Mr. SWING. If they can get their outstanding indebtedness refinanced, and probably cut down in some States, probably get the rate of interest reduced, perhaps the length of time in which to pay may be extended, all of that is left to the discretion of the Secretary of the Interior, who will set up the proper agency to carry on these negotiations.

Mr. BANKHEAD. I suppose that is based upon the assumption that the condition of agriculture will improve in time.

Mr. SWING. Why, sure; and that is the assumption on which we voted $2,000,000,000 for private corporations, that we were going to tide them over until conditions improved.

Mr. MICHENER. As a matter of fact, all these drainage districts are joint ventures between the people interested. They start out and they succeed for a while. Then adversity comes. Now, they are in financial straits, and the real purpose of this is to permit them to refinance their joint venture on more favorable terms. Is not that it?

Mr. SWING. I think that is part of it. I think that is a fair statement of part of the purpose of the bill, certainly.

Mr. Cox. You have three classes of liens against property in these areas. The first is the State and county tax; then there is the lien created by the bonds, which is secondary only to the State and county tax. Then you have the general mortgage lien. A sale of any property within the district under a bond tax claim, divests the property of the private mortgage lien, does it not?

Mr. SWING. Yes, sir.

Mr. Cox. Now, when these foreclosures, or these sales, are had by the districts against the defaulting landowners, what interest does the private lien holder manifest on behalf of protecting his claim? Mr. SWING. Well, I will tell you what I know has happened in some cases. They have just simply turned their backs and marked it off and forgotten it. In some cases they have bought the land in and are sitting down hoping that at some time the situation will improve.

Mr. Cox. In other words, what is troubling me is the impression that I have that the proposed legislation is more for the benefit of the bondholders and the mortgage holders than it is for the benefit of the individual farmer.

Mr. SWING. The bill goes as far as it is possible to go to try to save the home, even of those who have been in default, even of those whose property has been sold, where there has been a tax sale, by containing a provision that they shall be given a preference.

Mr. Cox. Of course, you appreciate the fact that the whole of agriculture is distressed, and the situation of these people within these districts is no different from that of the condition of all other farmers, except that this obligation is a little heavier.

Mr. SWING. What you are concerned with here is destruction of a whole community, and because the foundation of the whole thing rests upon the district, if the district in a drainage area can not keep its pumps going, everybody in the community is destroyed. If the levee district can not maintain its levees, everybody in the levee district is destroyed. If the reclamation project can not keep its pumps going to get water onto the arid lands, everybody is burned up, and everybody's property has got to be abandoned.

Mr. O'CONNOR. The objection to this bill has been, from some sources, that you were going one step too far, that there would not be as much objection to lending money to the farmers, or to drainage districts, but you provide distinctly that that money can only be used for the purpose of paying off bondholders. It is like a debtor coming to you and telling you that he owed several creditors, and you said to him, "All right, now, I will give you the money, but you must pay this particular creditor over here." So the net result is that you are jumping right over the debtor, you are giving the money to this creditor over here.

Mr. SWING. You can not say it goes too far. Here is a man who might have an ingrown toenail, and here is a man who might have an ulcer on his stomach, but he has a loop around his neck which is choking the life out of him, which is stopping the circulation of his blood, and that noose must be cut with a knife, if the man is to live.

Mr. O'CONNOR. But why don't you give him the money and let him do with it what he wants? Why do you prescribe that he must pay the bondholder? I know the answer, but could not it be worked out in some way so that you could take care of the situation without tagging that money and saying, "This must go solely to the bondholder"?

Mr. SWING. If you could get rid of the bondholders, for whom this tax is compulsory, and which is choking the life out of these communities, the rest of the situation can be taken care of.

Mr. Cox. What are the States doing to relieve the situation?
Mr. SWING. Everything they can do.

Mr. Cox. What consideration has been given to the matter of the States participating with the Government in behalf of giving relief to this distressed class of people?

Mr. SWING. I think that was answered the other day by Judge Driver. Some of these States are in as bad a situation as the individuals are themselves, so that they can not sell bonds, they can not extend any credit.

