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Comparison of short-term and long-term interest rates, 1931-40

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The CHAIRMAN. Then, we will take a recess until 2:30 this after

noon.

(Thereupon, at 11:40 a. m., the committee took a recess until 2:30 p. m. of the same day.)

AFTER RECESS

The committee met, pursuant to the taking of recess, at 2:30 p. m., in the committee room, New House Office Building, Hon. Marvin Jones (chairman) presiding.

The CHAIRMAN. The committee will come to order. The committee has met this afternoon for the purpose of hearing Mr. L. J. Taber, master, National Grange. We will be glad to hear you, Mr. Taber.

STATEMENT OF L. J. TABER, MASTER, NATIONAL GRANGE

Mr. TABER. Mr. Chairman and members of the committee, my name is L. J. Taber, master of the National Grange, a farm organization of 8,000 local units and approximately 800,000 dues-paying members located in 40 States.

As an officer of a farm organization, and a dairy farmer who has spent most of his life on a farm in Belmont County, Ohio, I most earnestly desire to oppose the passage of the pending bill, H. R. 8748, unless radically amended and unless many objectionable features are entirely eliminated.

I come before this committee with a twofold sense of embarrassment. I am deeply disturbed because I have known and admired your chairman as much as any Member of Congress. I look upon Marvin Jones as an agricultural statesman of character and ability. Mr. Jones has introduced many of the bills which the Grange has championed, and we have always and at all times found ourselves in accord with most of the principles advocated by your chairman. Therefore, it is difficult to oppose so vigorously a measure bearing his name.

I am equally embarrassed because this committee has been the most friendly and constructive committee in Congress and because I have appeared before it every year, or almost every year, for a quarter of a century, and it is embarrassing to oppose the great chairman and a great committee, but there is no other way. Nevertheless, I am profoundly convinced that the dangers of this legislation are so great that we must appear against it.

Twenty-five years before the Farm Loan Act was passed, in 1916, the National Grange had gone on record again and again for a better credit system for agriculture. We sponsored the passage of the original Farm Loan Act in 1916, and the Intermediate Credit Act, and have supported all of the amendments that have made the Farm Credit Administration one of the largest and soundest financial institutions of its kind in the world.

Under a former administration, we sought to have an independent status given to this system and sought to remove it as a bureau of the Treasury. We wholeheartedly endorsed the action of President Roosevelt in 1933 in consolidating the system and giving it an independent status.

Not only in 1933, when this bill was pending, but upon many other occasions before and since, the National Grange has advocated placing the Farm Credit Administration under a bipartisan board with staggered terms. Our last pronouncement on this question was at Peoria, Ill., on the 17th of November last, when the National Grange unanimously declared as follows:

Whereas the Grange has had a consistent policy of many years' standing favoring a cooperative credit system, under an independent bipartisan board: Therefore, be it

Resolved:

First. That the National Grange favors the establishment of the Farm Credit Administration as an independent agency, operating under the supervision of a bipartisan board, appointed for staggered terms of office.

Second. That such agency have supervision of the Federal farm-loan system, the production-credit system, the banks for cooperatives, the intermediate creditbank system, and the Federal Farm Mortgage Corporation.

Third. That the cooperative features of the Federal land-bank system, the production-credit system, and the banks for cooperatives be preserved and strengthened and means be devised for establishing the intermediate credit banks on a cooperative basis.

Fourth. That the Federal Farm Mortgage Corporation be continued as an emergency lending agency until agriculture can be established on such basis that emergency credit of this character is no longer needed.

Such policy is important to agriculture for the following reasons:

(a) A dependable source of credit adapted to the borrowers' needs and paying capacity is essential to a successful agriculture.

