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question of taxing power is involved, because whatever Congress does, you

have the same resources with which to tax. Senator BROOKHART. We had just reached the conclusion-I thought you agreed with meall that is behind the bonds is taxing power, and all that is behind the gold is taxing power.

Mr. STONE. Not all, because you have some actual gold base.

Senator BROOKHART. Well, we got that through taxes, did we not? We had to tax somebody to get every ounce of gold the Government owns.

Mr. STONE. All wealth comes out of the ground originally.

Senator BROOKHART. Yes; but when the Government gets it it taxes somebody.

Mr. STONE. That is right.

The CHAIRMAN. Are there any further questions? (After a pause.) We thank you, Chairman Stone.

Senator FRAZIER. Mr. Chairman, I would like to insert a copy of Mr. Stone's letter to me in the record.

The CHAIRMAN. Yes; we will be glad to have it. We thank you, Chairman Stone, for your kindness to the committee.

(The letter of Chairman Stone to Senator Frazier is here printed in the record in full, as follows:)

MARCH 23, 1932. Hon. LYNN J. FRAZIER,

United States Senate. DEAR SENATOR: In response to your recent request, I have gone over your bill for refinancing agricultural indebtedness (S. 1197), and I wish to commend you for your recognition of the serious problem which confronts our farmers as a result of the great burden of debt which was incurred at a higher price level and which they are now finding it impossible to liquidate with low-priced farm products.

The Farm Board is heartily in favor of any sound workable method of correcting the unwarranted price deflation which has brought such distress to all agricultural regions. The board indorses in general the resolutions on monetary stabilization recently adopted jointly by the Grange, the Farmers Union, and the Farm Bureau Federation. The Glass-Steagall bill is a step in this direction. We believe that every effort should be made to bring about a sound controlled credit expansion designed to aid both agriculture and industry and to effect a restoration of the price level. With such improvement in prices, our farmers will be in better position to liquidate indebtedness and to face the future with confidence. I am inclosing a marked copy of recent speech in which I discussed the importance of the problem of restoring the farm price level.

In examining your bill a few questions have arisen as to how it would work out if put into operation. As I understand the measure it would refinance the agricultural indebtedness of the country on the basis of a fair value of the land plus 50 per cent of the value of improvements, and at a rate of interest not to exceed 142 per cent. The Federal reserve banks would issue a large volume of paper money based on land in exchange for the farm-loan bonds. This money put into circulation would be expected to raise the price level so that farm products would sell at a price which would justify land values at or above levels at which debts were incurred. By keeping a good deal of this paper money in circulation the price level would be maintained at some level substantially higher than that prevailing at present.

One of the questions raised concerning your bill is if the general price lerel were raised—and presumably it would be under the provisions of the bill—would the prices of farm products be kept on a permanently high level? In other words, is the bill adequate to prevent overinflation and then a later drastic deflation of farm prices? Would the bill necessitate the United States going off the gold standard and substituting therefor a managed currency system based partly on land? I am not quite clear as to whether you would expect to retire the issue of Federal reserve notes by later selling the bonds to the public. I am wondering how a permanent market might be maintained for such bonds at 142 per cent interest. further question is, Might not the bill stimulate expansion of agriculture into submarginal areas and add to the surplus as a result of reoccupation of farms which have been abandoned since 1920? These are some of the questions which have come up in considering your bill and they seem to be pertinent to its successful operation.

Assuring you of our interest in this fundamental problem, I am, with kind regards and api iation. Sincerely yours,

JAMES C. STONE, Chairman. Mr. O'NEAL. Senator, three national farm organizations come, at your kind invitation, to these hearings. This is the third time we have been here, and we would like very much for the committee to give consideration to the bill-our bill-in a definite program of hearings, and we ask the committee to consider it as soon as it possibly can.

The CHAIRMAN. Yes; we all had that very much in mind, Mr. O'Neal. I am advised that Senator Thomas of Oklahoma has the president of the Farmers Union here, or has some one who would like to be heard for a few minutes. We will hear the gentleman Mr. Baird presents, and then we would like to have statements from the heads of the various farm organizations.

