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supporting, and I think they have paid about enough interest-I will give you an example from my home State. If you go back from the day of statehood to the present time I will assure you they have paid enough interest on their farms to buy at present values all the agricultural land in the State over about five or six times, and it is selfevident why North Dakota is, at least, in the situation it is in, partlynot entirely because of the high rate of interest but one of the principal reasons is the high rate of interest.

Mr. ANDRESEN. And another fact is that you haven't had any rain out there with which to get crops. As a matter of fact I used to live in North Dakota and I have seen time and time and again when farmers in North Dakota have paid for their entire land with one crop and done it year after year.

Mr. LEMKE. And that was the time when they got the land for about $250 a quarter.

Mr. ANDRESEN. That was when the Lord was in North Dakota.
Mr. LEMKE. And we hope the Lord returns.
The CHAIRMAN. Any further questions?

Mr. PACE. Dr. Black, the first thing I would like to ask is to have some one send the committee by tomorrow an explanation as to subsection C on page 12. It says:

The provisions of this section shall apply to any loans to farmers pursuant to fifteen or twenty acts.

I am sorry but my time does not permit me to study those various acts. Would

Would you have somebody explain that for us? Mr. BLACK. Those are all the various emergency crop, feed and seed loan acts that have been passed by Congress.

Mr. Pace. They apply to emergency seed and feed loan acts?
Mr. BLACK. Yes.

Mr. PACE. Well, with that explanation we don't need to dig all those acts out.

Mr. BLACK. This series of acts cited here include all of those that have been passed, I believe, since the first one.

Mr. Pace. Now, I want to get one or two things straight in my mind. Under this bill it looks like you have a debt adjustment committee under one section of the bill and then in the next section you have refinance machinery which is separated entirely.

Mr. BLACK. I do not read the act that way.
Mr. Pace. In other words it seems to me section 8-
Mr. Black. The two activities could be carried on by the same

local group.

Mr. Pace. Well, as I read it—I think you probably use the same committee. I presume you do.

Mr. Black. I presume you are referring to the fact that there is a debt-adjustment proceedings for these crop, feed and seed loans and then also for the refinancing.

Mr. PACE. Am I to understand that the farm-debt adjustment committee authorized under section 8 is to adjust only feed and seed loans? I thought that was to adjust all indebtedness.

Mr. BLACK. Yes, that section 8 refers specifically to crop, feed, and seed loans.

Mr. PACE. As one of the items to adjust?

Mr. Black. Precisely. The adjustments on mortgages would be conducted under a later provision of the bill and might be conducted by the same farm debt adjustment committee.

There is authorization in the bill to use either a separate committee or to use the National Farm Loan Association.

Mr. PACE. Well, under section 9-B they could adjust Federal landbank loans, couldn't they?

Mr. BLACK. No, under section 8-B.
Mr. PACE. 9-B?

Mr. BLACK. 9-B would apply only to debts incurred under the acts listed in section C, which are the emergency crop, feed and seed loans, and any adjustment of mortgage debts would be done under sections 10 and the following sections.

Mr. PACE. Well, the language there is pretty broad:“Whenever the Government is a creditor of any debtor." Don't


think under this bill the Government would become a creditor under the land-bank loans?

Mr. Black. Not under this section. The section refers to any loans made pursuant to the acts set forth in subdivision C of this section.

Mr. Pace. Do I understand you are setting up a farm debt adjustment committee for the sole purpose of adjusting old seed loans?

Mr. BLACK. That is correct; yes.
Mr. Pace. Well, do you think that is justified?

Mr. BLACK. Which do you mean, the setting up of the committee or the adjusting of the debts?

Mr. PACE. The machinery of setting up the committee to adjust only the seed loans and only those seed loans which under the terms of the act must have been in default at least 3 years. A seed loan in my section that has been in default for 3 years doesn't need any adjustment; it just needs to be written off the book's.

Mr. Black. But there has to be an authorization for that. We cannot write any of these loans off the books and some have been in default 20 years.

So far as the machinery goes the practical working out of this would be that a single group would do both jobs.

Mr. PACE. Well, let me ask you this

Mr. Black. Perhaps it was felt necessary to have it written in this way merely for drafting purposes. I don't know about that.

