elected by the borrowers rather than appointed by the Governor of the Farm Credit Administration?

Secretary WALLACE. In most cases the Governor of the Farm Credit Administration would use the directors of the local associations.

Mr. HOPE. Well, he may, or he may appoint committees.

Secretary WALLACE. There may be areas where the associations are not operating and in those cases it would be necessary to set up a committee.

Mr. HOPE. You would not think there could be any harm, do you, in providing that in case associations were operating that the officers of the association should act as a committee?

Secretary WALLACE. Frankly I do not know; I think that is a question which this committee might well consider.

Mr. HOPE. We would like to have your suggestion before us when we consider it.

Secretary WALLACE. In the vast majority of cases the land-bank associations that would be all right but I can envision certain localities where the recent experience of the farmer has been so discouraging that the judgment of the men elected by the farmers in that community might tend to be impaired as to what land values might be, and maybe the result would be a raiding of the Federal Treasury.

Mr. HOPE. Of course, they would have to be operating under regulations issued by the Farm Credit Administration. You would not assume that they would have an entire open field to operate, would you?

Secretary WALLACE. Well, frankly, I have such a great belief in the democratic method as employed by the county A. A. A. committees, that invariably arise by election of farmers first in the townships and then from the township committee for the county, that I would be willing to chance it and have them all come from the farmers. I can see that there might be some difficulty in a few communities here and there where farmers would have exorbitant ideas as to the value of their land, and I think there is just no benefit to the farmers whatever in the long run to get loans based on exorbitant ideas as to the value of the land.

Mr. HOPE. Wouldn't that difficulty be obviated somewhat if you retained the present system of local associations where each farmer has a financial interest? Wouldn't you then have a local association that would have enough interest in the welfare of the local borrower and the bank, as well, so that you would not have that difficulty that you might otherwise have?

Secretary WALLACE. Well, in some cases the local associations are composed of men who, in effect are a kind of a club made up of the more well-to-do farmers in that community. That is not generally true. But when a group is a little but out of touch with the farmers generally in that community, the members of the group can look upon themselves as a farmer aristocracy. However, that is a rare situation.

Mr. HOPE. What particular additional duties are in contemplation to be assigned to the local committees or local land bank associations? The bill does not specify what those additional duties will be.

Secretary WALLACE. Well, I think the bill does indicate in a very general way. One of the big functions of the directors of the association, or the committees, as the case might be, would be dealing

T

with delinquencies and foreclosures, the handling of farms after they had been deeded over to the Government and then their leasing them back to the operators until such time as the operators can take over those farms on the basis of probable future productive value.

It is my belief that those local committees knowing their neighbors and knowing whether they are trying to farm diligently and efficiently and when they are laying down on the job will do a more workmanlike job than can be done from Washington. We have found that the A. A. A. committees are much more hardboiled in handling acreage allotments than anyone from Washington could possibly be. So there is human nature involved. These directors of farm associations or committees can do a much more just and at the same time hardboiled job of taking care of their neighbors who are in distress.

Mr. HOPE. Are they not doing a good deal of that under the present set-up?

Secretary WALLACE. Well, if I hear correctly when I travel through Wisconsin and Minnesota and throughout the Northwest, they are not. They definitely are not. It is for that very reason in fact that I reached the conclusion last summer that I had to step into this farmcredit picture. I thought I could coast along without stepping into it myself but when I got out into the field, in various States people said, "You are Secretary of Agriculture. You have been given the duty of handling Farm Credit Administration." Well, they gave me many specific instances of unjust foreclosures and then they said, "Mr. Secretary, do you believe in that kind of thing?" I knew then that I had to step into the picture and that is the reason I did so, combined with the fact that the Comptroller General made it clear that I was responsible, that Congress meant what it said when it put this duty on me.

Mr. HOPE. I think if you have a responsibility such as you do have that it is your duty to take hold of the job. I agree thoroughly on that, but getting back to this question of the local associations, I know some local associations that are doing about the very thing you speak of. Secretary WALLACE. Yes; I think some of them are, but there are very widespread complaints that many others are not and where the fault lies I do not know.

I do not know precisely to what extent it is a matter of law or to what extent it is a matter of local policy or to what extent it is a matter of policy dictated by Washington. I do think that this law will clarify the situation very materially.

Mr. HOPE. Yes; I think so, if you have something along that line, but I would prefer to keep the associations as they are with their financial interest in the matter rather than using committees appointed by the Governor for the Farm Credit Administration. It seems to me that you would expect better results if that were done.

Secretary WALLACE. We reached out to get information along that line and I do not know of anyone, Mr. Hope, who has made a careful systematic study of the nature of the local associations. I wish I knew. My wife and myself happen to be members of one associa

I know how it operates in my own community and I can roughly visualize how these associations probably operate throughout the Nation. I can guess as to the probable variations but I do not know of anybody who has made a careful study of hundreds of these associations. And so in order to arrive at a proper answer to your ques

tion it probably would be necessary to make a study that would completely cover the field. We could then determine whether those associations have an attitude of mind that thinks in terms of only one class of farmers. That is a question mark that I have in my mind as I watch some of this hullabaloo which has been stirred up recently. Do these people represent only one particular group of farmers? I just do not know.

