STATEMENT OF W. I. MYERS-Resumed The CHAIRMAN. Governor Myers, you may proceed with your statement. Mr. MYERS. We had completed discussion, I believe, of section 9. Section 10 will permit any "physical facility" loan to be made in an amount not exceeding 60 percent of the appraised value of the security. 66 The present amendment provides, in substance, that in making physical facility" loans we can loan on 60 percent of the security to be financed. This would permit making "physical facility" loans up to 60 percent on whatever is reasonable security, or whatever security is acceptable for that loan. It means no substantial change, may I say, in the idea that was behind the original amend ment. Section 11 will enable the Governor to permit loans on the security of commodities to be made at rates of interest lower than 1 percent in excess of the discount rate of the Federal intermediate credit banks. Apparently some misunderstanding has arisen. There is no change in the interest rate to be charged by banks to cooperatives, for capital, working capital, not to commodity loans. This permits the making of lower rates of interest on commodity loans in order to handle through the banks for cooperatives, discounts with intermediate credit banks, and the funds that would be loaned on commodity loans with money obtained from intermediate credit banks would not be Government funds but would be obtained from some investor, so that the interest rates that could be charged would have to be fixed so we would be able to pay for the sale of the debentures, when the merchants do not need it; but the interest cannot be made lower than 3 percent, the present limitation of loans to cooperatives. Is that point clear? The CHAIRMAN. Yes. You are trying to average it rather than set a specific rate? Mr. MYERS. Yes. We can make the facility loans at 42; that would mean the commodity loans would be 1 percent above the discount rate. The CHAIRMAN. But that is the discount rate on debentures that are sold. Mr. MYERS. One percent above the discount. The CHAIRMAN. Ând there has been some doubt about that? Mr. FLANNAGAN. You do not contemplate any loans on an interest rate that is less than the Government is paying for the money? Mr. MYERS. Less than the intermediate credit bank pays for the money, but that would enable the intermediate credit bank to make the same rate of interest on commodity loans; I mean, the bank of cooperatives could make the same rate of interest that the intermediate credit banks could make. Mr. HOPE. So far as this section is concerned it does not require the lending of Government money? Mr. MYERS. No. Mr. HOPE. By the intermediate credit banks? Mr. MYERS. No. The CHAIRMAN. And no new financing. Mr. MYERS. No. The CHAIRMAN. All right. Mr. MYERS. The commodity loans would come through the bank for cooperatives instead of the intermediate credit banks. The CHAIRMAN. All right. Mr. MYERS. Section 12 amends section 15 of the Agricultural Adjustment Act. It will clarify the definition of cooperative associations eligible to borrow from the Governor and from the banks for cooperatives; it will broaden such definition to include cooperative associations in which farmers act together in furnishing farm business services, and will enable the Government and governmental agencies to use the facilities of large cooperative purchasing and marketing associations without jeopardizing their status under the Capper-Volstead Act and the Agricultural Marketing Act. At the present time the regulations and the law provide that cooperatives cannot do more than 50 percent business with nonmembers. This amendment would provide that when cooperatives, acting as agent for the Government, or governmental associations, then such business would not be considered as either member or nonmember business, but it would be left out of consideration in arriving at the percentage of nonmember business that might be handled. Mr. HOPE. Heretofore it has been considered as nonmember business? Mr. MYERS. Yes; I think so. Mr. HOVEY. I do not think the question has ever been brought up for decision. Mr. HOPE. I see. The CHAIRMAN. This just makes it clearer. Mr. HOVEY. Makes it clear; yes. Mr. HOPE. Let me ask you what is included in the term "business service" to farmers? Mr. MYERS. Farm fire insurance, cooperative farm fire insurance; or the furnishing of electrical service, or water. For instance, if a group of farmers desire to furnish a business service, cooperatively, and would make that a business cooperative, the association will be able to borrow, or could borrow if it had the proper security. Mr. FLANNAGAN. Mr. Chairman The CHAIRMAN. Mr. Flannagan. Mr. FLANNAGAN. May they borrow for any purpose? Mr. MYERS. For farmer business, for marketing, and purchasing.. Mr. FLANNAGAN. I see. Mr. MYERS. The principal classes of cooperatives that need assistance now are cooperatives furnishing fire insurance; they have done over 50 percent of the farm fire insurance for the farmers of the United States. Ordinarily they anticipate their assessments by borrowing from commercial banks. That source of credit has been unavailable, and this would make such institutions cooperative in the nature of furnishing business service of that kind. The CHAIRMAN. There are not any old-line fire-insurance companies offering insurance to farmers now? Mr. MYERS. That is right. The CHAIRMAN. At any reasonable rate? Mr. FLANNAGAN. Is it your idea to put the farmers in any line of business? Mr. MYERS. Only those connected with the farm operations; fire insurance on a cooperative-business basis. Mr. FLANNAGAN. Well, I mean, under this language the farmers could go into any business Mr. MYERS. Their business judgment dictates. Mr. FLANNAGAN. I understand. Mr. MYERS. This is merely to enable us to make loans, within certain limits. Mr. FLANNAGAN. Yes. Mr. MYERS. To furnish business service. The CHAIRMAN. The business of furnishing service? Mr. MYERS. And not for any others; for themselves. Mr. FLANNAGAN. I understood you to say that they could go into the electric business. The CHAIRMAN. Furnishing electricity to themselves. Mr. FLANNAGAN. Yes. Mr. MYERS. They could finance a transmission line, on a cooperative basis, if it were found financially