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ness, existing at the date that this act takes effect, by making loans at the rate of 3 per centum interest per annum, secured by first mortgages on livestock used for breeding or agricultural purposes, to an amount equal to 65 per centum of the fair market value thereof, such loans to run for a period of one year, with right of renewal from year to year for a term of 10 years: Provided, That any depreciation in the value of such livestock is replaced by additional livestock used for breeding or agricultural purposes, and the amount of the loan is reduced 10 per centum each year.
Sec. 5. The funds with which to liquidate, refinance, and take up existing farm mortgages and other farm indebtedness shall be provided by the issuing of farm loan bonds by the Federal farm loan system, through the Federal Farm Loan Board and Federal land banks, as now provided by law, which bonds shall bear interest at the rate of 142 per centum per annum, if secured by mortgages on farms, and 3 per centum per annum if secured by chattel mortgages on livestock used for breeding or agricultural purposes. These bonds, after delivery to the Federal Farm Loan Board, may, by it, be sold at par to any individual or corporation, or to any State, National, or Federal reserve bank, domestic or foreign, to the trustees of the postal savings depository system or to the Treasurer of the United States. And it shall be the duty of the Federal reserve banks to invest their available surplus and net profits, after the dividends are paid to their stockholders, in such farm loan bonds. Such profits to include the franchise tax now paid to the United States.
SEC. 6. The trustees of the postal savings depository system are authorized and directed to invest at least 40 per centum of the postal savings in such farm loan bonds, and all limitations upon the amount that may be deposited in the postal savings depositories are hereby removed. And such farm loan bonds may be exchanged and delivered to depositors for their deposits in postal savings depositories as is now provided by law for investments of savings funds in bonds.
Sec. 7. In case all of said farm loan bonds are not readily purchased, then the Federal Farm Loan Board shall present the remainder to the Federal Reserve Board, and the Federal Reserve Board shall forthwith issue and deliver to the Federal Farm Loan Board Federal reserve notes, as now provided by law, to an amount equal to the par value of such bonds as are presented to it. Such farm loan bonds to be held by the Federal Reserve Board as security in lieu of any other security or reserve.
SEC. 8. The Federal Farm Loan Board and the Federal land banks shall turn over all payments of interest and principal on such farm loan bonds, for which the Federal Reserve Board issues Federal reserve notes, to the Treasurer of the United States, and shall be by him kept and reinvested as a sinking fund in municipal or State bonds and in bonds of the United States Government, bearing interest at the rate of at least 3 per centum per annum.
SEC. 9. Whenever the amount of money actually in circulation in the United States shall exceed $75 per capita, then the Treasurer of the United States, by and with the advice and consent of the Federal Reserve Board and the Presi dent of the United States, may retire Federal reserve notes in an amount equal to the principal paid on farm loan bonds, for which Federal reserve notes were issued, not to exceed 2 per centum in any one year, of the amount of Federal reserve notes so issued.
SEC. 10. There is hereby created a board of agriculture consisting of one member from each State, elected by the farmers of such State, who shall be elected by delegates selected by a mass convention of farmers in each county or parish within the United States, who are indebted and declare it to be their intention to take advantage of this act, such county or parish convention to be its own judge as to who are bona fide farmers and otherwise eligible to participate in its proceedings.
Sec. 11. The State delegates, so elected, shall meet at the State capital of their respective States and elect a member of the board of agriculture, who shall hold his office from the date of such election and for a period of two years from March 4 following, and who shall receive a salary of $4,000 per annum and 5 cents per mile for necessary traveling expenses while on official business, to be paid by the United States Government in the manner now provided for the payment of salaries of Members of Congress.
SEC. 12. The Federal Farm Loan Board is hereby authorized and directed to give public notice, through the Federal land banks, to the farmers of each county or parish of the time and place of holding the first county or parish convention, which shall be held at the seat of government of each county or
parish; and it shall at the same time give notice of the first convention of the State delegates, to be held at the State capital of each State, notice of such convention to be given at an early date after the passage of this act.
Sec. 13. The farmers attending such county or parish convention and the State delegates attending such State convention shall organize and make such rules and regulations for their procedure as they deem necessary or convenient, and shall elect a president and a secretary and make arrangements for such other and future conventions as they may deem necessary; and they shall at all times cooperate and assist the board of agriculture, the Federal Farm Loan board, the Federal land banks, and national farm loan associations to liquidate and refinance farm mortgages and farm indebtedness.
Sec. 14. Immediately after their election the members of the board of agr. culture, upon call of the Federal Farm Loan Board, shall meet at Washington, District of Columbia, and organize by electing a chairman and a secretary, and they shall make such rules and regulations as they deem necessary and expedient in carrying out the purposes of this act. They shall elect an executive committee of three, none of whom shall be members of the board of agricultdre, who shall hold their office at the will of said board, and who shall receive a salary of $10,000 per annum, and 5 cents per mile for necessary traveling expenses while on official business, to be paid by the United States Government in the manner now provided for the payment of salaries of Members of Congress.
