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the Department of Commerce, and they sent me all the information they had; but I have been unable to find where the records would show more than five hundred millions in circulation in foreign countries. I have made the investigation for years, and if there is any information that any one has I would like to get it, because I am very much interested in that particular feature.

Mr. LEMKE. With regard to Federal reserve notes, on October 31, 1931, a year later, we find that the Federal reserve notes have been increased to over one billion one hundred million. Again, that amount of increase was shown to be largely in four or five large cities, and the statement was made that this was necessary in order to prevent the reserves from getting too low, and that they are hoarding; but I am satisfied that if the truth were known, it was done in order to protect the banks, because the big banks have sloughed off on the smaller banks and on the insurance companies fifteen billion of foreign bonds of which two billion had turned out more or less worthless.

Senator THOMAS of Oklahoma. The President in his first message to us at this Congress advised us that $6,200,000,000, approximately, was necessary to take the place of that which had gone out of circulation; and the inference was that people who had money on deposit took their money out of the banks and put it in hiding, and in order for the banks to keep their reserves up they had to get money to replace the money that the folks took out and hid. Therefore the banks either had to borrow from the Federal reserve banks or had to sell their notes or bonds. That was the theory advanced to us.

Mr. LEMKE. I think his theory was in part correct that it was to keep up the reserves. I do not agree with him, and I think he is not well informed on the subject, when he says that it was due to hoarding. I think it was due to the fact that laboring people were beginning to draw on their reserves to keep the babies and wives dressed and give them something to eat.

Senator THOMAS of Oklahoma. Following that theory, if the laboring people had money in the bank and were drawing it out, they would spend it, and whoever got the money would take it and put it in the bank again. So that the bank would be running at the same level.

I can not see any other way out of it than that there is a large amount of money hoarded. I personally know of a large amount. Mr. LEMKE. I think if you will investigate you will find that most of this so-called hoarding is in the banks in a few large cities; and a good deal of it is invested in foreign bonds.

Senator HATFIELD. Hoarded in banks?

Mr. LEMKE. Yes.

Senator HATFIELD. What about the increase in deposits in postal savings?

Mr. LEMKE. All that goes back into the banks.

Senator HATFIELD. That is true; but the individual who has a bank account will draw his money out of the bank and will invest it in postal savings.

Mr. LEMKE. I think that is correct to quite an extent; but that money all goes back into the bank.

Let us take up the situation of the Federal land banks. I wish to file these letters to show that the Federal land bank is not able

to function and protect the farmers because it has not got sufficient money to do it.

This letter is dated May 3, 1930.

(The letter referred to and submitted by the witness is here printed in full as follows:)

Mr. ANDREW SKARVOLD,

Christine, N. Dak.

THE FEDERAL LAND BANK OF ST. PAUL,

May 3, 1930.

DEAR SIR: We have to-day reecived a letter from Lemke & Weaver, of Fargo, N. Dak., referring to the May 1 installment of $180 under your loan. They are writing in your behalf, requesting that we carry this matter over until about September 15.

Now, I believe that you have been previously advised that we will not be in a position to allow delinquencies to accumulate on our loans. This matter has been under consideration by the officers of this bank for the past two years and considered from every angle and recently placed before the board of directors, who decided that we could not afford to allow delinquencies on our loans. We can show where we lose money every time there is an installment that is not paid when it is due. We take the stand that our borrowers know when these installments are due and they should arrange their financial affairs accordingly.

Once in a while there is perhaps a good excuse for a borrower not being able to pay his installment promptly, but those cases are few and far between. The majority of our borrowers have heretofore been in the habit of allowing their installments to run delinquent to suit their own convenience, but from now on this can not be done.

I do hope that you will be able to get hold of a sufficient amount of money to take care of this installment and place your loan in good standing. I do not see how we will be able to grant you the extension requested.

Yours truly,

GEO. S. GORDHAMER, Treasurer.

Mr. LEMKE. I wish also to file two letters dated April 22, 1930, and January 19, 1932.

(The two letters referred to and submitted by the witness are here printed in full as follows:)

Mr. ANDREW SKARVOLD,

Christine, N. Dak.

THE FEDERAL LAND BANK OF ST. PAUL,

St. Paul, Minn., April 22, 1930.

