of new committees, but this bill will be amended, or an amendment. will be offered, to provide that the board of directors in the national association-in the loan association-shall constitute a committee where are such associations. Committees will be used only where there are no such associations. So, just consider the bill from that standpoint.

Mr. SHORT. All right. In another place in here

Senator BANKHEAD. It would not be centralization unless it were a matter of selecting the committees?

Mr. SHORT. Oh, yes.

Senator BANKHEAD. It depends on how the committees would be appointed. What would be the difference on the subject of centralization?

Mr. SHORT. If you had authority to appoint committees when, in your opinion, the National Farm Loan Association was not functioning, then you would certainly be taking away the power out there in the field to select those committeemen, who have up to now been the board of directors of the national farm loan associations.

Senator BANKHEAD. I am saying, now, assuming for the purpose of your centralization idea that the committees will be selected by the farmers and not from Washington.

Mr. SHORT. Then, another place in here it gives

Senator BANKHEAD. Well, wait a minute.

Senator HUGHES. Under (d) of that same section, section 8, you will find that there is an alternative method.

Mr. SHORT. Well, of course, you are touching upon the greatest objection in this bill, because we feel that even this bill, as it is now drawn, as we are certainly considering it from the standpoint of its present language-that authority here is for complete centralization of the system.

Senator BANKHEAD. Where is that language?

Mr. SHORT. I don't know whether the committee wants to take the time. I haven't got my marked bill here; I am not familiar enough with it. There have been suggestions to change that. That is certainly in line with our theory.

Senator BANKHEAD. That is the use, wherever it can be done, of the board of directors of a national loan association?

Mr. SHORT. One step further, Senator. In the event there happens to be a county or an area not being served by-and I think about 98 percent of the territory in the United States is now being served by farm loan associations-but if there happens to be an area not being served, and assuming sufficient volume to justify establishment under the present regulations of a farm-loan association, then the farmers should be called upon to organize a farm-loan association there, and the duties of that committee transferred to the newly formed association, so that it will be put in the hands of the duly elected farmers in the area being served.

Senator HUGHES. In other words, if you left out "(a)" under section 8 and adopted something similar to the "d" under the same section— "d" on page 11-providing not for the appointment by the Governor but that the directors should be that committee, with a provision that in cases where they had no such farm agency the Governor could make the appointment in that case until such farm agency was set up in that

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particular section, that would probably cover your views on it, wouldn't it?

Mr. SHORT. That is right, sir. There is another provision in here

Senator HUGHES. In other words, you do not want the Governor to have power to appoint this committee?

Mr. SHORT. That is right.

Senator BANKHEAD. Do you go far enough to say that where there is no association or board of directors and a committee is needed, in no event should the Governor have power?

Mr. SHORT. If the area is not being served by a farm-loan association, the bank or the Farm Credit Administration would have authority to set up a committee until such time——————

Senator BANKHEAD. You are not taking the position that under no circumstances the Governor should not have power to appoint a committee?

Mr. SHORT. No.

Senator HUGHES. If there is no agency, there could not, therefore, be any directors. Until such directors exist or are set up, the Governor cannot set up such a plan?

Mr. SHORT. That is right.

Senator BANKHEAD. I think there is no difference among any of us about the need or advisability of committees being selected by the farmers or primarily of having the board of directors of the association as the committee. As far as that point is concerned, there isn't any difference.

Mr. SHORT. I see; that is fine.

Senator BANKHEAD. Let us go to the next point.

Mr. SHORT. There is another point in "b". I can't lay my finger on the exact language, but the Governor has authority to determine who shall be members of that associatoin.

Senator BANKHEAD. Where is that?

Mr. SHORT. In "b" of section 8. I think, as heretofore, that the farmer directors of the farm-loan association are in a much better position to determine that than is anybody else anywhere else.

Senator BANKHEAD. That language refers to territorial convenience, those who can be conveniently included. That is to suit the convenience not only of the applicant but of the association. It is a convenience, not a right. I think that is a very small item; we are wasting time on it. Go on with the next one.

Mr. SHORT. Reference was made yesterday to these seven methods that have just been discussed and how they could be made mandatory on the bank. I would like to amplify my answer to that question of yesterday by the statement that we feel that if in the first instance you have your cooperatives set up here on democratic principles, and then you bring about the provision for allowing the farmerborrowers of this organization to elect a majority of the board-we feel that through that democratic process, the application of these seven methods of caring for the honest farmer who finds himself in distress will be put in effect. I don't think we will have to worry about that. We feel that that is a democratic process of bringing about sympathetic administration; we all favor it.

