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properties were occupied by the owners, where there was little mortgage debt, where taxes were not seriously in arrears, even in 1938—how could such a place be a slum and warrant driving out of the people in the furtherance of a new concept of political economy at a cost to the taxpayers of millions of dollars? Far better to go to each home owner and point out wherein his home violated some municipal ordinance, fire, sanitary, or something else. Far better to make some such proposition like this: "Your house violates such and such a code of this community. It will cost this much to correct it. If you do not have the money we will loan it to you at 2 percent interest with 20 years to pay, a few cents per month. If you are unwilling. then we will be obliged as a public safety measure to take the house, pay a fair but conservative price, do the remodeling ourselves and resell to you or anyone who desires it." Such a program might have used as much as $100,000 or $300,000 of the taxpayers' money, but which would have been ultimately recovered, instead of the millions most of which will never be recovered. But far more important it would have preserved a group of people with a spirit of home ownership, of acquired Americanism, a pirit which will never le conceived or nurtured among tenants of public housing.
I could take all afternoon but the committee has been very gracious, Mr. Chairman, and I think the only reason that I am here, as a private industry man, is this: I could give you plenty of examples. We do not think this takes care of the poor people or needly people. But there are many other objections to it. All we want to be sure of is this: I am not sure that we quite understand the political, social, and philosophical implications in this bill. And after all, it is a measure that covers some 10 years. We are afraid it is going to open up the flood gates. We are afraid it is going to destroy what we think probably is the last frontier in the world where free men still have a chance to work out their destiny, just as the spirit which was brought out in this particular letter, which I am leaving for the record. We want to be sure that everything is done, Mr. Chairman, to preserve this last frontier for free people. Thank you very much.
Mr. Brown (presiding). Thank you, Mr. Davis, you may proceed.
STATEMENT OF WILLIAM D. DAVIS, PRESIDENT, FARM MANAGE
MENT ASSOCIATES, INC., KANSAS CITY, MO.
I am William D. Davis, of Kansas City, Mo. I am president of Farm Management Associates, Inc., 1016 Baltimore Avenue, Kansas City, Mo., and vice president of Suiter Farm Co., Inc., of the same address. The business of Farm Management Associates, Inc., is the management, appraisal, and rehabilitation of farms. The business of Suiter Farm Co., Inc., is the sale of farms and city property and the making of mortgage loans.
I have served as a member of the faculty of the American Institute of Real Estate Appraisers at its farm appraisal case-study courses viven in cooperation with Ohio University of Agriculture, a member of the board of directors of the National Association of Real Estate Boards, and the chairman of the agricultural affairs subcommittee of the Realtors' Washington Committee of the National Association of Real Estate Boards. I am past president of the American Society of Farm Managers and Rural Appraisers and of the Farm Brokers Institute. I am a member of the board of directors of the Farm Brokers Institute at the present time.
I live on my own farm of 180 acres in Platte County, Mo. It is a dairy farm bonght with the savings of previous years and operated out of its own income. It is a fully modern balanced farm.
I am glad to have the opportunity to point out to the committee some of the points in title IV of H. R. 4009 which I believe the committee will feel worthy of serious consideration.
I appear in opposition to the above-mentioned proposal because such procedures as are proposed in the bill are not in the best interest of agriculture.
The bill proposes to define a farm as one which has a minimum production of commodities for sale or home use of $400 per year. This property certainly in my judgment cannot be classed as a farm. Very few farmers with an income that small could be considered a credit to themselves and their community because they simply would not be making a living. This sort of thing would tend to perpetuate socalled rural slums, a byproduct of improper land use in the past which in a large measure has been aided and abetted by ancient taxation techniques.
On page 52, paragraph (c), beginning with line 5, it provides:
In order to be eligible for the assistance authorized by paragraph (a), the applicant must show (1) that he is the owner of a farm which is without a decent, safe, and sanitary dwelling for himself and his family and necessary resident farm labor, or for the family of the operating tenant, lessee, or sharecropper, or without other farm buildings adequate for the type of farming in which he engages or desires to engage; (2) that he is without sufficient resources to provide the necessary housing and buildings on his own account; and (3) that he is unable to secure the credit necessary for such housing and buildings from other sources upon terms and conditions which he could be reasonably expected to fulfill.
In other words, it picks out the poorest risks on the poorest farms those least likely to succeed. This title apparently has been so hastily drawn and casually considered that the effect would be more nearly to provide help for a city man who wants to set himself up a place in the country than for one who is really an operating farmer.
