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shall refund to the purchaser from the Corporation all principal payments theretofore made by him, less the amount of any damages to the property occasioned by his fault."

Thus, so long as a purchaser from the Corporation has an unpaid balance on any mortgage incident to such purchase, he does not have title in fee simple. Regardless of the worth of his equity, the high productive value attained and maintained on the farm, or regardless of the current position he may have maintained throughout the life of his loan, he could not voluntarily or involuntarily transfer title without approval of the Governor.

Through the exercise of the authority given in this subsection, together with authority given in other sections of this bill, the Government would become the greatest potential landowner in the country.

Section 12 (d): The rights and privileges enjoyed by all other borrowers, as provided in the Frazier-Lemke Act, would be unjustifiably denied to all borrowers of this system who availed themselves of the refinancing privileges set forth in this section.

Section 13 takes away the authority of the associations and the banks and transfers it to the Governor to determine to whom sales shall be made and the price and conditions of such sales.

Section 14 (a) provides that the Governor may change the terms of all loans, new and old, and provide variable payments, which now rest with the associations and the bank.

Section 14 (b) gives authority to the Governor to adjust up or down the size of any farm, the owner of which is in need of the refinancing benefits in sections 10 to 13, inclusive. This gives unwarranted power to the Governor to determine what shall “constitute an effective farm management unit."

This provision gives the Governor the authority to determine the type of farming to be carried on in any area and in addition thereto the authority to subdivide any farm in any manner that he deems advisable in the event the owner of such farm was forced, by reasons beyond his control, to seek the refinancing provisions of this bill.

We do not think even the directors of a national farm-loan association should have the power provided in this subsection over any private landowner, much less have this power vested in one man or even in a group of individuals located in Washington or any place else. This decision should be left to the farmer.

Section 15: The Governor controls the collection policies of the banks, such as determining the use of reamortization, or variable payment plans. The collection policies have heretofore been the responsibility of the banks and the farm-loan associations.

Mr. Short. I would like to have the privilege of answering another question.

Senator BANKHEAD. No; the committee may want to examine you on any other questions.

Mr. SHORT. So far as this applies to the questions that have come up.

Senator BANKHEAD. You may make a fair statement of what you want to say.

Mr. Short. I would like to have the opportunity to clarify and to submit a short concluding statement.

Senator BANKHEAD. All right. We want your views.
Mr. SHORT. We want to be constructive and not misunderstood.

Senator BANKHEAD. We do not want that statement held up in any way, because we want to have these hearings printed promptly.

Mr. SHORT. Here is another thing. In the refinancing provision the Governor is given authority to determine who is entitled to a scale down.

Senator MILLER. You are going to cover that in your statement? Mr. SHORT. And the amount, and so on.

Senator BANKHEAD. I asked you in the beginning if there was any centralization you objected to except in the refinancing part of the bill.

Mr. Short. That is getting back into the refinancing.
Senator Hughes. You want that there, don't you?

the power,

Mr. SHORT. No; we think the determining power should be out there with the local association.

Senator Huges. You make it pretty hard on people out there. When all those people who want that scaled down find that they have

I should think they would leave home for a season. Mr. SHORT. We feel that they are in the best position to make those decisions. They are in a much better position than anyone elsemyself or anyone here in Washington.

Senator HUGHES. I am not as hopeful about some of these things, maybe, as you people are. The local boards are not, many times, made up of very strong men.

strong men. I do not think they are the kind of men who could—I would not say “intelligently,” but they certainly would not do it.

Mr. SHORT. Our position on that is if you want real administration, if you give responsibility to those boards you will get them to do a better job, than anybody here, even the bank.

If the local boards of these associations had had more power in the last 23 years, we feel we would have avoided some of the mistakes we have made.

Senator BANKHEAD. As I understand it, you have no objection to the rate of interest proposed in this bill? You are not fighting the

? bill on account of the 3 percent interest if the Government can get the money back?

Mr. Short. No, sir.

Senator BANKHEAD. You are opposed to the method of administering the bill; that is, you insist on a board. You want to change the system that has been provided ever since the Farm Credit Administration was set up or since it was organized?

Mr. SHORT. That is right.

Senator BANKHEAD. You want to have one administrator, and you want a board, a corporation?

