ment. It seems to me that in any debt conciliation attempt at the present time, that is a good deal the position, because all the borrower can do is really to blub; he can tell his creditors that if they do not scale down his debts he will quit and leave his place to them. But that machinery has been established here whereby the farmer can get cash and then he ceases to be a beggar. He becomes a bargainer with the strongest force that we have at his command. The creditors need money. Most of them do need money, and he will be in a pretty good position to get a reduction in the interest rate on his debt.

I am not familiar with very many mortgage holders, but I do know some farmers' widows who depend on those for their income. Their income has been shut off, and I know very well that a number of those persons and many others would be very glad to scale down the principal of a frozen asset in order to get cash or bonds, the income of which is assured, and without any further machinery I believe that this provides, insofar as it can be provided, the means whereby individual debtors can obtain a scaling down of their debts, insofar as the position of the individual case permits, and in that case it is not only the position of the borrower but the position of the creditor, because creditors need money, and the more seriously they need money the better will be the chance of the borrower to get a scaling down of his obligations.

Mr. DoxEY (presiding). Are there any further amendments you desire to discuss?

Dr. EVANS. No, sir.

Mr. DoXEY. Are there any other questions?

Mr. MCCANDLESS. I suggested a while ago that the Territories be included in the provisions of this bill so that we, as well as the States, may participate in its benefits.

Mr. DOXEY. I think it is agreed that there is no objection to that. Mr. PIERCE. Under this section you can loan on those second mortgages up to 75 percent of appraised value. Of course, that is in the interest of the mortgage companies and the insurance companies. It seems to me that they ought to take the second mortgage and the Government ought to have the first mortgage. The way it is arranged now, the mortgage company has the first lien and the Government takes the second lien clear up to 75 percent of appraisement. It seems to me that is a very risky way of putting out Government

money.

Dr. MYERS. I do not have any answer to that other than to say that I think you are slightly misinformed in regard to the insurance companies, that the insurance companies hold first mortgages.

Mr. PIERCE. They have foreclosed on thousands of these farms in the West.

Dr. MYERS. Their mortgages will be refinanced even though under title 1 they be first mortgages.

Now, title 3 I have not defended on any other basis than as a business risk. Whether it is safe or not depends largely on the trend of prices from now on. If we are at the bottom and conditions improve, those loans are reasonably safe, given intelligent and fairly conservative administration.

The point I make is that they will assist in the liquidation or scaling down of the junior debts, and that would not include the insurance companies. It would include the local banks, the local dealers, and all creditors of farmers who hold either chattel mortgages or unsecured debts, because it would be the means whereby a little better cash condition could be used to obtain a drastic scaling down in those obligations. It would give the farmer 10 years in which to clean them up and it would give the creditor a little cash instead of doubtful frozen assets.

Mr. BOILEAU. I do not see why that provision does not apply to refinancing.

Dr. MYERS. It does.

Mr. BOILEAU. It seems to me that any loan that could be made under the first title could also be made under this title except with a limitation of $5,000.

Dr. MYERS. That is correct, but the reason for putting in first or second mortgage is that certain territories where the Federal land banks did not operate, there might be a need for a first mortgage.

Mr. BOILEAU. It seems to me that there is very apt to be some partiality shown under the provisions of this title.

Dr. MYERS. You must remember that these two are going to be administered by the same agency.

Mr. BOILEAU. I was wondering about that title 3. Under it you can apply for the same kinds of loans as under title 1, and vice

versa.

Dr. MYERS. That might be so. But the use of it would be primarily for small second-mortgage loans.

Mr. HOPE. I assume from what you said here yesterday that after going into this matter from all angles you are convinced the Government cannot sell a bond at par which carries less than 4 percent interest. Is that your conclusion?

Dr. MYERS. That is the best information we can get, and that is why the limit was put at 4 percent, but with the condition that if at any time these bonds can be sold at about par with less than 4 percent, the saving would be given to the borrowers immediately. Mr. HOPE. I think the members of the committee probably feel the same way about this, at least those whom I have talked to, but this bill is going to be a disappointment to the farmers of the country in the fact that it does not carry a lower rate of interest than 412 percent. The letters that we have been getting from our constituents talk about a rate of 1 percent and 112 percent, 2 percent, or 3 percent. While we realize that this is a great help, as far as it goes, yet I think the general feeling over the country is going to be one of disappointment, and I wondered if you have given any consideration to a proposal of temporarily, say for a year or two, charging a lower rate of interest on the loans that are made under this act and preserving the general rate of one half of 1 percent above what your bond is selling for, but as a temporary matter lowering the rate to say 32 percent or 3 percent. Of course, that would involve a government subsidy to these borrowers, and we recognize that it is a matter of policy to a certain extent in the bill already, because we are appropriating $15,000,000 to pay the difference between the

rate of Federal land bank bonds now and that which they will carry under this act. The question I should like to have you answer is whether any consideration has been given to the further extension of that policy along the line I have suggested.