(b) Consistent continuity of policy and sound management are necessary if funds are to be available on favorable interest rates and terms. This cannot be accomplished if the policy and management are subject to sudden changes. Borrowers, employees, and investors alike must be freed from political uncertainties or pressure if maximum safety and service are to be attained. This can be accomplished only by providing supervision by a bipartisan board, serving for staggered terms if sufficient safety and service are to be attained. (c) The credit service should provide not only long-term capital credit, shortterm production credit, and cooperative-marketing credit, as are now provided by the Federal land banks, the production-credit system, the banks for cooperatives, and intermediate-credit banks, but until agriculture has sufficiently recovered from the many years of depression to operate on a normal basis, emergency credit similar to that available through the Federal Farm Mortgage Corporation will be needed. Since the power of this Corporation to make loans expires on January 31, 1940, it is essential that it be extended for a reasonable period.

(d) The substantial progress made by the Federal land banks, productioncredit system and banks for cooperatives operating on a cooperative basis has demonstrated the soundness of that form of organization. It protects the system against making unsound loans. It enhances the prompt collection of installments. It is felt that greater assurance of a completely well-rounded and sound credit system sympathetic to agriculture's needs would be accomplished if the Intermediate Credit System were owned and controlled on a sound cooperative basis by the Production Credit Association and cooperatives which they serve. Cooperative control could be strengthened by a more practical system of election of directors, thereby assuring the borrowers of a voice in the management of their credit affairs.

In addition to this declaration, the Grange has again and again gone on record for the preservation of the cooperative features of the act, and for farm participation, ownership, and control. In view of all these resolutions, I am compelled to assure this committee and the Congress that our organization, as well as millions of other farmers cannot look with favor on this type of legislation. The Grange has advocated lower interest rates during the period of depressed farm income. We believe that there is a better and simpler method of reaching this goal than provided in section 2 of the bill. No amount of interest reduction can equalize the present handicap of agriculture. The farm dollar is only worth about 80 cents. The Grange has favored a law continuing to support interest reductions until farm parity can be restored.

Section 3 can centralize too much authority in the hands of the Governor and does not give to the Federal land banks the authority that is theirs.

We would especially ask that that section be entirely rewritten. Sections 5 and 6 entirely destroy the entire cooperative features of the act.

It would seem to me that they cannot be amended and all that could be done to those is to eliminate them if we are to preserve this cooperative feature. No one can deny that some farmers in distress would be willing to accept this payment as proposed for their capital stock, but on the other hand, the price of this program is the complete destruction of the cooperative features of the act, and the elimination of the incentive for local associations to build up and to go forward.

Section 5, as indicated, if it is retained in the bill, will have the effect of destroying what we have spent 23 years to do, to build up a farmer owned and controlled system and would have been “gone with the wind."

Sections 7 and 8 centralize too much authority in the hands of the Governor of the F. C. A., and it seems from a careful reading of these sections that it might finally destroy the initiative of local control.

The testimony of Governor Black and the Secretary of Agriculture before this committee causes grave apprehension to all of us who have jealously guarded the independent features of the act, and who have sought to promote and increase the cooperative responsibility of farmers.

Now, there are social problems, there are relief problems that must be attended to. We-some of us-have read "The Grapes of Wrath." Some of us know that terrible condition that we have in certain sections, but we must keep credit free from changing administrations; free from relief, free from partisan politics, free from bureaucratic

control, free from production control, free from soil conservation and similar programs, and free from mixing relief and charity, which has its place in a time like this, with credit that is sound.

I would like to digress and say-and I can say this, because my Quaker friends are not here-I spent Sunday night very profitably. I took the testimony of Albert Goss that was placed in the record; I took this bill, and then I took the testimony of Governor Black and Secretary Wallace, their prepared statements, and read them all, and I am willing to testify I walked the floor in distress and could not sleep. I saw the destruction of the things which we have given our efforts to build.

I wish you would do that. You have heard it here, but if you will just spend Sunday night that way, you will be emotionally disturbed.

We must secure a continuity of good officers to attract good loans, and this can only be done if legislation such as this is defeated and proposals such as the Kleberg bill are enacted into law.

Let me point out that in the days since Gifford Pinchot, the Grange has battled continually to keep the Bureau of Forestry in the Department of Agriculture. There is where it belongs. Here is where the Department can render its greatest service.