DEAR SIR: This will acknowledge receipt of your letter of recent date regarding the installment coming due May 1 in the sum of $180. I am very sorry indeed that you are unable to pay it promptly when it is due, but we have no way to be of any assistance to you.

The

We have decided that delinquencies from now on will not be tolerated. officers of this bank and the board of directors have given us strict instructions regarding delinquencies and insist that from now on the loans are to be kept in good standing at all times. We feel that if our borrowers would pay a little more attention to the due dates of their installments that they could arrange to meet them with more promptness.

We will not be in a position to carry this open for you for any indefinite length of time, so I am passing this information on to you at this time to give you an opportunity to arrange in some way to meet the installment when it is due or a short time thereafter.

Yours truly,

GEO. S. GORDHAMER, Treasurer.

By J. E. JOHNSON.

Mr. OSCAR KYLLONEN,

Brocket, N. Dak.

THE FEDERAL LAND BANK OF ST. PAUL,
St. Paul, Minn., January 19, 1932.

DEAR SIR: You have not cooperated with us the way you should in reference to the loan under foreclosure, and our fieldman has endeavored to get a settlement with you so that we could cancel the foreclosure proceedings now pending, but it is apparent that he has not met with any degree of success.

We are handing you herewith a 1932 crop mortgage which we have made and ask that you and the others who are interested in this crop, sign and return the mortgage and hail assignments at once.

If you do not feel as though you wish to give a 1932 crop mortgage, we will then go ahead and foreclose, and if you are willing to sign the inclosed agreement which has reference to the stock in your association, we will recommend to the committee that foreclosure proceedings be for delinquent installments and taxes; otherwise the foreclosure will be for the full amount of the mortgage.

We do not propose to carry this matter in abeyance for an indefinite length of time and if within 10 days from the date of this letter we are not in receipt of proper security or the agreement properly executed we shall continue with the foreclosure now pending against your loan. We are getting a little discouraged with the way you are handling this matter and we do not feel as though you are showing the spirit of cooperation that you should.

Yours very truly,

J. E. JOHNSON, Assistant Treasurer.

Mr. LEMKE. I wish also to file a letter dated September 9, 1931, from W. E. Byerly, commissioner land department, State of North Dakota, to John Kyllonen, Brocket, N. Dak., from which I would like to read one paragraph, which is as follows:

May I suggest, therefore, that the order of importance of the various bills to be paid would be, first, the taxes; second, interest on your first mortgage farm loan; and third, other debts in order of their importance, keeping in mind, of course, that your family must have food and clothing throughout the winter above everything else.

(The letter referred to and submitted by the witness is here printed in full as follows:)

JOHN KYLLONEN,

Brocket, N. Dak.

STATE OF NORTH DAKOTA,
LAND DEPARTMENT,
Bismarck, October 9, 1931.

DEAR SIR: This department has charge of approximately $23,000,000 of school funds, $11,500,000 of which are invested in farm loans. You are one of these borrowers. The annual income from these loans, the bonds we hold, and the unsold school land normally amounts to nearly $1,500,000 per year, all of which is distributed to the schools of the State each year, thus reducing the taxes in like amount.

Therefore, any reduction of the income to this department naturally decreases the income to the schools of the State. A great many people will be short of funds with which to meet their current bills this year. If you are one of these, I hope you will give your first attention to the land upon which there is a mortgage, more especially if such land is your home, or your chief source of income. Otherwise, unpaid taxes and interest might cause you to lose your home and make it impossible for you to pay future obligations you wish to take care of.

May I suggest, therefore, that the order of importance of the various bills to be paid would be first, the taxes; second, interest on your first-mortgage farm loan; and third, other debts in order of their importance, keeping in mind, of course, that your family must have food and clothing throughout the winter above everything else.

If you are going to be compelled to ask the State land department for an extension of time of your interest payments, do not under any circumstances give a crop mortgage to any one other than this department on the land mortgaged to the State, unless it be for the purpose of procuring seed with which to plant such land, as it will reduce your chances to just that extent in getting an extension, as all applications must be considered from the standpoint of security and the future possibility of the applicant being able to pay the delinquencies.

No doubt a great many of those who owe interest to the school fund will be able to make their payments when due. We urge upon all such the necessity of so doing in order that the income to the school may not be diminished. Yours truly,

W. E. BYERLY, Commissioner.

Mr. LEMKE. That is the difference between the attitude of the Federal Land Bank and the Land Department of the State of North Dakota.

