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Mr. BLACK. Yes.

Mr. FLANNAGAN. I want to say, I think it is one of the most efficient Governmental agencies ever set up, doing a real work, and down in my district I understand that over the whole period about 98 percent of the loans have been repaid.

Mr. COOLEY. I hope it is not understood that I am criticizing the seed loan, because in my particular locality they have repaid about 99 percent.

Mr. BLACK. There are other operations that Farm Security does that Farm Credit certainly would not want to take on. It has the grant program, for example, handling direct rural relief, direct grants to farmers.

Mr. COOLEY. If the Farm Credit Administration does not want to absorb the Farm Security Administration, why not give the seed loan to the Farm Security?

Mr. BLACK. That has been discussed and it was agreed that it would be advantageous, but it was decided not to do it for this year. Mr. PACE. I hope it will never be done.

Mr. FLANNAGAN. I think we had better let the seed loan set up alone. This agency is efficiently managed and has done a real job. I hope it will not be disturbed.

Mr. FLANNAGAN. I hope nothing will be done, certainly this year, to disturb the set-up of the crop loan.

Mr. BLACK. That is correct.

The CHAIRMAN. Mr. Murray, did you have some questions.

Mr. MURRAY. Mr. Chairman, is Dr. Black coming back to the hearings again?

The CHAIRMAN. That depends on whether the committee has finished with him. The House does not meet today, and I thought if we could get through with him, we would run a little overtime. If we cannot, I am sure he will be glad to come back.

Mr. HOPE. I wish Dr. Black would come back next week. In going through the bill there are other questions I want to ask.

Mr. MURRAY. I would rather wait until next week to interrogate him, then.

Mr. LEMKE. I would like to ask one or two questions along the lines we have been discussing.

The first question is: There seems to have been some feeling that the rate of interest in this bill is so low that private investors could not compete, particularly insurance companies. Do you know of any good reason why the life blood of agriculture should be sucked out in order to keep the coupon clippers going, and riding on agriculture's back? Is it not more important that we take care of those who feed and clothe the Nation and keep them going than to keep even the life insurance companes going?

Mr. BLACK. I do not think I should answer that. That would be editorial comment, I am afraid. (Laughter.)

Mr. LEMKE. Let me ask this question, then. The object of this bill is to lower the interest on the debt of agriculture?

Mr. BLACK. Yes, sir.

Mr. LEMKE. It is not intended to have any other effect except that it may lower the interest in other fields, and if that is the result, do you see any good reason why that is not something much to be desired by the American people?

Mr. BLACK. I favor lower interest rates all through, and I think the farmers ought to get the benefit of as low rates as they possibly can. Mr. LEMKE. Well, that is one thing that I have been very much interested in. I wish to say right now that I am very much pleased with the way the new set-up in the Farm Credit Administration has approached the difficult subject of handling the loans of debt-ridden agriculture, as compared with the treatment we got before. But has your Department since the change taken any steps to see that North Dakota can again get loans? You know, we have been kicked out because the former administration did not like the hair of our Governor, and North Dakota is very much interested, especially if this bill passes, in being put on an equality with other States.

Mr. FLANNAGAN. Can you not get a new Governor?

Mr. LEMKE. We have got a new one now, a good Democrat, so I think they ought to make loans in North Dakota again.

Mr. BLACK. That situation should be reexamined. I have not been working on it specifically.

Mr. LEMKE. Now, in regard to bad faith, would you have any objection if we put something in this bill that would at least define what bad faith is? Because I think that the people of the States are agreed in the fact that some of the people from the Federal Land Banks are less than gentlemen. We know they insult the farmers, or have in the past, and then when the farmer talks back to them, he is listed as acting in bad faith and a bad man, when all the people in the community will testify to his good faith. But I have never been able to get that changed. It seems to me that good faith and bad faith should really be defined by legislative enactment rather than to be left to the judgment of an individual. I would be perfectly willing to leave it to you here in Washington, but not out there, and in numerous cases where these things have come up in the seed and feed loans there have been at least 10 percent of our people who have applied for seed and feed loans and have been charged with bad faith. I will give you one case.