Dr. MYERS. Yes. The question, of course, is one that involves congressional policy, the fiscal policy of the United States Government and the ability of the Government to keep taxes down and reduce taxes and at the same time provide a substantial subsidy. There is also the following understanding, that in his letter of transmittal to the Congress, the President intimated, or even said directly, that the same treatment be given the home owner. There are about 8 or 9 billions outstanding of farm mortgages and something in excess of 20 billions of home mortgages which are entitled to the same sort of treatment.

You have a problem of national fiscal policy which it seems to me you have got to face and there is a conflict between the desire to reduce interest rates to meet the needs of the situation and the inability to borrow money even with a Government guaranty at a rate of interest anything like approximating the rate that you have in mind.

Mr. GLOVER. Suppose I am a borrower and I want to borrow $1,000. I have to take stock in one of these associations.

Dr. MYERS. Yes, sir.

Mr. GLOVER. I pay $5 for each $100 and $50 for each $1,000 that is put up. That is held as collaterial by the local association. Dr. MYERS. Yes, sir.

Mr. GLOVER. Suppose I carry that for 10 years. Do I get any interest on that deposit that I put up, or what becomes of that?

Dr. MYERS. I am a member of a local association and I can tell you what has happened. The local association, in turn, holds stock. in the land bank of the district. When conditions were normal and the land bank made earnings, it paid a dividend to the local association which, in turn, paid dividends to the members. During the past 3 years the decline in prices continued, which resulted in foreclosures and in losses, so that the land banks have not been in a position to pay dividends. So that under normal conditions, when earnings are made, the land banks pay dividends to the local associations, which, in turn, distribute them to their farmer members. During a period of depression the members get no dividends. They are like the holders of any other securities.

The CHAIRMAN. If there is nothing further, Dr. Myers, we desire to thank you very much. You have made a very enlightening statement, and the committee appreciates it.

The committee will now go into executive session and take up the various amendments that have been suggested.

(Whereupon the committee went into executive session.)

STATEMENT BY HENRY WOODHOUSE, OF NEW YORK, EDITOR OF SCIENTIFIC AGE, SCIENTIFIC ECONOMIST, CHAIRMAN OF THE NATIONAL RECOVERY COUNCIL, NEW YORK, AND WILLARD HOTEL, WASHINGTON, D.C.

Mr. Woodhouse is the owner of thousands of acres of farm lands in different parts of the United States and has studied the subject scientifically as an economist and as a farmer and has studied the proposed act and has prepared the following data which answers questions that have been asked by members:

1. There are 27,000,000 persons in the United States engaged in agriculture. Their income was less than $200 per capita in 1932.

2. The capital investments in agriculture aggregate $58,000,000,000. The 1932 income was less than 10 percent on the invested capital.

3. The act provides that the funds shall be made available by the Reconstruction Finance Corporation. That means that the United States Treasury will borrow the money as has been done in all financing of the Reconstruction Finance Corporation.

4. The borrowing power of the Federal Government is unusually high this year, on account of there being from 45 to 50 billion dollars of idle deposits in the 20,000 banks of the United States and the 30,000,000 depositors are eager to convert their deposits into Government guarantees of some kind. Government securities are equivalent to guarantees.

5. The Treasury has been able to borrow billions at from one half of 1 percent to 2 percent interest. An offering of Treasury certificates at three fourths of 1 percent interest brought oversubscriptions in excess of $3,000,000,000. The Treasury can probably borrow as much as $5,000,000,000 at 1 percent interest today.

6. There are outstanding about $12,000,000,000 of farm obligations.

7. The farmers will need in 1933 about $520,000,000 for interest on loans and mortgages.

8. The farmers will also need about $629,000,000 for taxes on their farms. 9. The ratio of the debt to the value of mortgaged farms is said to be under 40 percent.

10. The $12,000,000,000 of farm mortgages are held, in part, as follows: Farm bank lands_

Joint-stock land banks__

Life insurance companies_

Federal Reserve banks__.

11. The owner-operated farms owe.

The tenant-operated farms owe.
Manager-operated farms___
Unknown___.

Total___

$1, 121, 000, 000

415, 000, 000 1, 433, 000, 000 368, 000, 000

5, 000, 000, 000 4, 000, 000, 000

1, 000, 000, 000

2, 000, 000, 000

12, 000, 000, 000

12. The farm products of the United States brought only about $5,500,000,000 in 1932.

13. That is a reduction of about $2,000,000,000 from the 1931 income, which was close to $7,000,000,000.

14. In 1930, the farm products brought close to $10,000,000.

15. That was $2,000,000,000 less than was received in 1929, but was almost twice as much as was received in 1932.

16. The most pressing problem of the farmers is to obtain a sufficient income to

(a) Pay their taxes and interest on obligations. That applies to all.

(b) To obtain enough to live on. That also applies to all.

(c) Those who are pressed by overdue taxes and obligations must find means to pay them.

(d) Those who have lost their farms through foreclosure need aid to live at all. The Nation will gain if they can be restored to their farms.