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Mr. GILCHRIST. Would it be unconstitutional in cases where you are giving the joint-stock land banks the advantage of additional securities; that is, the mere fact that we are giving them an advantage under this bill could not they be made to scale down their mortgages in consideration for that?

Mr. Hovey. But we are not giving them anything in this bill except what is being given to all creditors of the farmers. The jointstock land banks do not come into the picture in making these land bank loans or Land Bank Commissioner loans in any way except as creditors of the farmers and they do not receive any of the bonds of the new corporation; they were not given that authority. It may be that

I have misunderstood your question, but as I say, I do not think a compulsory scale-down of their loans could be accomplished.

Mr. GILCHRIST. The fact still remains that they are given an advantage through this bill, and through the arrangement for prepayment of their loans, before maturity. Do you not think it would be constitutional in that case to put some limitation upon

their rights to get money at this time in advance of the time when the mortgage was really due?

Mr. Hovey. I think that if we put in the act a limitation to the effect that we could not refinance the joint-stock land bank loans, or that they could only be refinanced in the event there was a ratable scaling down by them as creditors--that is your suggestion?


Mr. Hovey. I think that possibly would do more harm to the farmer than good, because he is interested in having the joint-stock land banks

Mr. GILCHRIST. I am not making a suggestion that we compel them to do so. I am just more or less wondering if that plan could not be worked out, through some legal means whereby the reduction could be made ratably all the way down the line.

The CHAIRMAN. Anything else? Mr. MARSHALL. I have just one question, Mr. Chairman. To what extent have the joint-stock land banks cooperated under the legislation passed last spring to enable the farmer to get money to

Mr. Hovey. Mr. Goss could answer that better, perhaps.

Mr. MARSHALL. I am asking that question because I had a good deal of correspondence regarding it, asking if they had any funds available to relieve the farmer who was not in position to borrow and I was wondering what they had done.

Mr. Goss. The legislation passed was for the purpose of enabling them to make loans in order that they may be able to borrow money, to meet their taxes, delinquent taxes and interest, and there have been about a million and a half, that is, borrowers for the purpose of meeting those obligations.

Mr. Hovey. You will recall that the bill provided that in order to take advantage of it, they, the banks, would have to agree to reduce the interest rate, not only on the mortgages which were offered by them but on all the mortgages which they held; and to make certain agreements in regard to deferring foreclosure.

Mr. MARSHALL. Have any of them done that? Mr. Hovey. I believe they have not, to the best of my knowledge.

carry on?

Mr. FULMER. To what extent have any of the joint-stock land banks benefited under this law?

Mr. Hovey. Only to the same extent to which any other creditor has. They do not come into the farm mortgage corporation in any way; their bonds may not be exchanged for its bonds.

Mr. FULMER. In the passage of the bill during last session a good many thought it was making it possible that they could borrow a certain amount of money to be helpful in liquidating their accounts to the banks.

Now, these banks have taken advantage of their position, in my State, at least, to make it hard on the farmer; in other words, they have foreclosed on the mortgage, taken over the land and refused to reduce the mortgage; bought in the bonds, and in some instances have actually made a profit out of the transaction. I have had a number of cases come to my attention where they have had a lot of trouble with these kinds of transactions, where farmers have attempted to deal with the joint-stock land bank in trying to refinance their indebtedness with the Federal land bank.

Mr. Hovey. Mr. Fulmer, I believe the funds that they have used in buying their bonds are the funds that they have obtained from the Reconstruction Finance Corporation, which is one of the sources of funds, and not those made available to the joint-stock land banks in the bill of last May, the one which permitted them to extend leniency to the borrower in the matter of delinquent taxes and interest and things of that sort, on assignments of which they might borrow provided they agreed to the certain limitations stated therein. The compulsory scale down is a matter which perhaps could be handled in the making of Commissioner's loans under the 75 percent limit, which are available now.

Mr. FULMER. Under that policy they would go to work and close out the mortgage and resell the land, perhaps at a sacrifice, and use the money to buy the bonds at a reduced price, with the amount received from the land and the amount received on the bonds, the difference between the price paid and the actual value of the bonds, and in some instances they have actually made a profit out of the transaction because they held a first lien or mortgage on the property.

The CHAIRMAN. There is nothing in this bill which would keep you from making every effort to get them to agree to these limitations?

Mr. HOVEY. No.

The CHAIRMAN. And to make their restrictions a little less severe than they were last year?

Mr. Hovey. That is right. I believe the present act, passed last spring, does not permit them to take advantage of it because of the interest rate on their outstanding bonds.

Mr. FULMER. I can give an illustration of what just took place in the case of a man who had a land-bank loan in the amount of $13,000, that is, made application for a land bank loan of $13,000 and an additional Commissioner's loan, and the joint-stock land bank refused to accept this, and at this time if that land were sold at a private or a public sale it would not bring more than $10,000. They refused, and proceeded to foreclose the mortgage and that is what they obtained; they had every opportunity to receive a fair value for their loan, because it was a splendid farm and the value was there.

