of course, that if, upon default, it is found that irreparable waste or depreciation in value of the mortgaged property would result by delay the mortgage, under the amendment, would be subject to foreclosure. But it should be remembered that the amendment is intended primarily to give some consideration to the farmer who is making an honest effort to pay for his land but is unable to meet the regular amortization payments on account of conditions or emergencies over which he has no control. Very truly yours, BUTLER B. HARE. Mr. SEIBERLING. I think it would be enlightening to know if the Secretary of the Treasury approves or disapproves of these bills. The CHAIRMAN. He disapproves of both of them. Mr. STEAGALL. I should like to ask the gentleman with reference to his amendment to the intermediate credit act. Just what do you attempt to do in that? Mr. HARE. As suggested a few moments ago, I will have the amendment inserted in the record, beginning at line 16, page 4, subsection (e). The purpose of the bill is to give intermediate credit banks a right to make loans direct to individuals instead of having to go through an agricultural credit corporation or some banking institution as is now provided. Mr. STEAGALL. That is the only change you have attempted to make? Mr. HARE. Yes. Mr. STEAGALL. I had not seen the bill until a few moments ago. Mr. HARE. Of course it provides that there shall be a bonded, experienced representative of the intermediate credit bank to first pass upon each application made by the individual farmer, but the primary purpose of the bill is to take care of a situation that has arisen after several years of experience in lending money by the intermediate credit banks for production purposes through agricultural credit corporations. I think it will be generally conceded that the present policy, method, or system has not met the conditions that were contemplated when the act was passed. In other words, in the section of the country with which I am familiar practically all of the agricultural credit corporations have failed. As a consequence, farmers in those sections are unable to secure loans for production purposes, and when we consider the practical operation of these corporations we can understand why they would necessarily fail. As a rule, most of them were institutions of small capital. Consequently, the loans they could make were limited. The spread between the interest they charged and the interest received was too small to take care of the overhead charges and losses that would naturally arise. Failure, therefore, was inevitable, although a few of the larger organizations have survived. The bill would give to an intermediate credit bank in its territory the right for its representatives to pass upon the security offeredmight say the whole security, the moral risk, the actual chattels or collateral or prospects before a loan would be made. This repsentative would have the right to follow up the loan and see that st money is well expended. under such conditions are certain. This amendment would remove the possibility of such practices. Mr. STEAGALL. You think the direct loans under the intermediate credit banks would be safer than loans made through an agricultural credit corporation, with capital stock wholly unprotected? Mr. HARE. I think so, and my opinion is based on experience and what I would consider general information; in other words, if I were a banker I would feel safer in taking the report of the representative of my bank as to the security for such loan than the report of the representative of an agricultural credit corporation where it does not take the time and expense to personally investigate the risk to be assumed. I think the plan I have suggested would be perfectly feasible and perfectly reasonable and at the same time could be done cheaper, because I think the intermediate credit banks can take the spread between the amount charged the farmer and the amount charged by the bank and take care of all the overhead expenses and reduce the losses to an extent that it would take care of all losses that might follow. The Secretary of the Treasury, Mr. Mellon, in reporting on this bill seems to think that the field forces of the bank would be enlarged and expenses greatly increased. It is true the field forces would be enlarged and expenses would be increased but I am contending that the 2 per cent now allowed the agricultural credit corporations would revert to the bank and this accumulation of funds would more than defray the expenses incident to the work and any remaining could be placed in a fund to take care of losses that might occur. Under the present policy 2 per cent goes to the credit corporation and should there be any profit after expenses are paid the surplus goes to the stockholders of the credit corporation. So under the proposed amendment the cost to the farmer would be the same and the charge to the intermediate credit bank may be less. However, one of the great advantages the intermediate credit banks will have under the amendment is that its representative would be charged with the responsibility of first approving the loan and then would be required to look after the collection of it in the fall or whenever the crops are harvested and see to it that the proceeds from the sale of all mortgaged crops are placed to the credit of the notes, because under the present policy there is much complaint to the effect that borrowers often "run their crops and fail to apply the proceeds to their notes. I think if the Secretary of the Treasury would inquire of the presidents of these intermediate credit banks they will say that they can loan direct to the farmer with as much or greater safety than they can under the existing plan. Mr. STEAGALL. Of course the intermediate credit banks can not operate unless they get the money from which to make the loans. Do you think they could obtain better accommodations and secure the money under a system where they went out and loaned the individual farmer than they can through a credit corporation? Is not this a fact, that even the commercial banks that serve the farmers have come upon the time when even they can not borrow money to be reloaned for production purposes? Is not that the practical situation they are in in your section of the country? Mr. HARE. Yes; to some extent. of course, that if, upon default, it is found that irreparable waste or depreciation in value of the mortgaged property would result by delay the mortgage, under the amendment, would be subject to foreclosure. But it should be remembered that the amendment is intended primarily to give some consideration to the farmer who is making an honest effort to pay for his land but is unable to meet the regular amortization payments on account of conditions or emergencies over which he has no control. Very truly yours, BUTLER B. HARE. Mr. SEIBERLING. I think it would be enlightening to know if the Secretary of the Treasury approves or disapproves of these bills. The CHAIRMAN. He disapproves of both of them. Mr. STEAGALL. I should like to ask the gentleman with reference to his amendment to the intermediate credit act. Just what do you attempt to do in that? Mr. HARE. As suggested a few moments ago, I will have the amendment inserted in the record, beginning at line 16, page 4, subsection (e). The purpose of the bill is to give intermediate credit banks a right