Mr. Cox. You appreciate the fact that the man in the hills, the farmer, is in identically the same situation as these people down in these levee sections.

Mr. SWING. No such question was asked when we were here with a bill to help out the banks, creating the refinance corporation. What are the States doing to help out the banks? What is the answer?

Mr. Cox. That legislation was not intended to help out the banks. It was intended to help out the whole country, and the argument that it was class legislation, in my judgment, tends to corrupt the public thought on the subject, which is unfortunate. So far as I am concerned, I am prepared to defend the legislation that we had just adopted, upon the theory that in the end, proportionately speaking, it does just as much good to the man in the woods, the man in the hills, as to the man at the head of a bank in the city.

Mr. SWING. All right. If there is any justification for our extending our credit and our aid to private corporations, to business, then there is every reason in the world why we should extend our credit and our aid to public corporations as distinguished from private corporations, because, while we extended aid to private corporations to help business, business may be destroyed and yet brought back

to life again if the communities are kept alive, but if you once let the community be destroyed, you are going to have a hard time reviving business.

Mr. O'CONNOR. Did you vote for the amendment to lend that money to municipalities?

Mr. SWING. No. Was that in the House?

Mr. O'CONNOR. Yes, sir.

Mr. SWING. I do not think I was here; I was in California. Mr. O'CONNOR. Let me ask you another question right here, along the same line. There were no strings in that bill, that the money should be used for any specific purpose, for instance, to liquidate the stock holdings of the banks, or to pay off the stockholders.

Mr. SWING. If I understand the point, your contention would lead to the Government dealing directly with the individuals.

Mr. O'CONNOR. I do not care what they do when they get it. but when you say they can only use it to pay bondholders, why have that intermediary, the drainage district? Why don't you have a bill providing that the Government shall pay the bondholders directly?

Why try to confuse the thing and make it seem what it is not?

Mr. SWING. I do not want to do that, and you do not want to do that, to have the Government take over these districts and operate them, but here are these bonds which, in the present emergency, are sinking the ship.

The CHAIRMAN. And your point is that if they get any relief at all, you must go to the bondholders?

Mr. SWING. That is the place where you have got to get the ship lightened. That is the thing that is sinking.

Mr. O'CONNOR. Why don't you call them right in?

The CHAIRMAN. What information have you as to a possible adjustment with the bondholders?

Mr. SWING. I know what has happened in my State. In practically every one of these districts already the bondholders know the situation they are confronted with, and they have set up bondholders' committees, and they have asked to have the outstanding bonds sent in to the committee. There has been a pooling of the bonds, because they realize that they have made a bad investment, and they are prepared to meet the situation and to cut their claims to the bone. I do not anticipate that we are going to have a great deal of trouble with the bondholders whose values have already shrunk. This bill provides for a settlement at the appraised value of the bonds. I do not doubt but that we are going to reach an agreement with the bondholders, because any sort of a good Yankee trader or bargainer from the Interior Department can enter into negotiations which will result in a great lightening or lifting of the tremendous burden which is sinkng these communties down deeper into this difficult situation, a burden which they can not continue to carry. The Government will be safe, because of that provision in the law which requires a reappraisal at that time of the values, and only permits the issuance of Government bonds of a kind which the district can support and pay for in taxes under existing conditions. If it is ascertained that a district to-day can, in this depressed condition of agriculture, sustain so much in pay

ments on bonds, the Government will be safe, because nobody expects this condition to continue indefinitely.

Mr. PURNELL. What do you say to the suggestion that has been made that other drainage districts which are now solvent may take steps, directly or indirectly, to render themselves insolvent in order to take advantage of this legislation? Is there anything in that argument?

Mr. SWING. I can not appreciate that argument at all. How can a community which is solvent declare itself insolvent, when the first thing that the Secretary of the Interior would do would be to send a man there to investigate, and he would find that they are solvent, and that they had merely defaulted. That is a far-fetched situation, and I do not see how it could possibly happen. The willful default on a bond does not make a man insolvent.

Mr. PURNELL. The things that motivate a man to take advantage of a Government appropriation or Government aid would motivate a district which is composed of men.

