money would be sent back to your local bank, that is where it would finally reach out to the public. Is not that true of all of the others? Mr. LEMKE. But, Senator, in our district they did not increase it but very little, only thirty millions. Senator NORRIS. I am only using that as an illustration. Mr. LEMKE. The reason for doing it is that the banks have more money than they know what to do with. They say they make loans on the proper security, and still they won't loan you $250 on a half section of land with buildings worth far more than the loan that is asked for. Senator NORRIS. What I am trying to get at is to find out just wherein the circulation went to the banks in these cities. If it went out through the operations of the Federal reserve bank, it seems to me it would be scattered over the districts represented by these four cities. It would not necessarily be confined to the cities. Mr. LEMKE. Except this, Senator; that you will find that Chicago had 48 banks closed in one or two weeks, and it went to local banks in Chicago. Senator NORRIS. That is what I am trying to find out. Mr. LEMKE. Yes. Senator NORRIS. Take Philadelphia, for example. That is one of the cities, is it not? Mr. LEMKE. Yes. Senator NORRIS. Did that increased circulation stay in Philadelphia, or, as a matter of fact, did it go all over the district that is represented by Philadelphia? Mr. LEMKE. In answer to that, Senator, I have not positive knowledge, but from information and belief, I would say it went to the largest cities, to take up some of the worthless bonds that insurance companies and others had gotten from foreign nations. Those worthless foreign bonds even got as far as North Dakota, because I have got some friends that got some of these Brazilian bonds. Senator NORRIS. Oh, yes; they got into Nebraska, too. Mr. LEMKE. But, as a matter of fact, among the farming community up there, there is not $2.50 in circulation to-day. We are becoming a nation of Indians up there. We operate by trading and bartering. Senator NORRIS. It seems to me you ought to consider this: These banks, you said a while ago, have got lots of money. Mr. LEMKE. Yes. Senator NORRIS. They do not loan it. Mr. LEMKE. They do not loan it. Senator NORRIS. I speak of that without criticism. Maybe I would do the same thing if I were a banker. Mr. LEMKE. I would. Senator NORRIS. Because they are frightened; they are scared. Mr. LEMKE. Yes. Senator NORRIS. But they have got more cash on hand in the banks than they have had in a good while, haven't they? Mr. LEMKE. Yes. And we talk about hoarding. If there has been anybody hoarding, it is the banks. Senator NORRIS. And it does not get out to the business men because the banks are afraid to loan to anybody. Mr. LEMKE. The values have been so diminished that they are perhaps wise not to loan it out. I will say that if I had two or three thousand dollars I wouldn't lend it on any farm land anywhere in the United States, unless you got a refinancing system. A question was raised this morning if it would not destroy the interest rate. It would not destroy it. But, as a matter of fact, is not the preservation of the farmer's home more important than clipping off a few coupons as interest? But, as a matter of fact, you are coming to this, whether you do it at this session or not, because this Nation is going to preserve itself, it will have to, and it will save it on interest. If you collapse the financial structure of the Nation, the whole thing will go with it. Senator NORRIS. Mr. Lemke, under this bill, who determines how much shall be loaned on any particular farm where there is a present indebtedness that you are going to take up? Mr. LEMKE. The Federal Land Bank. The existing machinery is used. We have had so much trouble with those kinds of animals that we created a farm board to watch them and supervise them and make complaint, because if the man is not fair in his actions, it is the duty of the President of the United States to remove him and put somebody in that will function properly in that capacity. But our experience has been with the Federal Land Bank that it has not been representing the farmers, but, rather, we feel that it is representing the moneyed interests of the East. Senator NORRIS. You would not feel, would you, that we ought to take up all farm indebtedness? Mr. LEMKE. Oh, no; the bill does not provide for that. The bill puts limitations on it. To give you a concrete example, I drove by a farm the other day in Minnesota that was being foreclosed for $15,000, three-quarters of a section, with beautiful buildings on it. I was told that that farm was worth $65,000 not many years ago, and the poor farmer couldn't get $15,000 on it. If he were refinanced under this bill, if the Federal land bank, after going out there and seeing what the value of that farm was, had advanced him enough to