effect of that is to have that same situation come about, but the primary benefit of the bill is to make it easier for the farmers to carry on, then you are benefiting the farmers, and the incidental benefits are by-products of the bill, to fall where they may. Now, take the Federal land bank proposition. Practically all of the money that has been loaned upon real estate, farms, under the Federal land bank act, or under the intermediate credit act, have gone in the first instance towards the payment of prior obligations. A man has been able to refinance his mortgage obligation on his farm by going to the agency set up by the Federal Government, borrowing the money at a cheaper rate of interest over a longer term, under more favorable conditions than he could have gotten from private capital. The effect of that law is that the man who loaned the money on a private mortgage gets his money and the farmer gets a cheaper rate of interest.

Now, let us take the irrigation district to which I have referred, and in which I am interested. They have an indebtedness on which they are paying 6 per cent interest.

Mr. O'CONNOR. How much would you say that was in the aggregate?

Mr. SIMMONS. About two and a half million.

Mr. O'CONNOR. How widely distributed are those bonds?

Mr. SIMMONS. That I can not answer.

Mr. BANKHEAD. When are they due?

Mr. SIMMONS. I can not answer that. I know they are not due at the present time.

Mr. MICHENER. There are hundreds of them in my district.

Mr. SIMMONS. I do not know where they are located, but at the present time there is no urgency on the part of the bondholders on my project asking for their money; that is not involved in it at all. But there is involved in it just this one element of the difference between 3 and 6 per cent interest, and here is your direct parallel with the Federal land bank, a saving of 3 per cent, less the difference in the land bank rate, 6 per cent as against 3 per cent under this bill.

Mr. O'CONNOR. What did those bonds sell for, at par?

Mr. SIMMONS. Practically at par.

Mr. BANKHEAD. What do the bondholders want for those bonds, on a refunding under this bill?

Mr. SIMMONS. I do not know, because, so far as I know, nobody has consulted with the bondholders on it.

Mr. O'CONNOR. There was a lot of talk here yesterday about getting the bondholders to agree to take 25 or 50 per cent on the bonds. I do not know how you are going to work that out practically, because one bondholder could hold up the whole thing.

Mr. MICHENER. The way they are going to try to work it out is this, that these bond issues were bought by certain firms, not naming any bond company, and they sold them to their subscribers. They did not guarantee the payments, but they feel that the subscribers are entitled to something, that they have a moral obligation. to make the payments to the subscribers. They have gone largely to the distributing points, to the banks, and said to them that these bonds are in default, that they are no good, and if we can salvage them, let us do it, will you agree to it? And they are getting people

to come in and sign up, agreeing to take whatever they can salvage the bonds for. As I understand it, that is the modus operandi.

Mr. SIMMONS. Let me state this, that whenever those farm operations have been refinanced by farm loans, there has been neither a presumption nor a requirement that the man who holds the mortgage on the farm will accept less than face value. I think you will find in most instances that the bondholders will be asking for the face value of their bonds. Now, getting back to the specific case, on the project that I have reference to, it means a saving of over a dollar an acre interest charges a year on that project.

The CHAIRMAN. Then on the basis of your supposition, we would have to take care of all the loans that are out.

Mr. SIMMONS. I think, sooner or later, Mr. Snell, that if this bill became operative, not only the bondholders but the districts would be asking for it, because it would mean the refinancing of their obligations at a lower rate of interest. That is the policy that the Federal Government has established in these other agencies, and there is no reason to say that it woud not be the policy that ought to be followed if this bill should pass.

The CHARMAN. That would not take care of the farmers in my section of the State. They have got loans on their farms and are paying 6 per cent, and they are being foreclosed right now.

Mr. SIMMONS. That is a very proper question, and the answer is simple. Your individual farmer on the project now has available, if he can meet the conditions laid down under the farm loan act, an opportunity to make a loan. But that applies to the individual farmer. On a specific project of this kind, you can not make a loan under the farm loan act directly to the people who own the land, but it must be to these irrigation projects. I do not know the drainage set-up, so I do not include that in the picture.

Mr. MICHENER. The farm loan act would not be applicable to defaulting farmers.

