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Mr. PIERCE. The question of interest; is not that what brings the bankers here?

Mr. Houston. As we study this with the possible further reductions

Mr. PIERCE. You do not want to see that?

Mr. HOUSTON. And with the scaling down sometimes under other conditions of the principal of the debt, we view its effect both on the banks and on the farmers

Mr. PIERCE (interposing). Then the object of your visit here is not in the interest of the farmer but your own banking group, is it not?

Mr. Houston. I beg your pardon.

Mr. PIERCE. For fear that if the bill becomes a law it will affect the interest rates.

Mr. Houston. Would you pardon me if I say that I stand here as one who was on the farm and operating a farm from the years 1927 to 1937, through the depression, on a farm that was owned and is owned,

and has been, in our family for 89 years? Mr. PIERCE. Why, that does not answer the question. What brings the bankers here?

Mr. Houston. I am coming to the point, and I will get to that.
Mr. PIERCE. It is the bankers' interest ; is that not it!

Mr. Houston. No, sir. I am coming to that point in just a minute, and I will show you what I fear to be the effect upon the farmers of the State of Iowa if such legislation is passed.

As a banker, if this law is passed, and I review that note case with those mortgages, with those feeder loans, with those crop loans, and the barnyard, dairy loans which we have and which we are free to make—and I will stop just a moment to tell you that in the 34 years I have been in business in a farmer-controlled bank in the State of Iowa, we have foreclosed on four farmers in the entire 34 years

I have been in business. Mr. PIERCE. Then, the bankers are here as friends of the farmer? Mr. HOUSTON. Absolutely. Mr. PIERCE. They are here to help the farmers. Mr. HOUSTON. Absolutely. Mr. PIERCE. I am delighted to hear that.

Mr. Houston. Now, the change takes place. I go back, if such legislation is passed, and view our note case with those assets, farm assets, and look forward, although I was one of the sufferers both from a banking standpoint and from a farm operator's standpoint in the last depression, and we know that other depressions are approaching and will reach us. I know that I am going to have to meet with those farm borrowers on a proposition to scale down loans which we believe are fairly and honestly made; which we believe are safe assets to keep in our files at the price or at the state in which they are in.

Nr. PIERCE. Then you think that it is perfectly fair for the farmers to pay interest at the present rates

Mr. HOUSTON. Pardon me. I do not.
Mr. PIERCE. The 31/2 percent which we put through this committee.
Mr. HOUSTON. I am not complaining about it at all.

Mr. PIERCE. We had the opposition of the Farm Credit Administration when we did it.

Mr. Houston. I am not complaining about it.

Mr. PIERCE. The President vetoed it at their request.
Mr. ANDRESEN. There is some opposition, too, to the repeal.
Mr. PIERCE. He vetoed that bill.
Mr. ANDRESEN. He vetoed that bill.

Mr. Houston. Then, gentlemen, as a banker, about the only thing that an Iowa banker can do is this, is to view those assets as they may appear to somebody else at that time and to consider first the making of loans as we have made them, with that facing us and which will probably result in a reducing of the credit that is going to the farmer from the lending agencies already set up in our States.

Now, if that comes about, gentlemen, I fear that the farmer, the farm-borrower in our State will suffer rather than gain by such legislation as this bill.

Another thing is this, as I view it, and I have thought about this. Suppose we did sit there and had to view 25 percent of our assets in our note file with a possible scale down. Gentlemen, could we look at the other people who have the other 75 percent of their loans from other lines of business in the face and say that we are not going to give them the same consideration that we are giving to our farmer customers? What would their answers be! “Why, you are scaling down these farm mortgages. You are scaling down your cattle loans. You are scaling down your barnyard loans and dairy loans. Why not scale down your loans ?”

To me, gentlemen, it seems that it is going to take from the farmer the big line of credit that was his long before we had any land banks, any production-credit corporations, or things of that nature. It will have that effect, and it means a menace to us, to some extent, because if you gentlemen were sitting back of the banker's desk you would have the same feeling that I have when I sit back of the banker's desk. We want to continue loaning to the farmers. We want to continue loaning to him at the lowest rate of interest he can get anywhere. We think we are good competition.

Mr. PIERCE. You do not believe that this bill will lower interest to the farmers?

