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Mr. SMITH. The President did not commit himself. The Secretary of the Interior at the last session of Congress expressed himself as being much impressed by it, but he said:
I do not want to express an opinion until I have looked the plan over and talked with the President about it.
We have not asked the Secretary at this session of Congress his opinion on this legislation.
Mr. MICHENER. Now, this bill would authorize the appropriation of how much money?
Mr. SMITH. It authorizes the appropriation of $100,000,000 to be expended over five years, $20,000,000 a year.
Mr. MICHENER. Then it authorizes the department, whoever administers the law, to make investigations as to any and all projects coming within the law, does it not?
Mr. SMITH. Well, we anticipate that the Secretary of the Interior will not voluntarily make any investigation of any project, but that the projects themselves will take the initiative, and those that are needing relief will make their applications. Then the Secretary of the Interior, through the Reclamation Bureau, will have an engineer or a special agent visit this project and make a survey of the conditions.
Mr. MICHENER. Now, will our drainage districts in Michigan be administered through the Reclamation Bureau just the same?
Mr. SMITH. As far as this relief is concerned; yes, sir. Mr. MICHENER. How high does that rate of interest go on some of those projects in the West ?
Mr. SMITH. Our investigation discloses that it is not over 6 per cent. When the bonds were sold below par it would amount to 7 or 8 per cent.
Mr. MICHENER. Now, they are paying 7 per cent or 8 per cent on some of those projects, and there is no one in the country, I presume, that will pay less than 5 per cent or 512 per cent. Mr. SMITH. About 5
cent. Mr. MICHENER. If this bill becomes a law, then it is within the purview of the bill that every drainage proposition or project coming within the law can refinance on a 3 per cent basis; is that true ?
Mr. SMITH. Yes, sir.
Mr. MICHENER. Even though they are solvent. And if that is true, it would be poor business on the part of any drainage district in the United States to remain as is, and pay 5 per cent or 6 per cent or 8 per cent interest, when they could come to Uncle Sam and refinance at 3 per cent; and if that was true, it would take over $400,000,000
Mr. SMITH. But the bill provides that it shall apply to those projects where the farmers are delinquent, where they can show necessity for relief.
Mr. MICHENER. Well, all you have got to do is not to pay your taxes for one year, and become delinquent. If I could refinance the mortgage on my farm without paying the interest this year, and refinance it next year at 3 per cent instead of 7 per cent, I do not believe I would pay taxes this year.
Mr. SMITH. Well, in that case the Secretary of the Interior would inquire into the financial status of the district, and ascertain whether or not they could pay.
Mr. MICHENER. That is true—talk about an army-how are you going to determine, where there are 100 or 1,000 farmers in a district, how are you going to determine which one of them is able to pay?
Mr. SMITH. Well, a man could go into a district and in two or three days, by going over a project, could learn what he needed to know.
Mr. O'CONNOR. The bill does not say anything about these farmers being delinquent. It only says, where there are outstanding bonds or indebtedness.
Mr. Smith. Well, it is intended that this bill should apply to the necessitous districts, and the Secretary of the Interior will determine which one is the most necessitous and give those districts the pref
Mr. O'CONNOR. I do not think that is exactly the fact. I do not think it is in the discretion of the Secretary of the Interior. All he determines is whether or not there is ample provision to tax annually the taxable property pledged as security for the bonds issued, sufficient to pay the maintenance expenses of the district.
Mr. Smith. It provides that the Secretary of the Interior, before making the loan, must be satisfied that legal authority exists for, and ample provisions have been made, to annually tax the taxable property pledged as security for the bonds issued sufficient to pay the maintenance expenses of the district for a period equaling the life of the loan, and beginning at the end of 10 years the annual taxes must be sufficient to establish a sinking fund which will retire the loan at the maturity dates fixed by the Secretary of the Interior.
Mr. O'Connor. He has not any discretion as to whether or not he shall make the loan.
Mr. SMITH. Oh, yes, he has.
