Mr. SWING. I sincerely hope there will be no partisan action, no partisan consideration given either to the resolution or the bill we have been discussing. They are Democrat and Republican communities, Democrat and Republican farmers who are so deeply involved in this situation and who need this relief. On both sides it should receive nonpartisan consideration.

The CHAIRMAN. Politics are in the discard.

Mr. O'CONNOR. That has never been suggested in connection with this measure.

Mr. MICHENER. No, sir.

The CHAIRMAN. We will be glad to hear you now, Mr. Lozier.

STATEMENT OF HON. RALPH F. LOZIER, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MISSOURI

Mr. LOZIER. Mr. Chairman, may I say in the beginning that I recognize not only the prerogative but the duty of this committee to analyze and review all legislative proposals on which a rule is requested? That is the purpose of the creation of this committee, and I am quite sure that this committee will not abuse its function or embezzle any powers that the rules of the House do not vest them with.

While I am on that subject, may I say that there is another function, or rather, a part of that function, which this committee, I think, should exercise, and should not hesitate to exercise. Where the administration, the executive department of our Government, or the majority party, or the minority party, calls for the enactment of certain legislative proposals of a general class, intended to bring relief to certain vocational groups, and intended to administer emergency treatment to relieve economic distress, it is the function of Congress and the function of this committee to weigh and consider every one of those proposals, and to accept or reject such as they think are not wholesome and wise.

To illustrate, the President has requested enactment of a certain type of legislation, 2 or 3, or 4 or 5 bills that have come before this Congress for action, all of them being designed to accomplish a certain specific purpose, namely, the relief of certain vocational groups. Each of them is palliative, or a treatment for economic conditions. Now, I, as a Member of this House, am willing to go along with the President in so far as my conscience and judgment will permit, and give him support on such of those legislative proposals as I believe to be wholesome. But I deny the right of the administration, I deny the right of the majority party, or of the minority party, to say that in enacting this relief legislation Congress should be confined to the recommendations of the administration or to the recommendations of the majority party. It is the function of Congress, when these legislative proposals come before it, to say, "We will accept or reject these."

But, on the other hand, Congress should exercise its constitutional prerogative to inaugurate other emergency legislation, perhaps along the same line and founded upon the same principles as this legislation which has recently received favorable action in Congress. In other words, I want this Congress to rise to an appreciation of this important fact, that in initiating legislation, in proposing relief

measures, this Congress has a right to add to the agenda of the President, and on its own motion to initiate legislation of an emergency character which will meet other emergencies than those proposed by the President.

Now, this matter has been presented to the rules committee at great length, and in a very persuasive and convincing manner. The committee has listened patiently, and I have no desire to travel over ground covered by those who have preceded me. It is my purpose to gather up the fragments, and possibly to answer some objections which have been urged to the granting of the rule, while this matter has been under consideration by your committee. Therefore I will not deliver a dissertation upon this bill and the policy that under

lies it.

In the first place, I want to call your attention to this fact. The gentleman from Michigan the other day raised the question as to whether or not this act would be applicable or of any benefit to the drainage districts of the people of Michigan. The gentleman is one of the best lawyers in a State that has produced many eminent lawyers. He is one of the best attorneys, we all recognize, in this House, and it would be presumptuous in me to attempt to tell him what the laws of Michigan are. But the gentleman, like some of the rest of us, has possibly been out of practice in Michigan for several years, and possibly some of the details of these Michigan statutes have escaped his attention.

May I just very briefly call your attention to the fact that this bill would be helpful and beneficial to the people of Michigan. I say to you frankly that I do not know of any State the citizens of which would receive greater benefits than will come to the people of Michigan under this bill. In the Michigan compiled statutes, the Michigan drainage laws provide that the county drain commissioner shall issue these bonds. The point was made that if the district tax fund did not have sufficient money to discharge the interest obligations on the bonds, that the county would pay the difference out of the general fund. May I call your attention to this statute upon that subject?

Section 4937 of the Compiled Statutes of Michigan provides:

In case the amount available in the drain fund should be insufficient to pay the principal or interest of any such bond theretofore or thereafter issued when they become due, the same shall be advanced and paid by the county out of its general fund.