Senator NYE. Mr. Lemke, there is not any threat of the Bank of North Dakota having to close its doors by reason of a program of that kind either, is there?

Mr. LEMKE. There is not, and I want to say that the Bank of North Dakota has been taking up some of the Federal land bank loans where foreclosure procedure had started. Now, coming to the bill: I will read the title, which will express it pretty well.

Be it enacted by the Senate and House of Representatives of the United States in Congress assembled, That the Government now perform its solemn promise and duty and place American agriculture on a basis of equality with other industries by providing an adequate system of credit, through which farm indebtedness and farm mortgages now existing may be liquidated and refinanced, through real-estate mortgages on the amortization plan, at 11⁄2 per centum interest and 12 per centum principal per annum, and through mortgages on livestock used for breeding or agricultural purposes at 3 per centum interest per annum through the use of the machinery of the Federal farm loan system, the Federal reserve banking system, and the postal savings depository system.

We use the existing machinery as far as possible. Then:

This act shall be known by the title "The farmers' farm relief act."

And I wish to state that the reason for that is that the farmers are willing to assume full responsibility for this act, and if it does not work they can be blamed for it. Otherwise they do not want to take responsibility for acts that are called farmers' relief that they are not interested in and are not responsible for. [Reading:]

Section 3.

This is one of the important sections

SEC. 3. The Federal Farm Loan Board is hereby authorized and directed to liquidate, refinance, and take up farm mortgages and other farm indebtedness, existing at the date this act takes effect, by making real-estate loans, secured by first mortgages on farms, to an amount equal to the fair value of such farms and 50 per centum of the value of insurable buildings and improvements thereon, through the use of the machinery of the Federal farm land banks and national farm loan associations, and to make all necessary rules and regulations for the carrying out of the purposes of this act with expedition. Such loans to be made at a rate of 12 per centum interest and 11⁄2 per centum principal per annum.

Senator HATFIELD. How much money would it take to do that? Do you have any idea?

Mr. LEMKE. I would say that the money is to be gotten through the Federal reserve bank, and if you get from two to three billion dollars that way there will be enough money out in the country

that you will find that the rest of the mortgages will be taken by private individuals.

Senator HATFIELD. Do you think between two and three billion dollars would do it?

Mr. LEMKE. I think so, because, when this other inflation was, we certainly had plenty of money.

But the total mortgaged indebtedness, as I understand, as estimates have been made, and they are only estimates by the various departments; I had one yesterday; this is by the Bureau of Agricultural Economics. They claim there is at present estimated $9,240,000,000 mortgage indebtedness. But I am inclined to believe it reaches about twelve billion.

Senator HATFIELD. Twelve billion?

Mr. LEMKE. Yes.

Senator HATFIELD. So that if you are going to set it up on a monetary basis, it would take about twelve billion?

Mr. LEMKE. Twelve billion.

Now, the next section, section 4:

The Federal Farm Loan Board is further

Now, the limitations here are in the existing indebtedness, first, on the real estate.

Senator NYE. Mr. Lemke, before you leave that, if I might be permitted

Mr. LEMKE. Yes.

Senator NYE. You mean that the present money in circulation would be inflated by that amount?

Mr. LEMKE. That is not necessary, because the Federal reserve banks handle it, and like every other banking business there would be deposits and redeposits.

Senator NYE. That is right.

Mr. LEMKE. And that is on what I base my conclusion.

Senator NYE. But if the twelve billion would be added, would the total then in circulation be out of step with any such totals as have been in circulation in times past?

Mr. LEMKE. Yes; because we have become a Nation of check kiters, and we are using paper and bonds and notes as money; and once in a while we get caught, and the only reason that we can give for having permitted that condition up to the present time is because we do not pay enough attention to the financial affairs; and the international bankers are the largest money loaners and are eager to draw interest about sixty times on every dollar. If there were enough actual money to do the business, they could not draw interest on imaginary dollars that are not in their possession. The substance of the Frazier bill has the approval of some leading economists including Professor Bone, of Northwestern University. We have not enough money to do the money business, and anyone who goes into the banking business in a small scale as operated under the Federal reserve system is a fool.

Senator NYE. What was the highest amount that was in circulation at one time?

Mr. LEMKE. It is very close to that figure; probably about $5,698,000,000, or about $53.01 per capita. That is the highest

amount.

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