The CHAIRMAN. It may be they will be more considerate following the decision of the Supreme Court recently.

Mr. HOVEY. I think so.
The CHAIRMAN. Anything further?

Mr. BOILEAU. I would like to ask one question about scaling down these debts. About what percentage of the farmers' debts have been scaled down; have you any information on that?

Governor MYERS. The compilations which we have show that of all the Land Bank Commissioner's loans approximately one sixth of the amounts were scaled down and that scaling down was accomplished in about 17 percent of the cases.

Mr. BOILEAU. Seventeen percent of the loans in the Commissioner's loans?

Governor MYERS. Yes.

Mr. BOILEAU. Do you have any figures as to the aggregate amount of the debts actually scaled down in the farmers' loans?

Governor MYERS. We could get the figures for the record. We have the figures for each loan, showing the scaling down, if any.

There is, however, another important phase. The interest rate on the mortgage which is refinanced is about a fourth less. The borrower receives the advantage of that reduction also.

Mr. BOILEAU. That is, the interest rate under the new mortgage?

Governor MYERS. Where the debts were refinanced the interest rates were scaled down.


Governor MYERS. That is, the reduction amounts to about one fourth of the interest previously paid.

Mr. BOILEAU. Your figures do not include the amount of interest, in this scaling down, do they?

On the $210,000,000 loaned from May 1 to December 31, 1933, the scale-downs amounted to approximately $4,000,000.

In addition to the reduction of the borrowers' indebtedness through scale-downs, substantial savingsin annual interest payments are being made through the refinancing of the indebtedness. Reports from the 12 banks indicate that this saving amounts to approximately $2,700,000 per year on the indebtedness refinanced by land-bank and Land Bank Commissioner's loans during the 8 months, May 1 to December 1, 1933.

Governor MYERS. No; that scaling down is on the principal.

Mr. Hovey. Except to this extent, that the creditor has reduced or canceled the amount of accrued interest in some cases.


Mr. Hovey. And in that event it would be a part of the debt scaled down.

Governor MYERS. Yes; but I was just speaking of the amount of the debt scaled down.

Governor MYERS. And the one-fourth reduction in interest rate.

Mr. Boileau. The pill provides for that and I was just wondering if it would be possible, Mr. Chairman, to have that included in the report, showing the amount acutally scaled down on these loans.

The CHAIRMAN. Could you submit that?

Governor MYERS. Yes; we can get that information. Of course, the loans that have been closed have been those which are more easily dealt with. In some of those closed later on it may be that the amount scaled down will be larger.

Mr. TOBEY. Mr. Chairman, I would like to ask this question.

The CHAIRMAN. Will you come up a little nearer so we can hear you?

Mr. TOBEY. You referred, Mr. Myers, to these bonds being sold

at par.

Governor MYERS. Yes.

Mr. TOBEY. To what extent will they be exempt from taxation; the same law applicable to the Liberty Loan?

Mr. Hovey. To a greater extent than the bond under the Second Liberty Loan Act as amended, since they are exempt from taxation except estate inheritance and gift taxes as provided therein.

Mr. TOBEY. Above $5,000?
Mr. Hovey. Yes; they are not subject to the surtax.
Mr. Tobey. The same as the 472 percent bonds?
Mr. HOVEY. No.
Mr. TOBEY. Thank you.

Mr. KLEBERG. I would like to call attention to the fact that in my opinion there will be more difficulty in scaling down these debts because of the present condition in the economic field which may have improved considerably since March 4.

The CHAIRMAN. Is that all? Do you gentlemen think, you can submit the information called for in time to have it ready to be printed in the hearings?

Governor MYERS. We will be glad to do that.

The CHAIRMAN. What is the pleasure of the gentlemen of the committee with reference to the committee going into executive session?

Mr. MITCHELL. I move that the committee go into executive session.

Mr. KLEBERG. I second the motion.
(The question was put and the motion was agreed to.)

The CHAIRMAN. I would like to ask one or two of you gentlemen toremain with us to furnish any additional information that we might require, Mr. Myers, if that does not interfere with your other plans.

Governor MYERS. I can stay, or either of us, if you desire, Mr. Chairman.

The CHAIRMAN. Perhaps you could furnish any desired information that may be needed during the discussion and the reading of the bill and we will be glad to nave you.

Governor MYERS. Yes.
(Thereupon the committee went into executive session.)
(Information referred to is as follows):

Federal Land Banks and Land Bank Commissioner, farm-mortgage loans closed
May 1, 1933 to Dec. 31, 1939, and loans outstanding Dec. 31, 1933, by States

(Farm Credit Administration-Division of Economics and Statistics)


District no. 1:

New Hampshire.
Rhode Island
New York.
New Jersey

District no. 2:

West Virginia.
Puerto Rico

District no. 3:

North Carolina...
South Carolina


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