Mr. Smith. He would have full discretion. In his judgment, he determines whether or not he should loan it to a district that needs it, or not loan it to a district that does not need it.
Mr. GREENWOOD. Where is the language in that bill which leads you to that conclusion?
Mr. SWING of California. The word "authorized " in the first section has been construed by the Attorney General of the United States as mandatory, and as a word which is entirely ample to vest the administrative authority with discretion. On page 2, lines 8 and 9, the bill says, “ The Secretary of the Interior is authorized to loan ”-that leaves the matter entirely in his discretion. There can not be any question about that.
Mr. O'CONNOR. Why don't you put in the bill only the delinquent ones, or the districts that are hard up?
Mr. SMITH. I am willing to have the bill amended in that way.
Mr. MARTIN. Why should the interest be 3 per cent when the Government is obliged to pay 5 per cent?
Mr. SMITH. When we passed the farm relief act we had a provision in it that the interest should be determined by the prevailing rate at that time, which I think was a very unwise provision. I
know of an instance where a cooperative put up a building for $20,000 and they are only paying 112 per cent interest. We have safeguarded that situation by making the interest 3 per cent in this bill.
Mr. MARTIN. But if we go out and get money now, we have got to pay at least 5 per cent.
Mr. Smith. But a year ago you got it at 142 per cent. That is the reason we put it in the bill at 3 per cent. Mr. Martin. New York City pays what—6 per cent? Mr. O'CONNOR. Yes; 6 per cent in New York City. Mr. MARTIN. On this new loan it will be very close to 5 per cent. Mr. SWING. The loan they got last week was 1.94.
Mr. O'CONNOR. But it was a 40-year loan. We paid 6 per cent for 11 days in New York—or 8.
Mr. RANSLEY. Did anybody appear before your committee against the bill ?
Mr. SMITH. No, sir.
Mr. SMITH. Nobody appeared against it, but it is a bill that has been discussed in the newpapers for the last several years.
Mr. RANSLEY. You did not request the Secretary of the Interior or the Secretary of Agriculture
Mr. SMITH. No, sir.
Mr. PURNELL. This is the unanimous report of your committee, is it not?
Mr. SMITH. Yes, sir.
Mr. Smith. There are 34 States affected. Out of 17 on the committee, there were 15 of them present, and they voted for it.
Mr. Martin. In your committee are there any members who do not have drainage projects in their districts?
Mr. SMITH. Oh, yes, sir. I have a list of the committee here, if you want it. You take this committee right here. You have Mr. Pou, Mr. Bankhead, and Mr. O'Connor; they are interested in all legislation that is beneficial to agriculture.
Mr. O'Connor. I have voted for every farm-relief measure, and I am still waiting for you to vote for some of my people up home. Last year you said you would. But I am still waiting.
Mr. Hall. Mr. Chairman, I would like the committee to hear Judge Driver now.
STATEMENT OF HON. WILLIAM J. DRIVER, A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF ARKANSAS
Mr. DRIVER. Mr. Chairman, we told you about a year ago what the purpose of this legislation was. We have been before Congress for four years presenting the cause of the people on these reclaimed areas. Last year we presented the matter to everyone, from the President down to every Member of the House and Senate, and we still have the problem with us. Every member present, with the
possible exception of Mr. Greenwood, was a member of this committee when we appeared before you, when we attempted to give you the actual facts, after the committee having jurisdiction of the bill reported it out.
I think we can very briefly present this matter to you to-day in the nature of answers to questions that may be addressed to us. I think you gentlemen are aware of the fact that we have represented before you 50,000,000 acres of reclaimed land. On those lands there are living to-day 5,000,000 or more farmers. Those farmers, in addition to the burdens imposed upon the average man, the man who owns property outside of these districts, are carrying the burdens imposed by the reclamation works in their districts.
When that statement was made before this committee last year, there was immediately a question asked as to whether that was not something that was brought about by the people living on those lands? Of course, it was. It was just as much brought about by those people as the condition in which a man is to-day who bought bonds some time ago and now has them chilling the vaults of his bank, and for whom we are undertaking to afford relief. These people entered upon these lands with the view that they were going to promote their own selfish interests, but they made a mistake in issuing securities on these properties based upon the reclamation districts, under such terms that the conditions existing in the past few years have made it impossible for them to meet their payments.
