posal submitted adding three titles to the farm marketing act covering what might be termed the debenture plan, the equalization-fee plan, and the allotment plan? And, third, you favor the enactment of the McNary resolution making available some money and credit for use in financing surplus American products abroad?

Mr. GRAY. Yes.

Senator THOMAS of Oklahoma. Now, have the three organizations agreed on any other proposal to your knowledge that might be beneficial to the farmers?

Mr. GRAY. Yes; they have agreed on other propositions.

Senator THOMAS of Oklahoma. Would you care to name them briefly?

Mr. GRAY. I would prefer, Senator Thomas, if you please, inasmuch as I am delegated to speak for them only on the one thing, that they each speak for themselves through their authorized representatives here when they appear before this committee.

Senator THOMAS of Oklahoma. That is all.

Senator BANKHEAD. Let me ask you another question: It appears that for the first time the three organizations have been together. Will you explain what differences they have had heretofore, and what they have come together on?

Mr. GRAY. Yes; I will explain that, Senator Bankhead, in relation to the project we are discussing this morning. I touched upon it a while ago. At the first when the grange began to sponsor_the debenture plan, and at first when the American Farm Bureau Federation began to sponsor the equalization plan, and more recently when the union began to sponsor the allotment plan, each became so enthusiastic about its own plan that each, as I said a while ago, concluded the one plan would be all sufficient. As years have gone by we have come to the conclusion that they are all necessary.

Senator BANKHEAD. Did each oppose the other's plans?
Mr. GRAY. No; that never has happened.

Senator BANKHEAD. None of the organizations ever opposed any of the plans proposed by the other?

Mr. GRAY. You are exactly right. That never has happened.
Senator BANKHEAD. Simply did not emphasize it?

Mr. GRAY. We have advocated our own plan and let the other organization advocate its own plan, and this is the first time with a definite, concrete bill that the three organizations have ever come before any committee advocating a unification of plan.

Senator BANKHEAD. Then there has been no yielding of views by any particular organization?

Mr. GRAY. NO. There has been a consolidation of views, but not yielding of views.

Senator CAPPER. I think it is very encouraging that these three organizations should come here and take that stand for a definite program. It ought to be very helpful.

Senator BULOW. Have they not got the three plans embodied in this so that they are all satisfied?

Senator CAPPER. Yes.

The CHAIRMAN. I might say this, having been a member of this committee as long as anyone present. Way back in 1922, when the first bill was introduced carrying an equalization fee, which in part bore my name, the American Farm Bureau Federation, the Farmers'

Union, and an organization called the-what was that organization that Mr. Peck was a member of?

Mr. GRAY. The Corn Belt Federation.

The CHAIRMAN. They all advocated the equalization fee but the grange. The grange had no aggressive plan; continued rather negative in so far as a plan was concerned, but never opposed equalization until after it was first vetoed by President Coolidge in 1925. I introduced the bill, made some changes hoping to conform to President Coolidge's objection. A professor came before the committee on the bill introduced by Senator McKinley, a professor of economics of the University of Illinois, whose name eludes me now, and brought forward this debenture plan in 1926; in the spring of 1926. The grange later got back of that plan. There was never any opposition to one plan or the other by any of the organizations. The grange favored the debenture and the Farmers' Union at that time and the Farm Bureau Federation favored the equalization fee plan.

Things went along, and I think we have all discussed it with these leaders that it was essential before Congress would take action to come before the Congress with some aggressive plan and support one measure. Out of the equalization plan, through the influence of Mr. Simpson, developed the so-called allotment plan.

Now, these farm gentlemen have come together, each clinging to his own view, and yet seeing virtue in his neighbor's view, and have brought to us to-day the equalization fee, the debenture, and the allotment plan as optional schemes to strengthen the Federal marketing act, and that is how they are appearing here in that particular line, and I think in a brief word that is an outgrowth of these theories and finally an amalgamation of the three ideas into one plan presented by Mr. Gray this morning representing the various organizations.

Mr. GRAY. You have stated it very accurately.

The CHAIRMAN. Well, I have been here and listened to this story a long while.

Senator BANKHEAD. I am glad to have that statement, because as a new member I am trying to know the history and the background of it all.

The CHAIRMAN. That is the reason I made the statement, Senator. Senator BANKHEAD. Thank you.

