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ment, you would find that no board ever agrees on anything, and consequently, I think there should be under that board or in addition to that board, an executive head of the Farm Credit Administration who would be the directing genius of the administrative end of the business.

Mr. COFFEE. Now, assuming the Farm Credit Administration stays as it is, under the Department of Agriculture, would you think that it would be advisable to establish this nonpartisan board?

Mr. MYLANDER. Well, you would have to do an awful lot of tinkering with the present farm-credit law, if a nonpartisan board would be anything other than an advisory committee, because at the present time I know of no other Government officer who has as much authority as the Governor of the Farm Credit Administration. I think he should have that authority. For example, we cannot hire a man in the Louisville bank at a salary in excess of $2,000 a year without that individual's qualifications and salary being approved by the Governor and all through the regulations, all through the law, you find the words, "with the approval of the Governor," and he has to put his stamp of approval on almost everything that goes into the entire Farm Credit Administration. I am not objecting to that. After all, I have worked long enough to know that there must be a boss some place who is the final word.

Mr. COFFEE. Well, in that connection, inasmuch as the Secretary of Agriculture may remove the Governor of the Farm Credit Administration, is not that power that is delegated to the Governor of the Farm Credit Administration in fact delegated to the Secretary of Agriculture ?

Mr. MYLANDER. I had never thought of it in that exact way, but I think perhaps you may be right.

Mr. COFFEE. You mentioned that it was similar to the Federal Reserve Bank System. Is there any fear expressed among the bankers that the members' stock in the Federal Reserve System might be taken over by the Government, similar to the taking over of the Federal land bank borrowers' stock or retirement of the Federal land-bank associations' stock?

Mr. MYLANDER. Well, of course, every now and then there have been proposals introduced to authorize the Secretary of the Treasury or someone to buy all of the stock in the Federal Reserve banks. I do not know whether there is any fear on the part of the banks that that would be done. We would hate to lose our investment, because it is one of the best earning assets we have got now.

You know, they have to pay 6-percent dividends if earned, and that is a corking good earning asset these days, that stock in the Federal Reserve banks. But as to the effect it might have upon the operations of the Federal Reserve System and its contact with the member banks, there would be very little difference.

Mr. COFFEE. Is your Louisville bank making loans at the present time on about the same basis that it was in previous years?

Mr. MYLANDER. We are trying to make loans with all of our might. We have recently hired and put out a force for the purpose of canvassing the territory for loans, because our problem today, Mr. Coffee, is one of investing excess funds. We have bought, in the last year, in the Louisville bank, some 16 or 17 million dollars worth of our own bonds in order to have a place to use our money.

Mr. COFFEE. That is quite a contrast from the Omaha bank.
Mr. MYLANDER. That is right.

Mr. COFFEE. Which is making very few loans or has been during the last year.

Mr. MYLANDER. We are making all of the loans we can, but even so, we are receiving in principal payments somewhere around $1,000,000 a month, while we are unable to invest only at the rate of around $350,000 a month in new loans.

Mr. COFFEE. One more question. You mentioned —

Mr. MYLANDER. Let me amplify that last statement just a minute by saying that we have now in the Louisville bank—and I am not sure of these exact figures, but roughly they are correct-nearly 50 percent of all of the farm-mortgage debts in Tennessee; some 40 percent of all the farm-mortgage debts in Kentucky and between 25 and 30 percent of all of the farm-mortgage debts in Ohio and Indiana. We have looked at a great many more of the farms of those four States, and have either turned down the applications, because they were not eligible under the law or for some reason are other we have not been able to take it. So that the field for us to expand in is somewhat limited.

Mr. COFFEE. You mentioned that the insurance companies were loaning more than 50 percent value on the farms in your territory. In your opinion, would it be advisable to make Federal land-bank loans in excess of 50 percent; or what percentage would you think Congress should prescribe?

Mr. MYLANDER. My answer to that is that certainly I never want to see the Federal land-bank system go any further than it is now going. It is a permanent financing system for long-term credit for agriculture. At the present time we can lend 75 percent of the value of the farm, 50 percent by the land banks and another 25 percent by Commissioner loans. It is true that there is a philosophy that a 10-percent down payment is enough, but I do not agree with that philosophy.

