Mr. ANDRESEN. We have reported a bill from this committee that proposes $300,000,000 guarantee of debentures and loans to farmers to acquire land up to 90 percent of the value, and in some instances 100 percent, and it seems to me that if that bill is enacted into law it will take the place of the Federal land bank.

Mr. BLACK. I do not know what the intent of Congress is with respect to that, but we have no desire certainly to take over the activities of the Farm Security Administration. My understanding is that if that bill does pass it will be operated as a supplement to the tenant-purchase program.

Mr. ANDRESEN. It is a tenant-purchase program, but it will be a duplication of activities, because in each county where it operates, the county committee handles it. This bill also proposes to use county committees, so that there will be two sets of county committees three sets, one A. A. A., one Farm Security, and one Farm Credit Administration.

Mr. BLACK. That is not undesirable. On the whole, I think it is desirable. It will accomplish several things. It gets more farmers interested in these matters. For example, it allows the farmers to operate on matters in which they are particularly interested, and from a local point of view, if all of those activities were combined, you would not have committees. You would have a lot of full time Government employees who would put all of their time into it.

Mr. ANDRESEN. They are Government employees now. Probably they do not receive a great deal of compensation, but nevertheless they are employees.

Mr. BLACK. Oh, to call them Government employees is a little far-fetched, because they spend 2 or 3 days a month or something of that kind. But that is quite a different matter than if they derived their principal income from this work.

Mr. ANDRESEN. A short time ago I received a statement from your office to the effect that the Federal land bank and the Farm Mortgage Corporation had foreclosed on approximately 84,000 or 85,000 farms since January 1, 1934, and title has been taken to this land. Now, as I understand it, when you foreclose on a man's farm and take possession of it, you do not give the foreclosed owner an opportunity to repurchase that land unless he pays all the accumulated charges, interest, principal, and costs; if he does that, he can get the farm back again. On the other hand, the farm is sold at sometimes half the price to some disinterested party. Is that still the practice of the Department?

Mr. BLACK. That is not the policy; no. It was the policy of some of the banks for a while, but they actually never did adhere to it strictly.

Now they are selling the property to the former owner in cases where the former owner is a desirable borrower and is approved by the local association. And they are doing that on the basis of the appraised value of the property. When they take properties over, they always reappraise them, see what their carrying capacity is. They would be sold at that appraised value.

Mr. ANDRESEN. Do they then give the old owner of the land lost by foreclosure the same opportunity to repurchase it as they would somebody else?

Mr. BLACK. They are definitely doing that at present.

Mr. ANDRESEN. That has been one of the complaints, we have had here.

Mr. BLACK. I think it has been a justifiable complaint, but that policy has been changed and it has been in operation for some little time. It has not been given any publicity but that is the way the banks actually are operating at the moment.

Mr. ANDRESEN. Under the Farm Security bill and the Farm Security Administration we are trying to provide homes for tenants and sharecroppers.

Mr. BLACK. Yes.

Mr. ANDRESEN. It seems to me something should be done to continue home owners in possession of their homes, rather than taking them away from them.

Mr. BLACK. I agree with you that there should be. Every effort should be made to keep them in possession of their farms. We are interested in a number of devices that are being put into effect--they were adopted last fall, so they are not new-they have only recently been given any publicity; with respect to second mortgages, the payments on the mortgages are frequently postponed for a while in order to give the man an opportunity to bring his first mortgage current. They have also adopted a variable payment plan and several other devices which are designed to keep the good farmer, the man who has done his very best on the farm, an opportunity to continue.

Mr. ANDRESEN. Can you show the committee any instances where the debt has been scaled down?

Mr. BLACK. No; we cannot do that, because it is contrary to law. We cannot do it.

Mr. ANDRESEN. You cannot scale down the debt?

Mr. BLACK. No, sir.

The CHAIRMAN. You can scale down some outside debts?

Mr. BLACK. Yes, sir.

Mr. ANDRESEN. That is from private borrowers, not the Government scaling down.

The CHAIRMAN. But provision is made in this measure for doing that.

Mr. BLACK. There is machinery set up in this measure which would accomplish that, yes.

