Senator WHEELER. What is the higher priced employee you have? Mr. STONE. The highest priced employee we have is the general counsel. Senator WHEELER. How much does he get? Mr. STONE. $20,000 a year. Senator WHEELER. What is the next highest? Senator WHEELER. And what is the next highest? Mr. STONE. The next is the head of our loan division, who receives $10,000. Senator WHEELER. How many have you receiving $10,000 a year? Mr. STONE. Only one. Senator WHEELER. How many have you receiving at the rate of $5,000 or $7,500 a year? Mr. STONE. I will have to furnish you a list. I can not recall it offhand. The CHAIRMAN. Was the salary of your general counsel fixed at $20,000 a year originally? Mr. STONE. How was that? The CHAIRMAN. What was the salary of your general counsel fixed at originally? Was it as high as $20,000 a year? Mr. STONE. No; it was not as high as $20,000. It was originally, I think, $10,000. The CHAIRMAN. It was originally fixed at $10,000, and now it has reached $20,000 a year? Mr. STONE. Yes. The CHAIRMAN. And that is a maximum amount paid to anyone as approved by the Federal Farm Board? Mr. STONE. Yes. The CHAIRMAN. Mr. Milnor is in charge of the stabilization activities, is he not? Mr. STONE. He is in charge of the Stabilization Corporation. The CHAIRMAN. Inasmuch as the Farm Board supplies the funds and is responsible for the management of that corporation as you have described, you have fixed the salaries of those associated with Mr. Milnor, have you not? Mr. STONE. We have been consulted about salaries. The CHAIRMAN. What salary does Mr. Milnor receive? Mr. STONE. Mr. Milnor receives no salary now from the Stabilization Corporation. His salary is all paid by the Farmers' National Grain Corporation. He gets $50,000 a year. The CHAIRMAN. Let me see if I understand the proposition: His salary is not fixed by the Grain Stabilization Corporation? Mr. STONE. No. The CHAIRMAN. But is fixed by the Farmers' National Grain Corporation? Mr. STONE. Yes, sir. The CHAIRMAN. Isn't that an adjunct of the board likewise, the same as your stabilization corporation? Mr. STONE. NO; I would not say that. It is a cooperative organization. The CHAIRMAN. In order to save asking so many questions will you detail briefly to the committee how that institution was created, and its purpose, and who is responsible for its management, and for the funds that it controls. Mr. STONE. The Farmers' National Grain Corporation was organized in the fall of 1929. The board called together representatives of all the grain cooperatives in the country, into a meeting in Chicago, for the purpose of suggesting the organization of a national sales agency to be owned by the cooperative units handling grain in the country. The result of that suggestion was the formation of the Farmers' National Grain Corporation. They now have 27 units, 27 local or regional associations handling grain, which are stockholder members of the Farmers' National Grain Corporation. These regional or local cooperative units are owned by the farmers, and these regional cooperative units are the members or stockholders of the Farmers' National Grain Corporation, and they are the ones who elect the directors of the Farmers' National Grain Corporation, and those directors formulate their policies and make their own organization. Senator WHEELER. Do you mean to say that the Federal Farm Board does not dominate that organization? Mr. STONE. No; but the board is interested in their policies, and their organization, and in the matter of clean management, and having efficient men to do the work. The CHAIRMAN. Mr. Chairman, who supplies the funds for the operation of the Farmers' National Grain Corporation? Mr. STONE. Largely it was the Farm Board in the beginning. Since that time they have provided funds by means of credit with the intermediate credit banks, and the commercial banks of the country. In addition we have furnished them sums of money for commodity loans and merchandising loans. The CHAIRMAN. Have you the figures for the funds that you have furnished them for all this? Mr. STONE. Approximately $38,000,000. The CHAIRMAN. How much money have they been able to obtain from cooperative organizations? Mr. STONE. Do you mean from intermediate credit banks and commercial banks? The CHAIRMAN. Have they borrowed exclusively from the Federal Farm Board and the banks? Mr. STONE. Yes. The CHAIRMAN. How much have they secured in addition to that? Mr. STONE. Mr. Milnor can give you those figures. The CHAIRMAN. Does that corporation go out and into the market and secure grain in storage? Mr. STONE. It operates along this line: The various member units of Farmers' National, who operate directly with their farmer members, offer those members one or more of three options: A grain grower can deliver his grain to one of these units and take that day's market for it. If the unit buys the grain at that day's market, it pays the grain grower for it and immediately hedges the sale, merchandises the grain, and then buys in the hedge. This is done in order to maintain an even position and not gamble in the market. Option No. 2 is: The grower has a right to deliver grain to the unit and reserve the right to say when he wants it sold, and if he desires he can borrow a percentage of the market price of the grain from the unit. Option No. 3 is: He may deliver grain to the unit, put it in the seasonal pool, receive a reasonable advance on it, and be paid the average price that grade and quality of grain brings, less the expense of operation. The Farmers' National operates as a sales agency for all member units and also for its own account. The CHAIRMAN. Now, that brings me to this question: The maximum amount of money obtained by these Government agencies to purchase wheat amounting to 329,000,000 bushels, was any of it acquired by the Farmers' National Grain Corporation? Mr. STONE. Not in connection with the Stabilization Corporation. That money was put up by the Farm Board or borrowed from intermediate credit banks or commercial banks. The CHAIRMAN. Does the Farmers' National Grain Corporation and the Grain Stabilization Corporation compete in the market for wheat? Mr. STONE. To some extent they may have. But grain bought by the Stabilization