Senator BANKHEAD. You think they have had it all the time?
Mr. SHORT. No.

Senator BANKHEAD. Do you think that any change in the law is advisable?

Mr. SHORT. Yes; we think the change in the law to the extent that the majority of the members of the boards of directors of the 12 banks should be elected by farmer-borrowers is necessary.

Senator MILLER. Mr. Short, I do not know of any provision in existing law that specifically and expressly authorizes the banks to do the things which you enumerated yesterday. That has been done or is now being done in some district by virtue of the inherent power of the board of directors to govern their institution.

Mr. SHORT. That is right.

Senator MILLER. That is just naturally an inherent power in the board of directors to govern any financial institution.

The thought occurred to me that we might approach that question in this way, and I want to know your opinion about it.

To avoid the objection of regulations by agencies, the Congress might say that the board of directors of the Federal land bank, of the Intermediate Credit Bank, of the Production Credit Association, of the Farm Mortgage Co., and the other agencies shall provide such and such-then take up the seven or eight objectives; shall provide for the handling of those questions under regulations to be approved by the Farm Credit Administration.

In that way we would have certain provisions incorporated in the law prescribing the duties more or less of the boards of the various boards of directors-creating, in their judgment and in the judgment of local committees where the particular distressed farmer is located, a criterion or a means whereby that relief might be administered, and at the same time we could possibly avoid the criticism that you were discussing with the chairman, Senator Bankhead, when I came in. Mr. SHORT. Senator Miller, our opinion on that is that if you outline that in law, it so seriously affects your collection problem. All of you men have had experience with finance agencies and realize that we do have collection problems. We feel that these regulations are in effect in every bank today.

Now, somebody said yesterday that there was some difficulty on the part of getting a bank to exercise that right. I believe it was Senator Wheeler. Now, we feel that if the majority of these boards are elected-in other words, you are getting a more democratic process there if they are elected by the farmers, we feel there would be all the safeguard that is necessary there to see that you get sympathetic, sound administration to meet the needs of farmers without giving what I might term, by writing those things specifically out in the law, an invitation.

We recognize today, I assume, that these regulations would not be in effect if the banks did not have the power under existing law. I think I am quite certain that they have.

Senator HUGHES. I am not sure of that.

Senator MILLER. I am trying to avoid the creation of a psychology among the borrowers that "I don't have to pay this debt; it will be scaled down." I am trying to avoid the creation of such a psychology, if it would be likely to spring up, by making the payments depend upon a finding of a board of fellow men who are acquainted with the local conditions, who are acquainted with the local drought, who are acquainted with the particular problems of that particular borrower.

I see no serious objection to writing into the law a provision that such and such may be done or shall be done if in the opinion of the board of directors of the local farm association, concurred in by the board of directors of the bank, and approved by the Governor, they find such and such conditions existing. Then direct them to give that relief. I believe we would then be avoiding regulations which might be made in the future, the contents of which we would not know. We would be writing them into the law, and at the same time we would not be creating a psychology.

Mr. SHORT. I think that would only be justified if this committee thought that under existing law that was not possible. Personally I assume

Senator BANKHEAD. If there is any doubt about it, why not make it clear by the law?

Mr. SHORT. For the very thing that the Senator refers to, and that is, it would bring about a psychological condition among great numbers of people that it is not necessary to extend themselves to meet their obligations. That is very dangerous if you determine that you want a cooperative system.

Senator BANKHEAD. Do you think the farmer is going to be quick to deed his land to the Government?

Mr. SHORT. No; I don't think he is going to be quick to do that. The vast number of farmers, we will admit, probably as much as if not more than any other group, want to meet their honest obligations; but if you hold out an invitation you might have enough of them take advantage of it to seriously affect your system and then by that small percentage break down your system to the point where this service would not be available to the vast majority of people who do want to make every effort to meet their obligations.

Senator BANKHEAD. I pointed out that you had emphasized time and time again your objection on the ground of centralization. I ask you to point out the language that you think bears upon centralization that does not exist in present law. You have pointed out certain things about the committees. Is there anything else in the bill except that relating to the appointment of the committees? Senator MILLER. May I make this suggestion, Mr. Chairman, that in view of the fact that he does not have with him his marked bill, he file it later with the committee in order that we can go ahead and finish with the rest of these people?

