other governmental agencies either concerning an organization that desired credit accommodation, or perhaps concerning banks in which it was depositing funds.

These various agencies are now sometimes willing to give the information, but they have no legal authority to do so. This section does not require them to do so, but it would permit them to give this information.

Mr. HOPE. That is in case of information concerning loans to cooperatives?

Mr. MYERS. In relation to the credit of the borrowers from intermediate credit banks, and information in relation to banks in which they have their deposits.

The CHAIRMAN. All right.

Mr. MYERS. Section 9 will broaden the present authority of the Governor, and the banks for cooperatives, with respect to the making of physical-facility loans to eligible farmers' cooperative associations, to include loans for physical facilities for all cooperative business purposes.

The present law provides that the banks for cooperatives can make loans to cooperative marketing organizations, both for working capital and for physical facilities. They cannot make loans for physical facilities to cooperative purchasing organizations.

For instance, a local farmers' cooperative supply organization buys gasoline or buys seed or buys furniture, and it cannot obtain a facility Ioan. This would broaden the purpose so that we could make physical-facility loans to cooperative purchasing associations, and also to cooperative associations furnishing farm-business services. It would make a loan possible, for instance, where you have a group of farmers who want to put up a transmission line, cooperatively, to buy electricity. These facilities for rendering business services to farmers on a cooperative basis

Mr. ANDRESEN. It would permit them to be made for any line of business, would it not?

Mr. MYERS. Business, cooperative business.

Mr. ANDRESEN. Yes.

Mr. MYERS. That would be marketing and purchasing, and rendering of farm business services on a cooperative basis, and on the same basis of security

Mr. ANDRESEN. They could carry on a general-merchandising business.

Mr. MYERS. No.

Mr. ANDRESEN. And employ stock issue

Mr. MYERS. No; the present law limits it to farm supplies, the things used in the farmer's business.

Mr. ANDRESEN. In the operation of the farm?

Mr. MYERS. Yes.

Mr. DOXEY. Anything the supply merchant may do, all of that business could be done by the cooperative farm group to supply the farmer or the tenants with the necessary supplies he uses on the farm?

Mr. MYERS. The everyday articles.
Mr. DOXEY. For its operation.

Mr. MYERS. Yes; that is correct. It is solely a cooperative proposition, operated on a business basis, to purchase seed or fertilizer and other farm articles.

Mr. DOXEY. This is to finance it. You have organizations going into that business, you might say, on a small scale now. But this would enable you to broaden out and they could be broadened out by getting this financial assistance.

Mr. MYERS. We can only make loans to purchasing associations now for working capital.

Mr. DOXEY. Yes.

Mr. MYERS. The cooperatives can now buy seed, and so forth, but where they are required to use a warehouse, or to bring in fertilizer in wholesale lots, requiring the use of physical facilities, this proposed amendment would permit us to make physical facility loans. Mr. DOXEY. They could do business with their own members and outside people too?

Mr. MYERS. They are limited; the provision is that they must do as much business with their own members as with nonmembers. Mr. DOXEY. Yes. But it is true that they can do business with nonmembers.

Mr. MYERS. Yes.

Mr. DOXEY. All right.

Mr. COFFEE. May I ask another question, Mr. Chairman?

The CHAIRMAN. Mr. Coffee.

Mr. COFFEE. Is it necessary for the farm cooperatitves to incorporate in order to be helped through this program?

Mr. MYERS. Yes-well, Mr. Hovey can answer that.

Mr. HOVEY. It must be organized under some State law, and meet the tests of the Capper-Volstead Act in regard to either limited dividends or limited voting power, that is to say, one member one vote; and, in any case, meet this further qualification: it cannot do more business with nonmembers than it does with members. It must be organized, must be an association organized under some law.

Mr. HOPE. Has there been much demand for an amendment of this kind?

Mr. MYERS. Yes. The cooperative supply organizations are very important in a substantial part of the United States, and one way in which the farmers can meet the increasing costs of operation is for the cooperative marketing organization to have a cooperative purchasing power for farm supplies. It is not a subsidy that is proposed here, but it makes credit available on a business basis to a business organization to enable the farmers to help themselves. The CHAIRMAN. All right, Mr. Myers, you may proceed.

