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what the security was really worth, and after he had determined that, then he could deal with the bondholders.

Mr. SMITH. That is right.

Mr. MICHENER. And the bondholder could not compel payment for more than the Secretary found to be equitable, provided the bondholder wanted to accept that amount.

Mr. SMITH. Of course, if the bondholder would not receive what the Secretary offered him, nothing would be accomplished under the bill.

Mr. MICHENER. They have got to take whatever he says; in other words, they are just salvaging what they have got?

Mr. SMITH. That is absolutely true, because you would not obligate the Government to go into a proposition that, on the face of it, will not permit the Government to reimburse itself.

Mr. MITCHENER. You suggest that the bondholders are not so much interested now as they were formerly. Have you thought of Otis & Co., the bond concern which floated many of these western private district bonds, and has failed and gone out of business?

They are in the hands of a receiver, and they are not here represented as a company, as they were last year. Mr. Begg, as I recall, was very much in evidence here.

Mr. SMITH. Yes, Mr. Begg was in the fight earlier, but after we amended the bill his people felt that they would not be benefited, by being put in the position of having to make a sacrifice on the value of their bonds.

Mr. O'CONNOR. Mr. Smith, I asked you some time ago whether this bill was any different from the bill on which we heard arguments last year, in January, and you said that it was. As a matter

of fact, we heard you on the Senate bill as amended by your committee. Now, is there any difference at the present time between your bill and the Senate bill as amended by your committee on which we heard you a year ago?

Mr. SMITH. The only difference, Mr. O'Connor, is on page 5 of the bill, lines 12 and 13, where we inserted, instead of the phraseology there, with reference to bond issues by counties, that where said bonds are issued by a county, and it shall appear that under the laws of the State in which such county is situated, such bonds are direct and general obligations of the county issuing the same, and that provision is made by law for the levying and collecting of taxes for the payment of such bonds, it shall be sufficient if each bond, on the face thereof, shall pledge the full faith and credit of such county.

Mr. RANSLEY. Otherwise section 5 was in the bill last year?

Mr. O'CONNOR. Well, I want to get that straight, because you were talking about putting in the interest at 3 per cent, and appraising the value of the bonds. Now, that was all in your bill a year ago. Mr. SMITH. Yes; as amended.

Mr. O'CONNOR. Well, we considered it as an amended bill, that is all, in the report here.

Mr. SMITH. Yes, sir.

Mr. MICHENER. The provision that is added includes bonds that are in Michigan, within the purview of the bill.

Mr. SMITH. Now, gentleman, we want to deal absolutely fairly and frankly with you. We know that you are just as much inter

ested as our committee is, or these gentlemen who are here to-day, in the enactment of legislation that will be helpful to bring back business conditions as they ought to be. We feel that here is a class of farmers, probably a million individual farmers, who have not been brought into any relief legislation in this Congress or in the previous Congress.

Mr. MARTIN. How are you going to bring back business by increasing the surplus of the farmers, when they raise now more than they

can sell?

Mr. SMITH. Well, these people are mostly engaged in raising foodstuffs for themselves and their families, and they must be taken care of in some way, otherwise they will join the army of the unemployed. If a man is forced off of his farm, it not only affects himself and his wife, and the younger people, who leave and go out to seek employment, and probably interfere with their plan of education.

Mr. MARTIN. Would you favor a bill to help out the factory workers and the textile workers?

Mr. SMITH. Yes; we did favor them in the enactment of our tariff laws and other laws which were enacted to bring back business. If the farmers are prosperous, if they can sell their foodstuffs at reasonable prices, we will have no difficulty in keeping the factories going, because they create a demand for the various things that are manufactured. In other words, I think we have made a mistake in not first enacting legislation that will help the farmers individually and collectively before helping the railroads, banks, and our foreign debtors.

Mr. MARTIN. What else have we been doing for the last five years? Mr. SMITH. Well, if we keep the farmer employed, and let him raise enough for his family and also something to sell, then all the other businesses will prosper just as they have in the past. It is intended that this legislation will stabilize nearly a million farmers who otherwise will have to give up their farms. Of course, the bondholders would lose, just as they would lose if these projects would be abandoned. I know of one district in which are five towns that are being absolutely deserted, all because of the fact that they can not go ahead and meet their obligations.