to make loans direct to individuals instead of having to go through an agricultural credit corporation or some banking institution as is now provided. Mr. STEAGALL. That is the only change you have attempted to make? Mr. HARE. Yes. Mr. STEAGALL. I had not seen the bill until a few moments ago. Mr. HARE. Of course it provides that there shall be a bonded, experienced representative of the intermediate credit bank to first pass upon each application made by the individual farmer, but the primary purpose of the bill is to take care of a situation that has arisen after several years of experience in lending money by the intermediate credit banks for production purposes through agricultural credit corporations. I think it will be generally conceded that the present policy, method, or system has not met the conditions that were contemplated when the act was passed. In other words, in the section of the country with which I am familiar practically all of the agricultural credit corporations have failed. As a consequence, farmers in those sections are unable to secure loans for production purposes, and when we consider the practical operation of these corporations we can understand why they would necessarily fail. As a rule, most of them were institutions of small capital. Consequently, the loans they could make were limited. The spread between the interest they charged and the interest received was too small to take care of the overhead charges and losses that would naturally arise. Failure, therefore, was inevitable, although a few of the larger organizations have survived. The bill would give to an intermediate credit bank in its territory the right for its representatives to pass upon the security offered I might say the whole security, the moral risk, the actual chattels or collateral or prospects before a loan would be made. This representative would have the right to follow up the loan and see that the money is well expended. man Under the existing arrangement or practices that have been following heretofore, it has been found not infrequently a would obtain money and never plant his crop, or he would obtain a loan and plant only half of what his inventory contemplated. Losses under such conditions are certain. This amendment would remove the possibility of such practices. Mr. STEAGALL. You think the direct loans under the intermediate credit banks would be safer than loans made through an agricultural credit corporation, with capital stock wholly unprotected? Mr. HARE. I think so, and my opinion is based on experience and what I would consider general information; in other words, if I were a banker I would feel safer in taking the report of the representative of my bank as to the security for such loan than the report of the representative of an agricultural credit corporation where it does not take the time and expense to personally investigate the risk to be assumed. I think the plan I have suggested would be perfectly feasible and perfectly reasonable and at the same time could be done cheaper, because I think the intermediate credit banks can take the spread between the amount charged the farmer and the amount charged by the bank and take care of all the overhead expenses and reduce the losses to an extent that it would take care of all losses that might follow. The Secretary of the Treasury, Mr. Mellon, in reporting on this bill seems to think that the field forces of the bank would be enlarged and expenses greatly increased. It is true the field forces would be enlarged and expenses would be increased but I am contending that the 2 per cent now allowed the agricultural credit corporations would revert to the bank and this accumulation of funds would more than defray the expenses incident to the work and any remaining could be placed in a fund to take care of losses that might occur. Under the present policy 2 per cent goes to the credit corporation and should there be any profit after expenses are paid the surplus goes to the stockholders of the credit corporation. So under the proposed amendment the cost to the farmer would be the same and the charge to the intermediate credit bank may be less. However, one of the great advantages the intermediate credit banks will have under the amendment is that its representative would be charged with the responsibility of first approving the loan and then would be required to look after the collection of it in the fall or whenever the crops are harvested and see to it that the proceeds from the sale of all mortgaged crops are placed to the credit of the notes, because under the present policy there is much complaint to the effect that borrowers often “run their crops and fail to apply the proceeds to their notes. I think if the Secretary of the Treasury would inquire of the presidents of these intermediate credit banks they will say that they can loan direct to the farmer with as much or greater safety than they can under the existing plan. Mr. STEAGALL. Of course the intermediate credit banks can not operate unless they get the money from which to make the loans. Do you think they could obtain better accommodations and secure the money under a system where they went out and loaned the individual farmer than they can through a credit corporation? Is not this a fact, that even the commercial banks that serve the farmers have come upon the time when even they can not borrow money to be reloaned for production purposes? Is not that the practical situation they are in in your section of the country? Mr. HARE. Yes; to some extent. RELIEF TO FARM LOAN BORROWERS Mr. STEAGALL. You do not think you could devise a system of loans to farmers better than these banks with all the Mr. HARE. I think they would have the same security and a better security than they have under the existing law, because under the existing law, as I understand it, they have only the security embodied in the mortgage given by the farmer supplemented by the stock of the agricultural credit bank which generally runs from ten to twenty thousand dollars. I think the security under the proposed plan would be just as good and just as ample and just as be more secure because a representative of the bank would first pass As a matter of fact, the point I am making is that it would upon the security of the mortgage to be given by the farmer and he would be more careful in exercising that discretion than has been exercised by the representatives of the agricultural credit corpo secure. rations. Just one more point in that connection, and that is this, we are Now, if the intermediate credit bank has met with a condition Mrs. PRATT. I should like to ask a question, and in asking it I tions of individuals? I think it was brought out very clearly by what Congressman Jare said a few moments ago, namely, the difficulty of determining erhaps just what was the cause of the immediate necessity an individual farmer. He spoke of the question of serious ness. That is very distressing; but do you feel that we should be ified in permitting the Federal Government to aid in such a condi? Would we not perhaps be making the farmer less provident, o speak? The agricultural business, of course, is affected more aps than any other business by outside elements, but I think the ment Mr. Luce made yesterday is very ill hat the farmer oftentimes perhaps is no t lean years, and he gave an illustratio ating, and that reful to lay up |