desirable. Mr. FLANNAGAN. It looks like they could do anything else. Mr. MYERS. Sections 13 and 14 will authorize each bank for cooperatives to borrow from, and to buy, sell, or discount paper with any Federal intermediate credit bank and other banks for cooperatives. Any questions on that? Section 15, paragraph (a) will authorize the Governor to except from the stock ownership requirements of section 35 (a), borrowers from the banks for cooperatives whose loans are secured by commodities. That is, we could reduce the requirements for stocks purchased in the case of commodity loans to less than the 5 percent that is now required, $100 for a $2,000 loan. Mr. HOPE. That is to enable you to furnish the same service through the cooperative banks Mr. MYERS. Yes. Mr. HOPE. As to the cooperatives which now deal direct with the intermediate credit banks? Mr. MYERS. Yes. I might say that this type of credit is available to the cotton farmers, and they are now paying an interest rate on commodity loans, and this will authorize the Governor to except the stock ownership requirement on loans that are secured by commodities. Paragraph (b) will authorize each bank for cooperatives to permit the retention of stock in the bank by borrowers who have discharged their loans. It would not require, but would permit, this. There are some commodities which wish to make seasonal loans. They wish to retain stock ownership in the bank for cooperatives so that they will be eligible to borrow next year. This would make it possible for them to retain their stock ownership; and it is optional with the borrower. Paragraph (c) will give each bank for cooperatives the authority to realize, in partial or total liquidation of indebtedness, upon the stock of such bank held by defaulting borrowers. I take it that such is perfectly clear. In case a borrower should default his stock could be taken in partial satisfaction of the loan. Section 17, which amends section 30 of the Emergency Farm Mortgage Act, will extend until May 12, 1937, the time within which the Land Bank Commissioner may make loans to joint stock land banks. for their orderly liquidation; will provide that no such loan shall be made unless the bank agrees that the required reduction to 5 percent in the rate of interest to be paid by its borrowers shall be effective on the next regular installment dates; and will provide that the required forbearance from foreclosures of mortgages for default in the payment of interest or principal shall extent for a period of years from the effective date of this amendment. 2 Section 18, amending section 31 of the Emergency Farm Mortgage Act, will extend for 2 years the period within which the Land Bank Commissioner may make loans to any joint stock land bank for the purpose of securing the postponement of the foreclosure of first mortgages during that period, except with the specific approval of the Commissioner, and except in cases where the property covered by the mortgage is abandoned. These two sections involve no change in terms. They simply make funds available on present terms for 2 more years. Section 19 contains the usual constitutional saving clause; and expressly reserve to the Congress the right to alter, amend, or repeal the act. The CHAIRMAN. If there is nothing further this morning, the committee will adjourn, to meet at the call of the chairman. (Thereupon, at 1:35 p. m., Saturday, Feb. 2, 1935, the committee adjourned, to meet at the call of the chairman.) The committee was called to order at 10:30 a. m., Hon. Marvin Jones (chairman) presiding. The CHAIRMAN. Mr. N. C. Williamson, president of the American Cotton Cooperative Association, New Orleans, La., has asked to appear and file a statement in answer to those filed by the American Cotton Shippers' Association and the Cotton Industry's Employees' Association. While this is an executive meeting, I have told Mr. Williamson that he could be heard briefly. Mr. WILLIAMSON. Mr. Chairman, I want to thank you for extending me this courtesy, in order that I might file a statement in answer to those who appeared in opposition to the proposed legislation. STATEMENT OF N. C. WILLIAMSON My name is N. C. Williamson, of Lake Providence, La. I am a cotton farmer. I am president of the American Cotton Cooperative Association, whose headquarters are at New Orleans, La. First, I desire to correct statements made by preceding witnesses. The cotton cooperatives are not Government institutions. The cotton cooperatives are not Government subsidized. The cotton cooperatives are not Government controlled. The American Cotton Cooperative Association is the central sales agency of 14 State or regional associations. The capital stock of American Cotton Cooperative Association is owned by these State and regional associations, each of which is owned and controlled by farmers. Each of the associations is directed by a board of directors elected each year by the members of the respective associations. Each grower member has 1 vote and only 1 vote, no matter whether he ships 1 bale or a thousand bales. Each State or regional board of directors elects one director to represent it on the board of directors of the American Cotton Cooperative Association. The board of directors of the American Cotton Cooperative Association elects its own officers, employs its management, fixes salaries, and otherwise controls the policies of the American Cotton Cooperative Association. All of the savings or profits of the American Cotton Cooperative Association are returned to the State and regional associations as patronage dividends, or else are set up as reserves in American Cotton Cooperative Association. These reserves belong to the 14 member associations in proportion to the amount of cotton contributed by each association. Any losses which may be incurred will be paid out of these reserves. The American Cotton Cooperative Association has not yet shown a loss in its own operations for any season but has shown a profit each year. It has accumulated a net worth of approximately $2,500,000, after paying patronage dividends to the various member associations. It is true that the accounts of the Federal Farm Board show a loss of approximately $28,000,000 by the American Cotton Cooperative Association on 83 |