than they do at the present time, and especially as cheap loans as are being given to others, when the farmers are the people who produce the food articles that go to feed the people who make up this Government?

Mr. BESTOR. Senator. I agree that agriculture is a basic industry, but I do not think that the Government should subsidize the farmer to the extent of giving him a special rate, regardless of whether that rate is justified or not. In other words, I do not think we should make it so easy for the farmer to borrow that he will be in danger of borrowing more than he can pay back. It is not credit the farmer wants so much as it is a fair price for his commodities. Senator FRAZIER. The money is loaned now, Mr. Bestor.

Mr. BESTOR. Yes.

Senator FRAZIER. And we are trying to work out a way by which it can be paid back, that which was loaned through your organization, and others. If they can not pay it back they will go out of business, will they not?

Mr. BESTOR. Some of them.

Senator FRAZIER. Yes, you admit they can not pay the cost of production at the present time, and that it is impossible for them to go on in the way they have been, and what are they to do? And what are we to do? Let them lose their farms and become serfs and tenants, or try to do something else?

Mr. BESTOR. I hope you will try to do something else, Senator. Senator FRAZIER. Do you not think the present situation warrants our trying to do something else?

Mr. BESTOR. I think the present situation warrants doing something, if it can be done, to improve commodity prices.

Senator FRAZIER. I think so too, and even with their prices, to let him have a chance to secure a lower rate of interest.

Mr. BESTOR. I think he should have a lower rate of interest, consistent with a sound policy; but I do not agree that this is a sound plan. I can not see it.

Senator FRAZIER. I hope you do not agree with Secretary Hyde, that this bill is

Mr. SIMPSON (interposing). Of no value to the farmers.
Senator FRAZIER. Something like that.

Mr. BESTOR. I think it would relieve a great many farmers temporarily, but the ultimate effect would be as disastrous-worse than the present situation.

Senator FRAZIER. Can you conceive of a rate of 12 per cent interest on the present indebtedness, and 12 per cent on an amortization plan being detrimental to the farmers, by the greatest stretch of the imagination? They pay the interest at 112 per cent, and pay off the indebtedness at the rate of 12 per cent. If you have an interest in those farmers, to save them, it seems to me they have got to have a lower rate of interest, and an easy way of paying out.

Mr. BESTOR. I do not believe the great mass of farmers would ask for a special privilege like this.

Senator FRAZIER. I resent this, when the bankers and the gamblers of Wall Street have had this special privilege all these years at the expense of the farmers.

Mr. BESTOR. Two wrongs do not make a right, Senator.

Senator FRAZIER. It is hardly becoming of you to talk about a lower rate of interest to the farmers being unethical to the farmers.

Mr. BESTOR. I think it is desirable and ethical on any sound basis, to give a low rate of interest, but I can not see this as a sound basis, when I feel that it would disrupt the entire business structure of the country.

Senator FRAZIER. I am sorry you worry so much about the business structure of the country. The situation of these farmers is enough for you to worry about.

Mr. BESTOR. I am worrying about it.

Senator FRAZIER. You have a lot to worry about.

Mr. BESTOR. I have plenty to worry me.

Senator SHIPSTEAD. Mr. Bestor, these commercial bank notes are based on the debts of the borrowers; they are also, at the same time, guaranteed by the Government of the United States for payment, because they are obligations of the United States. Now, do you think you could borrow money at a lower rate of interest and loan it to the farmers at a lower rate, provided the land banks' obligations were obligations of the Government, the same as the Federal reserve banks' notes are obligations of the Government? That would be, in effect, guaranteeing payment.

Mr. BESTOR. That would undoubtedly give the farmer a lower

rate.

Senator SHIPSTEAD. How much lower would you be able to borrow money if they had that privilege?

Mr. BESTOR. Well, it would be the same rate, undoubtedly, or approximately the same rate, as that of Government bonds. It would depend largely on the term of the bond. The Federal land banks have sold securities at from 4 to 5 per cent.

Senator SHIPSTEAD. Do you see any reason why the farm land bank should not have the same privilege as the Federal reserve bank in that respect?