Mr. HOUSTON. I doubt it.
Mr. PIERCE. You doubt it?
Mr. HOUSTON. Yes, sir.

Mr. PIERCE. Do you not believe that the farmer is entitled to relief from the 5-percent commission or bonus that is now collected from him now as a guaranty of his neighbors' loans? Do you think that that is a good provision?

Mr. HOUSTON. I heard you ask a few minutes ago about that 5-percent provision. I want to say this, that if I have ever had anyone speak to me about paying the 5 percent, it is very, very seldom we have ever heard anything. We have a good many of our people who borrow from the land bank. Now, the reason they borrow from us, on their farm mortgages—you may wonder where we get the $400,000 at the rate of 4 percent. They do not borrow from us because they do not have to pay the 5 percent, and I will tell you why they borrow from us and not the land banks. It is because lhey bank with our institution and they can pay any amount from $100 to all of the loan any day they want to step in with it.

Mr. ANDRESEN. And is there not the further fact that they get away from a whole lot of red tape?

Mr. Houston. That is right.

Mr. ANDRESEN. You can close the transaction in a few minutes, where it takes the land bank months ?

Mr. HOUSTON. That is right. I remember this, gentlemen. I remember that the Commodity Credit Corporation this year thought that they would take all of the corn loans and that they would not leave anything for the banks until after August 1.

We sat over there and listened to the farmers that were absolutely opposed to any such thing. Why? Because they can come to our committee in Cedar Rapids; they can come in and fill out their papers and go over to the courthouse on the island and record those papers, and any one member of that committee can handle that. For instance, in our institution, while we close at 2 o'clock, we will wait until as long as after 4 or 5 o'clock for any farmer to get his papers recorded, and he can get his check that very day. And, they knew that they would have to wait at least 3 weeks to get the money from the other system. They want to use the money and they have a place for it and want it immeditely. Mr. ANDRESEN. Did


loan 50 cents on corn? Mr. HOUSTON. We did.

Mr. ANDRESEN. Is that the loan agreement that you got from the Government?

Mr. Houston. It is; and at one-half of 1 percent.

Mr. ZIMMERMAN. I would like to ask a few questions. I come from an agricultural district down in southeastern Missouri; live in the country down there and I happen to be identified with some country banks, and I am very much interested in the rate of interest you say that you are charging the farmers in your country.

Mr. Houston. Four, four and a half, and up to five percent on the dairy loans.

Mr. ZIMMERMAN. You spoke of 4 percent on real estate.
Mr. HOUSTON. That is right.
Mr. ZIMMERMAN. What is the term of those loans?

Mr. Houston. Five to ten years, with an amortization of a reasonable amount, a small amount, which we feel is well within the power of the farmer to pay, and with the privilege of paying any amount he wants to on any day in the year that the bank is open.

Mr. ZIMMERMAN. I am going to say to you that over in our State the legal rate is 8 percent, and I do not know of any banks down in the rural sections that are doing that much for our farmers.

Mr. HOUSTON. Well, of course, I am not acquainted in Missouri. I stick to my own State, gentlemen, as I have always lived there, and I do not know business conditions very well elsewhere, although I was on the regional agricultural cooperative as a director from Iowa in 1933 until it was liquidated in 1938. And, the Government had very little losses through those regional loans in the State of Iowa. We had three and one-half million dollars loaned. When we liquidated two loans on January 1, 1938, two loans were unpaid which had not been charged off as a total loss. They were a thousand dollars, and if we had charged those off on that day the loss to the Federal Government on those loans from the State of Iowa would have been three hundred and fifty-one one-hundredths of 1 percent.

Mr. ZIMMERMAN. I think that the farmers over in eastern Iowa are getting along pretty well.

Mr. Houston. They are getting along very well.
Mr. ANDRESEN. Mr. Chairman.
The CHAIRMAN. Mr. Andresen.

Mr. ANDRESEN. You know, we are glad to have someone come here from that country and talk to us and tell us that prosperity can return and is returning to Iowa, because we heard the Secretary of Agriculture say recently that they were pretty well down and out in his State and elsewhere.

Mr. Houston. I know the Secretary of Agriculture, and I will put another thing on the record. Of course, you gentlemen understand that Iowa is practically all agriculture. If you will look at the record you will find that the income taxes collected from the State of Iowa were 39.25 percent higher than they were in 1938, and that there were close to 7,500 more returns filed, although some did not have to pay in 1938.