Mr. HOPE. Now leaving that suggestion-let me ask you if it isn't true that except for the need of scaling down a loan the Farm Credit Administration has authority now to make practically all the adjustments that are covered in this bill such as accepting variable payments, amortizing over a longer period of years, and various other adjustments? When Mr. Goss was before the committee the other day he mentioned quite a number of adjustments that had been in effect for several months past.

Secretary WALLACE. I was told a year ago that legal authority did not exist for those adjustments.

Mr. HOPE. Well, I had been told

Secretary WALLACE (interposing). Maybe the attitude has changed. I am informed that legally those powers exist only on delinquent loans or loans that are in foreclosure, and they do not exist in respect to current loans.

Mr. HOPF. Yes; that is my understanding, too. As far as delinquent loans are concerned these powers always exist, and the legal department says they exist and have existed for several months prior except as to scaling them down. You have no authority to do that, except, that I understand it could be done by a rather cumbersome way of foreclosure and resale to the former borrowers.

Secretary WALLACE. It would be necessary to have legislation in order to get away from the so-called Springfield plan.

Mr. HOPE. You think that is desirable?

Secretary WALLACE. Yes.

The CHAIRMAN. Mr. Ferguson wishes to ask you a few questions, Mr. Secretary.

Mr. FERGUSON. Mr. Secretary, this bill seems to deal with farms that are already in trouble. For instance, a longer amortization comes along after the main loan is in default, just as Mr. Hope points out. That is possible now. Would you favor granting a longer amortization on Commissioner loans whether they are in default or not?

Secretary WALLACE. Well, after a man is hopelessly overboard, I do not think it is any favor to him to prolong the agony.

Mr. FERGUSON. I am talking about a loan that is not in trouble-to give him the advantage of a longer amortization if he applies for it, say an amortization over a 40-year period.

Secretary WALLACE. Generally speaking, the longer the amortization the better, for all farmers.

Mr. FERGUSON. If that is true, what excuse is there for continuing both the Land Bank Commissioner loans and the Federal land bank loans and why not have one loan over a longer period of time?

Secretary WALLACE. I think that would be a desirable ultimate objective.

Mr. FERGUSON. That could very well be included in this legislation.

Secretary WALLACE. Well, I question whether it is desirable to open up the gates to all loans being made on the basis of 75 percent of the value.

Mr. FERGUSON. That is just what I was coming to. If we could make these loans on a 75-percent basis over a long period of time what objection would there be to making new loans on this same 75-percent basis, to new borrowers, not to those who are already in the system? It would make the Federal land bank the agency to finance farms on a 75-percent basis.

Secretary WALLACE. I think it should be the effort of Congress and the executive branch of the Government to keep the Farm Credit Administration in as sound a position as possible. If borderline financing is to be conducted that should be put off in a small compartment. I am not advocating doing away with the Commissioner loans and it might be well to consolidate Commissioner loans with land-bank loans so that the extra 25 percent does not produce such an extraordinary load in the way of foreclosures. I do not like the idea of a second mortgage. But I do think the 75-percent mortgages should be in a different category from the 50-percent mortgages.

Mr. FERGUSON. How can you put them in a different category after you finance those and have first and second mortgages? They are in the bank the same as any others.

Secretary WALLACE. I would like to have them pass through some special type of consideration, if you are going to put them on a 75percent basis. Obviously when you make a 75-percent loan you have to take into account certain personal qualifications in the way of character and diligence which are not so necessary in the case of a 50-percent loan.

Mr. FERGUSON. Here we have a bill that provides a method if the fellow goes under.

Secretary WALLACE. Yes.

Mr. FERGUSON. If you can aid a man and keep him from going under by providing the aid of a long amortizing period.

Secretary WALLACE. I am enthusiastic about that. I do not know whether Dr. Black is, or not.

Mr. FERGUSON. How can this committee justify a 90-percent loan or a 100-percent loan as we did in the Lea bill?

Secretary WALLACE. Well, I certainly would advocate the Farm Credit not open the gates to excessive loans.

Mr. FERGUSON. It depends on what you term an excessive loan. Ninety or 100 percent has not proven excessive under the Farm Tenancy Act.

Secretary WALLACE. They have operated under much more careful supervision. The Farm Credit Administration does not have such supervision.

Mr. FERGUSON. But you use the same method of selling land to the

tenant.

Secretary WALLACE. Let us see how those committees work first. The CHAIRMAN. I suppose some other members would like to ask some questions. Will you be back tomorrow morning at 10 o'clock? Secretary Wallace. I think so.

(Thereupon, at 12 o'clock noon, the hearing recessed until 10 a. m., Wednesday, March 27, 1940.)