. But I know how it would have to be administered.

Mr. Pace. If the only debts to be adjusted by this committee are the seed loans, don't you think if you are going to confine the activities here to that one loan and only those loans which have been in default at least 3 years, that we could simply add to this bill that the farm debt adjustment committee under the Farm Credit Administration is authorized to handle that handful of loans?

You know in my section the collections of seed loans have been from 97 to 100 percent.

Mr. BLACK. I know that.

Mr. PACE. And Mr. Flannagan stated the other day that his section is 98 to 100 percent.

The CHAIRMAN. Wouldn't it be better to have the crop loan committee do that?

Mr. Pace. I would say the Farm Security Administration.

The CHAIRMAN. But, Mr. Pace, the Farm Security Administration does not handle crop loans. It would be better to have the crop loan committee do it.


Mr. Pace. They don't handle the making of the loans, Mr. Chairman, but they handle the adjustment of all debts that a farmer might

The CHAIRMAN. That is right. Well, one of the other of those committees, it seems to me, could handle it.

Mr. PACE. Is there any comment you would want to make there?

Mr. Black. I think that the adjusting of those debts could be handled by any committee that the Congress saw fit to set up.

The practical working out of it would be, if the act were passed, to have that work done by the same group that took care of the refinancing of the mortgages.

Mr. Pace. Now, I want to see the farmers of the Nation get their obligations at as low a rate of interest as is possible. You and I don't know who the next Secretary of Agriculture is going to be nor who the next Governor of the Farm Credit Administration will be. It seems to me that there is a provision in the bill that we should look to the future on, and that is, the way I read this bill, there is a terrific opening here for political considerations. In this bill you are injecting into the making of farm loans and the adjustment of farm loans a new element—that is, the productive value of the land, which in my judgment can be made to be as highly speculative as anything I can conceive of, when you or I or anyone else undertakes to determine the productive value.

Now, you might say that is easy; that you can take the farm income for 5 years and average it up, and I presume that would be the fair way to do it, but if you read the refinancing provisions of this bill you will find there that a Secretary of Agriculture, not the present one; that a Governor of the Farm Credit Administration, and certainly not the present one, would have a terrific political lever and I agree with the statement made here that if this bill passes instead of having 38.5 percent of the farm loans of this Nation as you now have, that you are going to have about 88.5 percent.

I am wondering if we are legislating just for today and not for tomorrow.

Mr. FULMER. Will the gentleman yield there for an observation? Mr. PACE. Yes, indeed.

Mr. FULMER. In regard to the statement made by you about the productivity of the land: Isn't it true that whether or not a farmer will be able to make good, the serious question is the type of farmer n the land?

Mr. PACE. Not only that, Mr. Fulmer, but

Mr. FULMER. I make that statement for the reason in furnishing farmers years ago of every type and every class of goods, some of the best goods that I had went to farmers living on practically marginal land, but because of the type of farmer and the way he operated he would pay me annually, and some of the others on the very best type of land, but because of the way he conducted his business I would have more or less losses with him than I would with the other.

Mr. PACE. I think that is true. In addition the productive value does not take into consideration something that I have always taken into consideration and that is the home value. I know of many men that operate a farm from year to year without profit other than having a home and a most delightful place to live, and it seems to me that when we enter into new fields, disregarding the value of improvements, disregarding the community in which you live; its proximity to a church and a school; disregarding everything but what a good farmer or a bad farmer might have produced on the farm for whatever period the Government might set up as a fair period in estimating the productive value, is not the proper measure. I am commenting here because it is

my reaction. I



wrong. I am sure nobody on this committee can answer that question.

The CHAIRMAN. May I suggest right there if the gentleman will permit me?

Mr. Pace. Surely:

The CHAIRMAN. As I understand it this debt adjustment is on the consent basis. That is, he must have the agreement of the lender as well as the borrower for this procedure.

Mr. Pace. That is true, Mr. Chairman.
The CHAIRMAN. And that would be at least some protection.
Mr. PACE. That is true and that is what provoked my statement.

Mr. BLACK. May I comment on that, Mr. Chairman? It doesn't seem to me that this adds any hazard to the loaning operation above those that are being carried now.