Mr. ANDRESEN. Is there any part of this measure that the Department approves?

Mr. BLACK. I really cannot tell you, because the Department has not taken a position on it.

Mr. FULMER. Doctor, I listened to your radio address recently, giving your attitude toward a reasonable policy in administerirg loans to farmers on their land. I want to say to you that I appreciate the attitude given to the public over the radio in connection with your views along that line. I think one of the great troubles has been the Administration in making loans has not been fair to a great many farmers who desired to secure loans on their farms. In the next place, they have ruthlessly foreclosed on many farms that today would still be in the possession of the former owners if they had worked under a policy as outlined by you in your radio address. I understand we have had about 85,000 foreclosures since 1934, and I believe if your policy, which apparently is based on common sense and an attitude of wanting to be helpful, had been in operation, two-thirds or more

of those farmers today would still be on their farms. I read excerpts from a letter before the committee here from a good farmer in my country who has been fighting to keep from being foreclosed, and they have gone so far as to give information, for instance, to the Production Credit Corporation, or perhaps the Seed Loan people, about his condition, as if they would be anxious to withhold loans that they are making, and close him out and sell his land, and from that letter giving his views, what should be done in the interest of people to help them retain their farms instead of making tenants out of them, and then going around spending millions trying to make landowners out of other people is absolutely in line with the statement you made over the radio, and I am mighty glad to see that you propose to bring about that type of administration.

For instance, right here, because of a hail storm or drought, the farmer is unable to make his payments, he needs then some cooperation and some assistance and some extension to enable him to make his payments and keep his farm. And I notice in section 15 that where the type of loan under a certain period of years would work a hardship to this farmer, you are giving considerable more time, for instance, in line with the case of the tenant farmer, so as to make his payments reasonable and permit him to take courage and go on and perhaps finally own his farm. And I just wanted to make this statement and say to you that I am very happy to know that you are interested in carrying out these loans along that line, which I think will do more to restore confidence on the part of people who today are laboring to pay their mortgages, and will do more to continue them as landowners than anything else that we have done recently.

Mr. PACE. Dr. Black, in the Farm Credit Administration there are the Federal Land Banks and the Federal Farm Mortgage Corporation that make loans. What loans does the Farm Mortgage Corporation make?

Mr. BLACK. It makes Land Bank Commissioner loans. It can also do other things, but primarily Commissioner loans. Then there are the intermediate credit banks that discount short-term paper for agricultural lending agencies, both public and private. The bulk of their business is discounting the paper of the Production Credit Associations.

Mr. PACE. What other lending agencies are there?

Mr. BLACK. The Production Credit Corporation and the Production Credit Associations and the 13 banks for the cooperatives. Those are the 5 major lending institutions. Then in addition to that, the Farm Credit Administration supervises the emergency crop, feed and seed loans.

Mr. PACE. You do supervise that?

Mr. BLACK. Yes.

Mr. PACE. There is quite a sentiment, Doctor, for the consolidation of these agencies.

Mr. BLACK. I should add some other agencies to the list. The revolving fund, for example, that was established under the Agricultural Marketing Act of 1929, is in liquidation. Then there is the old regional agricultural credit corporations that were established, I believe, in 1932. They are also in liquidation, as are the joint-stock land banks. We are supervising the liquidation of those institutions. Mr. PACE. Would anything be gained by a general consolidation of these lending agencies under one agency, and the outlining of a general

policy where the rates of interest will be the same and the treatment will be the same, where a farmer could make application at one place to get a loan on his land and reduce operating expenses?

Mr. BLACK. In the field, of course, there is an attempt now being made to get local offices of the P. C. A. and the national farm-loan associations located together, so that a man could make application at one place. But the production credit associations do not have offices at a sufficiently large number of places to take care of that demand.

Mr. PACE. They have about as many offices as you do, have they not, Doctor?

Mr. BLACK. No; the production credit associations are only 500 in number.

Mr. PACE. In some sections I think they have more than you do. Mr. BLACK. Well, they have branch offices in many counties. That is correct. The national farm-loan associations average more than one to a county the country over.

Mr. PACE. What is your view about such consolidation and coordination?