Now, gentlemen, I want to impress this thought upon you: These people are in a different attitude entirely, in taking care of the problem that confronts them, so far as credit is concerned, from the people outside of the districts, the people who are remote from the problems that confront them. To-day, so far as financial relief is concerned, they are banned. Now, we have just passed a bill authorizing $125,000,000 additional capital to be given to the Federal land banks, and not $1 of that money will flow to the fellows in the reclamation areas.
Mr. O'CONNOR. I voted for that bill.
Mr. O'Connor. The Federal Land Bank of New York opposed it, and kept writing to me telling me that I had voted wrong.
Mr. DRIVER. And I congratulate you.
Mr. DRIVER. And I congratulate you. I voted for it, and I am glad I voted for it. I voted for it, knowing at the time that there were men on these millions of acres of land who would not get one nickel from it.
Now, gentlemen, that is the situation. Even as serious as the conditions may be to-day throughout the country, the man who is located outside of these districts has some equity on which he could possibly raise a little money, but that is not true of these fellows on these projects. They are in a condition where they have placed liens upon their land, deliberately and for the purpose of promoting their selfish interests, but, notwithstanding that fact, they can not borrow a dollar for their own relief when they become delinquent in their taxes. There is no financial resource open to them. There is no loan coming to them from the banks, no credit extended to them. They can not get a loan from the joint-stock bank. No
individual on the face of the earth is going to loan them any money, in the “ sick ” districts, as we term them, because they are unable to pay the debts that are now standing against them.
Mr. MICHENER. Are there any other liens against these districts except tax liens?
Mr. DRIVER. Unfortunately, there have been some private liens, which have come about in this way: Private lenders have entered there and loaned these people money, and they have acquired certain moral obligations.
Mr. MICHERER. But the mortgage would be subject to this lien, or subject to this tax?
Mr. DRIVER. Yes; but a Government agency will not accept any such lien, and so far as that is concerned, no other agency known today will do it. Therefore, when his taxes become delinquent, he loses his land.
Now, let me follow that up-
Are these bonds or liens allocated to separate projects, separate tracts, or to the whole tract?
Mr. DRIVER. They cover the district as a whole. For instance, let us assume that I own a 100-acre farm in the middle of one of these districts. Mr. Ransley owns a farm adjoining, and Mr. Smith owns one just beyond it. My land is forfeited; I quit paying. The property, by operation of law, goes into the hands of the local agency. The revenues of that district are diminished just to the extent that I fail to pay, and you are assuming an additional burden, my burden. That condition has gone along for four years, until here are the districts in an attitude where they are unable to meet the obligations now. If they ever pay out, it will be only the proportion charged against my land, but when they do not pay out and the default is made, we are all in the same boat, and all the property is foreclosed against. I lose my property, notwithstanding the fact that I have stayed there courageously holding onto my land and paying my taxes and trying to protect my equity in the land. It is all gone.
Now, here is the situation. All of these districts are not bankrupt. In fact, you take the bond issues that were mentioned a year ago, $391,000,000; most of the districts have been able to pay, notwithstanding the bad business conditions. The men on these districts are not the ones you had in mind a while ago when you were speaking of the fellow who would want to get the difference between 3 per cent and 6 per cent interest. As a matter of fact, I do not believe the act will be so administered as to give that advantage to men of that kind. If we could amend the bill in such a way as to protect only the districts that are actually in need of assistance, I would be willing to indorse it right now. But I do not know how to do it otherwise than to oppose discretion in the agency which is to administer the act. It is the same situation as we have in regard to this new credit corporation; we must necessarily leave some discretion in the hands of people who will administer an act of that kind. The Secretary of the Interior is fully advised of the actual conditions, and he knows just who is in default, and he also knows those who are able to pay. He knows that this will be for the relief of those people