Mr. MICHENER. Is that a reclamation district or a swamp land district?

Mr. SMITH. That is a private reclamation district. There are five towns in two counties in the State of Idaho where a dam burst out and the farmers have never been able to sell bonds to put it back. I visited there last summer with Senator Thomas and saw the conditions there. Originally they were towns of 1,000 people and they are dwindling down to 200 or 300.

Mr. MARTIN. Has the State shown any financial interest in any of these projects?

Mr. SMITH. I do not know about drainage projects, but I know they have in private irrigation projects.

Mr. MARTIN. Have you communicated with any of the States to see if you can get any help out of them?

Mr. SMITH. There was one project in our State where the legislature appropriated $100,000, but it was found that it was not sufficient to rehabilitate the project, and the State withdrew.

Mr. RANSLEY. Do you think it could be handled by the States, as a general proposition?

Mr. SMITH. I do not see how the States could handle it properly under the present conditions..

Mr. RANSLEY. The State taxes those funds?

Mr. SMITH. Yes, sir.

Mr. RANSLEY. If they are taxable by the States, should not they be relieved by the State? Why come to Uncle Sam for relief?

Mr. SMITH. Why come to Uncle Sam for this reconstruction corporation? Why come to Uncle Sam for relief of the bankers and railroads? Because they can not help themselves, and because Uncle Sam rehabilitates them in order to stabilize industry.

Mr. RANSLEY. In our industrial cities you have the same conditions; you have thousands, not hundreds, but thousands of people who have been dispossessed of their homes.

Mr. SMITH. Yes; I know that.

Mr. RANSLEY. And they are not asking for relief?

Mr. SMITH. If they had any practical proposition to present, they would undoubtedly ask for relief.

Mr. MICHENER. It is not practicable because it is too enormous; is not that it?

Mr. SMITH. Well, that is probably so.

Mr. MARTIN. We estimated this would cost about $375,000,000 last year.

Mr. SMITH. No; the bill authorized an appropriation of $100,000,000 over a period of five years, or $20,000,000 a year.

Mr. O'CONNOR. There were $391,000,000 of these bonds out last year.

Mr. SMITH. And the probabilities are that those bonds will scale down probably 10 or 15 cents on the dollar.

Mr. GREENWOOD. What should be the measure of value in the redemption of these bonds?

Mr. SMITH. The current price in the market or appraised value. Mr. GREENWOOD. Are they selling for anything on the market now?

Mr. SMITH. I know of two private irrigation projects in my State where the bonds originally sold for a hundred and are now down

to 5 cents.

Mr. GREENWOOD. You would not expect the Government to buy them at 5 cents?

Mr. SMITH. Yes; I would.

Mr. MICHENER. Wait a moment, let us correct something. In reading your bill, I agree with my colleague across the aisle; I think the bill provides that you make a survey of the project, and this will require a lot of engineers, it will require a lot of agents in the field, it will require a lot of experts, and it will require a lot of lawyers if this thing goes through. This bureau, then, will make an investigation as to the value of the thing itself which is secured by the bonds. Now, the value of the bonds, as quoted in the newspapers, will have but little to do with the matter. After these engineers determine the value of the project, then the engineers will determine how much the Federal Government is justified in loaning on the project. Then the Federal Government will tender, through

its bureau, to the owners of the bonds, a certain amount of money, and they can take it or leave it. Is not that correct?

Mr. SMITH. That is right.

Mr. MICHENER. And it is not intended at all that the market should control, but this will require a great army of people going over the country. The reason I speak of an army of people is this, and if I am not right, please correct me. I come from Michigan, where we do not have many arid lands; we do not have any reclamation projects, but we have a few drainage districts, just in the ordinary way, according to whatever method the farmer selects. Now, the conditions are entirely different. You could not appraise the value of that land. You could not take our bonds until you sent expert engineers to Michigan to determine the situation there. If you sent an engineer there, he would have to know something about the local conditions. That engineer would be of no value in determining the value of flood-control projects in Arkansas; he would be of no value in determining the value of irrigated territory.

