting with products from the farm, we can't move them into the market, the farm income is at the lowest it has ever been in recent years. The CHAIRMAN. Wait a minute.

Mr. McLEAISH. I question that.

The CHAIRMAN. I think we should correct the record in that respect. I don't think that you want to say that the farm income is the lowest that it has ever been.

Mr. MULTER. Well, is my information wrong?

The CHAIRMAN. Yes, very apparently it is wrong.

Mr. McLEAISH. I think so.

It was off for the last year from 2 years ago, and has been going off for the last 2 or 3 years, but it isn't the lowest it has ever been.

Mr. MULTER. Then what of this cry that we have been getting? Are the city boys being fooled by this business about farm income dropping off

The CHAIRMAN. No, if you say dropping off, all of us farmers will go along with you.

Mr. MULTER. I would like to understand, Mr. Chairman.

The CHAIRMAN. But you cannot say that farm income is the lowest it has ever been.

Mr. MULTER. Is the cry that we are getting that the farmer isn't just making as much profit as he was making before?

The CHAIRMAN. That is perfectly all right. We will go along with that. He is not making as much profit, but you said his income is the lowest it ever has been. That is not true.

Mr. MULTER. Let us find out. Is the farmer prospering in the country today?

Mr. McLEAISH. Title V loans are 4 percent and always have been. Mr. MULTER. I will go back to the interest in a moment. Let me get straightened out on this: Is the farmer in the country prospering today?

Mr. McLEAISH. Well, I wouldn't say that he is as prosperous as he has been for the last 8 or 9 years.

Mr. MULTER. Is he prospering?

Mr. McLEAISH. Certainly, by the standards of the thirties, a lot more prosperous.

Mr. MULTER. How about by the standards of the forties?

Mr. McLEAISH. Well, now, I don't have figures before me, but there were some parts of the forties when he wasn't as well off as he is now. Mr. MULTER. Obviously there are farmers who need help or we wouldn't have enacted this farm program to begin with, that we are talking about now.

Now, you tell us, on the one hand, in this statement, that because there are some part-time farm owners who have outside income they have gotten all of the loans, and there hasn't been enough money to go around to meet the needs of the others; am I right?

Mr. McLEAISH. Congressman, since I have been here we have had applications from employees, full-time employees, of the Government Printing Office, for loans on small plots of land outside of Washington, in the rural areas. We have had applications from a railway mail clerk down in Texas who bought a little piece of land and wants us to build him a home and under this title V he is eligible and he pointed it out to us very strongly.

Mr. MULTER. Did he get the money?

Mr. McLEAISH. If we had authorized it he would have gotten as much as a man with 160 acres, a full-time farmer.

Mr. MULTER. What interest did he pay?

Mr. McLEAISH. Four percent.

Mr. MULTER. Why do you have to increase the rate? Why do you suggest increasing from 3 to 4 if they are paying 4 percent?

Mr. McLEAISH. It has been testified to here this morning, of the large number of loans which Farmers Home Administration has not been able to make, and it is a fact, they haven't.

Mr. MULTER. Hasn't been able to make them-why?

Mr. McLEAISH. Because the appropriate funds were not sufficient to go around.

Mr. MULTER. At what rate were they made?

Mr. McLEAISH. They were made at 4 percent.

Mr. MULTER. That 3 percent must be increased to 4 percent to get more money?

Mr. McLEAISH. On these insured loans-that is what I am speaking about-when you go to a private insurance company 3 percent is their net return. The Farmers Home Administration gets onehalf of 1 percent for administration and the insurance fund a half of 1 percent so the net return to the lender is only 3 percent.

Mr. MULTER. Were these loans made by these lending institutions? Mr. McLEAISH. No, sir; not in any volume.

Mr. MULTER. They were not made?

Mr. McLEAISH. Sir, we got some from Negro insurance companies who did it purely as a matter of racial pride. We have got a few from some of the States, and State retirement funds as a matter of State pride, but as far as getting them on the basis they should be, no, they haven't been available.

Mr. MULTER. Let me see if I understand you. Are there two separate problems involved here, one getting an increased appropriation to give you enough money for all of the loans, those of the part-time farmer and the full-time farmer, and a separate problem on getting an additional increased rate to get additional guaranteed loans? Are there 2 problems, or is it 1 problem?

Mr. McLEAISH. Well, I think we have the problem of getting additional funds. It is my information that Farmers Home has never had appropriated to it enough money to make loans for all the applications it has had.

Mr. MULTER. And those loans were made at 4 percent?
Mr. McLEAISH. Those loans were made at 4 percent.

Mr. MULTER. And you are not asking to increase that?

Mr. McLEAISH. Yes, we will have to make them both on the same basis. You cannot say to one man over here, now because we are getting insurance money for you that you have to pay an extra 1 percent, and because of the Government is lending it to the man over here

Mr. MULTER. Why worry about the fellow who wants another 1 percent interest, if you are exhausting your present authorization? Do you need any more money at the existing rate?

Mr. McLEAISH. We are not worrying about the man who wants the extra 1 percent. We are worried about the farmer who hasn't got a farm because we haven't got money to lend to him.

Mr. MULTER. Isn't the fault of that one of administration, at least in part? If it is a fact, as you say in this statement, that you loaned to the part-time farmer because he had outside income and used up your appropriations that way, and ignored the fellow who was a full-time farmer and needed help, isn't that the fault of your administration that you did not take care of the farmer who needed help?

Mr. McLEAISH. No; and I think before I came with this Farmers Home Administration that the policy had been adopted to discontinue making those part-time farmer loans, but prior to that time there had been quite a few made.

Mr. OAKMAN. Will you yield?

Mr. MULTER. Surely.

Mr. QAKMAN. I noticed a very short time ago that the farm income was increased by about $6 billion last year because of part-time employment that people living on farms had found in factories in the general areas where they lived. That would mean a great mass of people. Are you going to discriminate against the farmer if he goes in and works in a factory 40 hours a week for a few months of the year?

Mr. McLEAISH. No; that is not our thought at all. Here is a man. who is primarily a farmer. He has a farm and is a bona fide farmer and because of either weather conditions or employment conditions he leaves the farm, maybe he leaves his family on it, and goes and gets a job. We are not intending to discriminate against him.

What we are trying to do is to get away from the fellow whose fulltime employment is as a railway mail clerk or accountant, or something else, and who only gets this little piece of land for the purpose of having a country home. They are not farmers.

Mr. MULTER. Now, look, we have a direct farm-loan policy-a farmloan policy of direct loans to the farmer, haven't we?

Mr. McLEAISH. Yes; for the purchase of farms.

Mr. MULTER. And that is where you need an additional authorization for more money. Am I right? Do you need more money for your direct-loan policy?

Mr. SMITH. Yes, Congressman.

Here is essentially what our position is with respect to title V, and that is what is before us now: The manner in which title V has been administered here in the last couple of fiscal years amounts to serving bona fide farm owners with housing loans where they cannot get loans from private credit sources. To that extent that really duplicates