for these cases, in such a way that it will be on a temporary emergency basis that would not involve the whole farm-loan system.

Another objection to such a wholesale application of such refinancing is that it might involve the Government taking title to a considerable amount of farm land.

One of the serious dangers in several provisions of this bill as now drafted is the centralization of various powers in the Governor of the Farm Credit Administration in Washington. It may be that this was not the purpose of these provisions, but nevertheless, the danger exists in present wording of these various provisions. Among these provisions are: possibility of governmental control and operation of system resulting from direct Government guarantee of bonds unless carefully safeguarded; authority to Governor to substitute county committees for farm loan associations and to determine who can be included as members of new associations; transfer of authority from associations and banks to the Governor to determine who is entitled to a scale-down in debt and the amount of the scale-down: authority given to Governor to determine whether farm is to be sold back to original borrower and terms of sale; control of collection policies of banks which heretofore have been the responsibilities of banks and associations; substitution of Governor for boards of banks in determining what bank functions shall be delegated to associations.

While proper supervision of the system by the Farm Credit Administration is essential, nevertheless a distinction should be made between supervision and operating control of the system. Adherence to true cooperative principles requires greater local autonomy and local responsibility rather than greater centralization of control in Washington.

Finally, we believe that the most effective supervision and regulation of the Farm Credit system can best be achieved by the adoption of a plan for administration through an independent, bipartisan board of five persons appointed by the President, with the consent of the Senate and the Secretary of Agriculture as a member ex officio, as recommended in S. 3480 introduced in the Senate by Senators Gillette, Mead, Truman, Hatch, and Miller, and introduced in the House by Congressman Kleberg.

We therefore respectfully urge that the committee approve this proposal.

In conclusion, may I state that there are certain features in S. 3509 as now worded which we feel present serious dangers and we therefore hope these objectionable features will be eliminated. There are some constructive improvements which can be made in the farm-loan system. I have called your attention to several definite suggestions which we believe are worthy of careful consideration.

Let me reiterate that we strongly oppose any changes in the Federal farm-loan system that will weaken the feeling of individual responsibility of the farmer borrower, that will impair or weaken in any way the cooperative features of the system, that will weaken or jeopardize the soundness of the system. On the contrary, we desire to most strongly recommend and urge that everything possible be done to strengthen and improve the cooperative features of the system to the end that we may ultimately have a farmer-owned and farmer-controlled cooperative credit system which will provide adequate credit to agriculture at the lowest rates and terms of payment consistent

with sound economical and efficient management, and adapted to the needs of agriculture.

Senator BANKHEAD. Senator Hughes, is there something you wish to ask?

Senator HUGHES. I hesitate to ask because I have not heard what was said before; I was not present yesterday. However, I was interested in the first statement Mr. Short made this morning, namely, that the present law contains substantially all that is necessary for the reorganization or scaling down, and so forth, of these loans. I wonder if he can point out that provision of the law which now provides all the authority that is necessary to do that.

Senator BANKHEAD. Yes, that is a good question; I want to find out something about that myself.

Senator HUGHES. I would just like to know where those provisions are. I have been under the impression-and I myself have had some experience with farm loans-that that was something that you could not do under the present law.

Mr. SHORT. Well, under the present regulations we have, first, forbearance for temporary periods, second. we have extensions, where borrowers need more time; third, there is deferment, in which the principal portion of one or more installments may be deferred through long-term extensions to the end of the loan; fourth, we have reamortization over a longer period where payments prove too heavy; fifth, we have the standstill agreement, whereby the farm mortgage corporation agrees to withhold any collection efforts on commission loans long enough to permit the borrower to place his land-bank loan or mortgage in current conditions, and this agreement may extend up to 5 years; sixth, we have a variable payment plan, under which the borrower may agree to pay a certain percent of his crop, so that in years of low income he may pay less, and in years of higher income he may pay more; and seventh, there is a suspended payment plan, which calls for payment of either a definite proportion of the farmer's net income or a definite sum each year, and if these payments do not meet the installment in full, any deficit is carried over into a suspense account and held until the borrower's income enables him to meet such items.