Mr. BLACK. Certainly, if one were starting new but could look back for 20 years on the historical development of farm credit, I think he could design a more efficient organization than the existing one.

Mr. PACE. Is it not time to do that now, right in connection with this bill?

Mr. BLACK. I do not know how much the consolidation should be. For example, the banks for cooperatives do not loan directly to farmers. They loan to farmer associations. The individual farmer borrower does not enter into that lending arrangement.

Mr. PACE. But his need does.

Mr. BLACK. His need does, of course. I do not see, from the standpoint purely of efficiency of operation, that it is necessary or even desirable that that be consolidated with the land banks, for example, because they work through different channels. The same is true of the intermediate credit banks. They do not come in direct contact with borrowers at all.

Mr. PACE. Toughing that, Doctor, do you know of any reason why in a resale of property by a Federal land bank, the purchaser who purchases it at resale should not have the same benefits and the same rate of interest as the original borrower?

Mr. BLACK. No; and that is one point that I should have mentioned when I went through the bill. The bill does not grant this interest rate on purchase-money mortgages.

Mr. PACE. I noticed that.

Mr. BLACK. And I do not know whether the committee has in mind making an exception of that, but it would appear to me that that should be included.

Mr. PACE. Do you think it is a fair interpretation of the present interest reductions of the act now in operation for the land bank to interpret the intent of Congress in that act as not intending to grant reduced rate in interest on purchase money mortgages?

Mr. BLACK. I doubt that they have the choice. I do not think that is a matter of interpretation. I think it is a matter of law. Mr. PACE. There is no doubt in your mind about the intention of Congress, that Congress did not intend to discriminate against a purchaser?

Mr. BLACK. I assume that if Congress had given it thought, they would have so included it, but I do not think there is a question as to the law. I do not think the banks could do it.

Mr. PACE. And regardless of the success of the bill now before the committee, you would recommend that in the bill now in the House, this committee reported out about three weeks ago, that purchase money agreements be covered in there?

Mr. BLACK. I think they should be evened up, yes, sir. I see no reason for different rates to different borrowers.

Mr. PACE. Now, Doctor, just a minute and I am done. I want to get a little better acquainted. You are the head of the whole Farm Credit Administration?

Mr. BLACK. Yes, sir.

Mr. PACE. What has been your line of work prior to this?

Mr. BLACK. For several years I have been in the Department of Agriculture in the A. A. A. I was in charge of the corn-hog program when it started in 1933. I was later chief of the Bureau of Agricultural Economics.

Mr. PACE. Do you farm?

Mr. BLACK. Personally I never did. I was raised on a farm until I was 23 or 24 years old.

Mr. PACE. But you never farmed yourself?

Mr. BLACK. No.

Mr. PACE. I understand the purpose of this bill, which does not yet have your approval, is to try to reduce the rate of interest on farm loans, and for the Government to step in and guarantee all the obligations of the land banks. That is the general purpose of the bill? Mr. BLACK. That is correct.

Mr. GILCHRIST. Dr. Black, what is the purpose of this 5 percent that has been withheld at the time the loan is made?

Mr. BLACK. It has two purposes. The first is to give the farmer borrower a financial interest in the association and to enable him through that stock ownership to have some measure of control over the operations of the institution.

Mr. GILCHRIST. What institution?

Mr. BLACK. The Federal Land Bank.

Mr. GILCHRIST. Then the farmer has a vested interest in the local association and in the farm bank too. The farmer having such a vested interest with regard to cases where the institution is solvent, by what right will you cut off his vested interest and say that he must liquidate and the whole thing be given over to a new institution? Mr. BLACK. Will you put your question again?

Mr. GILCHRIST. What contractual right have you to do so? I am not concerned with the constitutionality of the act; I am concerned with the case of a farmer who wants to retain his contractual rights. How could you take them away from him?

Mr. BLACK. Could I just raise the slight objection that you are speaking to me as though it were my bill? It is not my bill.

Mr. GILCHRIST. Well, as administrator of the bill, what would you say to that point, then?

Mr. BLACK. I would have to say that I cannot answer that question. I would have to ask a lawyer.

Mr. GILCHRIST. All right, Doctor. The question cannot be answered at this time.