Corporation since November was purchased in the open market at prevailing prices. The CHAIRMAN. If any losses follow as a result of the operations by the Farmers' National Grain Corporation, do those losses fall upon the Stabilization Corporation or the Federal Farm Board that controls the Government funds, or does it fall upon the cooperatives? Mr. STONE. It falls on their own organization alone. Senator WHEELER. If they have put any money up originally? Mr. STONE. They have an authorized capital stock of $10,000,000. Senator WHEELER. They have an authorized capital stock of that amount? Mr. STONE. Yes. Senator WHEELER. But what did they actually put up? Mr. STONE. They paid, I think, 10 per cent in cash on the subscribed stock, the stockholders did, and had five years in which to pay the balance, in five equal instalments. Senator WHEELER. Have they ever paid that balance? Mr. STONE. They have paid all of their commitments up to the present time, and the Farmers' National Grain Corporation has made considerable money in its operations. The CHAIRMAN. I do not know whether this is a duplication of the question propounded by Senator Wheeler or not, but you said you loaned the Farmers' National Grain Corporation approximately $38,000,000? Mr. STONE. The total to June 30, 1931, was $47,000,000. They paid back $34,000,000 to that date. The CHAIRMAN. What security does the Federal Farm Board have for this money? Mr. STONE. It has as security the actual facilities, the mortgages on the actual facilities on which loans have been made, and the commodities upon which the money was loaned. The CHAIRMAN. As chairman of the board, is it your opinion you will not lose anything by reason of what has been advanced? Mr. STONE. I think not. The CHAIRMAN. Did you say that the Farmers' National Grain Corporation had made money in its operations? Mr. STONE. Yes. The CHAIRMAN. How was that made? By buying at one price and selling at an advance in price? Mr. STONE. The objective of the Farmers' National Grain Corporation is to bid a price on grain bought from its members based on the terminal market that is nearest to it, less a sufficient amount to take care of the handling charge of the grain, with a reasonable commission on the transaction. In other words, the Farmers' National Grain Corporation largely operates the same as does a grain merchant on any of the markets, only its objective is entirely different from the objective of the grain merchant. The objective of the grain merchant is to buy grain as cheap as he can and sell it as high as he can to make as much money as he can. Senator WHEELER. Isn't that the same plan that we have here? Mr. STONE. No. The objective of the Farmers' National Grain Corporation is to bid a price for the members' grain as high as they can to enable them to get their money back and make a reasonable commission in the transaction. Whatever it makes goes to its stockholders. That in my opinion has had a very beneficial influence on the price of grain, even though the price level has been low. The CHAIRMAN. If the profits realized are distributed back to the individuals who are members of the cooperatives, then they get the benefit? Mr. STONE. In a way, yes. It has not been actually paid back to the members as yet, because any profits which have accrued in the operations of the organization is held until the capital stock becomes paid up in full. Senator NORRIS. Can you give the committee the amount of grain that the Farmers' National Grain Corporation handled under each of the three options that a purchaser has a right to take advantage of? Mr. STONE. I can not give it to you offhand. But I think that information could be furnished to you. Senator NORRIS. Could you give me relatively the amount that has been handled under option 3? Mr. STONE. In the seasonal pool? Senator NORRIS. Yes. Mr. STONE. I think most wheat handled, through the seasonal pool, has been through three or four cooperatives. Senator NORRIS. You stated that the Farmers' National Grain Corporation had made considerable money. Mr. STONE. Yes. Senator NORRIS. They can not make any money under any wheat given to them under option 3, can they, because that is the cooperative part of it, and the grower of the wheat who consigns his wheat under that option, is entitled, is he not, to all the profits in it? Mr. STONE. He is, except for certain deductions for reserve funds, and so on, in his local cooperative. Senator NORRIS. That still would not leave what you might call a profit to the Farmers' National Grain Corporation, would it? Mr. STONE. NO; I think there may be possibly some little profit in the matter of the handling charge of the wheat, however. Senator NORRIS. Well, if they make a profit on wheat consigned in that way, they are going beyond the object of the organization, are they not? Mr. STONE. That depends entirely upon the rules and regulations and the by-laws and the charter of the organization, whether or not it gives them the right to set up this reserve fund; and if it does, it sets forth specifically what that is for. Senator NORRIS. If a producer consigns wheat under option No. 1, then he makes an outright sale, does he not? Mr. STONE. Yes. Senator NORRIS. And he has lost title to that wheat, and any profit would be a legitimate profit to the Farmers' National Grain Corporation on that; and if there were a loss, that would be a loss that they would have to suffer. Mr. STONE. Yes. Senator NORRIS. Would that loss, or any part of it, have to be compensated for by the producer who consigned his wheat under option 3, which is a purely cooperative arrangement? Mr. STONE. That is rather a technical question of operation, and I should like for Mr. Milnor to answer that question for you. Senator NORRIS. Very well. You may let it go until he come to the witness stand. Mr. STONE. All right. The CHAIRMAN. I think we will go forward with you and let that be answered when Mr. Milnor takes the stand. Mr. STONE. All right. The CHAIRMAN. Is this organization functioning now throughout the country? Mr. STONE. Do you mean the Farmers' National Grain Corporation? The CHAIRMAN. Yes. Mr. STONE. It is. The CHAIRMAN. Do you know what quantity of grain it has in storage now and owns? |