Mr. DICKINSON. I have said earlier in my statement that we are not bankers. While we would like to have a cooperative credit system if it can be worked out, yet we are not bankers and we are not ambitious to become bankers; all we want is a lending service that will serve the farmers of America.

Senator BANKHEAD. That is the paramount issue. I fully agree with you, as far as I am concerned.

Mr. DICKINSON. Mr. Harry A. Carnal, secretary of the Dairy Farmers Union of New York, in endorsing this bill, says in part:

That provision of the debt-adjustment bill which eliminates the purchase of land-bank stock as a prerequisite to obtaining a loan will be especially commended by eastern farmers. This especially onerous provision has long been regarded as a legalized racket, an unfair toll levied upon those who can least afford it. A pun on the words "stock" and "stuck" had already gone the rounds of the New York milkshed in this connection.

The stock-purchase plan is so unpopular, not only because of the added burden it imposes, but because it is an obvious injustice to make one farmer jointly liable for the loan of another. A farmer who is a borrower is not impressed with a neatly engraved stock certificate. His major interest is in getting a loan and getting it paid off most expeditiously, and anything which interferes with this is bound to be vexatious, especially when it appears to be unnecessary and unjust.

I think that if we just put ourselves in the farmer's place over there when he goes in to secure that loan, probably we can appreciate a little more his feelings.

Suppose one of you Senators was to go to the bank to borrow $2,000, and suppose the bank would say, "Yes, Senator, we will be glad to accommodate you, but it will be necessary for you to take a hundred dollars of that loan in stock in our bank."

Well, you would say, "What is the purpose of that?"

The bank would reply, "In the first place, it gives you an interest in the bank here itself; in the second place it is additional collateral, of course."

"Well," you will say,

"will I be able to get dividends on it?" Senator FRAZIER (interposing). You do not want to forget the cooperative feature there. (Laughter.)

Mr. DICKINSON. The bank will say, "Well, we won't promise you dividends. We did pay a few dividends back in the early 20's, but we have not paid any in the past 15 years."

You will say, "Well, will I get my hundred dollars back when I pay my loan off"?

The bank will say, "We can't promise you that. We have had so many losses charged back to that stock that it is very doubtful if you will get your stock back."

If you were to go into a bank with good collateral and wanted to borrow $2,000 and they put that kind of proposition up to you, how would you feel about it? That is how the farmer feels.

Senator FRAZIER. The farmer won't take the loan if he can get it somewhere else?

Mr. DICKINSON. Certainly.

GOVERNMENT GUARANTEE OF BONDS

Now let us consider the Government guaranty of bonds. The argument has been made that Government guaranty of bonds would not mean much to the farmers inasmuch as Federal Land Bank bonds have sold up to as near as one-fourth of 1 percent on

Government bonds. Even on this close margin, if the farmers could have saved this one-fourth of 1 percent, it would have meant $5,000,000 on the approximately $2,000,000,000 of bonds outstanding. But who would deny the fact that the position of these bonds in the market has been made possible through the attitude of Congress during the past several years in bailing out the banks when they have been in trouble? In fact, if Congress had not come to the rescue in 1933 this system would have been in liquidation long ago. There is a realization on the part of the investing public that the Government feels a moral, if not a legal, responsibility in protecting the bonds both as to interest and principal.

But our contention is that until the Government guarantees the bonds the system will be dominated as in the past by the investing public. When looking to the mortgages as their collateral, the investors are naturally interested in the kind of loans to be made and the territory in which they are made. They have had in the past what is known as the bond-buyers committee that reviews the loans of the various banks. Through their influence, the Engineering Department of Farm Credit Administration "blacked out" many localities throughout the country. For example, at one time they refused to make loans in the rice territory in my State on the theory that the water level was sinking. After a fight that lasted 2 years, costing the people much money, for trips to Washington, St. Louis, and many other places, and during which time many farmers lost their homes because they could not secure credit, the ban was lifted. I might cite for you another example. Senator Miller is familiar with the rice situation in our region.

