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(c) Not to exceed one-fourth of the sums advanced under section 1 of this act are authorized to be made available to the Secretary of Agriculture to be used by him in carrying out the purposes of Public Resolution Numbered 11 entitled, “ Joint Resolution to authorize the Secretary of Agriculture to aid in the establishment of Agricultural Credit Corporations and for other purposes," approved, March 3, 1932, in addition to the sums authorized in section 4 of such joint resolution.

Amend the title so as to read : "Joint resolution authorizing and directing the Secretary of Agriculture to request allocation of funds by the Reconstruction Finance Corporation, and for other purposes."

The CHAIRMAN, Mr. Jones, we will be glad to hear you at this time.


Mr. JONES. Mr. Chairman and gentlemen of the committee, you will recall that when the Reconstruction Finance Corporation bill was up for passage, an amendment was adopted allocating a possible $200,000,000 of the fund to the Secretary of Agriculture for direct loans to farmers. That was in the form of $50,000,000, plus an expansion, which, on the sale of debentures, would amount to $200,000,000 for that use. Under that provision, $75,000,000 was transferred to the Department of Agriculture, and the Department of Agriculture has made loans aggregating approximately $65,000,000, or $63,000,000, plus, with some outstanding loan applications that will probably run it, in round numbers, to $65,000,000, leaving a balance of $135,000,000 or $137,000,000 unexpended.

This resolution which has been favorably reported by the Committee on Agriculture directs the Secretary of Agriculture to request the transfer of the balance of the fund, and then it broadens the base and extends the period for making direct loans.

Mr. GARRETT. Are the funds to be transferred to the Reconstruction Finance Corporation?

Mr. JoNEs. No; from the Reconstruction Finance Corporation to the Secretary of Agriculture. Under the act as it is now written, the loans were limited to crop production for the year 1932. The Secretary of Agriculture has construed that to mean, and not without some reason, that loans can only be made for crops the production of which will be completed and harvest completed in 1932. Under the regulations, the Secretary of Agriculture has ceased to make loans as of the date April 30, leaving the balance unexpended. This amendment would broaden the base of the loans; would make the loan limit $2,000 to any one individual, rather than under the regulations which authorize a limit of $400; and it authorizes the making of loans on adequate security with a provision that that security may consist of liens upon crops, upon livestock, or other personal property.

An additional provision also authorizes him to use not to exceed one-fourth of the amount so allocated for the purpose of carrying out the provisions of Public Resolution No. 11, which the House passed some two months ago, and which provides for assisting in The organization of agricultural credit corporations and livestock loan corporations for operation under the provisions of the inter

mediate credit banking system. The intermediate credit banking system has had its terms liberalized somewhat, and funds from the Reconstruction Finance Corporation may be used in the purchase of their securities. This would involve the organization of those corporations to take advantage of the system.

That, in brief, is the substance of this resolution.

I will say this, that in my judgment, these direct loans, small though they were, have done as much to soften the feeling among the agricultural population of this country as anything Congress has done.

Mr. MICHENER. Does the Secretary of Agriculture ask for this legislation?

Mr. Jones. The Secretary of Agriculture has not directly asked for this. Some members of the committee went down to see him, and he said that he liked these provisions much better than he did the old provisions, because the old provisions did not require adequate security. The old provisions were limited to crop-production loans, and, according to his philosophy—I do not want to quote him except subject to correction—might have a tendency to overproduction. The old loans were limited to crop-production credit, which, if I interpret the Secretary's position correctly, being limited to such credit, have a tendency to overproduction, or more so than if made under a general credit arrangement. This would make a general arrangement whereby they could secure credit or loans in the absence of credit facilities otherwise. It is not limited to crop-production loans. It makes them coextensive in the application of the terms with loans that the Reconstruction Finance Corporation makes in taking care of institutions, such as railroads, insurance companies, and so forth.

The CHAIRMAN. Was there any opposition to the resolution in the Committee on Agriculture?

Mr. Jones. There was no opposition in the committee. One or two said they would like to think about it further, but, as I remember, there was no vote at all. I am sure the committee is unanimously for it.

