pean agriculture is not analagous to ours. In Europe they have an agriculture that has been established for centuries and they have there a limited area that is available for agriculture, and other conditions which we do not have here, where we have ample land to be used, where we have an agriculture that has been established comparatively recently, which has been in existence a comparatively few years, the same system of finance that is used with respect to European agriculture could not be made to apply to this country at all, as I see it.

Senator BROOKHART. Well, now, our exportable surplus that is fixing our price is less than 10 per cent, but they have a good deal bigger percentage for their exportable surplus of their products than that outside of Denmark. So is not our situation more favorable for stability than theirs?

Mr. BESTOR. I would not say so, Senator. I am not equipped to discuss exportable surpluses, so far as that is concerned, because I have not devoted much study to the problems involved.

Senator BROOKHART. I do not think anything has hit the farm values harder than this restricted policy of making the farm loans, and especially in the joint-stock land banks and their foreclosure policy and balancing the books and buying in their depreciated bonds. Now, is that not true? Has that not injured land values. and destroyed the security behind all these farm loans?

Mr. BESTOR. I do not think that that is the case, Senator. I would not agree with you. You sent me the other day a clipping from an Iowa paper containing a long list of foreclosures, about three columns, and in all that list of foreclosures there was not a single one that had been instituted by a Federal land bank or jointstock land bank, but all by local individuals or insurance companies or local banks, every one of them.

Senator BROOKHART. That is true because the insurance companies have followed that policy, but still I have got a long string of farm land bank's foreclosures.

Mr. BESTOR. That may be true. But I would not say that they were responsible for the decline in land values.

Senator BROOKHART. In Iowa a joint-stock land bank can foreclose a $20,000 farm with a $10,000 mortgage on it and sell that farm for $4,000 and get enough money from it to buy in its own depreciated bonds and balance up its books, and that is what they have been doing ever since Eugene Meyer took charge of their system. Now, is not that a policy that is going to destroy land values and destroy the values for the insurance companies and everybody else?

Mr. BESTOR. Would it be better, Senator, for the bank to do that or to go into receivership? Which would be better for the farmer? Senator BROOKHART. Well, I think anything would be better than that. I can not imagine a worse plan than that.

Mr. BESTOR. In a receivership, of course, there is very little that the receiver can do but to liquidate.

Senator BROOKHART. Under a receivership a court would have some liberality. It would not foreclose these and try to balance the books by the buying in of a bond at 40 per cent of its face value.

Mr. BESTOR. Well, there have been some very serious problems, before the joint-stock land banks, which unlike most other private lending agencies have to take into consideration the fact that they

must meet their bond interest. They have to meet their bond interest or go into receivership.

Senator BROOKHART. This bill would settle that interest question. Mr. BESTOR. This bill would take over all the joint land-bank loans.

Senator BROOKHART. Yes; and that would help the farmers; you admit that?

Mr. BESTOR. It unquestionably would if it could be made a permanent proposition on a sound basis.

Senator BROOKHART. Well, now, money is loaned to a Wall Street gambler at about 1 per cent, I think, right now. Why should not a farmer in a legitimate business have some such a right?

Mr. BESTOR. I am firmly of the opinion that rates ought to be governed largely by the hazards involved and other economic factors that have to be taken into consideration.

Senator BROOKHART. You think there is not any hazard in this Wall Street game up there?

Mr. BESTOR. There seems to have been in the past.

Senator BROOKHART. Dug out some forty-five billions of it in the last few days. Well, are you not in favor of us giving the farmers as good a deal as anybody else in this country?

Mr. BESTOR. Absolutely, Senator. I am a farmer myself, or I think I am. I believe he ought to have just as good a deal as anybody else. But you have included in this bill for refinancing, a provision that would put land back of reserve notes. While the reserve bank is not within my province, there is the question of what is going to happen if you so change our financial system so that instead of having gold and other liquid securities back of reserve notes you issue reserve notes on the basis of unsound loans on land. That is what this provides.

Senator BROOKHART. Well, if there is objection in the reserve bank to doing that, let us issue Treasury notes. What do you say to that? Mr. BESTOR. Do you mean issue Treasury notes so that you can loan the money at 12 per cent?

Senator BROOKHART. You can raise the money with Treasury notes directly, so far as that is concerned.