Senator BANKHEAD. I am perfectly willing to have him hand it to the reporter.

Senator MILLER. Point out the exact language, the line, and the page.

Mr. SHORT. May I ask for the privilege of submitting, at the end of the printed record, with my testimony

Senator BANKHEAD. No; I want it to appear right here.

Mr. SHORT. I understand.

Senator BANKHEAD. You may have until tomorrow to do it.

Mr. SHORT. I am asking for that privilege.

Senator BANKHEAD. Oh, yes; I am agreeing to it. Turn it in by tomorrow, and it will go into your statement in answer to this question. (The matter referred to follows:)

MEMORANDUM ON CENTRALIZATION OF AUTHORITY IN GOVERNOR OF FARM CREDIT ADMINISTRATION UNDER PROVISIONS OF S. 3509

As requested by Senator Bankhead, the following memorandum is respectfully submitted with respect to the centralization of power in the Governor of the Farm Credit Administration in S. 3509:

A careful study indicates that practically the whole bill is predicated on centralization of authority. Some of the sections and subsections are so interrelated, however, that their full significance may not be readily apparent without a careful analysis of the bill as a whole. Therefore, it is very difficult to point out all of the language in the bill that specifically addresses itself to centralization.

Section 3. The governor, with the Secretary of the Treasury, determines maturities, interest rates, manner of issue and sale price of farm-loan bond issues.

This is necessary, of course, if bonds are to be Government-guaranteed, but is an example of the centralization which begins to take place when a start is made in the direction of a Government-owned-and-operated system. The bond committee and board of directors of the Federal land banks, which heretofore shared with the governor and the Treasury responsibility for determining such matters, would, under S. 3509, no longer have any important function.

Section 8 (a), page 9: "The Governor shall determine the extent to which farmer participation in the Federal land bank system can be increased

* * * ""

This authority has always rested in the banks. Also in this subsection, the Governor is authorized to substitute county committees of his own selection for the national farm-loan associations to perform such functions now being performed by either the bank or the association. This, together with other provisions of the bill, gives the Governor absolute authority over all associations and banks in regard to all functions now performed by the Associations and the banks.

Section 8 (b), page 10, gives the Governor the authority to determine who can or cannot become members of the association. This authority, at present, is very properly that of the Board of Directors of the associations.

Section 9 (b), page 12, in lines 12 to 14, inclusive, the Governor is authorized to adjust all farm "indebtedness to the Government, including compromise, reduction, or release thereof, under such terms and conditions as he deems appropriate." This authority gives to one man a blank check to the Treasury of the United States. At present, this authority rests in the bank and the Board of Directors of the Farm Mortgage Corporation, consisting of the Land Bank Commissioner, the Governor of the Farm Credit Administration and the Secretary of the Treasury, or a member of his choosing.

Section 10 gives authority to the Governor to set up the requirements to be met by any borrower who wishes to refinance his mortgage and, therefore, the determination as to who is entitled to such service.

Section 11 (a) rests in the Governor full authority to determine whether or not the requirements of Section 10 have been met.

Section 11 (b): Refinancing of all loans by the Corporation is made mandatory on approval of the Governor.

Section 11 (c) provides that before any Federal land bank borrower can receive these refinancing privileges, the bank shall assign his mortgage to the Corporation on a basis satisfactory to the bank and the Governor. However, it further provides that "any losses or gains incurred or realized on account of the sale or other disposition of the property covered by any mortgage so assigned shall be shared equally by such bank and the Corporation."

Therefore, the Governor having been given the authority to scale-down debts to the Corporation is here authorized to incur losses to the banks and associations without their approval or consideration. This is grossly unfair to the banks, the associations and stockholder-members and borrowers of such associations. Authority for determining losses should rest, as now, in the associations and the bank.

Section 12 (a) gives authority to the Governor, through the Corporation, to enter into a lease with the borrower and gives him very broad authority as to the terms and conditions of such lease.

Section 12 (b) gives authority to the Governor to determine who may repurchase land from the Corporation and the price to be paid.

Section 12(c): The Governor has broad authority in determining the conditions and terms of the mortgage and deed of trust when selling back to the borrower. Section 12 (c) (6) in our opinion is very objectionable. It is much more than a standard acceleration clause, for it not only gives the Governor power to rescind the conveyance, but provides "in the event of any such rescission the Corporation