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 thoug't 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

shall refund to the purchaser from the Corporation all principal payments theretofore made by him, less the amount of any damages to the property occasioned by his fault."

Thus, so long as a purchaser from the Corporation has an unpaid balance on any mortgage incident to such purchase, he does not have title in fee simple. Regardless of the worth of his equity, the high productive value attained and maintained on the farm, or regardless of the current position he may have maintained throughout the life of his loan, he could not voluntarily or involuntarily transfer title without approval of the Governor.

Through the exercise of the authority given in this subsection, together with authority given in other sections of this bill, the Government would become the greatest potential landowner in the country.

Section 12 (d): The rights and privileges enjoyed by all other borrowers, as provided in the Frazier-Lemke Act, would be unjustifiably denied to all borrowers of this system who availed themselves of the refinancing privileges set forth in this section.

Section 13 takes away the authority of the associations and the banks and transfers it to the Governor to determine to whom sales shall be made and the price and conditions of such sales.

Section 14 (a) provides that the Governor may change the terms of all loans, new and old, and provide variable payments, which now rest with the associations and the bank.

Section 14 (b) gives authority to the Governor to adjust up or down the size of any farm, the owner of which is in need of the refinancing benefits in sections 10 to 13, inclusive. This gives unwarranted power to the Governor to determine what shall "constitute an effective farm management unit."

This provision gives the Governor the authority to determine the type of farming to be carried on in any area and in addition thereto the authority to subdivide any farm in any manner that he deems advisable in the event the owner of such farm was forced, by reasons beyond his control, to seek the refinancing provisions of this bill.

We do not think even the directors of a national farm-loan association should have the power provided in this subsection over any private landowner, much less have this power vested in one man or even in a group of individuals located in Washington or any place else. This decision should be left to the farmer.

Section 15: The Governor controls the collection policies of the banks, such as determining the use of reamortization, or variable payment plans. The collection policies have heretofore been the responsibility of the banks and the farm-loan associations.

Mr. SHORT. I would like to have the privilege of answering another question.

Senator BANKHEAD. No; the committee may want to examine you on any other questions.

Mr. SHORT. So far as this applies to the questions that have come up. Senator BANKHEAD. You may make a fair statement of what you want to say.

Mr. SHORT. I would like to have the opportunity to clarify and to submit a short concluding statement.

Senator BANKHEAD. All right. We want your views.

Mr. SHORT. We want to be constructive and not misunderstood. Senator BANKHEAD. We do not want that statement held up in any way, because we want to have these hearings printed promptly. Mr. SHORT. Here is another thing. In the refinancing provision the Governor is given authority to determine who is entitled to a scale down.

Senator MILLER. You are going to cover that in your statement? Mr. SHORT. And the amount, and so on.

Senator BANKHEAD. I asked you in the beginning if there was any centralization you objected to except in the refinancing part of the bill. Mr. SHORT. That is getting back into the refinancing. Senator HUGHES. You want that there, don't you?

Mr. SHORT. NO; we think the determining power should be out there with the local association.

Senator HUGES. You make it pretty hard on people out there. When all those people who want that scaled down find that they have the power, I should think they would leave home for a season. Mr. SHORT. We feel that they are in the best position to make those decisions. They are in a much better position than anyone elsemyself or anyone here in Washington.

Senator HUGHES. I am not as hopeful about some of these things, maybe, as you people are. The local boards are not, many times, made up of very strong men. I do not think they are the kind of men who could I would not say "intelligently," but they certainly would not do it.

Mr. SHORT. Our position on that is if you want real administration, if you give responsibility to those boards you will get them to do a better job, than anybody here, even the bank.

If the local boards of these associations had had more power in the last 23 years, we feel we would have avoided some of the mistakes we have made.

Senator BANKHEAD. As I understand it, you have no objection to the rate of interest proposed in this bill? You are not fighting the bill on account of the 3 percent interest if the Government can get the money back?

Mr. SHORT. No, sir.

Senator BANKHEAD. You are opposed to the method of administering the bill; that is, you insist on a board. You want to change the system that has been provided ever since the Farm Credit Administration was set up or since it was organized?

Mr. SHORT. That is right.

Senator BANKHEAD. You want to have one administrator, and you want a board, a corporation?

Mr. SHORT. That is right.

Senator BANKHEAD. That board to have five directors?

Mr. SHORT. That is right; six with the Secretary of Agriculture. Senator BANKHEAD. That, of course, is not an objection to the bill. Your objection is that it is not in the bill-not that it is in the bill. Mr. SHORT. That is right.

Senator BANKHEAD. You want a change in the form of administration to five, plus the Secretary, each to have a $10,000 salary.

Mr. SHORT. I would like to call attention at that point that that is not a new policy with our organization; we have always been in favor of that.

Senator BANKHEAD. I am trying to get what your attitude is here, since you represent the Farm Bureau.

You do not object to the rate of interest; you do insist upon a board of directors. You do object to the retirement of stock owned by the farmers in the loan association?

Mr. SHORT. That is right.

Senator HUGHES. You do not want that paid immediately?
Senator BANKHEAD. He does not want it paid at all.

Mr. SHORT. We did not go into detail on that yesterday. We feel you cannot have cooperative marketing or cooperative organization on the one hand and lack of financial responsibility on the part of the folks who are participating in this program on the other hand.

Senator BANKHEAD. Where is your cooperative marketing to borrow money?

Mr. SHORT. These are cooperative institutions to go into the market to sell credit.

Senator BANKHEAD. Suppose you get the money otherwise. Suppose the Government guarantees the bond, as is provided in this bill, and as is in effect now, a better guaranty, and you do not have to go out and buy one. You have no market involved. You have a formula about cooperative marketing that I am trying to submit to you does not apply to this situation.

Mr. SHORT. Senator, I would like to ask this question of the committee: Can you have decentralization on the one hand and Government guarantee on the other?

Senator BANKHEAD. Of course, you cannot have it if you do not give the Government any control at all except furnishing money. You cannot have it any other way.

Mr. SHORT. That has not only been proven in this financial agency but in almost every other financial agency in the United States. I think this committee must decide if it wants a cooperative credit system.

Senator BANKHEAD. Suppose you want a credit system established by farmers a land credit system so that they can get long-term money at a low rate of interest-and that is your primary objection Had you rather just stand on the idea of a cooperative if you can work out that system yourself?

Mr. SHORT. We feel that we have a system that has brought credit to the farmer at the lowest interest rates, I think, of any country in the world. I do not think there are any farmers in the world who enjoy lower interest rates than we are now enjoying.

Here is what we are fearful of: During the depression there was another agency set up strictly a governmental agency--and the Government guaranteed the bonds, as I understand it, to go out and save the homes of people. They are taking losses. The mere fact that the Government came in and guaranteed bonds did not save the homes; they are now foreclosing. Congress has refused to make appropriations to continue that service.

If we go into a strictly governmental agency, the Government guaranteeing bonds, and allowing all the losses to accrue to the Government, we may find Congress in a frame of mind that it has not been in in the last 7 years, and they would say: "We can't continue this thing of making these funds available to meet the credit needs of agriculture."

Senator BANKHEAD. You sound very much like bankers talk.

Mr. SHORT. NO; I don't want anybody to misunderstand me. I think what we are interested in is just what you are interested in. We want it on a permanent basis.

Senator BANKHEAD. You want to go on as is, like you have been? Mr. SHORT. No; we are making some suggestions here that we think will strengthen the system.

Senator BANKHEAD. They are minor ones. business of the association stands today?

Do you know how the You seem to think it is a

great success and want to continue it; that it is farmer-owned, farmer-controlled.