Mr. ANDRESEN. Are conditions generally good in the agricultural sections in Iowa?

Mr. Houston. They are complaining about one thing at the present time, and that is the $4.70 at the interior packers for hogs. Corn is selling at 48, 49, and 50 cents, not sealed corn.

Free corn.

Oats are about 35 to 40 cents, which is very high for oats. Cattle are selling at good prices. The only thing that is low in the State of Iowa is

. hogs. I sold 225-pound butchers in 1933 at 2.95 cents. So, I do not think they are so low at $4.80; but they are a little too low, but business is good in Iowa.

Mr. ANDRESEN. Do you feel that there is a need for continuing to take money out of the Treasury to pay out in benefits, and part payments to the farmers of Iowa?

Mr. Houston. Well, gentlemen, there is more than the matter of taking money from the Federal Government to pay out subsidies to farmers in Iowa.

When my grandfather moved on the farm that I spoke about, he raised 40 bushels of wheat to the acre. When he quit raising wheat he was getting 7 bushels of wheat to the acre. And, we have got other diversified crops.

Unfortunately some of our country which was formerly a great wheat-raising country and is ceasing to be a wheat country, and if we are going to continue to eat white bread, in my opinion, some of the Iowa lands and lands like it have got to be put back in condition to raise wheat, or we are going to to eat some other kind of bread, and about the only way you can get them to leave a corn crop off or cut it down is to offer them something to raise something else to put the ground back in shape, because I have seen Iowa corn land that would raise 60 bushels or 70 bushels in a very few years reduced to a state where it would not raise 25 bushels an acre. Fortunately our lands through various ways can be put back over a period of years so that it will produce those crops again.

Mr. ANDRESEN. One more question. As I look at the figures of Iowa—and I think it is important, because we are here talking about credit to farmers—but, as I look at the figures from Iowa under the reduced corn acreage that we had last year, which was, I think, 2,000,000 acres, under the reduced acreage, you produced one of the largest crops you have had in the history of the State.

Mr. Houston. Our good Secretary found a hybrid corn which we raised in Iowa.

Mr. ANDRESEN. I understand that he is the "inventor" of it.
Mr. HOUSTON. That is right.
Mr. Hook. If that is all, we desire to thank you.

Mr. WIGGINS. Mr. Chairman and gentlemen, I would like to make a very short statement. I will keep you only for a very short statement.

Mr. Hook. We will be glad to hear you.


Mr. Wiggins. My name is A. L. M. Wiggins and I am chairman of the Committee on Federal Legislation of the American Bankers Association. I am president of the Bank of Hartville, Hartville, S. C., a small country State bank. I had hoped to have the opportunity on behalf of the American Bankers' Association to discuss some of the provisions of this Jones bill and to undertake to develop our viewpoint of some of the philosophies underlying this legislation, but in the absence of that opportunity and on account of the shortness of the time, and in the hope that this bill may receive the future consideration of this committee, at a later date, at which time you men will give me that opportunity on behalf of the bankers of the country, to present that viewpoint, I would like, for the purpose of the record, and in order to make clear our position which I admit very frankly is in opposition to much of the bill and many of the views expressed here by the members of the committee, I would like to read this statement.

The American Bankers' Association has entered its opposition to the Jones bill knowing that its position may be construed as opposition by banks to the relief of the farmers and an expression on the part of the bankers of a desire to maintain high interest rates for the benefit of private capital. We know that is what the implication will be, and the criticism that some may raise to the position that we announce. Such criticism has no basis in fact. However, in the public interest, we cannot remain silent in the face of an attack on the integrity of credit and the introduction of unsound policies into the operaton of the agricultural-credit system of the country. The most serious threat to the credit structure of the nation that has yet been offered for the consideration of Congress is contained in three proposals in this bill. They are:

First, the substitution of the guaranty of the Government in place of the collateral underlying the bonds of the Federal land-bank system.

Second, the destruction of the integrity of the obligations of the borrowers on farm-mortgage loans through the abolition of personal liability.

Third, the provision that establishes as a statutory right the repudiation of obligations through an open invitation for scaling down debts.

The bankers, as custodians of a large part of the liquid wealth owned by the people of this country, would be unfaithful to their trust if they refused to speak out in the face of a threat that would

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