Mr. COFFEE. I am assuming that we will take the Federal landbank system only, in the event that we have no Land Bank Commissioner loans.

Mr. MYLANDER. No what?

Mr. COFFEE. No Land Bank Commissioner loans. That is more or less temporary.

Mr. MYLANDER. Yes, sir.
Mr. COFFEE. An emergency set-up?
Mr. MYLANDER. That is right.
Mr. COFFEE. Without that set-up, do you think that Congress could

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safely provide for a higher percentage than 50 percent?

Mr. MYLANDER. I do not think so, sir, because the land bank today is lending 50 percent of the normal value of the farm. Now that normal value is worked out by a formula based on prices prevailing from 1919 to 1924, I believe, and consequently there were times in 1932 and 1933 when 50 percent of the normal farm value in Ohio, at least, exceeded the market value of the property. Today 50 percent of the normal value in many cases is not 50 percent of the market value; but I think it is best for a long-time loaning institution

to keep its loans pretty much on an even keel and not try to follow the business cycles up and down, because that is where you get in trouble.

Mr. COFFEE. This bill, you know, sets up a new standard, the productive value. What do you have to say in connection with that sort of a formula on which to loan?

Mr. MYLANDER. Frankly, I do not know what it means. It is not defined in the bill. I do not know what it means and I do not know on what basis you would compute the productive value of a farm. Productive value in an era of good weather and high prices is one thing. Productive value in an era of dry weather and low prices is quite another thing.

Mr. COFFEE. I just want to ask one more question. Mr. Mylander, you mentioned this morning the fact that in the Louisville bank during 18 months when you had the peak of loans you increased the personnel from 123 to 1,365. I am wondering what success you had 'in reducing the personnel back to normal after your loaning peak had passed?

Mr. MYLANDER. Well, I think our personnel now is about 425 at the last count. In other words, we have about trebled it. We have trebled our loan total, because we service, of course, the Commissioner loans as well as the land-bank loans which makes about three times the number of loans we had.

We have done our best to cut it down. One of the sad duties of a director during the last 5 years has been the necessity of cutting people off of the pay roll; but I think if you get the statistics from the Farm Credit Administration and examine our operating costs, you will find they are pretty well along the lowest in the system.

Mr. COFFEE. If this had been a Government-controlled organization, do you think that you would have been able to make your personnel reductions that you were able to make as an independent agency? Mr. MYLANDER. Oh, yes, sir; I think so. Mr. COFFEE. That is all. The CHAIRMAN. We desire to thank you, Mr. Mylander.

Mr. MYLANDER. May I say. Mr. Chairman, one final word to the committee, and that is that I deeply appreciate the courtesy that you have shown me in hearing me, and the interest you have shown in what I have had to say. I hope that you will consider this bill very carefully and that you will get all of the information you can and that you will not destroy the Federal land bank system without looking it over pretty carefully.

The CHAIRMAN. I want to assure you that we thank you for the information which you have given us and we expect to go over each provision very carefully before we take any final action.

Mr. MYLANDER. Thank you.

The CHAIRMAN. Mr. Wiggins, you had someone else who wanted to make a statement ?

Mr. WIGGINS. I would like to have as our second witness before the committee Mr. A. G. Brown, who has had much experience as a commercial banker and was for a number of years the president of this Louisville bank, which we have heard, and was later executive vice president of the Farm Credit Administration at Louisville, and at the present time is deputy manager of the American Bankers' Association.

The CHAIRMAN. Mr. Brown, we will be glad to hear you.

Mr. HOPE. Is it understood that these hearings are going to be definitely closed tonight on this bill, or that the matter will still be left open?

The CHAIRMAN. I hope to close the hearings on this particular bill, and the committee will go over it afterwards and make such changes as we want to make and then we will determine as to the future; but so far as the present bill is concerned, I hope that this will close the hearings.

Mr. HOPE. I think that there are probably one or two other witnesses that the committee might want to hear. I would hate to have the understanding that we are going to close the hearings tonight. I would rather leave them open and then later determine whether we want to hear someone else.