In addition to that, there is a leasing agreement on land that a man did own. If in the opinion of his neighbors, the farm-loan association, and the bank, he cannot carry on, the farm can be leased to him for a period of 5 years. At the conclusion of that time, with the experience that has been had during that period, an agreement can be entered into whereby they will be willing to sell that farm to him on the same basis as they would be willing to sell it to anybody else.

So, there is a method provided in the present law to take care of worthy cases. We certainly want to go on record as favoring the offering of every possible opportunity to worthy borrowers who find themselves, either through adverse prices, bad weather conditions, or other catastrophes that may have fallen upon them, unable to meet their obligations.

Senator BANKHEAD. Now, you said something yesterday, and you said something this morning to the same effect, because Senator Hughes was not here yesterday, and he wanted to ask you about it,

and it is this: that under the present law the banks have power to scale down debts. Do you assert that?

Mr. SHORT. This last remedy or plan that I have outlined here, Senator, amounts to the same thing.

Senator BANKHEAD. What plan?

Mr. SHORT. The lease to the farmer.

Senator BANKHEAD. How is the Government going to lease the farmer's own land to him?

Mr. SHORT. That is in the event that a man cannot carry on; and either by voluntary assignment or foreclosure, for the reasons to clear title, they can enter into a lease agreement with the original land owner, which amounts to the same thing as is in the Jones bill at this time.

Senator BANKHEAD. Do you mean that the bank without obtaining title to the farm can lease it?

Mr. SHORT. No, the bank has to obtain title, just as the Governor would have to do to apply the same remedy under this bill.

Senator BANKHEAD. This bill provides for a deed, does it not?

Mr. SHORT. It provides for conveyance by the farmer to the bank in the Jones bill as written.

Senator BANKHEAD. And this bill?

Mr. SHORT. This bill provides that in the event a man wants refinancing privileges, he first deeds his property to the Governor. Senator BANKHEAD. There is nothing in the present law that authorizes that, is there?

Mr. SHORT. Oh, yes; he has that privilege.

Senator BANKHEAD. He has got to deed it?

Mr. SHORT. Just as he does under the Jones bill.
Senator BANKHEAD. In order to have a loan made?

Mr. SHORT. No. To get an opportunity to carry on.

Senator BANKHEAD. Is there any authority in the law for the land bank then to lease that land either to that owner or to anybody else? Mr. SHORT. There is not necessarily specific authority of law, but by regulation they are doing it.

Senator BANKHEAD. Is there any provision for a land bank to scale down any debt-any mortgage debt?

Mr. SHORT. I think the law provides that. I presume the regulations in effect today are within the meaning of the law. I know that that matter is provided for in the present regulations.

Senator BANKHEAD. Then, you do not claim that this provision in the bill is soft credit?

Mr. SHORT. No. The objection that we have, Senator

Senator BANKHEAD. You say it will do the very thing, now, that a lot of them are doing; setting up a soft credit system?

Mr. SHORT. We have not made that charge. You know as much about that as I do.

Senator BANKHEAD. It is supposed to come from the two farm organizations and the banker groups who are associated with the farm organizations and the cooperatives.

Mr. SHORT. I think that is an unfair statement. I hardly think you can charge our organization with taking that attitude. I think you have worked with us for years and years, and you know that we really want to be constructive in our appearance here.

Senator BANKHEAD. Let us get this straight. Does your organization claim that this bill and the Jones bill tend to create or bring about a soft credit program?

Mr. SHORT. Well, I think if you write these provisions into the law, there tends to be

Senator BANKHEAD. No; in this bill.

Mr. SHORT. Well, they are in here Senator, and it makes it mandatory upon the Governor, and I think that is an invitation to borrowers who may not be entitled to it to come in and demand a scale down in times of low prices or for any other reason they may see fit.

Senator BANKHEAD. I am not discussing solely the scale down; I am discussing the bill and the various things that have been criticized in the bill and the things you enumerate they can do under the present law. I am trying to find out what you are criticizing that is new, that you have not said they can already do.