Down in the southeastern corner of our State, Chicot County, next to the Mississippi River, about 300 families went in on land donated by the State. It was in the forest. Of course, those of you who have been in the Mississippi River bottom section know what it means to clear up that land and put it under cultivation. Those people went in in a pioneer spirit and opened those bottoms. In doing so they naturally accumulated some debt, and they found they could not get the proper acreage cotton acreage because they did not have the proper base under the farm program, and they became involved, ranging from $600 to $800 apiece on 80 acres of land that was worth anywhere from $4,000 to $6,000 because it had been improved.

Those mortgages were held by merchants and by one mule buyer over there, whom you know, Senator.

After they had got their land improved, a movement was started to foreclose them. They went to the Federal land bank and found it was blacked out because it was in what was called the Boeuf Basin. Senator MILLER. The Boeuf floodway.

Mr. DICKINSON. Congress was contemplating flood control down there, and so the land was blacked out. They couldn't sell bonds on collateral in places like that.

The point I am trying to get at is that the System has been directly influenced by the investing public.

So they started to foreclose these people and I will say this, Senator Frazier: Had it not been for the Frazier-Lemke moratorium, they would have done it; but when we found we could not borrow from the

Federal land bank we turned to Farm Security and found we were able to get sufficient security to set up 60 out of 300.

Senator MILLER. That situation does not exist only in that particular instance; it exists in several other instances in Arkansas, where we are blacked out on account of our flood troubles and drainage districts.

Mr. DICKINSON. That, however, is improved very materially, because Congress provided funds for refinancing and improving districts, both drainage and flood.

If the Government guaranteed the bonds, investors would look to the Government for security and would not be interested in dictating policies of the Farm Credit Administration. If the System is ever to be made responsive as a farmers' cooperative, we must get from under this influence. It is true that the Government has at least morally guaranteed the System from the beginning. Investors naturally expect it will do it in the future. Therefore, they would probably prefer that it remain as now, that they may collect a little higher rate of interest on the bonds.

Much of the opposition to this bill has come from the banking interests and insurance companies of the Nation. This would seem to be in poor faith when we remember that the System from May 1, 1933, up to the present has bailed out the life-insurance companies, commercial banks, savings banks, and other private lending agencies, to the tune of approximately $2,000,000,000.

Senator MILLER. In that connection, I want to ask you a question about the list of the delinquencies of the Federal land-bank loans and Commissioner's loans. I just want to call the attention of the committee to that situation.

Senator BANKHEAD. Before you go to that, I would like to refer to the last statement Mr. Dickinson made about bailing out other agencies.

Senator MILLER. That is what I want to get at.

Mr. DICKINSON. I mean the money, Senator, that they borrowed from the Commissioner to take up mortgages that went to those people. I will list them a little further.

Senator MILLER. Commissioner's loans have only been made since 1933.

Mr. DICKINSON. Maine, 54.9 percent.

Senator MILLER. The national average of delinquencies on Commissioner's loans was 28.9 percent.

Mr. DICKINSON. At the present time it is 29 percent.

Senator MILLER. On the old Federal land-bank loans it was 20.5 percent.

Senator BANKHEAD. It is now 22 percent, I believe.

Senator MILLER. But there is considerable discrepancy, now, and I would like to know where that money went.

Senator BANKHEAD. What caused that discrepancy between the Commissioner's loans and the land-bank loans?

Mr. DICKINSON. Remember, the Commissioner's loans in most instances are second-mortgage loans a man who is already in distress when he borrows. He owed the Federal land bank 50 percent of the value of his farm, and he borrowed up to 75 percent. Then, another thing I would say is that in the poorer sections the original

loans were made by the Commissioner, and they were low-producing farms.

Senator BANKHEAD. The best loans went into the banks?