A farmer who farms 240 acres of land near Grafton got 200 bushels of wheat and a little oats and barley and here was the report-I finally got a report from the Department before you went in—that he had a wife and five children; that he was living with his wife-his answer was whether they expected him to live with somebody else's wife-and then they went on and said that he had fed some of the oats, a few bushels, to livestock that they had a mortgage on, and therefore he was guilty of bad faith. Therefore, I think the line should not be drawn so strict against the farmer under those circumstances, and there ought to be something in the law defining what bad faith is. Would you have any objection to that?

Mr. BLACK. Certainly not. It is very helpful to the administrator of any law to have all of these matters as fully defined as possible. The CHAIRMAN. It is pretty difficult to define things in simpler terms than "bad faith."

Mr. BLACK. I would continue from there that the definition should not be of such nature that it made it more complicated to administer than less complicated.

The CHAIRMAN. You might exclude some cases that should be included and include some cases that should be excluded if you undertook to do it without having all the facts before you. After all, the

best way is to have good administration, and if it is not being handled properly, to make correction there. I am in thorough sympathy with the correction of anything that needs correcting.

Mr. LEMKE. In this case the culprit himself, who goes there and makes trouble for this farmer, is judge, jury, and prosecutor. There ought to be some way in which he could at least get a fair hearing as to what constitutes bad faith and good faith. I am just making this suggestion because there has been a great deal of abuse of the

term.

Mr. ZIMMERMAN. Would you say that practice has been carried on in many instances in your State?

Mr. LEMKE. That has been especially true in the St. Paul Land Bank district. The farmers up there have very little commendation for the St. Paul Federal Land Bank.

Mr. ZIMMERMAN. They must have had some very difficult situations up there.

Mr. LEMKE. Yes; they have in the St. Paul district, particularly because the value of the land in the western part of the State, I think, has been permanently cut in two because of drought and the falling of the water level. The great majority of the mortgages were made before that happened, and they must be discounted finally by about 50 percent because they cannot be paid and the value is not there.

Mr. ZIMMERMAN. I just want to say that where I live I have found that where farmers have appealed to me they have been willing to cooperate and have gone a little further than I could ask them to go to help the farmers.

Mr. LEMKE. Are you in the St. Paul area?

Mr. ZIMMERMAN. No; I belong out in Missouri.

Mr. FLANNAGAN. You are not in the Baltimore area either. [Laughter.]

Mr. ZIMMERMAN. I just wanted to say that for the record.

The CHAIRMAN. Does the committee want to continue now, or shall we adjourn? I think we had better adjourn until Tuesday morning at 10:30.

(Whereupon, at 12:10 p. m., the committee adjourned until 10:30 a. m., Tuesday, March 12, 1940.)

FARM CREDIT LEGISLATION

TUESDAY, MARCH 12, 1940

HOUSE OF REPRESENTATIVES,
COMMITTEE ON AGRICULTURE,
Washington, D. C.

The committee met at 10:30 a. m., Hon. Marvin Jones (chairman) presiding.

The CHAIRMAN. At the time we adjourned Dr. Black was on the stand. I believe there are some other questions to be asked of Dr. Black.

Mr. MURRAY. Yes; I would like to ask unanimous consent to put this in the record at this point.

The CHAIRMAN. The statement that you made?

Mr. MURRAY. My statement in connection with this entire program. I don't care to take your time to read it all.

The CHAIRMAN. Without objection it may be inserted in the record. (The statement referred to by Mr. Murray is as follows:)

Mr. MURRAY. I wish to say that for many years I have felt that we should have a uniform and a fair rate of interest on farm mortgages. I have a keen interest in the purposes of the bill which we now have under consideration, whether it is the Jones bill, the Wheeler bill, Farmers Union bill, or whatever the name of it may be and regardless of the individual, group, or party sponsoring it.

I have lived in a territory that really has been in an agricultural turmoil for 10 years: a drought, of which no one had ever seen its equal and low prices have made this territory far from a normal producing area.

Farm prices were low and a general hymn of hate, partly political, had resulted in a situation in which family was arranged against family, reighbor against neighbor and in which right thinking, equity, and fairness were difficult to follow. Your figures will show that in 1933 and 1934 Wisconsin had a very large number of loans. Mr. Morgenthau personally came out to Wisconsin and helped start the program.