take off that indebtedness of $15,000 and refinanced him, he would have to pay $450 a year, and at the end of 47 years his farm would be clear, whereas at straight 6 per cent interest at the end of 47 years he would have to pay $28,000 worth of interest. Senator NORRIS. There is one thing on that illustration that bothers me. The fact the farmer gets cheap interest does not bother me at all. I would not care if it went down lower. I think we can afford to go a good way in that respect. But suppose that farmer now, who under your system would have to pay $480, you say, a yearMr. LEMKE. $450. Senator NORRIS. Besides that, of course, he has got to live. Mr. LEMKE. Yes; and taxes. Senator NORRIS. And taxes, and all that. Mr. LEMKE. Yes. Senator NORRIS. Under present conditions, could he do that? Mr. LEMKE. Senator, I want to say that Mr. Stone hit the nail on the head the other day when he answered the Senator here in regard to that, when he said that if this bill passed it would raise the level of farm products. And it would. Plenty of money always raises it. Senator NORRIS. We must be careful that something of that kind occurs, because I think nobody would want to embark upon a system that was not fundamentally sound. Mr. LEMKE. Yes. Senator NORRIS. And under present conditions that farmer, I presume it is a pretty big farm, the farm you just referred to? Mr. LEMKE. Three-quarters of a section. Senator NORRIS. That was a farm consisting of three-quarters of a section? Mr. LEMKE. Yes. Senator NORRIS. In Minnesota ? Mr. LEMKE. Southern Minnesota. Senator NORRIS. What was it worth before the war? Mr. LEMKE. $65,000. Senator NORRIS. That was before the war? Mr. LEMKE. Yes. Senator NORRIS. Under present conditions, it is doubtful if the farmer did not have any mortgage at all if he could live and pay his taxes? Mr. LEMKE. Yes; and he could not get $5,000 for it, if he had to sell it for cash. Senator NORRIS. I presume he could not. Mr. LEMKE. But here is the other bill that these gentlemen can get together on for permanent relief. That is on the cost of production. The two of them, the permanent and the emergency, should go together, hand in hand. But this bill itself will raise the commodity prices. You all know we can have too much money as well as too little. But in this case, at this time we have too much in the banks. We have $60 in the bank for every $100 on deposit. The majority of the people of this country can not permit a few people to wreck this Nation. And that is where we are going. I refer particularly to the States that I named, and I understand that Texas and Oklahoma are in the same situation as we are up northwest. Just last week the Legislature of Illinois indorsed this bill by a two-thirds vote in the Senate and unanimously in the House, and that previous to that the Legislatures of North Dakota and Wisconsin indorsed it, and in the State of Iowa they got within one vote of a constitutional majority of appropriating $25,000 to send a group of men down here to lobby for this bill. That shows that there is a serious situation. Especially take the State of Illinois, a State where there is certainly wealth and banking represented in the legislature, passing it without a dissenting vote in the House and by a two-thirds majority in the Senate. That was just last week. If there were more legislatures in session, I am satisfied that the agricultural legislatures in this Nation would pass this. They know the need of it. The statement was made this morning at the committee hearing, Senator-I don't know whether you were present or not-that everybody agreed on the inflation of money. I do not like the term "inflation." I say we need enough money to do the business of the Nation with. Senator NORRIS. I think you should use it in a modified form. Because a man is in favor of inflation it must not be understood that he is in favor of unlimited inflation. Mr. LEMKE. No. Senator NORRIS. Inflation is just as bad as deflation. Mr. LEMKE. Absolutely. But this bill guards against it. They can not inflate more than 2 per cent in any one year after the per capita has reached $75. Referring again to this Frazier bill, for example, let us take a $10,000 mortgage out west here that is refinanced under the Frazier bill. The farmer would have to pay $300 each year on that, $150 on the principal and $150 for interest. At the end of 47 years he would pay in approximately $14,000. The United States Government would get $4,000 in gross profits. Senator FRAZIER. And at the end of 47 years he would have the loan paid up. Mr. LEMKE. At the end of 47 years he would have the loan paid up and the Government would have made a profit of $4,000. Now, let us say we have that same thing happen through the Federal reserve bank, that the Government gives $10,000 worth of Federal reserve notes to or through the Federal reserve