Now, if we stop there, as was suggested the other day, we would have this situation, that the counties are guarantors for the landowners in the district. We would have the situation of principal and surety. But the statute provides further:

And reimbursement to said general fund shall be made out of the drain tax thereafter collected; and provided, that such advancement shall not cause the total debt of the county to exceed the constitutional limitation thereof; and all taxes levied under this act, with all lawful costs, interests, and charges, shall be and remain a perpetual lien upon the lands which are assessed.

That is a condition which prevails in my State and practically in every other jurisdiction-no personal liability, no individual obligation.

The statute continues:

And a personal claim against the owner or owners of such lands until they are paid.

In other words, even in the absence of a statute providing for reassessment of these taxes back on the land, or providing for claims against the landowners, under the general law the doctrine of subrogation would apply, and the county would have the right to proceed against the landowners and against the districts for reimbursement of the funds thus advanced. The foregoing provision was carried into the amendment of 1931, and this last act provided that the bondholders may foreclose their lien in a suit in chancery in the same manner as in the foreclosure of a mortgage. That provision was added in 1931.

Section 4933 provides for a suit by a commissioner in an action of assumpsit, or the delinquent taxes may be charged back in the assessment against the land.

In other words, let us not get the idea that when the county advances the amount necessary to pay the delinquent interest on the bonds, that that is the end of the matter. They are in the position of a surety or guarantor that has not only by the common law but by statute the right to enforce the lien not only against the land, but against the individual owners.

Mr. MICHENER. I can see that the gentleman has stated the law exactly as it is in Michigan. But, as I understand the terms of his bill, as stated by Judge Driver, no relief will be given unless the bonds are in default. As long as these bonds are worth 100 cents on the dollar there can be no relief under this bill.

Now, first, in Michigan the district is primarily liable. If the district can not pay, then the county guarantees, and the county is held, as a county, for the redemption of the bonds at 100 cents on the dollar, and the interest. Now, if that is true, then there could be no compromise with the bondholders, because the district is not insolvent so far as the bonds are concerned.

That being true, if this law were enacted, the surveyor would go to Michigan and make a survey of the district and, assuming that he found the district could not pay the bonds, then he must survev the entire county and find that the county can not pay the bonds. If he found that condition, then we might get help; but in none of the districts in Michigan where we have these drainage areas could that condition possibly exist.

Mr. LOZIER. My theory of this law, and my views, may not be in harmony with those of other Members who are better able to construe it, but my theory is that the market price of the bond has absolutely nothing to do with it.

Mr. MICHENER. No; not the market price.

Mr. LOZIER. It is a question as to whether or not the district is delinquent upon those bonds, and a question as to whether or not the conditions and the showing that the district can make, justifies the Secretary of the Interior in affording or extending relief.

Mr. MICHENER. Of course, the gentleman differentiates between market value and intrinsic value, which was suggested here the other dav. If a bond can be collected at 100 cents on the dollar, and interest, regardless of the quoted value of the bond, the bondholder, if he holds his bond to maturity, will be safe; it is just like a United States bond to-day; all he has to do is just hold on to it, whether it is selling at 83 or 103, and he will get at maturity 100 cents on the dollar plus interest.

Mr. LozIER. My construction of this law is that the market price or the intrinsic price, or any other price of the bond is de hors the record. It is simply a question of whether or not the district is delinquent-whether it is in such a condition as to appeal to the conscience of the Secretary of the Interior.

Mr. Cox. What is the prevailing interest in these districts?
Mr. LOZIER. About 6 per cent.

Mr. Cox. It is provided in this bill that the loan by the Government shall be at the rate of 3 per cent. Do you not encourage these districts, as reference was made to this question the other day, who are now meeting their bonds, to default in the payment of interest in order that they might receive the benefit of this legislation?

Mr. LOZIER. I am glad that the gentleman asked that question. It was asked me the other day. I am going to tell you why that situation could not prevail unless this law is indecently administered.