The CHAIRMAN. Of course, we will be bound by whatever the committee decides afterward. I think that there are some changes, undoubtedly, that the committee will want to make in the measure, and I think that we can determine that more definitely at that time. Of course, if the committee desires or wants to hear some further witnesses, we will be glad to do it, but so far as the present hearings are concerned I would like to finish them today, and then if there is anything that the committee wants to have hearings on, or the committee thinks that it wants to hear someone else, that will be all right.

STATEMENT OF A. G. BROWN, DEPUTY MANAGER, AMERICAN

BANKERS' ASSOCIATION

The CHAIRMAN. We will be glad to hear you, Mr. Brown.

Mr. Brown. My name is A. G. Brown. I am deputy manager of the American Bankers' Association in charge of agricultural credits and for a number of years was a country banker in Illinois and Indiana before going into the Federal Land Bank of Louisville in 1929 as its president. I remained in the Federal land bank at Louisville until 1935.

This statement is made to supplement the reference given by Mr. Mylander concerning the plans and procedure for taking care of delinquent borrowers of the Federal land-bank system. Such plans and procedures as are now in vogue are the result of the evolution of considered thought and sympathetic interest of farmer-borrowers who, by their interest and attitude, have shown a willingness to cooperate in the proper maintenance of their farms, buildings, and otherwise doing their honest best.

Now, as to the matters you have been considering here during these hearings, the subject of treatment of delinquent borrowers and what forebearance should be given them short of foreclosure: I know that back as far as 1931 when the troubles began to show up in the Federal land bank at Louisville, and realizing that we had a socalled fair weather organization that for years had balanced the books each month, without even a delinquent out of some 40,000 loans, and that record for several years, that when the real trouble showed up in 1930, that we realized we did not have a program to meet the unusual situation that confronted us. A field organization was secured, delinquents were interviewed, and yet as you men may know—and I presume that the same policy was worked out in other land banks-we pursued what might be called a rather hard-boiled policy of asking folks to pay always, of course, with the confidence that things were going to be better next month, or next crop season, but when they did not get better and we had an accumulation of delinquencies, we realized that something had to be done.

In 1931 we provided what we termed an extension policy of bearing with the delinquent, studying his problems, considering his problem with the local association secretary-treasurer, his neighbors, and trying to work out something that would make it unnecessary to bring foreclosure. Fortunately Congress in the fall of 1932—and some of you may have been members of the committee that recommended it-authorized the Treasury to subscribe to $125,000,000 stock of the Federal land banks.

Now, that stock was purchased; $100,000,000 of it was allocated to the different banks according to the conditions of their difficulties; $25,000,000 earmarked for the purchase of granting extensions and that was the time when extensions were formally acknowledged as a part of the procedure of dealing with delinquent borrowers.

Now, through these years the consideration by many banks and by the associations, their member borrowers have grown and evolved around to a point where now today there is a most comprehensive program, and I think if you men do not now have or have not had the opportunity of considering a statement that came out as late as last November, by the then Governor Hill concerning the situation, the debt situation, and collection policies of the Federal land banks and the Land Bank Commissioners, that you should have it, because it is very comprehensive, includes some nine methods that the individual cases can be handled under, and I believe that you will agree with me that when you believe or know or understand that the individual case has had the consideration to determine whether any one of these nine cases, or any one of these nine plans of procedures can be applied to this man, then there is nothing else to do but foreclose.

I believe that you will agree that it is a very generous, charitable foreclosure policy, more considerate than that of any other agency whether it is private or whether it is Government.

That particular policy and that particular procedure includes first the so-called informal forbearance. That is a case where an interview develops that the borrower expects to be able to meet his delinquency in a short time, either from the sale of crops or from some other source and the account is held in abeyance temporarily until the needed funds are in hand.

The second is extensions, and that is where the borrower requires more time within which to meet his payments, and a formal extension should be granted. A formal extension is a definite undertaking providing for the payment of delinquent items in accordance with the schedule mutually agreed upon. Many extensions are made to the end of a harvesting season.

Others run for a number of years. It is dependent upon the circumstances of individual cases. The amounts involved may be amortized over the extension period or may be made to mature at the end of such period.

Then there is a deferment of principal through long-term extension, You men realize that there are so-called installments that borrowers meet annually or semi-annually and that a certain proportion of that

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