Mr. MYERS. Section 10.

Mr. DOXEY. Before you leave that, and I do not want to prolong this discussion, but you say you have had a great deal of demand

for it.

Mr. MYERS. Yes.

Mr. DOXEY. It is true, is it not, that there is a great deal of opposition to it from private industry? I mean merchants and people whose livelihood depends upon this business? I do not mean they

113667-35-SER

have taken the matter up with you, but you do know there are two sides to it?

Mr. MYERS. There is opposition to every cooperative effort on the part of the farmers.

Mr. DoXEY. I realize that is true, but you do not feel that the opposition on the part of the people engaged in this industry outweighs the merits or the benefits that will be derived by the cooperatives?

Mr. MYERS. I believe the farmers have the right to organize to buy supplies and to sell their products cooperatively, and to render a greater service on a business basis, and that is not unfair competition on the part of the cooperatives.

Mr. DOXEY. The selling feature is all right, because they are selling products they produce; but when you go out to compete with establishments in the merchandising end that have been in existence for years, it brings on another question. The agricultural-credit structure was originally designed to help the producer get a better price for the commodities he raised.

Mr. MYERS. The farmers are also competing with private industry in production.

Mr. DoXEY. That is true; but here they are going out and getting into another line, a different field.

Mr. MYERS. You have the local merchants, who buy and sell products in competition with the farmers.

Mr. DOXEY. I do not mean to argue it with you, but I just wanted to get in the record that there was opposition to this amendment. I want to help the farmer all I can, but at the same time I do not want to destroy the business of the small merchant and other business.

The CHAIRMAN. Governor Myers, I think probably this is a good place to interrupt you for a moment.

Mr. Hohenberg, president of the American Cotton Shippers' Association, I understand, is compelled to leave this afternoon at 2 o'clock. Mr. WHITE. Mr. Chairman, Mr. Butler wants to get away.

The CHAIRMAN. Very well. We will hear Mr. Butler, and after he has finished we will be glad to hear you other gentlemen.

STATEMENT OF C. W. BUTLER, COTTON MERCHANT, MEMPHIS,

TENN.

Mr. BUTLER. Mr. Chairman and members of the committee, in the first place

Mr. DOXEY. Will you give us your full name and where you live? Mr. HOPE. And your occupation.

Mr. BUTLER. My name is C. W. Butler, cotton merchant, Memphis,

Tenn.

I am representing the American Cotton Shippers' Association. Mr. Chairman, in view of the improvement which has occurred in agriculture, and particularly agriculture in the South, due to the present administration's efforts, it is with a good deal of reluctance that I come before your committee today to attempt to criticize any action which it may intend to put into law. But I do feel that agriculture has improved so much that it is about time for the Government to do what the President has often said, that he will as fast as

he can and as soon as he can, get the Government out of business and let agriculture stand on its own feet.

The cotton trade has never opposed the operation of farmer-owned, farmer-controlled, and farmer-financed cooperative organizations. The cotton trade is on record many times over to this effect.

My justification for appearing before you to discuss principally sections 11 and 12 of the bill, and incidentally other sections thereof, is that, as one of the large group of cotton merchants who have economically and efficiently handled the cotton crops of the South from producer to consumer over a period of more than 75 years, we are convinced that the farmers' interest is our interest; that for us to succeed, the farmer must succeed. Hence, I would not be here did I not firmly believe that the best interest of the farmer is being. jeopardized by the many Government activities which are endeavoring to tie in the producer with cooperative organizations.

Did not the actual facts, extending over a period of 10 years, confirm this conclusion, I would not now attempt this statement.