Mr. SHORT. That is right.
Senator BANKHEAD. That board to have five directors?
Mr. SHORT. That is right; six with the Secretary of Agriculture.

Senator BANKHEAD. That, of course, is not an objection to the bill. Your objection is that it is not in the bill—not that it is in the bill.

Mr. SHORT. That is right.

Senator BANKHEAD. You want a change in the form of administration to five, plus the Secretary, each to have a $10,000 salary.

Mr. SHORT. I would like to call attention at that point that that is not a new policy with our organization; we have always been in favor of that.

Senator BANKHEAD. I am trying to get what your attitude is here, since you represent the Farm Bureau.

You do not object to the rate of interest; you do insist upon a board of directors. You do object to the retirement of stock owned by the farmers in the loan association?

Mr. SHORT. That is right.
Senator HUGHES. You do not want that paid immediately?
Senator BANKHEAD. He does not want it paid at all.

Mr. SHORT. We did not go into detail on that yesterday. We feel you cannot have cooperative marketing or cooperative organization on the one hand and lack of financial responsibility on the part of the folks who are participating in this program on the other hand.

Senator BANKHEAD. Where is your cooperative marketing to borrow money?

Mr. SHORT. These are cooperative institutions to go into the market to sell credit.

Senator BANKHEAD. Suppose you get the money otherwise. Suppose the Government guarantees the bond, as is provided in this bill, and as is in effect now, a better guaranty, and you do not have to go out and buy one. You have no market involved. You have a formula about cooperative marketing that I am trying to submit to you does not apply to this situation.

Mr. SHORT. Senator, I would like to ask this question of the committee: Can you have decentralization on the one hand and Government guarantee on the other?

Senator BANKHEAD. Of course, you cannot have it if you do not give the Government any control at all except furnishing money. You cannot have it any other way.

Mr. Short. That has not only been proven in this financial agency but in almost every other financial agency in the United States. I think this committee must decide if it wants a cooperative credit system.

Senator BANKHEAD. Suppose you want a credit system established by farmers-a land credit system so that they can get long-term money at a low rate of interest—and that is your primary objection Had you rather just stand on the idea of a cooperative if you can work out that system yourself?

Mr. Short. We feel that we have a system that has brought credit to the farmer at the lowest interest rates, I think, of any country in the world. I do not think there are any farmers in the world who enjoy lower interest rates than we are now enjoying.

Here is what we are fearful of: During the depression there was another agency set up-strictly a governmental agency—and the Government guaranteed the bonds, as I understand it, to go out and save the homes of people. They are taking losses. The mere fact that the Government came in and guaranteed bonds did not save the homes; they are now foreclosing Congress has refused to make appropriations to continue that service.

If we go into a strictly governmental agency, the Government guaranteeing bonds, and allowing all the losses to accrue to the Government, we may find Congress in a frame of mind that it has not been in in the last 7 years, and they would say: “We can't continue this thing of making these funds available to meet the credit needs of agriculture.” Senator BANKHEAD. You sound very much like bankers talk.

Mr. Short. No; I don't want anybody to misunderstand me. I think what we are interested in is just what you are interested in. We want it on a permanent basis.

Senator BANKHEAD. You want to go on as is, like you have been?

Mr. SHORT. No; we are making some suggestions here that we think will strengthen the system.

Senator BANKHEAD. They are minor ones. Do you know how the business of the association stands today? You seem to think it is a great success and want to continue it; that it is farmer-owned, farmer-controlled.

I don't believe it is farmer owned or controlled either. I think that is theory entirely. In practical effect we have no such thing.

You have 3,722 farm associations; 1,101 of those have their capital impaired in excess of 100 percent—in other words, totally wiped out-1,101. You have another 1,089 associations whose capital has

been impaired to the extent that they cannot close new loans, which takes 2,200 loan associations out of the 3,722 totally out of the continuance of lending business.

Are you satisfied with that sort of program either in the interest of the Government or in the interest of the borrowers?

Mr. SHORT. I am not satisfied with that situation, Senator, but I am not surprised, because we set up this institution 23 years ago and made no provision for losses.

First, we made provision that losses would have to be all borne by the associations. Second, made no provision for rehabilitating those associations.