Mr. GRAY. If there is no further questioning, I am through. The CHAIRMAN. We thank you. Now, Mr. Simpson and Mr. O'Neal and Mr. Brenckman, how have you gentlemen arranged the presentation of your statements?

Mr. O'NEAL. Senator, Mr. Simpson says he wants to go. He would like to make a statement.

The CHAIRMAN. All right, let Mr. Simpson take the stand.

STATEMENT OF JOHN A. SIMPSON, PRESIDENT OF THE NATIONAL FARMERS' UNION, OKLAHOMA CITY, OKLA.

Mr. SIMPSON. My name is John A. Simpson. President of the National Farmers' Union.

Mr. Gray has made the general statement that represents the wishes and desires of all three organizations. So mine will be very brief.

I think I would like to emphasize the one thing which might be determined by the policy in this bill which we all three say must be accomplished, and that is getting cost of production for the part of the crops of farmers used in this country. Now, that is mandatory in this bill, and we all say that nothing less than that is a remedy. We did that by a resolution in getting together last January. That is in our resolution in which we say there is no remedy for farmers in any legislation that does not get for them cost of production for that part of the product used in this country. And we all agreed to that. We said nothing less is a remedy.

In arriving at a definite bill, which we have done this time in this Congress, after making that mandatory on the Farm Board that they must get cost of production for the part that is used in this country, then we give them these three plans for getting cost of production-No. 1, No. 2, and No. 3. And we make it optional with them that they can use any one of those plans or any combination of them. Now, that is really the heart of this thing.

I want to speak for just a minute along the line of another bill, because there is one other bill here that has been discussed, and that is the Frazier bill, S. 1197. I believe that it is absolutely necessary to refinance farmers on some other basis than they are financed now to save the vast majority of them. I do not believe the farmers can pay out even if we would have this bill become a law which we three farm organizations are asking for; I do not believe it would earn a measure of profit to farmers that would enable them to pay the mortgages they have on their places, pay up the interest, the heavy taxes, and ever pay off the mortgage.

The average interest on farm mortgages, the best estimate we can get, is about 7 per cent interest. That is, counting commissions and all. In a number of States it figures as much as 10 per cent, counting the commissions. But the average for the United States that the farmers are paying now in interest rates is 7 per cent. On a thousand-dollar loan that means $70 a year. With the Frazier bill a law and 12 per cent interest, it would be $15 a year on a thousanddollar loan, and that would mean $55 a year difference on a thousand-dollar loan.

Senator BANKHEAD. Have you any reliable statistics on the aggregate mortgage indebtedness of farmers?

Mr. SIMPSON. It is not less than $10,000,000,000.

Senator CAPPER. How rapidly is it increasing, Mr. Simpson?

Mr. SIMPSON. Well, the foreclosures have been moving along so rapidly that it is probably not increasing. And the opportunities to renew loans or to find money for new loans if the farmer should want them, are practically nil, or to such an extent that I presume the mortgage indebtedness is going down on the basis that the farmers are through private treaty turning their farms over, or through foreclosure having to turn them over.

Senator CAPPER. It is a fact, is it not, that there is a great increase in the number of foreclosures?

Mr. SIMPSON. Oh, yes, sir. And tax sales.

Now, let me finish this little arithmetical problem here in connection with the Frazier bill. Now, if a farmer can exist on paying 7 per cent interest on a loan, paying $70 a year, with the Frazier bill in force he only pays $15 a year and he has $55 to reduce the prin

cipal with. That certainly makes it safer for agriculture. That is on the basis that he can exist on 7 per cent interest. That lets him pay off.

But he can not exist on 7 per cent interest. And the results of the last few years prove it. He is losing his farm. He is losing it by foreclosure and by tax sales.

Down in Mississippi a few weeks ago the papers carried the story of 82 sheriffs in one week auctioning off 60,000 pieces of real estate aggregating 7,000,000 acres. One-fourth of the farm lands in Mississippi. And nobody to buy them except the county.

Senator Wheeler just returned from Montana about that time and he told me that the State treasurer up there told him that 80 per cent of the farm lands of Montana had delinquent taxes against them.

I learn from good reliable sources that that was true in North Dakota; 80 per cent were delinquent.

Senator THOMAS of Oklahoma. On that point, Mr. Simpson, what will be the ultimate result if the farmers are unable to pay their loans and they are sold for taxes? Will the counties and the States take over the title of these lands eventually under this present system?