Sec. 15. The members of the board of agriculture shall keep in touch with and report to the executive committee the progress of liquidating and refinancing farm mortgages and farm indebtedness in their respective States. They shall cooperate with county or parish and State governments, and with all farm and cooperative organizations within their respective States, to speedily bring about the liquidation and refinancing of farm mortgages and farm indebtedness.
SEC. 16. The executive committee of the board of agriculture shall counsel with and supervise the work of liquidating and refinancing farm mortgages and farm indebtedness by the Federal Farm Loan Board and the Federal Reserve Board, and they shall cooperate with said boards and with county or parish and State governments and with the various farm organizations, and with the agriculture colleges of the Nation in or er to bring about a just and speedy liquidation and refinancing of farm mortgages and farm indebtedness. They shall report any member of the farm-loan system or the Federal Reserve Board or of the postal-savings system, who neglects, hinders, or delays the carrying out of the provisions of this act, to the President of the United States, and it shall be the duty of the President, upon cause shown, to remove any such officer and to appoint some other suitable person in his place with the advice and consent of the Senate.
Sec. 17. The benefits of this act shall also extend to any farmer, or member of his family, who lost his farm through indebtedness or mortgage foreclosure since 1920, and who desires to purchase the farm lost or another farm. It shall also extend to any tenant, or member of his family, who desires to purchase a farm, provided he has lived on and operated a farm as a tenant for at least three years prior to the passage of this act.
SEC. 18. The executive committee of the board of agriculture shall have power in case of crop failures, and in other meritorious cases, to extend the time payments due on loans made under this act from time to time for a period not exceeding three years, provided that the mortgagor keeps up the payment of all taxes on the mortgaged property.
SEC. 19. This act shall be liberally construed, and no technicalities or limitations shall be imposed or permitted to interfere with the speedy carrying out of its purposes; and the provisions of the Federal farm-loan system, the Federal reserve banking system, and the postal-savings system sha apply as far as applicable in the carrying out of the provisions of this act; and all laws or parts of laws in conflict herewith are for the purpose of this act repealed. The persons charged with the duty of carrying out the provisions of this act are authorized and directed to do all things necessary or convenient to accomplish its purposes with expedition.
Senator FRAZIER. This bill was presented in the Senate and referred to the Committee on Agriculture and Forestry, and Chairman McNary of that committee appointed as a subcommittee to consider same Senators Thomas of Idaho, Hatfield of West Vir
ginia, Smith of South Carolina, McGill of Kansas, with myself as chairman of the subcommittee.
It is always customary to refer bills that are introduced to the department or departments which may be interested in the legislation intended to be covered. And I have here copy of a letter from Chairman McNary of the Committee on Agriculture and Forestry to the Secretary of Agriculture, dated December 16, 1931, which inclosed a copy of this bill and asked for a report thereon. · Also copy of a letter from Chairman McNary to Secretary Mellon of the Treasury Department under date of December 21, 1931, which inclosed a copy of the bill and asked for a report thereon.
Then, on January 22, 1932, I wrote to Secretary Hyde, asking for a report on the bill and informed him that a subcommittee had been appointed and hearings would commence on February 2. I am in receipt this morning of a letter from Secretary Hyde, which I will read [reading] :
THE SECRETARY OF AGRICULTURE,
Washington, January 30, 1932. MY DEAR SENATOR : Your letter of January 22, relative to S. 1197, has been received.
It is my judgment that the bill which you inclose is not conducive to the best interest of American farmers. Sincerely yours,
ARTHUR M. HYDE, Secretary. Hon. LYNN J. FRAZIER,
United States Senate. On yesterday I requested the clerk of the Committee on Agriculture and Forestry to transmit by special messenger a letter and copy of the bill again, both to the Secretary of Agriculture and the Secretary of the Treasury, copies of which letters I have before me, asking for a report from each department on the bill, and also requesting that some one representing each department be here. Mr. Paul Bestor, farm-loan commissioner, Federal Farm Loan Bureau, Treasury Department, called up, saying that he had an important meeting this morning but would be here to-morrow for our hearing, and that he would have some one from his office present for the hearing to-day.
I will call as the first witness Mr. William Lemke, of Fargo, N. Dak., who was instrumental in the preparation of this bill; and who also I will say has done a great deal to explain the provisions of the bill and to create public sentiment for such a measure. He has held meetings in various States, talked over the radio, and so forth, so that the people of the northwestern section of the country, more particularly North Dakota, South Dakota, and Minnesota, have heard him a good many times discussing this measure.
I will now call Mr. Lemke.
STATEMENT OF WILLIAM LEMKE, FARGO, N. DAK.
Mr. LEMKE. Mr. Chairman and members of the subcommittee, I might state that I appear before this subcommittee not representing any political faction, but rather as a citizen of the United States, deeply interested along with several million people who feel and believe that the present economic condition has no business in the land of plenty; that it has been brought about by manipulation of our
currency and by, perhaps, well-meaning but deluded international investors, who have deflated our medium of exchange by reason of investing billions of dollars in foreign bonds.