bank. At the end of 47 years, or a thousand years, for that matter, the Government gets back its original $10,000, with no profit at all. There is no reason from an economical standpoint why the Government, in a crisis like this, should not be willing and able to help out the farmer at a profit. May I ask what do you expect the Government will get out of that $500,000 that it gave to the Reconstruction Corporation? If it gets back its principal it will be doing well. Taking that parallel, you can see where the farmers of this Nation are beginning to feel that they can not get justice from the United States Congress any longer. Senator NORRIS. I do not like to hear you say that. I have been dealing with Members of Congress for a good while. Mr. LEMKE. Yes. I am not questioning Congress. Senator NORRIS. But that is what you said. Mr. LEMKE. But I say the farmers say that. Senator NORRIS. It seems to me you blame Congress a lot of times when you should not. Mr. LEMKE. The farmer perhaps is to blame when he should have made himself known. Senator NORRIS. Well, he did make himself known, and I think Congress has been pretty good in passing farm legislation. We have passed lots of bills that have never become laws. Mr. LEMKE. Yes; I know. Senator NORRIS. We fought out a great national campaign on the theory and the promise of the successful candidate that if he was elected president he would put the farmer on an equality with the manufacturer. Mr. LEMKE. Yes. Senator NORRIS. He would give him the benefit of the protective tariff. Mr. LEMKE. Yes. Senator NORRIS. Now, we passed some bills having that in view. Mr. LEMKE. And they were vetoed. Senator NORRIS. And they were vetoed. Mr. LEMKE. Yes. Senator NORRIS. Why is the complaint all against Congress, when Congress has passed first the bill that I introduced soon after the war? We did not pass that, but it was through the influence of the White House that it was defeated. We then passed the McNaryHaugen bill, and we passed the debenture proposition. It was taken out through the influence of the White House. Then the campaign came in which that was one of the three big issues; and we passed the bill then that the President wanted, to bring about that relief, and it is quite apparent that it has not come. Mr. LEMKE. Coming down on the train the other day I came to the defense of Congress, because a professor in the Yale Law Review censured Congress for having passed the Farm Board act, and I was going to say it was passed because the President of this Nation made a campaign on it, and Congress just O. K'd the issue, and if there is any fault to be found with it it should be up at the White House. Senator NORRIS. Of course. That is the President's bill. He got what he wanted. Mr. LEMKE. But at the same time this professor criticizes Congress for it, and I may be excused for saying what the feeling out there is. Of course, the Reconstruction Finance Corporation is the President's bill, and the Glass-Steagall bill, we feel, more or less, is an administration bill. But the Glass-Steagall bill also takes some things out of us and gives it to the wrong people. They give it to those who have too much now, and we know they have too much, because there is no security left to lend it on, and the time has come to give the great mass of the people more consideration. As far as the ability to pay goes, the safety of the loan depends on the ability to pay. I will say that I can more easily pay a $20,000 loan under the Frazier bill than I can pay a $10,000 loan at straight 6 per cent interest, because of the annual payments, and at the end of a certain period I am through with the payments, while if I borrow under the other at 6 per cent straight, I will still have the original amount to pay at the end of the term. For instance, on a $10,000 loan, under the former, under the Frazier bill, it will take $14,000 to pay it off, and the Government will have made a gross profit of $4,000. Under the 6 per cent interest proposition, there will be an interest accumulation of $28,000 at the end of 47 years, and the farmer still has $10,000 to pay on his principal. Coming back to the question of interest, legal rates of interest have never stood up since the world has begun to function, because if you put 1 cent out at interest, at the legal rate, from the beginning of time, it would have accumulated more gold than the weight of the world. The interest system itself will break or wreck any nation. It is my contention-and I think it is the contention of every farmer-that the farmer should be gotten out of debt and he should stay out of it. Senator NORRIS. That is the point of it exactly. Instead of trying to get the farmer or anybody else to go deeper in debt, we ought to do what we can to get him out of debt. Mr. LEMKE. That is the Frazier bill. Senator NORRIS. And ask him to stay out. |