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pass on the commissioner's loans and turn them down before it would make them available to be handled through the commissioners. Then, they would have to go back and file a new application for practically the same thing. Is there anything which justifies action of that kind?

Mr. Goss. I believe that condition has been corrected, Mr. Glover. When the Farm Credit Administration was first set up it was thought that greater speed and greater saving could be obtained by appointing these special agents of the Land Bank Commissioner for each land bank district to make these applications and to make the commissioner's loans separately. But we ran into innumerable complications, largely centering around the appraisals, and largely centering around the desire of everybody to get a commissioner's loan. We soon found that plan did not work out so that we had to change and make the land bank the agent of the Land Bank Commissioner, with this thought in mind, that they would lend just as much as could be loaned through the land banks and then add a supplemental or commissioner's loan to that. For the first few months we did have a great deal of confusion in many areas, including Arkansas, I think.

Mr. GLOVER. Now, the set-up in this bill provides that the bond may be accepted in full payment for mortgages. Now why not have an independent set-up from the Federal land bank so that you will not run into this same difficulty; why not have an independent set-up from the Federal land bank?

Mr. Goss. Shall I answer that question?
Governor MYERS. Go ahead.

Mr. Goss. I do not quite understand your question, Mr. Glover. Mr. GLOVER. The point I had in mind was this: I find that the set-up in this bill provides for the exchange of bonds, both principal and interest being guaranteed by the Government, which makes them just as good as cash, for mortgages. Now why not have an independent set-up which would make the handling of these loans independent from the Federal land banks altogether, so that they will not have to come together at all in making the loans, and by that means cut out a lot of the red tape that they have to go through now and you could do for the farmer what is intended under the law should be done.

Mr. Goss. If we are to make these loans on a sound basis it takes a certain amount of appraisal work and a certain amount of what you might call red tape to see that the title is correct, and that takes time, of course, it is true. We believe, however, that the land banks are now equipped to handle that as well as it can safely be handled by any group if we were to have a separate organization. In other words, we would have to have two transactions to handle the same thing. And, we think the land banks should eventually go back into the money market to secure the funds to lend when the money market becomes more stable. We want to have the loans flowing through the land bank cooperative system rather than calling upon the Federal Government for funds to make the supplemental loans. We think it can be worked out through one organization. If that is done there will be no need for an additional organization to refund the loans. If it can be worked out under the 75-percent limitation it can be done with the same machinery which is operating for the land bank and obviate the necessity of two separate organizations. The

land bank could do just the same thing as two organizations and there would be no duplication of effort or confusion.

Mr. GLOVER. If the system has been changed, of course, that is different, but at the first we had the plan of the person desiring a loan having to make application to the Federal land bank and after it was turned down he had to make another application.

Mr. Goss. He only makes the one now.

Mr. GLOVER. In other words, the theory was that they had to make the application to the Federal land bank before they were eligible to file an application for a loan to the Commissioner.

Mr. Goss. That has been changed.

Mr. GLOVER. And in turn they had to make application to the Commissioner for the same thing.

Mr. Goss. That has been corrected.

Mr. GLOVER. It has been changed?

Mr. Goss. That has been corrected. A single application is put in now. They do not make application to the Federal land bank and then to the Commissioner; they apply for the amount that they


Mr. GLOVER. But they cannot come to the Commissioner until they have dealt first with the Federal land bank?

Mr. Goss. They do not apply to the Commissioner for a loan at all. The applicant will apply for $1,000 or $2,000 and then when the farm is appraised, the land bank determines how much will be allocated to the land bank and how much to the Commissioner's loan. The practice of applying for two different loans has been changed. There is only one application now.

Mr. GLOVER. I know that it has been done; I am sure that two applications were made in some instances.

Mr. Goss. Yes; but that practice has been abandoned and the one application goes to take care of both loans.

Mr. GLOVER. That is all.

Mr. PIERCE. Mr. Chairman

The CHAIRMAN. Mr. Pierce.