In what form have you arranged the presentation, Mr. O'Neal?

Mr. O'NEAL. Mr. Chairman, I have a statement I would like to have go

into the record. I do that in order to save time. You are familiar with each organization, what we have presented to the Senate committee, but we will get Mr. Gray to explain the bill in detail, if you so wish.

The CHAIRMAN. Yes.
Mr. O'NEAL. At the proper time.

The CHAIRMAN. As president of the American Farm Bureau Federation you have a written statement ?

Mr. O'NEAL. I have a written statement I would like to put into the record. I would not take the time to read it before the committee.

The CHAIMAN. You may place that in the record now. And we will want to hear you in a moment.

This bill has not been introduced, Mr. O'Neal, in this precise form? Mr. O'NEAL. No, sir.

The CHAIRMAN. But it has been passed around to the various members of the committee, and just looking at it casually, I think it embraces the allotment plan, and the equalization fee, and embraces the marketing act; and it is indorsed by the three major organizations?

Mr. O'NEAL. Yes, sir.

The CHAIRMAN. I think it might be well to put into the record, following your statement, a copy of this proposal.

Mr. O'NEAL. Yes; if you please, Mr. Chairman.

(The statement of Mr. O'Neal, and the proposed bill referred to, are here printed in the record in full, as follows:)

SUMMARY OF STATEMENT OF EDWARD A. O'NEAL, PRESIDENT OF THE AMERICAN

FARM BUREAU FEDERATION, BEFORE THE SENATE COMMITTEE ON AGRICULTURE AND FORESTRY THURSDAY, ARIL 28, 1932.

The American Farm Bureau Federation in appearing before your committee this morning is interested primarily in securing legislation in the remaining weeks of the present session of Congress which will have an effect on prices of farm products. It is not intended unduly to criticize the legislation which has already been enacted this winter, some of which has an indirect relation to agriculture, but it can be stated definitely that deplorable as the condition of agriculture now is, economically speaking, this Congress has not yet buckled down to the task of enacting remedial farm legislation which will enable the farmers to enjoy a better price level and thereby put this great group of consumers back in the purchasing group.

We are not surrendering our position taken several years ago that a most direct way of securing a better price for farm products, especially in the doméstic market, is to segregate the surplus, whether seasonal or for the year, and so dispose of the surplus that our farmers behind the tariff wall can secure an American price for an American product. In disposing of this surplus we have formerly advocated, and do now maintain, that whatever costs, losses, and charges are incident to the operation should be borne by every unit of the commodity sold both in the domestic and in the foreign market. We still assert that the equalization fee principle should be written into the marketing act, that act being the foundation upon which we must build in striving toward an adequate price line for farm commodities.

We have broadened our vision in this matter, however, since first beginning studying the question years ago and now recognize the usefulness of the debenture plan in certain conditions of surplusses which might arise. This plan is tied definitely into our tariff structure and is intended to make the tariff effective at least to about one-half the rates on our various farm commodities written into the tariff act. We have in the Farm Bureau, for years, asserted that the warehousing and licensing provisions of the Federal Government should be enlarged. Handlers of farm commodities, whether cooperative or otherwise, might well be licensed by the Federal Government with penalties imposed for nonperformance of whatever license provisions are promulgated in keeping with warehousing and other acts.

In continuing study of the surplus question we have come to believe that the sécuring of cost of production for that portion of our crop sold in the domestic market is a convenient, if not a wholly accurate, yardstick to use in measuring whatever price a farmer is to get for the product he sells. In our tariff structure, particularly in the flexible provision, the cost of production yardstick is almost exclusively used in determining various rates and in the deliberations of the United States Tariff Commission. It is not inconsistent, therefore, that we use this same cost of production yardstick in the price equation for agricultural commodities. We believe in segregating the total quantity of any farm erop so that it can be sold, mostly at a high price in the domestic market and usually in lesser quantity at a lower price abroad. These latter provisions are characteristic of the so-called allotment plan and are integrated all through the actual operations of either the equalization fee or the debenture plan.