Mr. SIMPSON. They not only will, but they are doing it. About 70,000,000 acres now belong to counties and States that have been taken over by tax sales.

Senator THOMAS of Oklahoma. Does that further mean that the corporations and syndicates and banks and individuals who hold mortgages against those lands will have their mortgages default and bring about general repudiation of farm mortgages?

Mr. SIMPSON. In North Dakota some of the old-line life insurance companies, some of them being the big ones of the United States, are letting farms that they took over three or four years ago sell for taxes just like the little farmer does.

The CHAIRMAN. Mr. Simpson, the plan that you have all agreed on is calculated to elevate the price level?

Mr. SIMPSON. Yes, sir.

The CHAIRMAN. Will that take care of the interest rate and the carrying charges to the farmer?

Mr. SIMPSON. Well, it is one of the things that is absolutely necessary. Even if we were to have no interest at all, unless prices are higher than they are now, we could not maintain these farms and pay the taxes.

The CHAIRMAN. Now, let me ask you this as a practical proposition. The farmer was fairly prosperous-I say fairly prosperousfrom 1900 to 1920, when there was a precipitous price decline in his products. During that time was he particularly disturbed about the rate of interest he was paying? He was paying then the normal rate as fixed by the trade and commerce throughout the country? Mr. SIMPSON. He was paying higher rates then than now, but he was not satisfied, as evidenced by coming here to Congress and demanding the Federal farm land bank law. And that did help, too, to reduce interest rates to some extent on farm mortgages.

The CHAIRMAN. I think, if I recall the figures, that during that period the farm indebtedness was under four billions of dollars. Mr. SIMPSON. Yes, sir; I am sure of that.

The CHAIRMAN. And $6,000,000,000 added since 1920, which makes $10,000,000,000. And that has been due largely not to the rate of interest, possibly, as much as the low price level for his products. Now, the only disturbing thing to me is this. I see its advantages. How would it affect other groups throughout the country? I am thinking of the fellow who has an urban home and works for a salary-and they are very numerous, indeed-and those employees who work for the industries, and they are very numerous.

Mr. SIMPSON. Do you mean how will it affect their loans? The CHAIRMAN. Yes. Unless we do something they will be paying their 6 or 7 per cent and the farmer gets his for 12 per cent. How long can we maintain that unequal situation in our political life? Mr. SIMPSON. I would answer that this way, Senator, that if $10,000,000,000 now loaned to farmers were refinanced by the Government there will be $10,000,000,000 that will be seeking a place to be loaned on other property, and it just means competition to the extent that it will bring the rates of interest down just like the Federal farm land bank when it started in 1916, it caused the private loan companies to have to come down in their rates.

The CHAIRMAN. Well, I think so, too. I pondered that question a few days ago. I think it will affect the whole interest structure of the country.

Mr. SIMPSON. Make it come down.

The CHAIRMAN. All right. Could it come practically lower than the natural average income of the individual from other lines of endeavor? Would I loan money if I had it, for 12 per cent if I could invest it in other securities and make 4 or 5 per cent?

Mr. SIMPSON. No, sir; I would not expect you would.

The CHAIRMAN. Well, what I am trying to get at is this: What particular effect-and I want you to analyze that would this particular thing have upon such a group as that to which I just referred and other groups, as it affects the whole credit and interest structure of the country? It presents a very much larger problem than letting the farmer get out from under the heavy load he is carrying right now. There are many problems of an economic nature in connection with it that we should contemplate.

Mr. SIMPSON. Yes. I may not get your question just as you are meaning it, but I would say this, that there are two views to take of what the effect would be on those who have money to loan. I believe present conditions, present policies, present plans in this country are dangerous to the fellow that has money to loan. I think he is going to lose everything, too. I think that is going to be the final outcome.

Now, from a short-sighted policy I am willing to grant that it is against the creditor, the fellow who has money to loan, for the Government to provide cheap financing for the farmers. That is the short-sighted way to look at it. But I believe from the long standpoint it is going to save the creditor. I believe it is going to save the old-line life insurance companies. I think they are going down. just as sure as this thing that we have on us now continues two months longer.

Senator BANKHEAD. Mr. Simpson, where do you figure on getting $10,000,000,000 now and at 12 per cent interest?