Mr. PIERCE. My question relates to your procedure in determining what price you use in appraising the farm. Prices have varied very greatly during the years, since 1914, and if you were to take the produce prices, for instance, at this time, he would not have a very good chance; if you are going to figure the prices on farm produce some of them would not get any value at all.

Mr. Goss. The instructions to the appraisal division are, with certain exceptions which are made necessary by obvious changes in economic conditions, that it will determine the production of the land and apply the prices which prevailed during the 5-year period, 1909 to 1914, which roughly was approximately 40 percent above the present.

Mr. PIERCE. The present prices?

Mr. Goss. The present prices.

Mr. PIERCE. If they use the present prices some of them would get no loans at all?

Mr. Goss. That is correct; in many areas they would not.

Mr. PIERCE. Yes.

Mr. Goss. And in many areas they would not receive any loan.

Governor MYERS. May I just add one other thought in response to Mr. Hope's question that the commissioner's loans require that all evidence must come within the 75 percent. If the farmer has additional income or has other means or other sources of security to take care of the additional debt, that debt, of course, is not required to be brought within the 75 percent.

Mr. HOPE. I understand, that is true. And I am not quarreling with that general proposition, of reducing farm indebtedness where it can be done fairly, but there are a good many difficulties in individual cases. Now, you might have the case of a farmer who has some other source of income and who might be able to liquidate this other indebtedness; or take the case of a good many farmers, good competent farmers, more enterprising than the average, you cannot freeze them into the same pattern that the average farmer would fit into. A farmer may desire to increase his operations; he may rent some land and produce more stuff, so that I do not believe you can say to that particular farmer just what his actual amount of income is going to be for a certain period of years, in advance, or during the life of the loan.

Now, I do not believe that the law itself actually requires this; at least, I cannot find any language requiring it, and I assume that it is therefore simply an administrative policy. I do not think that you could apply the same rule to all cases and say that the farmer is going to get the same income from the same kind of a farm in each


Governor MYERS. If the individual farmer has other sources of income with which to meet the debt or the loan on the farm, his is made a special case.

Mr. HOPE. Well, if that is true, I think that takes care of it.
Governor MYERS. They are special cases.

Mr. HOPE. And that would obviate a great deal of criticism. Now, here is one other unfortunate feature of the whole thing, and that is the fact that when you start scaling down the indebtedness it is usually the unsecured creditor who must make the biggest concession. The local unsecured creditor has to take most of it because the secured creditor is very reluctant to stand any of the loss and, the farmer is very hesitant about going to the local creditors and asking them to scale down the indebtedness, and yet apparently most of the scaling will have to be done by them, because the insurance companies and the mortgage companies which are secured, are going to be very reluctant to make any concession. Now if something could be done to see that a fair scaling down all the way along the line would take place I think it would be very helpful in working out the situation and getting the farmers to feel more favorable to the idea.

Governor MYERS. That is the primary reason for Governor Morgenthau's requesting that debt adjustment committees be set up in the States and counties. Such farm debt-adjustment committees are now being set up in a large majority of the States in order to find out just how adjustments can be obtained wherever necessary. Mr. HOPE. How successful have committees been in working out these adjustments?

Governor MYERS. They have been operating and have been quite successful. As a creditor, we cannot go into a region and tell the

creditors, that is, other creditors that they must sacrifice a part of their indebtedness. We feel that about all we can do, under the authority granted us in the law, is to make as sympathetic an interpretation of the law as we can and leave to the local people the final determination of how the adjustments will be made if they are to be made.

Mr. HOPE. Is it the policy of the Federal land bank to scale down its indebtedness in cases where a scaledown is required in order to qualify for a Commissioners loan?

Governor MYERS. No.

Mr. HOPE. It takes the same position as every other secured creditor, does it not?

Governor MYERS. But please remember this: The Federal land banks are owned by the borrowers and it stands between the farmer who owes the debt or the mortgage and the bond holder; and further, more, it does not have any funds out of which it can scale down the debt unless further provision is made for such. However, the Federal land banks have been lenient in their treatment of debtors. They have shown a real interest in their outstanding mortgages and in many cases have made it possible for a good farmer to pay his interest. Where it has been found that the farmer could not pay all his interest, the banks have worked out some form of extension which would allow him to work himself out. Although the principal of the Federal land bank loan cannot be scaled down, I think that the Federal land bank borrower has had considered treatment.