The language of this title is so broad it would give the Secretary of Agriculture unlimited authority to prescribe any type of covenants to see that the farm would be operated in a manner satisfactory to the agents of the Department of Agriculture.
Mr. Chairman and gentlemen, I am in thorough sympathy with your desire to improve farm housing conditions. I ask you, however, not to ignore the fact that we in the industry are steadily at work toward that objective. Enormous improvements have come about during the last 20 years in farm living conditions.
The farmers looking after themselves will never achieve absolute perfection. There will be many mistakes. These mistakes are not all in the same direction, however, and many wise actions cancel numerous mistakes. When a mistake is made by one central planner and impressed on the economy it is multiplied by a factor of several millions. Such a mistake with no counter action to balance it can easily be disastrous.
I do not believe under the American system of government it is the responsibility of the Congress to house the farm people of the Nation.
From my experience as a farmer I know that this bill will not achieve the improvement of farm housing which is sought by the Congress. It will harm those farmers who are trying hardest to better their own conditions through their own efforts.
I do not question the motives of any member of the committee who wishes to support this title of the bill. I seriously question, however, the wisdom of placing in the hands of any Government agency the broad and loose grants of power contained in this title to gain greater and greater control over the lives and fortunes of individual farmers throughout the Nation. It is perhaps unpopular to take this position in view of the worthy motives of the congressional backers of this program. In this connection I would respectfully refer the Congress to the statement by the late Supreme Court Justice, Mr. Brandeis, in the case of Olmstead v. United States, 1928. Mr. Brandeis said:
Experience teaches us to be most on our guard to protect liberty when the Government's purposes are beneficent.
I suggest most strongly to the committee that you refuse to embark the Nation on this program at this time.
I sincerely appreciate the opportunity of appearing before the committee on this issue.
Now, Mr. Chairman, on page 51, title IV, that part of the bill which I am discussing with you today, I note that it is proposed to extend financial assistance, through the Farmers Home Administration.
I offer this suggestion to you, gentlemen : When we look for a good management we usually look for the management record. The management record of the Farmers Home Administration, from the standpoint of managing farms in agriculture, has been notoriously poor. Only the Indian Bureau, I believe, has done a poorer job.
A brief study of their attempts at buying large areas, cutting them up into small farms, improving them for use, and then liquidating them bears that out without question.
The second point I would like to emphasize is line 23 of page 51 of H. R. 4009, which says that the measure of a farm to be assisted under this title IV, is one with a gross income of $400 in 1944.
Now, gentlemen, a $400 1944 income was about a $150 1932 income, and if you will take that up to 1948, it is only about a $750 to $800 income. Seriously, gentlemen, to make a loan on a farm with an income that small is no favor either to the lender or the borrower, because a farm to be economic from the standpoint of an owner, certainly must bring in more income than $400 in 1944 dollars.
I call your attention to page 52 of the bill, in item (c), beginning at lines 5 to 17, the fact that it assumes, in that section, that inadequate buildings are the governing factor in income from farms. In almost 20 years of farm-management experience, there have been less than 1 percent of the cases in which buildings were the governing factor. In all of the cases the factor is soil fertility or management.
I submit that the biggest management problem we have to face is the problem of managing a farm that has too many buildings, not too few. In many cases buildings are being torn down for that reason, and I suggest to you that inadequate buildings is in only a very small percentage of the cases the deciding factor in a losing proposition,
I suggest also that when the borrower described at line 12 is described as one with insufficient resources to provide housing, that automatically picks a man to whom a loan should not be made. And it goes on to say in line 14 that he is not able to secure adequate credit. I submit that in this bill we deliberately pick the poorest possible borrower.
In section 402, at the bottom of page 52, we then say that we are looking for a borrower who has the ability to repay. Presumably then, if he has the ability to repay, he is eligible for normal financing which seems to be adequate.
On page 53, we talk about security, which is dear to the bankers' heart, lines 9 and 10. We provide for security upon the applicant's equity, and additional security or collateral. Are we proposing here. gentlemen, to start a series of second and third and fourth mortgages! I recall that in the good State of Iowa we had a very sad experience with that, not quite 16 or 18 years ago.
Also on page 5:3, line 18, when the Secretary has the a thority to direct the borrower to proceed with diligence to refinance, I think you are imputing to the Secretary probably a greater knowledge than he possesses, because in few cases would one who is financed under as generous an offer as is provided under this bill, be willing even to attempt to refinance.