Now, let us see. Section 1 provides that the Secretary of the Interior is "authorized to loan." That is an authority; it is not a direction. Obviously, a discretionary power is a quasi-administrative act, involves the exercise of a judicial discretion.

Now, in section 3 it is provided that loans will not be made until the Secretary of the Interior has satisfied himself by such examination as may be deemed necessary, that the loan will be beneficial.

As I go along, I want to show you how this situation, about which some of the gentlemen raised the question the other day, and which the gentleman from Georgia now very properly questions-how that situation is safeguarded in this bill and how such a situation could never occur unless the Secretary of the Interior recklessly goes ahead and maladministers the act.

Section 3 provides that loans will not be made until the Secretary of the Interior has satisfied himself-not satisfied somebody else. not satisfies the courts, not satisfied the bondholders, but satisfied himself; he can impose limitations, he can make requirements as to the quantum of the evidence which is necessary in order to satisfy himself, but the fact is that he must satisfy himself, by such examination as he may deem necessary-another expression of discretion of the reasonably successful operation thereof.

Mr. BANKHEAD. Now, Mr. Lozier, of course, the Secretary would not undertake to go into a personal investigation of the districts. We must assume that he would rely on the judgment of some of his subordinates who would be entrusted with that duty, and upon whom he could rely, to make an investigation and report.

Mr. LOZIER. Yes, sir.

Mr. BANKHEAD. That same question was raised on the floor of the House in connection with an amendment to the appropriation bill, and I think it is necessary to do so.

Mr. LOZIER. Oh, I am not complaining. I say that when the Secretary sends out his examiners to make an examination and survey of a district, and when the examiners report that the district is not in reality, in good faith, in default, and that there is no reason why relief should be administered to it, no relief should be granted.

Mr. PURNELL. And in that connection, an additional staff of investigators, economists, and lawyers would necessarily have to be employed.

Mr. LozIER. Oh, yes; I do not question that at all, but my point is that no man can force the Secretary of the Interior to extend him a loan when the case that is presented to him does not appeal to his conscience and his good judgment.

The CHAIRMAN. Gentlemen, you will have to excuse me for making the suggestion, but we have two other matters set for to-day, and we are compelled to ask that this hearing be brought to a close as speedily as possible.

Mr. LOZIER. I appreciate that, Mr. Chairman, and I will not abuse your patience any further than to say that in my opinion this is the only bill that has been presented, or, so far as I know, that will be presented, at this Congress, that will bring relief to the owners of the lands in the drainage and reclamation districts. The men who have given mortgages on lands which are not in drainage districts, the life insurance companies, the loan companies, the banks that own them, can take those securities and go to the Reconstruction Finance Corporation, and upon a proper appraisal, can get the funds to replace those bonds for the time being, funds with which to conduct. their ordinary banking operations. But no holder of a mortgage, no holder of a reclamation district bond, will be able to get within a thousand miles of the Reconstruction Finance Corporation with a request for security of this kind.

Mr. O'CONNOR. I understand the reclamation districts are expressly excluded from the bill.

Mr. MICHENER. Oh, no; they are included. Originally they were excluded, but they have put them in.

Mr. O'CONNOR. Not in this bill.

Mr. SMITH. Public districts are included, but not private districts. Mr. LOZIER. The point I make is this, that here are millions of acres of land, here are hundreds of thousands of men, and their earnings and accumulations of a lifetime are invested in these lands, and the Reconstruction Finance Corporation will not reach them. The Federal land banks will not reach them. These other bills that have been proposed will not reach them. Here is a situation that is acute, and it is a situation that will in the long run not cost the Government of the United States a dollar, because these lands. will be appraised, and the Secretary of the Interior in the administration of this act, will see to it, just like the reconstruction finance board of directors will see to it, that upon the advances there is an adequate margin so that the Government of the United States will not lose anything.

Mr. Cox. As far as I am concerned, I would experience no difficulty in going along with you, provided the proposal was for the participation of the General Government along with the States in behalf of giving this relief, with the administration of the law in the hands of State agencies, reserving to the General Government some supervisory power.

100667-32