Mr. DICKINSON. Yes; and they still do.

Senator BANKHEAD. Are the Commissioner's loans now all first

mortgage loans?

Mr. DICKINSON. No.

Senator BANKHEAD. There are still some second-mortgage loans? Mr. DICKINSON. Yes.

Senator MILLER. What do you mean by second mortgage?

Mr. DICKINSON. A man already had a loan in the Federal land bank, and then he was in distress by losing his home, so after he had provided for a 75-percent loan through the Commissioner, he again went to the Commissioner and secured another 25 percent.

Senator MILLER. They are all made out by the same people?

Mr. DICKINSON. Same agent. Commissioner loans are Government money.

Senator FRAZIER. In case of Commissioner loans, the money comes from the Treasury and not from the sale of bonds.

Senator MILLER. But they are both made through the same agency. Mr. DICKINSON. Let me repeat my statement: This would seem to be in poor faith when we remember that the system from May 1, 1933, up to the present has bailed out the life-insurance companies, commercial banks, savings banks, and other private lending agencies, to the tune of approximately $2,000,000,000.

In paying off these private lending agencies the scale-down of debts was only 10 to 12 percent and, evidently from the delinquencies and troubles we have had since then, we probably did not scale them down enough; but be that as it may, they benefited by it. That is what I am complaining about.

When the Farm Credit Administration was rushing to the rescue and pouring out the hundreds of millions of dollars to take care of a collapsing credit structure, who got that money? We want to answer that question for the record. We all want to know who was being rescued.

Life-insurance companies were rescued to the tune of over $330,000,000. Joint stock land banks were rescued for $150,000,000. Commercial banks, savings banks, and trust companies were rescued to the tune of nearly $400,000,000. In addition to these collossal and unbelievable sums there were nearly $400,000,000 of additional credit issued to take care of commercial bank loans, taxes, and redemption from tax sales and miscellaneous items. For this last item of nearly $400,000,000 bonds were issued on a basis of unsecured. indebtedness.

I should like to file with the committee a statement showing where that money went to.

Senator BANKHEAD. It may be filed with the reporter, to be included in the record.

232712-40- -12

(The statement referred to is as follows:)

Estimated amount of Federal land-bank and Land Bank Commissioner loan proceeds used for refinancing, May 1, 1933, to Dec. 31, 19391

Mr. DICKINSON. The contention has also been made that if the Government guaranteed the bonds, it would probably encourage loose credit and destroy a sound lending agency. It is difficult to understand how the system could be made much more unsound than it has proven to be in the past. It has been pointed out that 60 percent of the farm loan associations have either lost their stock completely or have it so impaired that they can no longer make loans through these associations. Even in the new associations, organized since 1933, 20 percent have had their stock so impaired they are unable to make loans.

Reference to a report of the Farm Credit Administration discloses 1,101 associations have their stock fully impaired 100 percent; 1,089 associations have their stocks impaired to the extent that they cannot close new loans; a total of 2,190 associations out of the total of 3,722. Senator HUGHES. And the farmers cannot get a loan at all?

Mr. DICKINSON. No, sir; not through associations. In some instances they have provided for direct loans or Commissioner's loans or for some other kind of loans.

DESIRABILITY OF 3 PERCENT INTEREST RATE

I shall now take up the subject of interest rates. It has been suggested that the bill should be amended to increase the interest rate to 31⁄2 percent. I have heard that not only from some of those who have testified here, but I have also heard it said elsewhere that probably that agreement may be reached. We are opposed to this as we believe the market will absorb the bonds at a rate to give the farmers money at 3 percent.

While the Government has been subsidizing interest rates from year to year, we feel lower rates should be made permanent and should give farmers the fullest benefits of Government borrowing. With the present outlook for farm prices during the next few years we feel 3 percent is all that farmers can be expected to pay. We urge most strongly that the 3 percent interest rate remain in the bill as it is.