Mr. Cox. If this fund of $200,000,000 is to be maintained, and is not to be depleted through loans from year to year, will it be sufficient in amount to take care of the future needs of agriculture, and have we any reasonable assurance that Congress will not have this demand made upon it again in the next session?

Mr. Jones. I can not say definitely that it would be sufficient. However, it will go a long ways in dealing with this condition that now prevails. In addition it will have a tendency to get it on a sounder basis, to aid in the development of a sounder credit system, and to work from the present crop production credit system, that we have had from year to year, into the sounder regular financial system of the country.

Mr. MARTIN. When you say “sounder," do you mean that it will be easier for the farmers?

Mr. JONES. No; it will not be easier.
Mr. MARTIN. It will not be sounder for the Government.

Mr. Jones. Yes; it will be sounder for the Government. Undoubtedly it will be sounder than the present method. The present method provides for a crop production loan, pure and simple, with a crop lien as security. In many instances that system has enabled the farmer who had the least crop to come nearest to qualifying for the loan. It has been more difficult for the farmer who was in a good position, or who would have been in a good position, to use the credit to take advantage of the loan. It has caused him to be handicapped. Now, this allocation of one-fourth will be on a perfectly sound basis. It is the portion of the provision that has been practically endorsed in principle in the whole credit system of the Government.

Mr. GREENWOOD. You are proposing to continue the loans with crops as the security.

Mr. Jones. I want the credit based on crops, livestock, or other personal property.

Mr. GREENWOOD. But not on the land?

Mr. JoNEs. No; I do not think the fund would be sufficient to go into that field.

Mr. PURNELL. After all, that is where the greatest demand for flexibility in the credit system arises. The demand comes from the farmer who has a mortgage on his farm rather than from farmers who wish to raise loans on chattels.

Mr. JONES. That is, perhaps, true, but, as you know, these moneys have been limited to crop production loans. The fund can only be used now in making loans for the actual production of crops. This takes away the limit, so that the farmer, if he can take advantage of the loan at all, can use it for the purpose of easing his tax burden, for instance, his land loan, or any other purpose of that character.

Mr. MICHENER. Is not the farmer more interested in the price that he gets for his products, and for some stabilization of prices, than in the borrowing of more money!

Mr. JONES. That is undoubtedly so; and yet, while that process is being worked out, there are many of them who are absolutely tied up so that they can not move. Mr. MICHENER. Who is urging this?

Mr. JONES. All of the farm organizations are favorable to it. We had them over there this morning. We had representatives of the National Grange, the American Farm Bureau Federation, and the National Farmers' Union. All of them indorsed this resolution. We have had representatives of bankers in New Mexico, from rangers, livestock people, and farmers throughout the South and Southwest, and they join in indorsing this proposition. I intended to bring some correspondence that came to me after the resolution was reported out, including letters and telegrams from farm organizations, all indorsing the resolution.

Mr. MICHENER. As a matter of fact, if we are now going into the chattel loan business, the administration will be

Mr. Jones (interposing). As a matter of fact, Congress definitely allocated this fund for this purpose, but on a basis much less sound than the one proposed in this resolution. The agricultural needs run over the $200,000,000 allocated to them, and the money certainly ought to be made available for them.

Mr. MICHENER. That was for crop production loans, in cases where they could not get sufficient money to procure seed or to harvest crops. They could use this money for any purpose they saw fit.

Mr. Jones. They can use it for anything if they put up adequate security.

Mr. MICHENER. If the farmer wants to buy a new automobile, and can put up sufficient security, he could get the money for that purpose.

Mr. JONES. I have an idea that it will be like any other application for credit. For instance, a man may go to a banker to borrow money, and he can use the money as he pleases, if the banker lets him have it.

Mr. MICHENER. This is a little different. The Government has never gone so far in all its history as to provide that an individual can come in and borrow money for any purpose he sees fit, if he can put up enough security for it.