Mr. SIMMONS. Let us not talk about defaulting farmers, because I am one of those who believe that we have a great mass of farmers who are not defaulting, but who are entitled to assistance, and who are trying to look forward and make the thing go. These men are fighting an uphill battle. Now, one of those farmers is entitled to consideration as well as the farmer who has given up and quit everything.

Mr. MICHENER. The corollary to this legislation would be further legislation affecting the farm loan act, giving the farmers there a chance to refinance

Mr. SIMMONS. No; because your man who has been able to finance under the farm loan act, in most cases can get along very well. I do not know the conditions on the irrigation district that I have been using as an illustration, but I do know this, that under the United States Reclamation Project in my home county there were, according to the last reports, 41 farm loans, under the farm loan act, on that project. The farmer there is absolutely shut out, Mr. Snell, and for this reason, that instead of considering the charges for reclamation costs as a tax payable annually, they have charged up the total cost of the financing to be paid out over a long period of years against the price of the land as a present encumbrance against the land, and taken that out of its value. When you have done that,

you have made it absolutely impossible for the average farmer to handle in any way the small amount of loan that the Government agency is willing to put on that land.

Mr. O'CONNOR. But legislation could easily cure that.

Mr. SIMMONS. Yes, legislation could cure it, by directing them to ignore this one particular set-up, but you can reach it just as effectively by allowing the Federal Government to extend its credit to the district on the basis of that being a prior lien, just as you are allowing the Federal Government to extend its credit under the farm loan act. So that the people who are involved in this matter are people who have been denied the farm loans, the low rates and long time loans.

The CHAIRMAN. Now, is the Federal Government extending its credit under the farm loan act?

Mr. SIMMONS. I think so. We have set up those agencies, we are supervising them and going ahead.

The CHAIRMAN. Do you consider that the Federal Government is responsible for those bonds?

Mr. SIMMONS. Possibly not to the extent that this bill goes.

The CHAIRMAN. Well, it would make an entire difference in the price of them.

Mr. SIMMONS. The Federal land bank agencies were set up by the Federal Government; their activities are supervised by the Federal Government; their bonds are sold under its supervision, and I think it is pretty generally understood that the Federal Government is behind those activities.

Mr. SMITH. Mr. Chairman, the law was passed authorizing the Government to purchase $100,000,000 a year in farm loan bonds. The CHAIRMAN. That does not mean that they are responsible for the rest of the bonds, just because they purchase them.

Mr. MICHENER. Your question is answered fully in the debates in Congress at the time the law was enacted, when it was said, when this language was inserted, that these obligations shall be instrumentalities of the Government. The question of what an instrumentality was was thoroughly discussed, and it was indefinite and uncertain language placed in the bill, which it was stated at the time did not mean that the Government was back of the loan.

The CHAIRMAN. That is my idea, but I want to get Mr. Simmons' understanding. I think his understanding is the same as ours.

Mr. O'CONNOR. Something was said about this the other day, and I want to get a clear idea of it for the future. Don't you believe that what is going to happen if this legislation is passed, will be that every district will want to refinance its properties?

Mr. SIMMONS. I am very frank to tell you, Mr. O'Connor; yes, sir. Mr. O'CONNOR. Their argument is going to be on the question of interest saving, the difference between 6 per cent and 3 per cent, and therefore they are going to refinance without any negotiations with the bondholders, but at 100 per cent. In other words, there will be $391,000,000 of bonds outstanding at 3 per cent in place of the present bonds at 6 per cent. Don't you believe that is the best that you can work out of this proposition?

Mr. SIMMONS. You might not, on a large number of these projects, be justified in assuming that the bondholders or anybody else would claim that they are worth par, but you will have projects in which

the bonds are claimed to be worth par, and they will insist on par. The people on these various developments are asking, first, for the saving of interest involved, for the long time amortization of their charges, and for a better general financing of their undertakings. I say that a precedent has been established by other activities which have been approved by Congress.

Mr. O'CONNOR. But you do not lay as much emphasis as the other speakers have done here on the possibility of liquidating or refinancing these bonds at 25 per cent or 50 per cent.