Mr. BESTOR. Have the Government loan the money at a loss? Senator BROOKHART. Well, I do not think it would be a loss, if they got an interest rate that they could afford to pay. I think it would be just like the Danish loans were. They would be safe and sound. But this restricted policy of figuring down 50 per cent of the value of the land and only 20 per cent of the value of the improvements, and nothing on the stock, equipment, and so forth, is a policy so much restricted that it is bound to reduce the security itself. Mr. BESTOR. The fact remains that even with the operation of the farm-loan system on the present basis there is a very large delinquent list. I can see very little benefit, frankly, in loaning additional money to any farmer who is so financially involved that there is no chance for him to work out, even if we do loan it to him at 11⁄2 per

cent.

Senator BROOKHART. Do you think that little $100,000,000 that was appropriated for capital for the land banks will relieve this nine billion loan situation among the farmers?

Mr. BESTOR. No. I do not think that, but I hope it will enable the banks to sell their bonds, which would enable them to take care of the situation.

Senator BROOKHART. Has it improved the bond sales any?
Mr. BESTOR. Yes; very materially.

Senator BROOKHART. Well, I offered a bill-perhaps it is here, or maybe that is in the other committee-for the Treasury to buy $100,000,000 of those bonds. That would help materially, too, would it not?

Mr. BESTOR. If that were necessary. I have personally hoped that it would not be necessary. I have this feeling about this bill, Senator Brookhart, that to try and quote artificial rates to any group, even a group that is as worthy and needs it as badly as the agricultural group, ultimately will not benefit the agricultural group, and would' no only destroy interest rate structures generally, but would react against the very group itself, even if temporarily it would give it relief.

Senator BROOKHART. Did you ever consider the proposition that the rates the farmers are paying are all artificially high? More than they can afford to pay?

Mr. BESTOR. Well, they are more than they can afford to pay at present commodity prices, but I would not say that they are artificially high. I would not say that.

Senator BROOKHART. The only time you think they are artificial is when they go lower than some market?

Mr. BESTOR. I do not think, Senator, that a 5 or 52 per cent rate for a farmer is out of line normally on a long-time mortgage.

Senator BROOKHART. Well, you know that the whole wealth production of this country even in good times is less than 4 per cent, or do you?

Mr. BESTOR. I have heard that statement.

Senator BROOKHART. Agriculture is less by a good deal in good times even than the average of the country. Now, how can it afford to pay 5 or 512 per cent when it can only produce 2 or 3 per cent? Mr. BESTOR. Well, you are not supposing that your farmer is going to be in debt for his entire farm?

Senator BROOKHART. So you lend him 50 per cent, and the high interest rate soon gets his other 50 per cent of value, and then call that a sound system?

Mr. BESTOR. Well, I think there has been no time except times of great expansion when it was very safe for any man to owe more than 50 per cent on his farm. The majority of the farmers of the United States, according to the Department of Agriculture, still do not owe anything on the farm.

Senator BROOKHART. The Danish farmers were able to owe 90 per cent and to pay it.

Senator HATFIELD. What rate of interest did they pay, Senator? Senator BROOKHART. My recollection is about 4 per cent. I do not recollect that accurately at this moment.

Mr. SIMPSON. Three per cent.
Senator HATFIELD. Three per cent?
Mr. SIMPSON. Yes.

117902-32- -3

Mr. BESTOR. I still maintain that you can not compare the European market with the American market when you take into consideration all the factors which concern American and European agriculture. I would like to see the farmer get as low a rate as consistently can be given him. We want to do everything within reason to see that he gets it, but I am convinced that the American farmer is more concerned over commodity prices than he is over interest rates. Senator BROOKHART. Since this European agriculture must compete in the world market of prices with the world agriculture, I think the comparison is very easy.

Senator THOMAS of Oklahoma. Mr. Bestor, may I ask you one or two questions leading up to the main question I want to ask? How many loans have you your system at the present time?

in

Mr. BESTOR. About 500,000, including the joint-stock land bank system.

Senator THOMAS of Oklahoma. What is the total amount of those loans, approximately?

Mr. BESTOR. About $1,700,000,000.

Senator THOMAS of Oklahoma. How many applications have you now pending for loans?