Accordingly, speaking for the American Farm Bureau Federation and in closest relationship with the officers of the National Grange and the Farmers Union, we advocate the bill submitted by the three farm organizations to your committee, which contains the three plans as amendments to the agricultural marketing act, leaving, however, the Federal Farm Board the option of which plan to use or what combination of plans to employ under various emergencies and surplus conditions as may arise.

Farmers are being foreclosed and dispossessed of their holdings literally by the hundreds of thousands. This is a deplorable state of things, and it would be with ill grace for anyone representing any farm organization to oppose legislation designed to permit farmers to refinance themselves in regard to their farm mortgage indebtedness so that through a term of years they might meet their obligations and save their homes. The interest rate which farmers ordinarily now pay on farm mortgages is too high. Too often it is pyramided in its various steps between the original loaning agency and the individual farmer who gets it in the shape of a mortgage. Just how to reduce this interest cost and the annual amortization payment is a question which is troubling us now, but assuredly both the interest cost and the amortization payment should be brought down to a more bearable basis in behalf of our sorely pressed farmers.

In view of this situation, and speaking for the American Farm Bureau Federation, I have no desire and less instruction to oppose such a measure as S. 1197 by Senator Frazier.

Referring again to legislation which strikes at the price line for farm commodities, may I call your attention to legislation now pending before both agricultural committees which seeks to aid the farmer who sells grain and cotton, by limiting or eliminating the inordinate amount of gambling which is now too prevalent in two great staple crop sof our Nation-grain and cotton. This legislation, in one form or another, has been pending 10 years on Capital Hill. Every session of Congress we find a great hullabaloo made about it but usually nothing done to put teeth into the grain futures and cotton trading acts. Right now, singular to state, all attention has been deflected from grain and cotton exchanges, seemingly, on Capitol Hill, to the same kind of transactions on the stock exchanges, and Senator Norbeck, with his Committee on Banking and Currency, is now actively engaged in disclosing to the public the iniquities of gambling on the stock exchange. We farmers wonder how long the grain and cotton exchanges are going to continue unexposed to public view and how long legislation like that pending before this committee in a bill by Senator Capper, and before the House committee in the Haugen measure, is going to remain in cold storage legislatively speaking. It seems to me that if Congress wants to do something which will have the ultimate effect of straightening out the line of price on grain and cotton, and keeping it from fluctuating so drastically as is commonly observed, this type of legislation should be enacted.

Looking again at the calendar of the Senate Committee of Agriculture and Forestry, one observes the McNary resolution designed to appropriate $100,000,000 of Reconstruction Finance Corporation funds for the specific purpose of finding new markets abroad and extending credits in the sale of wheat and со Permit me to say that no better use of $100,000,000 in Reconstruction Finance Corporation funds could be made than to apply it to the use designated in the McNary resolution. This legislation should be rushed through at the earliest possible minute as the wheat and cotton, particularly that in stabilization under the terms of the agricultural marketing act, should be put into motion into foreign markets which can absorb it and which now are not being supplied adequately with these commodities.

We again wish to call attention to the equalization fee amendments presented for inclusion in the agricultural marketing act by Senator McNary, S. 3680, by Congressman Haugen, H. R. 7609, and by Congressman Norton, H. R. 6992. These amendments substantially have been incorporated in the bill first mentioned this morning by me, but they are worthy to be mentioned again, inasmuch as they comprise a portion of the composite program relative to amending the agricultural marketing act now agreed upon by the three national farm organizations.

Not to make the Farm Bureau schedule of remedial price legislation too long permit me to conclude by calling your attention to the bills now pending both on the Senate and House side which aim to establish monetary stabilization, or stated differently, to stabilize the purchasing power of the dollar. It is recognized this legislation is not considered by the Committees of Agriculture. Properly it goes to the Banking and Currency Committees, but in these times when it takes three or four times as much of any commodity to exchange for a dollar as it did in former years, it is the part of wisdom for us to begin to realize that there is a lack of balance between the prices of commodities and the price of money.