Mr. SMITH. Well, Mr. Michener, I did not hear you offer any such argument as that against the reconstruction bill, under which you will probably employ 5,000 people to go all over the country in the administration of the law.

Mr. MICHENER. Well, if my conclusion is not correct, I want to be corrected.

Mr. SMITH. When you say an army, you mean a hundred men, in this instance; but when you speak of an army in connection with the reconstruction bill, you may have reference to 5,000 people. As a matter of fact, there are two of these projects located in my own district, where I know the bondholders would take 5 cents on the dollar and be glad to step out.

Mr. MARTIN. Why is this bill any good to them? Why would this bill help them?

Mr. SMITH. Well, to the extent that it would enable the settlers to get control of the property, and the bondholders would step out of the picture.

Mr. BANKHEAD. Has this bill been submitted to the Budget or to the administration during this session of Congress?

Mr. SMITH. Not in a formal way. We have had interviews with the President-not at this session of Congress, however-and with the Secretary of the Interior. The Secretary of the Interior expressed himself as being favorable, but, inasmuch as it was a rather new policy, he did not care to express his opinion officially about it. The President was very much interested, and stated that he thought that it had a great deal of merit. But we felt that we should first undertake to ascertain the sentiment of Congress for this legislation before presenting it to the President, and for this reason I believe that Congress itself is responsible for the policy in a matter such as this, rather than any particular official. We feel that when Congress has expressed itself as being overwhelmingly in favor of this legislation, the administration will then favor it-if the administration does not already favor it.

Mr. BANKHEAD. Of course, you will not take what I am saying as any expression of opinion of mine in regard to what we should do about this rule, but we are all practical legislators, and you, as

a former chairman of your committee, almost universally adopted the practice of submitting to the administration and to the appropriate department for an opinion, bills of this importance. You know that has been the usual practice.

Now, we know that the Administration has appealed to Congress to cut down appropriations, and, it seems to me, that if you expected to get a final favorable action upon your legislation-and, of course, that is what you want, because you are not coming here and seeking to make a mere gesture

Mr. SMITH. No; not at all.

Mr. BANKHEAD. It seems to me that it would be most advisable if we could have some definite statement from those who will be ultimately charged with the responsibility of approving this measure, as to their attitude upon it. Don't you agree with me on that?

Mr. SMITH. Well, as a general proposition, yes; but Congress is the authority to determine the policy, rather than the President of the United States.

Mr. BANKHEAD. Oh, I fully agree with you.

Mr. SMITH. Or a cabinet officer; because we know that the President of the United States, with all of the many things that are being pressed on him, can not possibly go into a detailed examination of a proposition of this kind. It is physical impossibility for him to take this bill, study it in detail, but he will take the judgment of the Secretary of Agriculture, the Secretary of the Interior, or some people in whom he has confidence.

Mr. BANKHEAD. Then, you can not give us any assurance, one way or the other, that, if this bill were passed in its present form, it would be approved by the Chief Executive?

Mr. SMITH. Oh, no. It is impossible for me to tell you what the President is going to do with this bill. We hope that, in time, he will conclude, if Congress is in favor of legislation of this kind, that he should give it favorable consideration.

Mr. BANKHEAD. In other words, you think that, under the circumstances, it is justifiable to put the responsibility up to the President?

Mr. SMITH. To sign it; yes, sir.

Mr. BANKHEAD. I mean as to the expenditures; that is the item I am interested in. Of course, you gentlemen realize that this is a matter that we are all interested in.

Mr. SMITH. As I said at the outset, I know you are all sympathetic with any legislation that is designed to relieve the farmer.

Mr. BANKHEAD. I agree with you. I have the only large drainage district in Alabama located in my district, and it is bankrupt, and naturally my personal sympathies are along this line.

Mr. SMITH. But why should we go ahead and pass a bill to take care of the depositors in insolvent banks-and I am in favor of that bill-and not take care of farmers who are losing their life earnings to the money lenders.

Mr. BANKHEAD. Well, I did not intend to get into any argument on the general proposition of relief, but I just wanted to know if you could give us any idea of the opinions of the administration and the Secretary of the Interior in this respect, and I do not think that is an unreasonable question.

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