I invite your attention to page 5t, section 103, having to do with potentially adequate farms. Again we single out the poor farm, that we hope will be adequate.
In lines 13, 14, and 15, we assume that the adequacy of the farm would be increased by buildings. Again that is contrary to all the management experience that one who has worked in the field can bring you.
Again on page 5t, lines 16 to 2.2, we presume that this borrower will adopt practices that will bring him income that will male the farm adequate to pay the loan. Gentlemen, I urge upon you the fact that the two practices that can most do that are, first, to get good dirt, and second, good management. Very rarely are the buildings a factor.
So in effect, in the bill, we indirectly admit that management is the thing that brings income, and yet we propose to give buildings the thing that generally makes the income hardest to get.
I submit again, at page 55, lines 4, 5, and 6, that we give the Secretary authority to make annual contributions up to about the interest and 50 percent of the principle. Again we are subsidizing, encouraging the poor farm, and/or the poor farmer. The Lord made all the land, and he made opportunities for the use of it. In some areas 40 acres is required to support a family and make a profit. In others a thousand acres. It is the productive ability that governs, not the buildings upon the land.
Page 55, lines 17 and 18 say this mortgage may not be assigned and the benefits of this borrowing may not be assignable or accrue to the benefit of a third party. Assuming you have a second or a third mortgage, what happens to the Government's investment when the first is foreclased! How is this benevolent factor of help to be protected in case the interest on the first mortgage cannot be paid?
On page 56 we come to the gift provisions, the Santa Claus section, so to speak. Section 104 of the bill, lines 15 to 20. We talk about an outright grant in this case, to poor farms, which generally means poor farmers, and generally means poor operators.
I wonder, gentlemen, if that is the type of farming we want in this country? Or if our attention should not be directed to better soil and better practices, as has been the policy of the Congress for the last il years, in the system of land-grant colleges.
On page 57, lines 8 to 14, we say that the Government, as a condition to the grant, may require that the landowner enter into stipulations with the Secretary and the occupant to obtain the full benefits. That is very nice language, but it means first, that I as a landowner borrow the money; second, you as the tenant receive the benefit; third, I as the landowner pay for it; you as the tenant again get the benefit, with no contribution.
We call that rent control in Platt County, Mo. We would call it rather usurping of the rights of landlord and tenant. We have had the privilege of having tenants with us for onto 18 years, in an atmosphere of understanding and mutual trust, and I submit to you that such a man would be insulted if such a proposal were laid before him. He has responsibilities. We meet them together, and operate successfully.
On page 57, section 105, lines 17 to 20, we authorize the Secretary to grant a moratorium. That is a very fine thing if properly used, but our benevolent Secretary probably, following the present trend of his actions, would so use it that repayment would be unlikely to be encouraged. I must confess that apparently the trend of our entire Department of Agriculture is toward social good rather than toward agricultural service, and I am very much afraid that such a provision and such a probability, available there, to many, would be used as another social goal to be reached under his direction.
I want to say a word, Mr. Chairman, concerning that provision in section 408 which is found on page 60 of the bill, lines 19 to 24, where we speak of the hard-working local committee, which does the work, takes the blame and has no responsibility, as is characteristic of most Government programs today. Under the terms of this bill we propose to grant him the magnificent sum of $5 per day for his services, and on page 61, section (b), lines 6 to 20, we point out that he has only the power to recommend, no power to direct. We impute to him the wisdom of an appraiser, the judgment of Solomon, the patience of Job, the willingness to sacrifice his own business, give him $5 a day, no authority, and the damnation of his neighbors. I know these men intimately, on our AAA committees, our PMA, as we now call them, who served on the farm-security committees—some have served diligently and well. Some have had the gall, I might call it, to stand up to the Secretary and say, "You follow our recommendations or get a new committee." The records of those committees are good. The records of those who went along are bad, both from a standpoint of loans paid off under the Farm Security Administration, and from the standpoint of the political inference that such a program draws.
I well remember of the Platt County AAA committee when some overzealous member of the Washington group decided they should contribute to the late President's campaign because they were getting AAA money. That did not happen in that section. For that they got the criticism of the neighbors and $5 and eternal trouble.
Again I call your attention to page 62, lines 7 to 14, where the Secretary may require any recipient of a loan to agree that the availability of improvements, and so forth. It is again the control of the Jease. It is rent control in the country. It is the old story of “Let the landlord pay the bill and let the tenant reap the benefit."