THE LOANS

The Farm Credit Administration, in my district alone, loaned over $20,000,000. Many "abundant life" advocates, who are always very liberal in giving other people's money away, inferred that the commissioner loans, when they were second mortgages, would never have to be paid. Many borrowers thought that when they had secured a rearrangement of their debts and had them consolidated in a Government loan, their debts were nearly paid because these were the days of the "forgotten man.'

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I have known many men like Fred Darling, Rufus Runke, Willard Spaulding, Milt Button, John Jones, Arthur Collentine, and Charles Simmons far too many years to have anyone make me believe that most of these men were not as sincere and capable public servants as could be found in any private or Federal organization that ever existed. Many of these men went out with the spirit of crusaders and felt as if they were solving the problem of agriculture in a way it had never been solved before.

HOW THE LOANS WERE MADE

The loans were made up to 75 percent of the normal agricultural value of the farm. The normal agricultural value was based on the earning power of the farm. Everyone was supposed to look through rose-colored glasses. Prices

under the previous Republican administration were ridiculed, for the day of the "more abundant life" was at hand and the inference was that higher prices for farm products would prevail in the future.

WHAT HAPPENED

After the loans were made and we had 8,089 loans on January 1, 1940, in the district-prices did not rise as they should. Milk is the life blood of the district and with 493,000 head of dairy cattle, the price of milk and dairy products largely determines the loan that a farm can carry. During the 7 pre New Deal years cheese averaged 17.5 cents per pound, butter averaged 36 cents per pound, and milk averaged $2.12 per hundredweight in the United States. During the last 4 Republican years, when there was a world-wide depression and a political hymn of hate never before equaled in this country, and with a hired "smearer" of the opposition party and with the House of Representatives under the control of this opposition party for 2 years, we had an average of 14.7 cents per pound for cheese and 32 cents per pound for butter.

Since the New Deal we have had to discard our rose-colored glasses as we find that milk has averaged $1.68 per hundredweight, cheese has averaged only 13.2 cents per pound, and butter has averaged 26 cents per pound and in 1939, after 6 years of the "more abundant life" butter has averaged only 25.8 cents per pound. Cheese in 1938 and 1939 averaged only 12.7 cents per pound.

THE QUESTION

Now, if the farmers could not carry their load with the prices they received in pre-New Deal days how, in time, can anyone expect them to pay their interest and payments with the prices that have prevailed during the past 7 years? We all realize that the products the farmer buys have advanced very materially in price during this time, many items up to 25 percent of their former value. The result

Number of loans in Seventh Congressional District of Wisconsin.
Total face value of loans

Percentage of delinquent loans (percent)

Number of farms now owned by Farm Credit Administration_
Percentage of recovery when farms were sold (percent) _

8, 049

$19, 515, 200

50. 2

711

61.9

In Wisconsin there is a 34-percent increase in the percentage of Federal landbank delinquencies and an increase of 70 percent in the percentage of commissioner loan delinquencies.

One thought immediately presents itself and that is, if the Farm Credit Administration would foreclose the 4,000 loans in my district which are delinquent, wouldn't we be about back to where we were in 1933? And hasn't the farmer lost his farm just the same whether the Farm Credit Administration forecloses or some individual forecloses? This is especially so if we realize that the farm prices, in relation to parity, have made little headway.

THE PRESENT BILL

The bill under consideration will reduce this interest one-half or 1 percent. If our average loan is $2,500, this makes an average difference of $12.50 or $25 per loan per year. This is desirable, but I maintain that the big problem is to get the farmer a decent price for what he raises, or a parity price, if these farmers are ever going to pay their interest on their loans. When the members of this committee and other Members of the House see the situation which prevails in my district, they will have a little more sympathy with my attitude toward the trade treaties, which reduced the tariff on cheese 42 percent. They would be especially tolerant when they realize that many of their States have had agricultural subsidies from the United States Treasury, during the past 7 years, which represent over 30 percent of the value of their farms while Wisconsin has had agricultural subsidies which represent only 3 percent of the value of her farms. This tariff was reduced 20 percent in 1938 when cheese was 12.6 cents per pound, or about two-thirds of parity, and no one in the Agricultural or State Department, nor any Member of Congress, ever tried to justify this reduction. Who the so-called experts were that recommended this reduction I am unable to find out.

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