The CHAIRMAN. If all other mortgage holders had been as lenient with the farmers there would not be as much difficulty as there is now. Governor MYERS. They have been helping meet the difficulty.

Mr. HOPE. I have one other question. In looking over this statement as to the loans that have been made by the various Federal land banks I notice there is a great difference in the amount that has been loaned by the different banks. For instance, in the month of December 1933, the St. Paul bank loaned eighteen and odd million dollars; Omaha, sixteen and odd million dollars; and the Wichita bank only $3,868,000. Now, I suppose that they did not have as many applications, and possibly the amounts were not as large, on the average, in Wichita, as they were in St. Paul or Omaha, and yet it seems to me that there must be some explanation for the great difference in these figures.

Governor MYERS. The Wichita bank was somewhat slow in getting underway. Many things, about which you are no doubt familiar, were somewhat unsatisfactory. We believe that with the organization which is now operating the bank we can now handle the situation in that territory.

Mr. HOPE. There is not any reason why the Wichita Bank should not be in position to loan money on the same basis as other land banks and with the same expeditious service?

Governor MYERS. No.

Mr. HOPE. As the other banks.

Governor MYERS. Of course, there are a number of reasons giving rise to this variation in amount. Among these are the greater number of applications and the size of the applications.

Mr. HOPE. Yes; I understand; but that would not seem to me to explain the great difference in the figures.

Governor MYERS. There is no great difference in the number of applications which have been closed. The Wichita bank, up to November, had closed or approved 52 percent of all applications received, which was slightly above the average of 50.5 percent for the United States. The Wichita bank is not the largest one, but it is now closing loans faster than it did earlier.

Mr. HOPE. How do the amounts paid out compare?
Governor MYERS. I do not have those figures with me.

them for you if you desire.

Mr. HOPE. I do not think that so so material.
The CHAIRMAN. Anything further?

I can get

Mr. FULMER. I have had a number of complaints from persons who have made applications for loans for refinancing their indebtedMany of these complaints run along this line. When the application is made the appraiser will go out and appraise the value of the land and the building and in a number of cases he reports that that farmer ought to have or should have an additional loan, and that they find that the dwelling should be painted, and perhaps the farmer has started an addition to his house and that it should be completely finished, and in passing on that application a certain amount of the application will be granted for the purpose of building a barn, completing or painting a dwelling, and when the actual amount allowed in making the land loan is not sufficient, and in a great many cases perhaps the party holding the mortgage will reduce his loan to a certain extent, but still the amount is not enough to take it up with the funds which are left if they are required to do certain repair work, paint the house, or build a barn, which if not done the loan is refused, the mortgage is foreclosed, and the farmer loses his home.

Governor MYERS. That is explained in this way.

Mr. FULMER. Would it not be better to let the farmer keep his home?

Gov. MYERS. One of the problems, of course, we have to meet is this: If a man has debts that he has accumulated they have to be refinanced. And in order to make it a good loan there has to be some improvement on the farm; the applicant may need a farm and a half to make an effective operating unit. The loan therefore must also provide a way in which such needs may be financed. It is the same sort of thing as requiring that a debt made for the purpose of improving the farm be brought within that amount.

Mr. FULMER. Would it not possibly be better for the farmer to stay there, continue his operations, and give him some method of refinancing his indebtedness in order to save his home rather than to refuse to do so on account of lack of repairs to his roof and have the farmer lose this home?

Gov. MYERS. It depends on how necessary that farmer's roof is to the house; it might be an integral part of the loan. You see a farm is just land without a dwelling. Some types of farms without barns are not complete farms. If the requirements are reasonable, and most of them are, I think they are necessary. If there has been unreasonable action in some cases, the Administration will be glad to correct it. The CHAIRMAN. Anything further?

Mr. KLEBERG. I would like to ask a question, Mr. Chairman.
The CHAIRMAN. Mr. Kleberg.

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