Mr. SHORT. This is in the regulations, and we can change the regulations to meet the conditions but we think it is a very dangerous provision to just hold out an invitation.

I think the farmers of America are traditionally in favor, and have demonstrated it over the years, of paying their bills. But human nature is human nature, and if you hold out an invitation in law

Senator BANKHEAD. Doesn't the regulation hold it out just as much as the law?

Mr. SHORT. NO; I think if you give wide publicity to your regulation as to how you are going to treat distressed borrowers-if I have 15 borrowers and 1 of them finds himself in distressed conditions over which he has no control, and he and I sit down around a table, and I grant him extensions, that is one thing; but if I advertise that to the other 14 men, I think that very materially I will affect my collection problem, because they might find reasons why they would want to take advantage of it.

I think I should be able to sit down with the one man and work to our common interest, if I am able to do it, and work out any relief measure. But I think that when we advertise those things, we are apt to affect the collection problem with all other borrowers to the extent that a sound system just could not be carried on.

Senator BANKHEAD. You favor putting it in the law instead of regulations?

Mr. SHORT. No; I think it is dangerous in the law.

Senator BANKHEAD. Although it is all right in regulations, you think it is dangerous to put it in the law?

Mr. SHORT. That is right.

Senator BANKHEAD. You mentioned quite a number of things, and restated them just now, that you contend the bank system can do now, and they include practically everything in this bill, do they not?

Mr. SHORT. Yes.

Senator BANKHEAD. So, the only difference

Mr. SHORT. Except the centralization. Under the regulations, the association and the bank determine the degree of scale down, but under the bill as now written that authority is all transferred to the Governor of the Farm Credit Administration. We believe that centralized authority, as provided in this bill, should not be put in the hands of one man.

Senator BANKHEAD. The scaling down is one phase of the liberal plans you have just listed-some eight or nine plans that you claim the bank can do now under regulations. You object to the bill, so far as those things are concerned, because you think that although they can do it now under the law through regulations, it is unwise to give the positive power in the law to do the things they are doing now through regulation?

Mr. SHORT. That is right.

Senator HUGHES. I suppose. Mr. Short, you have seen in the newspapers and heard otherwise a kind of outery that seems to be going on now around certain quarters in Washington about what they call the making of laws by regulations? It is contended that Government agencies, finding no provision to cover something that they want, write provisions in the shape of regulations and enforce them as law.

I wonder if there is not some of that in this that you are referring to here now. I rather think they did not provide in law for a good many of the things you mentioned but that they have been put in regulations without legislative authority.

Mr. SHORT. Well, we do not approve in this law or in any other law set up to serve particularly farmers-I think it should apply to all other economic groups-a centralization of power and the administration of it. We feel that the safest method to adopt in these programs is decentralization of power and the placing of authority, particularly in this system, in the local people. In the past that has been open to criticism. We feel we ought to have had more local autonomy, more association participation in the administration of the agricultural credit structure.

We have certain recommendations here in our statement that would have probably in the past avoided a lot of criticism in the administration of this program if the farmer-borrowers had had an opportunity to elect at least a majority of the members of these board banks.

We feel that through that method, sympathetic, safe, conservative, and sound administration would have prevailed and at the same time made available at all times ample funds to finance farmers at reasonable interest rates.

Senator BANKHEAD. You frequently refer to the subject of centralization increasing centralization as compared with the present law. In order to help the committee-because I doubt if there is any real desire to bring about, by anybody, any great amount of centralization I want you to specify in the bill the provisions that you claim increase centralized power in Washington.

I shall first ask you, does your objection apply to any part of the bill on that subject except the refinancing plan contained in the old, original Wheeler bill?

Mr. SHORT. Yes.

Senator BANKHEAD. It is confined to that?

Mr. SHORT. No; there are other points in the bill.

Senator BANKHEAD. All right; point them out.

Mr. SHORT. Under "national farm-loan associations," section 8, on page 9, authority is given to the Governor of the Farm Credit Administration to appoint committees.

Senator BANKHEAD. It has been announced-I do not know whether or not you have heard it-that that is not intended to provide a set-up