We have mentioned this simply to show our opposition to their changing from an independent status to the Department of Agriculture is not personal. It has nothing to do with the situation. It has nothing to do with the Government. It is simply because it is going into an operating department where it does not belong, and taking it out of an independent status where it should be returned.

Therefore, you will still find the Grange fighting, and I fear very soon, with legislative proposals to prevent the transfer of the Department of Forestry from the Department of Agriculture; but with the same sincerity that we fight this transfer.

We are going to fight to restore the independent status of the Farm Credit Administration. We refer again to the much-quoted statement Secretary Wallace made last May when he so wisely and so correctly stated that apparently the Farm Credit Administration could not be integrated into a properly managed Department of Agriculture.

With all of the earnestness at my command, speaking directly for the Grange, and indirectly for other millions of rural people, we plead with this committee to carefully consider and study every line and every section of this proposal.

It would be tragic if in haste we should destroy a system that has taken us almost a quarter of a century to build and the aspirations and prayers of a quarter of a century before that.

We ask the committee not to rush a matter of such serious and such grave importance.

Mr. Chairman, this statement is intended only to indicate to this committee the opposition of our organization to this proposal in its present form. We will be glad to file with the committee a detailed statement of our opposition on the needed changes, section by section, if it seems wise to go into any further details and the committee cares to receive it.

I do that, because we want, with all emphasis, to assure you that there will be no misunderstanding that if we have to plead with our

members to come to Congress, we want this committee to know we are going to be compelled to take the further steps, because we have to resist the passage of this law every step of the way from this committee, on to the floor of the Congress, before the committee of the Senate, on the floor of the Senate, and even to the desk of the President.

I say that, because we are so concerned to develop the cooperative features, to maintain them, and to preserve them.

I think, Mr. Jones, if I may, I would like to digress again from my short prepared statement to call attention to a very pleasant meeting I recently attended; it was typical of hundreds I have attended. At Eaton, Ohio, the county seat of a little county on the border line between Ohio and Indiana, Mrs. Taber and I went over to a banquet of the Preble County Farm Loan Association. This was just a typical Corn Belt county.

Preble County has about 2,000 farms; it is strictly a rural district, with corn the major crop; they also raise tobacco and livestock, with some dairying and general farming.

There were several hundred farmers and their wives at this banquet-nice food, nice fellowship. That was not what impressed me. It was the financial and business ability that these men and women from the soil had developed in a quarter of a century.

There was a blackboard up on the wall about the size of that one, that blackboard over there, or a little larger than that. They put down the number of loans and total value, and I was startled. They were servicing $1,770,000 of loans. They put down their capital stock. As I remember it was sixty-two thousand-and-some-hundred dollars. They put down the interest and undivided profits, and added it all up.

And they had a startling statement at the bottom; 90.98 percent of their loans were current. Not one loan was threatened with foreclosure. They had only had one foreclosure in the history of this farm-loan association, in its entire existence. Why? Why, the spirit was there. The board of directors were elected. The officers were selected, but the farmers in distress were having sympathetic community help. They did not want another foreclosure. They had $62,000 of their own money in it. They wanted to protect it. They were protecting it. They were protecting it as no beneficent government, even though it were annointed by the Divine, could do from Washington. It was their affair. It was receiving their attention. As I sat and listened to this meeting it just seemed to me that I had heard the financial heartthrob of the community.

The Grange deputy was there. The Pomona Grange master was there; the Farm Bureau president was there. Other farm organization officials were there. The chairman of the livestock cooperative was there.

And, I am taking too much time on this point, but I am trying to drive home the fact that we have about 4,000 such associations-some of them in distress; some of them having impaired capital; some of them having trouble; but hundreds of them are just like the association I am talking about, where they have developed financial ability; secretarial responsibility; financial assistance and control; where they themselves were doing something that to me is tremendously precious and I know that it ought to be.

224111-40-ser. i-23

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