Another thing, Senator, I don't know of any group of financial institutions—that from 1929 up to this moment has never had one dime's worth of assistance from the Federal Government or from its present stockholders.

Senator BANKHEAD. We went over that, and you admitted, and everybody knows that banks have had very, very material relief.

Mr. SHORT. You were talking about the associations.

Senator BANKHEAD. And so have the farmers and so have the individual members of the associations.

Mr. SHORT. I understand, but you were talking about the fact that 334% of these associations, approximately, were entirely impaired. A lot of losses took place in this institution before 1933. Our point is that the delinquencies and losses in this system are directly in line with the price structure of American agriculture. As you go down in price, delinquencies increase; as you go up in price, delinquencies decrease.

We object to the features in this bill that tend to relieve the individual responsibility of the farmer.

Senator BANKHEAD. There is a specific provision in here—and I have asked your position on that specific provision—that no deficiency judgments, except as set out in the bill for willful misconductyou have read the bill?

Mr. SHORT. Yes.
Senator BANKHEAD. Do you object to that?

Mr. Short. I think you are just weakening the institution's ability to go ahead and collect loans.

Senator BANKHEAD. Then, you object to it?

Mr. SHORT. When you say do we object to it being in the law, we believe that misuse of deficiency judgments are to be condemned, and I made every effort to find out in the last few years, not only in our bank but others, whether there has been misuse of that privilege.

You will find once in a while in the history of this institution some cases that you would criticize, and so would I, in the use of deficiency judgments; but we certainly believe in sympathetic administration, and I feel this way very definitely: that if I owe an obligation to this institution which I do; I am a borrower in the Federal land bank and production association, and sell a lot of my produce through a cooperative that uses this institution, so I am vitally interested in it as a

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farmer—but I feel when I borrow money from this institution, if I am able to pay, I should pay, and I should not be permitted to connive or hide assets or anything else in order to avoid payment.

Senator BANKHEAD. I have your position now, and I think the record shows your attitude.

You said something about being a director in some bank. What board are you on?

Mr. SHORT. I am an elected member of the St. Louis Farm Credit Board.

Senator BANKHEAD. Any other bank?

Mr. Short. Effective January 1, I was appointed as agriculture representative on the Federal Reserve Board at Little Rock, Ark. I have no stock in a private bank. I have never been a member of the board of a private bank.

Senator BANKHEAD. Are you on one at Memphis?
Mr. SHORT. No, I am not, sir.
Senator BANKHEAD. At Little Rock and St. Louis?

Mr. SHORT. That is right. You are familiar with the policy of the Federal Reserve at this time to, as fast as vacancies occur, as I understand it, to get a farmer representative on the board.

Senator BANKHEAD. Senator Miller, have you any other questions? Senator MILLER. I haven't any. Senator LA FOLLETTE. Mr. Short, have you served in the capacity of director of land banks in the past-in any of the banks?

Mr. SHORT. No; just effective January 1, 1938, as a member of the credit board in St. Louis, which, of course, deals with Federal land bank, production credit association, the bank for cooperatives, and

Senator La FOLLETTE. You spoke about the low interest rates which farmers have got under this system. Have you made any study of the testimony before the House committee on the Jones bili, the companion bill to this measure?

Mr. SHORT. No; I have not had time to read and study all that testimony. I testified before that committee.

Senator LA FOLLETTE. As I understand it, you approve of the 37percent interest rate, do you not?

Mr. SHORT. Well, our organization's policy on that has been very clear. We have supported the bill that passed the House and is now before the Senate to continue that provision for another 5 years.

Senator LA FOLLETTE. At least, you are in favor of it for 5 years? Mr. SHORT. That is right.

Senator La FOLLETTE. The reason why I ask you if you had read the House testimony was that I wondered if you had studied the analysis of the cost to the Government which was submitted by the Farm Credit Administration to the House committee.

Mr. SHORT. No; I have not.

Senator LA FOLLETTE. An analysis of the estimated comparative cost for the next 7 years, submitted by the Farm Credit Administration to the House Committee on Agriculture, indicated that a continuation of the present interest rates for the next 7 years would cost the Federal Treasury $255,500,000, and that under present laws a reduction of both land bank and land-bank commissioner loans to 3/4 percent, as was provided by the House in passing H. R. 8450, would be $281,400,000.

So on.

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