Mr. BESTOR. I could not give you those figures, Senator Thomas, as to how many are pending.

Senator THOMAS of Oklahoma. Could you give me an estimate? Mr. BESTOR. No; I could not do that. Since the first of the year the banks have loaned about $6,000,000 in new money. Since the 1st of January. And I think to about 1,600 borrowers, as I remember. In 1931 they loaned $42,000,000.

Senator THOMAS of Oklahoma. Then you have loaned so far this year $6,000,000 and last year you loaned $42,000,000, is that correct? Mr. BESTOR. $42,000,000 in 1931, and for the first three monthswe do not have the April figures-for the first three months of 1932 they have loaned some $6,000,000.

Senator THOMAS of Oklahoma. Tell the committee what was done with the $125,000,000 which Congress has given you this session.

Mr. BESTOR. $63,243,740 was allotted to the banks in the first allotment. Of that amount $25,000,000 was made available for granting extensions to borrowers, as provided in the act that was passed by the Congress.

Senator THOMAS of Oklahoma. By granting extensions you mean that this money was used to pay interest in default and permitting them to continue without foreclosure temporarily?

Mr. BESTOR. The law says obligations which would include principal, interest, taxes, and so forth.

Senator THOMAS of Oklahoma. Mr. Bestor, you said you were a farmer, and are dealing with a half-million farmers. Now, I desire to ask you a general question, based upon your individual knowledge as a farmer and upon your contact with this half-million farmers. In your opinion what can the Congress do to improve the condition of the farmers?

Mr. BESTOR. That is a big question, Senator.

Senator THOMAS of Oklahoma. I realize that, and I think you are qualified to answer it. If you are not I do not know who can.

Mr. BESTOR. If you can do anything to raise commodity prices, I think you will relieve the farmer all right.

Senator THOMAS of Oklahoma. Do you think that should be done? Mr. BESTOR. Surely.

Senator THOMAS of Oklahoma. Now, what can Congress do to raise commodity prices, if anything?

Mr. BESTOR. Well, I will have to confess that I do not know how it can do it directly.

Senator THOMAS of Oklahoma. Are you willing, though, to stand on the assertion that if Congress can do something to raise commodity prices you think Congress should do it? Is that correct? Mr. BESTOR. Anything that is at all within the realm of reason; yes.

Senator THOMAS of Oklahoma. Viewing the Government as an organization embracing two phases particularly, the Congress that makes rules and regulations and the administration or executive branch that enforces them, what can the Congress do and what can the administration do-I mean the executive branches-if anything, to improve the condition of the farmer at this time?

Mr. BESTOR. Aside from the matter of commodity prices, you say? Senator THOMAS of Oklahoma. Sir?

Mr. BESTOR. You say aside from the matter of commodity prices, what can be done?

Senator THOMAS of Oklahoma. No; if you have any suggestions that will elaborate on that answer, I would be very glad to get your

answer.

Mr. BESTOR. I wish I did have, Senator. I surely do. I am sorry to say that I have no suggestions.

Senator THOMAS of Oklahoma. Well, being a dealer in money in vast amounts, do you not believe that executive agents of the Government can do something to increase commodity prices?

do.

Mr. BESTOR. I think so.

Senator THOMAS of Oklahoma. Tell the committee what they can

Mr. BESTOR. I might make right there, Senator, just a brief statement in regard to what the Farm Loan Board and the banks in the system are trying to do. There has been a feeling with us that the intermediate credit bank system might be even more useful than it has been in the past. In 1931 the credit that was extended by the intermediate credit banks was nearly double that which was put out in 1929. While other institutions were restricting credits to farmers, the intermediate credit banks were increasing credits to farmers. In 1930 and 1931 the intermediate credit banks put out $485,000,000 to agriculture in total loans and discounts. The intermediate credit banks have sold $89,000,000 debentures in the first four months of this year as compared with $67,000,000 last year to finance their operations.

While it is true that the intermediate credit banks have not been able to do everything that we might wish them to do because of certain factors that have interfered very definitely, such as the nonexistence of discounting agencies in the form of credit corporations that were amply capitalized, nevertheless, we do believe that the intermediate credit banks have rendered a service and could render a still greater service, and they are doing everything that they can at the present time to do that.