Mr. Jones. They have been doing that ever since 1922. We have made some very broad loans, and, I confess, I can not see the difference. We passed the Reconstruction Finance Corporation act, with provisions for direct loans to banks, insurance companies, railroad companies, and other like institutions. This is limited by the application of that act. It provides that loans shall not be made for a longer period than loans made to those financial institutions. The loans are safeguarded in every possible way. This provision is much better safeguarded than was the provision under the original amendment to the act, which followed the old crop production loan system that has been running for years.

Mr. MICHENER. That is possibly true, but what I am getting at is this: From your statement, it would appear that you are extending the law to permit any farmer to borrow money for such purposes as he may see fit. Now, as I recall, from 1922 down, loans have been made only in emergency cases, to enable the farmer to produce a crop, or with the idea that he could only produce a crop if aid were given. Under this provision, he could take the money and buy an automobile, or anything else he chose.

Mr. Jones. This provision does not say, or the law does not say, that it shall be used for any purpose he sees fit. We simply take off the crop production limitation. Of course, there is not any financial institution that goes out and lends money promiscuously.

The CHAIRMAN. Would it not be subject to such regulations as the Secretary of Agriculture might impose ?

Mr. JONES. Yes; and the farmer would have to put up adequate security. I do not think that anybody in these times, or any farmers that I have had any report about, would be anxious to get money with which to purchase automobiles. They are anxious to get money to enable them to carry on.

Mr. MARTIN. And the same thing is true of every small manufacturer in the country. He has plenty of security, too.

Mr. JONES. Provision was made for them in the Reconstruction Finance Corporation law.

Mr. MARTIN. No; not a dollar.
Mr. Jones. This money is allocated to agriculture.

Mr. MICHENER. Of course, we must take care of the city man, too. The city man in my district does not have horses, cattle, and sheep

on which he may place a chattel mortgage and obtain funds from the Government, but he may have some diamonds and watches, and he certainly needs money.

Mr. JONES. Let me suggest this to the gentleman, that the farmers of this country constitute about 30 per cent of the population, while only 10 per cent of the money alloted the Reconstruction Finance Corporation was allocated to that 30 per cent of the population. Of that 10 per cent, only about 4 per cent has actually been loaned.

Mr. O'CONNOR. The farmers come under the other forms of relief, because the banks, insurance companies, and railroads that borrow from the Reconstruction Finance Corporation are operating in the farming districts. You can not talk about direct relief to the farmers. All that we have done here for years has been to give them aid, but the day is coming when no one will be able to take the floor and make those extravagant statements again about the farmer. You people have been promising to do something for the people in the cities, but you have not done it up to this moment. This Government has been run in the interest of farmers, as a favored class. This talk about taking care of the farmers is becoming annoying and obnoxious.

Mr. Jones. I am not disposed to argue that proposition. I know that the small banks instead of making these loans have had to go to the relief of the larger institutions where those small banks owed them money. Under those conditions very little could be done for the farmers. Now, we do not undertake by this resolution to take one cent other than the small amount that has been allocated, and we would utilize that in a way that would be better and safer than under the old method. I am just as much interested as the gentleman or anyone else in getting away from unsound methods.

Mr. O'Connor. You spoke about those farm organizations, and they are just as much a sword of Damocles hanging over the head of Congress as the reterans' organization or any other organization.

Mr. JONES. This resolution was introduced before they were consulted. However, they have indorsed it.

Mr. RANSLEY. Did the Secretary of Agriculture approve this resolution?

Mr. Jones. The Secretary of Agriculture has not made an open statement on the measure, but he did in effect make it to those representatives of the farm organizations and some individuals who were interested. He stated that he liked the provisions of this legislation much better than the old one.

Mr. MARTIN. Do you not think he should make a direct statement on a bill of this magnitude !

Mr. Jones. It occurred to me that if the funds were limited to the amount that was allocated for use in this manner, so that we would have to take those funds and no more, and if they are to be put on a much sounder basis, it would be decidedly advantageous to do this. Of course, if we delay these matters to the point of securing indorsements all the way down, it would practically amount to a denial. I am sure the Secretary of Agriculture will make no objection to it. I have talked with him about various matters. I have been in touch with him, but he was out of town at the time

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