A measure has been reported unanimously by the House Committee on Banking and Currency which, if enacted into law, would order the Federal Reserve Board, and through it the reserve system and the reserve banks to use every power resident within the system and through the banks relative to discounts, rediscounts, money and credit, to maintain as much as may be a straight and equable line of price between commodities and dollars. This is a type of legislation of fundamental importance. It is not unreasonable to state that unless legislation of this general type is enacted it will be a long and laborious process getting back to a profitable line of price either on industrial or agricultural commodities.

In conclusion let me state the same thought in which I began-it is price that the farmers need; price for their product so that in turn they can become purchasers of many other products from the factories of our Nation.

A BILL To amend the Federal Farm Board act, approved June 15, 1929

Be it enacted by the House of Representatives of the United States of America in Congress assembled, That the agricultural marketing act (Public, No. 10, approved June 15, 1929) is amended by adding after section 10, five new sections, as follows:

SEC. 11. (a) From time to time, upon request of the advisory committee for any agricultural commodity, or upon request of leading cooperative associations of producers of any agricultural commodity, or upon its own motion, the board shall investigate the supply and marketing situation in respect of such agricultural commodity.

(b) Whenever upon such investigation the board finds

First. That there is or may be during the ensuing year a seasonal or year's total surplus, produced in the United States and national in extent, that is in excess of the requirements for the orderly marketing of any agricultural commodity or in excess of the domestic requirements for the comm Ꭹ ;

Second. That the operation of the provisions of section 5 (relating to loans to cooperative associations or corporations created and controlled by one or more cooperative associations) will not be effective to control such surplus because of the inability or unwillingness of the cooperative associations engaged in handling the commodity, or corporations created and controlled by one or more such cooperative associations, to control such surplus with the assistance of such loans;

Third. That the cost of production of any agricultural commodity has been ascertained to be in excess of the prevailing market price secured by growers for such commodity and an estimate has been made for such agricultural commodity as to the part of its domestic production which is needed for consumption; and

Fourth. That the durability and conditions of preparation, processing and preserving and the methods of marketing of the commodity are such that the commodity is adapted to marketing as authorized by this section—then the board, after publicly declaring the condition existing relative to one or more of its findings, shall arrange to secure cost of production for that portion of the crop sold in the domestic market by marketing any part of the commodity by means of one or more of the plans hereinafter authorized in Title I, Title II, Title III; and shall continue until such time as the board finds that the conditions existing relative to one or more of its findings have been corrected and that such arrangements are no longer necessary or advisable for carrying out the policy declared by section 1.

TITLE I

SEC. 12. (a) A marketing agreement with cooperative associations engaged in handling the commodity or corporations created and controlled by one or more cooperative associations shall provide either

(1) For the withholding by a cooperative association, or corporation created and controlled by one or more cooperative associations, during such period as shall be provided in the agreement, of any part of the commodity delivered to such cooperative association or associations by its members. Any such agreement shall provide for the payment from the stabilization fund for the commodity of the cost arising out of such withholding; or

(2) For the purchase by a cooperative association, or corporation created and controlled by one or more cooperative associations, of any part of the commodity not delivered to such cooperative association or associations by its members, and for the withholding and disposal of the commodity so purchased. Any such marketing agreement shall provide for the payment from the stabilization fund for the commodity of the amount of the losses, costs, and charges arising out of the purchase, withholding, and disposal, or out of contracts therefor, and for the payment into the stabilization fund for the commodity of profits (after repaying all advances from the stabilization fund and deducting all costs and charges, provided for in the agreement) arising out of the purchase, withholding, and disposal, or out of contracts therefor.

The board shall provide in any such marketing agreement for financing any withholding, purchase, or disposal under such agreement, through advances from the stabilization fund for the commodity. Such financing shall be upon such terms as the board may prescribe, but no such advance shall bear interest.

If the board is of the opinion that there are two or more cooperative associations or corporations created and controlled by one or more cooperative associations, capable of carrying out any marketing agreement, the board in entering into the agreement shall not unreasonably discriminate against any such association or corporation in favor of any other such association or corporation. If the board is of the opinion that there is no such cooperative association or corporation created and controlled by one or more cooperative associations capable

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