Possibly you are suggesting that the appraisals should be made on the basis of current sales price. At one time the appraisals in the Farm Loan system were made on that basis and we have seen that the appraisals on the basis of current sales prices are not stable—they fluctuate very widely.

Later the Farm Credit Administration adopted appraisals on the basis of normal values in which they have attempted to project farm product prices for a certain base period into the future. Those are not entirely stable. I don't think that this introduced any further hazard. I think that this would be as easy to determine and as accurate as either of these other bases for appraisal. I think that on the basis of what could be secured on the farm by an average farmer in a normal period of years would give a rather accurate index as to the amount of debt that particular farm could stand.

I don't believe that it adds any increased hazard over those that are now being assumed, or I don't think the fears that you have expressed are any less present in the present appraisal situation.

Mr. Pace. Well, my criticism was that you eliminate all of your present standards of value; you eliminate consideration of normal value; you eliminate consideration of present market value; you eliminate consideration of the value of the improvements and drop back to the sole consideration of a new standard-"productive value.” And I am just wondering—you may be right-I am just wondering if we are ready to use that as the sole standard of value of farm lands in this Nation.

Mr. BLACK. Well, that is something for the committee to consider I had not read the bill from the point of view that you have and I didn't realize that it provided that as being the sole factor which would enter into the selling price.

Mr. PACE. At the top of page 18, that is under the refinancing feature, that is where you have refinanced someone else's mortgage. You have taken the property over and then you provide to sell the property at a price to be determined by the Governor on the basis of its productive value. That is the only basis you use. It is a new basis and all I am concerned about is it the right basis? Is it the safe

basis? That is all I am concerned about. It is something new under the sun.

Mr. FULMER. May I ask the gentleman a question right there? Perhaps in asking those questions you have in mind that under that kind of policy, or procedure certain farmers who really should get favorable consideration may be turned down when, as a matter of fact, on some other basis or on a fair construction of the value of the type of farmer he ought to come in.

Now, wouldn't this solve that problem, if it is possible to amend that bill to take care of that? I want to refer to the manner in which the loans have been made in the past. Apparently they have been very bureaucratic in passing upon applications. In my own State certain farmers could come in and go through and get consideration; others apparently whose cases were just as meritorious as the other fellow were turned down and there was nothing they could do about it.

Now, if we had a provision in there whereby these farmers would have some place to appeal so that somebody could look after their interests and to see to it that they got a square deal.

I want to say that I gathered from the doctor's address the other evening and his statements here that they want to be much more liberal than under the old administration, but after listening to your questions it may be a good idea to put some type of amendment like that in so that that farmer who perhaps would be entitled to a loan would have some redress.

Mr. LEMKE. Will you yield for just a question?
Mr. PACE. Yes.

Mr. LEMKE. I notice that refers only to the resale to the farm tenant and I think, keeping that in mind, that that is just if he ought to be able to buy the land--if he is going to pay for it at what it will produce.

Mr. Pace. That also covers the situation where the bank has taken over some one else's mortgage-refinancing some one else's mortgage. I think certainly one of the finest features of the bill is the refinancing provision. I thought that of the farm tenant bill and I think that of this bill, but it is provided here that the only farmer than can get the benefit of the refinancing provisions is a farmer who is in position to convey to the bank title to the land free of all liens and encumbrances. Well

, I would say that would be about 5 percent of the farmers that need refinancing. A great percentage of farmers have found it necessary to put a second mortgage and even a third mortgage on their property, and it seems that those unfortunates, under the language of this bill, would be denied the privilege of refinancing.

Mr. Black. I don't know how that could be changed. There is no method certainly that could force private creditors to scale their indebtedness unless they were willing to do so. But this would provide that creditors would secure something; that there is an agreed value set on this property that would be disbursed to the creditors.

Mr. Pace. Why couldn't we give the man the privilege of refinancing where on account of the second and third liens you have gone through the process of foreclosure?

Mr. BLACK. Well, this seems, this reference, more to private creditors than it does to the Federal Land Bank or the Federal Mortgage Corporation.

Mr. Pace. Well, as I understand, it applies to both.
Mr. BLACK. Yes,

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