Mr. SWING. Parallel your bankruptcy case. The mere refusal to pay a debt does not constitute a man a bankrupt.

Mr. RANSLEY. In the big cities many people are defaulting in payments on mortgages so as to rid themselves of the second mortgage; they are secreting holdings, and doing it deliberately.

Mr. SWING. Well, they ought not to.

Mr. RANSLEY. Yes; but these are trying times, and the way that some people try to save money is pretty nearly criminal.

Mr. SWING. That could not happen with a public corporation whose assets are known.

Now, in conclusion, permit me to say this:

As I understand the purpose of the Rules Committee, it is not to go into the question of the merits of a bill. A great committee of this House has considered this matter for several years. It has made a unanimous report to put that bill upon the calendar of the House. We are here to show that an emergency exists. We have set forth the condition of these communities, in which the life of the community is depending on getting relief.

In addition to that, it is shown that there is a demand to have this legislation brought on the floor, debated, amended, perfected, and acted upon by the aggregate wisdom of the House. All we ask of this committee is that we be given our day in court to present our case to the Members of the House. If they vote it down, that is their privilege and their right. We do not ask the members of this committee to pledge themselves to vote for this bill. If you report out this bill, you reserve the right to vote against the bill, if you want to, when it is brought on the floor of the House. What we do ask, and what we do insist upon, and what, as a great standing committee of the House, we have the right to ask, is that we be accorded our day in court on a matter of such great urgency which affects so many communities throughout the United States, and in which more than 220 Members of the House have already expressed their interest, and joined in asking you to give us our day in court, that we may present this matter fully and fairly to the House for its consideration. Mr. PURNELL. I think Judge Driver made the statement that the individual farmers in these drainage districts are not on a par with other farmers throughout the country, and therefore would

not be able to take advantage of any such legislation as has recently been passed, such as the act creating the Reconstruction Finance Corporation. Do you share in that view?

Mr. SWING. The Refinance Corporation could not possibly help these people. They could not be reached in that way.

Mr. Cox. It will help them as much as it will help the people in

the hills.

Mr. SWING. Oh, it purifies the air that they breathe.

Mr. O'CONNOR. What you say about the function of the Rules Committee is in accord with what I have stated many times, but when a bill comes before the Rules Committee which is entitled “a bill to provide for the relief of farmers by the making of loans to drainage districts "—and that is the substance of the title-and then when you look into it you find that that is not the purpose of the bill, the ultimate purpose or the real purpose of the bill, because there is nothing said in the title about paying off bondholders, and you find that the result of the bill is different from the title, the committee has reason to look into it.

Mr. SWING. Well. do you make the point, Mr. O'Connor, that provision in the bill to pay off the bonds by their reduction in amount and reduction in interest is not the greatest relief that we could give these farmers?

Mr. O'CONNOR. Well, I feel, personally, without disclosing whether I might vote to report this resolution, that there is something misleading in this bill.

Mr. SWING. Well, I want to assure you-
Mr. O'CONNOR. Not deliberately, I say.

Mr. SWING. The members of the committee are here with their consciences free and clear, and we have gone into this matter very fully and completely. I think there will be some benefit to the bondholders, but it is incidental. They are going to have to make a tremendous sacrifice in order to come within the provisions of the bill. But in a great relief measure, the fact that it incidentally benefits somebody else in addition to the primary group named is no reason for denying that relief.

Mr. PURNELL. You insist that this is a fine opportunity to pay a dollar with 50 cents?

Mr. SWING. Yes, sir.

off

Mr. MICHENER. May I make this observation, with reference to the functions of this committee? That is a question that comes up very often. But is not the function of the Rules Committee, the way it is constituted, to permit the responsible heads in Congress to func tion and to carry out their program? I think that is the real purpose of the Rules Committee.

Mr. SWING. Well, what are the responsible heads, if they are not your standing committees?

Mr. MICHENER. Well, the leadership is charged with certain responsibilities, and that leadership must assume those responsibilities, and this committee is the one committee in the House when the party in power, whether it be Republican or Democrat, has a 2 to 1 majority for the express purpose of permitting those in authority to report out such legislation as they feel should be given precedence over other legislation regularly on the calendar.