Having listened to the reading, by Senator Frazier, of the letter from Secretary Hyde, let me say, it would indeed be interesting to have the opinion of the Secretary of Agriculture on the recent enactment providing for the setting up of the $2,000,000,000 Reconstruction Finance Corporation. I should like to know whether in his opinion that will be conducive to the best interests of bankers and the financial interests. I should like to know what, in his opinion, is the difference between that particular measure and the measure now before this subcommittee-except that I might suggest that one is applying the remedy to the child's head when it has no headache at all, but on the other hand, has something radically wrong with its toes.
I wish to suggest respectfully to the Secretary of Agriculture that every dollar invested or loaned for refinancing those engaged in agriculture, as provided for in this measure, will pay off 10 obligations coming up from the toe of the child, whereas his bolster around the head of the child does not cure the ailment at all; that we must begin at the very root of the situation, and first understand the cause of our agricultural troubles.
What is the cause of the present so-called world-wide depression, which some of us good Republicans now call the Republican depression rather than a Democratic panic. Now, the trouble as it relates to agriculture is that the agricultural interests were not organized, that they were made the shock absorbers of the deflation.
I say, without the least fear of contradiction, that ever since the beginning of the deflation period the farmer, on the average, has sold his agricultural products below cost of production, and that this condition has continued since 1921, when the deflation was brought on; and that as a result of such condition, farmers have mortgaged their homes and their farms, and are losing them so fast at this time that, as a member from Minnesota told me this morning, it would be useless to try to get any statistics on the subject, because there will be so many more mortgage sales to-morrow to be added to those made to-day, that any statistics fitting conditions as of to-day would be useless to-morrow, and more useless the day after, and still more misleading the day after that.
As a pretty good illustration of this terrible condition let me state that as to Polk County, Iowa, in which the city of Des Moines is located, I recently saw a newspaper containing a list of the tax sales, which covered something like 60 pages. That is an important city, in an important county, in one of the richest States in the Union, or at least it was one of the richest States in the Union at one time. That condition exists more or less in all that section of country, the agricultural section of the country, and if you will consider this you will see a general picture of what is going on in agriculture.
During the war farmers were told to increase production. They were told to plow every possible acre of ground. Some of us city people became so enthusiastic that in our yards, instead of flowers, we planted corn to help feed the Army. At that time the price was fixed. Before the price fixing the highest price in Minneapolis was $3.89 a bushel for No. 1 dark northern wheat. I mean that there were
cash sales made at that price. The market price was a little below that.
Now let us consider the situation. At that time 1,000 bushels of wheat would have paid off an indebtedness of $3,890, and I say to-day, without fear of contradiction, that 10,000 bushels of wheat, considering cost of production, will not pay off such an indebted
And the most of the farm indebtedness was created during that period of inflation.
Your own Secretary Hyde has told us that in 1930 the cost, and I think I am correct in my figures, of producing a bushel of wheat was $1.24. And we were selling our wheat far below that price.
Some farmers at Hankinson, N. Dak., who marketed No. 3 wheat early received as low as 28 cents a bushel. That is why in one county alone-McLean County, N. Dak.—there are seven pages of tax sales.
And let me tell you this: People do not permit their homes to be sold; they will not lose their homes and farms when they have money that they are hoarding. I think there has been a false impression along that line given to the public. And it is not correct, generally speaking.
Oh, yes, it may be true that here in Washington and perhaps in a few other cities, where there is such a thing as a medium of exchange, that there is a little hoarding here and there. But I will guarantee that there is nothing to be hoarded in North Dakota and South Dakota and in many other States. It may be true that a few of the larger banks or trust companies claim that they have so much money they do not know what to do with it. But the reason that they do not know what to do with it is that the purchasing power of the farmer has departed, and they say they can not and they will not loan him a dollar,
Why, gentleman of the subcommittee, those banks and trust companies would not loan a farmer a dollar in silver if he brought in a dollar in gold without their first having it assayed. That is one reason for our present economic condition.
Another reason is that the banks are afraid to loan money to farmers, and while they have credited on deposit somewhere between forty-four and fifty-two billions dollars, yet there is less than $1,250,000,000 of actual money in all the banks and trust companies.
There is no use to camouflage these things. There is no benefit rendered by telling us that prosperity is just around the corner. Why, gentlemen of the subcommittee, we have heard that story so much that we are living in roundhouses because of our ever looking around the corner for the so-called prosperity.
I say to you gentlemen that prosperity can not come back unless and until there is purchasing power again in the hands of 6,000,000 farmers who must support 30,000,000 of our population. Prosperity can not come while there are 28,000,000 people going without enough to eat. Why? If present conditions continue and the present lack of medium of exchange continues, it will be but a short time before one old hen will produce a surplus of eggs in the city of Chicago.
I want to explain what I mean by the terms “overproduction" and "underconsumption." In the city of St. Paul recently somebody provided a Thanksgiving dinner in a certain restaurant for the hungry. The doors were opened at 11.50 a. m., but by 9.50 a. m.