Mr. SIMMONS. There may be some that you can do that with, and probably a considerable number in the drainage areas, about which I have no information; but, speaking of the irrigation district bonds, of which I have knowledge, a refinancing of them under the provisions of this bill, in my judgment, would be done practically at par. I want to illustrate the situation in which the Federal Government has gotten itself almost impossibly entangled, in the financing of this type of development. I call your attention to this chart I have here, showing the North Platte River, the farmers' irrigation districts, a private development, and the Federal Government development. Here is an irrigated area in two counties along the river. After that development was undertaken by the initial expenditures under which these obligations were first incurred, the United States starts up in Wyoming and comes down with a Federal reclamation project that completely surrounds this private project. Now, they have involved in that set-up, water carried through a main canal for the purpose of irrigation, a Government activity. They have also involved in it a joint drainage ditch and areas that are covered by surface irrigation and water taken away. But there is also involved this further fact, that the United States developed this great area, surrounding private lands, without charging a cent of interest to these people for the construction cost, and these people are paying 6 per cent on their construction charges. The United States is not only taking from them the value of their lands by developing lands that do not carry the costs that these people are carrying, but the whole operating cost, as between one piece of land here under private development and another piece of land over here under development by the Federal Government.

The CHAIRMAN. I suppose that on the Government project they pay the operating expense and the interest.

Mr. SIMMONS. There is no interest whatever paid upon Federal project funds, except on delinquent funds.

The CHAIRMAN. No operating cost?

Mr. SIMMONS. Oh, yes, sir. The operating costs in both projects are not involved. But the private developments, in this instance. have had to pay 6 per cent interest on construction funds. The United States Government goes around, right next to them, and puts in a development and carries the construction cost in some instances for 75 years and does not charge a dollar of interest.

Mr. MICHENER. That is the chief objection to the Federal Government going into business in competition with private industry. You always reach this stage.

Mr. SIMMONS. I want to submit the matter on the facts that we have before us, that the Federal Government is in this tangle, and here is a way for the Government to help straighten it out.

The CHAIRMAN. By taking over everything else? Mr. SIMMONS. By enabling a refinancing of those bonds. I have tried very frankly to present this matter to the committee as it applies to our people. It is a matter of reducing interest charges and getting a better method of financing, because, due to the direct instrumentality of the Federal Government, those people stand to lose, on account of the difference in the interest charges in that territory.

Mr. SMITH. Mr. Swing of California is present and will address the committee.

The CHAIRMAN. We will be glad to hear Mr. Swing.

STATEMENT OF HON. PHILIP D. SWING, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA

Mr. SWING. Mr. Chairman and gentlemen of the committee, it seems to me that we ought to distinguish between permanent and temporary conditions, chronic and acute conditions. Every industry, every section of the country, perhaps every human being in the United States, maybe, in the world, is to-day suffering from this period of depression. It is true, as has been referred to by the chairman, that industries in his district and in other districts are suffering. It is true, as the gentleman from New York says, that there are people in the cities as well as in the country that can not pay their taxes. But there is this distinction, that industry has been prosperous and will be prosperous again, whereas the condition of agriculture has been chronic, and in my opinion is going to remain chronic for some considerable period of time. The first thing I heard ten years ago when I came to Congress was a promise of farm relief. The first vote I cast, I think, was to rush through a tariff bill for the relief of the farmers, in order to give them higher prices for their farm products; and we have been rushing through farm relief ever since. We have had the Farm Board, with its loans, and agriculture has been going steadily down. Part of the depression in agriculture, of course, is superimposed on general depression, or rather, general depression is superimposed upon the agriculture depression. As the President of the United States said in addressing this Congress on the subject of farm relief, as there is no one cause of the depression, so there can be no one remedy for the agricultural depression. But it is recognized by thinking men on the farms and off the farms, and even in the cities, that something has got to be done to take agriculture out of its chronic depression. It is true that in years to come it will suffer by some temporary depressions, such as the stock market and industry and other sections of the country suffer, until we find some millennium method of preventing these recurring industrial depressions.

Now, as to the precedent that we are likely to establish. Congress has never hesitated in the matter of establishing a precedent whenever it was convinced that there was an emergency, an exigency, an actual need for relief. Nor should Congress hesitate in such a matter. We did not hesitate to loan money to the railroads. We do not hesitate to-day to loan money to build ships and finance ships.