Beginning with the passage of the Capper-Volstead Act in 1922, various cotton-producing States organized cotton cooperative associations. These associations were in operation from 1923 to 1929. In 1929 they were all bankrupt, or nearly so, and the Farm Board was organized to take them over. The State organizations remained, in many instances, with the same personnel, or approximately the same personnel, as had existed up to that time. The debts of these defunct organizations were paid by the Government, and the cooperative organizations again started with a clean sheet. To these regional cooperative organizations was added the American Cotton Cooperative Organization, which was a central organization for the various regional cooperatives. From 1929 to 1933, when the Farm Board was abolished, these cooperative organizations cost the United States Government approximately $140,000,000 of public money, taxpayers' money. The price of cotton declined from 18 cents per pound in 1929 to under 6 cents per pound in 1933. The cotton farmers were in perhaps the worst condition that they had been in since 1899.

The

In spite of all this Government aid there were less than 200,000 farmers who were members of the cooperative organizations, or less than 10 percent of the total number of cotton farmers. These cooperatives handled less than 20 percent of the cotton_crop. merchants handled over 80 percent of the cotton crop. In that long period of time, from 1923 to 1933, over 80 percent of the farmers continued to believe that the long-established system of merchandising cotton was preferable to the cooperative system. The Farm Credit Administration Act, while abandoning the Farm Board, has through the Central Bank of Cooperatives continued to assist the cooperatives by direct Government loans. Sections 11 and 12 of H. R. 4512 amend the act by further privileges granted to the cooperatives.

Section 11 amends section 8 of the Agricultural Marketing Act by eliminating the minimum rate of 3 percent per annum fixed by the Farm Credit Administration Act. This minimum rate was put into law as a result of the outrageous rates as low as one-eighth of 1 percent per annum, which were given to the grain and cotton

cooperatives operating in competition with private agencies. As I read the section the rate upon security of commodities is left entirely to the discretion of the Farm Credit Administration and can be made as low as the rate put into effect by the Federal Farm Board. There is some question, too, whether the provisions of the Federal Intermediate Credit Act, permitting loans to the extent of 75 percent of the value of a commodity would be applicable, particularly in view of the language of section 5.

It is not easy to understand just what the intention is with reference to the rate to be charged on what is called "effective merchandising loans ", but it is quite possible loans are now being made upon as low rate of interest as the 3 percent minimum which this act will do away with. Whatever may be the justification for fixing a relatively low rate of interest on loans well secured by commodities, it does not apply to effective merchandising loans which, at least insofar as the cotton cooperatives are concerned, could be more truly designated as unsecured loans. This character of loan explains Governor Myers' statement that there is no immediate prospect that the banks for cooperatives can market their debentures. A cotton merchant operating on his own capital, it seems to me, has a real reason to complain to the Government that finances a competitor by furnishing him capital without any sort of security at such a rate of interest.

Perhaps there would be less right to object if a loan were made to a real farmer-owned and controlled cooperative, but during the last few years the cotton cooperatives have bought cotton from producers, and even from persons who had gotten it from producers, in competition with the private agencies.

Furthermore, when this is done the seller of cotton, who may be a producer, not a member of the cooperative, is forced to join the cooperative association by reason of the fact that he must draw for that cotton on either the individual cooperative association or the American Cotton Cooperative Association, and that draft is a draft in form which they put out over his name, being a clause making him an applicant for membership in the association.

Now, of course, if the farmer sells that cotton to them he does not consider himself in the cooperative; he owes no obligation to the cooperative association.

He has sold his cotton for a fixed price, and got a fixed price, and he is not liable if the cooperative loses, if the cash market goes down. He does not mind, as the form he signs does not makẹ him liable; he simply signs the back of that draft but he does not consider himself a cooperative member; so I do not think he is a cooperative member. He does not sign anything; he simply sells his: cotton and draws on the cooperative for payment.

The CHAIRMAN. Mr. Butler, you spoke of unsecured loans. There are no unsecured loans provided for in this bill.

Mr. BUTLER. I thought there was.

The CHAIRMAN. The loans provided under this bill are secured loans, and there is, as I understand it, no provision for any loan which is not secured. You are possibly referring to some law that provided for commercial loans and commercial credit.

Mr. BUTLER. I thought they were in here.