Mr. BESTOR. I think that is entirely a matter for Congress to decide, Senator. There is nothing in the act that states that the Government is back of the Federal land bank bonds, but the Federal Government has provided some capital in the past, and recently provided some additional capital. But there is nothing like that in the act at the present time. Such action would, of course, affect the rate.

Senator HATFIELD. How much, would you say?

Mr. BESTOR. Well, it would make a difference, depending on the term of the bond; probably 1 or 2 per cent.

The CHAIRMAN. Mr. Bestor, returning to section 3 of the act for a moment, which provides that loans be made at the rate of 12 per cent interest and 12 per cent principal per annum, I would like to have you express your views of the effect that that rate of interest would have on urban home loans and real estate other than farms, and industrial and commercial loans, including railroads. What effect would it have on railroads and other commercial loans; would it cause bankers and lenders of money to accede to that rate to all borrowers throughout the country? In other words, would it bring down the interest rate to all borrowers to 12 per cent if the Government should take the initiative in placing a rate in this bill at 11⁄2 per cent?

Mr. BESTOR. I may be all wrong in my reasoning, but I do not see that it would have any marked effect, because people lend money based largely on whether they are going to get it back, or not, in their opinion. If they take a guaranteed proposition for a short term, why, they are ready to loan the money at a very low rate. If they loan money on a hazardous proposition, they demand a higher rate. It would have some effect, but I doubt whether it would have any marked effect.

The CHAIRMAN. Do you think the individual who wants to build a home in the city, millions of them, would still pay the commercial rate of 6 to 8 per cent when the farmer was getting it at 12 per cent from the Government?

Mr. BESTOR. I think they would, Senator, unless they demanded and got the same privilege as the farmer did. They might not pay quite as large a rate.

Senator FRAZIER. Do you not think it would be of general benefit if these interest rates were lowered?

Mr. BESTOR. Yes, sir.

The CHAIRMAN. What is the mortgage indebtedness of the farmers now, if you have the information?

Mr. BESTOR. As near as it can be estimated the first-mortgage debt is about $9,000,000,000.

The CHAIRMAN. Do you think $9,000,000,000 loaned to one group at 12 per cent would not have any effect on the public generally for commercial and home-building purposes?

Mr. BESTOR. Well, I say it might have some effect, but the man who has money to loan would be looking around to see where he could get the most for his money, and unless he can find a safe place for it where large hazards are not involved, I do not think he would be willing to loan it at such a low rate. However, the release of so large an amount of money for investment might have considerable effect on other rates.

The CHAIRMAN. Would a man have an opportunity to borrow, say, a farmer, to borrow at this low rate and then reloan to those who would pay a higher rate of interest?

Mr. BESTOR. I did not get that question.

The CHAIRMAN. Under the terms of this bill would it be possible for a farmer to place a loan at 12 per cent on his farm and then loan it to somebody else who is paying a commercial rate to-day? Mr. BESTOR. I am inclined to think it would.

Senator FRAZIER. Mr. Chairman, this money that is borrowed under this bill is to pay his existing indebtedness. He would have no opportunity or chance to loan it out for anything else.

The CHAIRMAN. Then one who would want to borrow from the Government originally, if this becomes an act, would not have the privilege of borrowing under this bill?

Senator FRAZIER. I beg your pardon?

The CHAIRMAN. If this bill should become a law, thereafter no one who wanted to place a mortgage on his farm would find money available under this bill?

Senator FRAZIER. No; not unless the bill was amended.

The CHAIRMAN. I mean, in this form?

Senator FRAZIER. This is for existing indebtedness.

Mr. BESTOR. It is to provide for the $9,000,000,000 we have now.

The CHAIRMAN. Now pass to section 4, Mr. Bestor, on page 3. That provides for chattel mortgages; first mortgages on livestock up to 65 per cent of the fair market value thereof. At the present time the Federal Farm Board does not loan on chattel mortgages. In your opinion is that a sound provision?

Mr. BESTOR. Where is that, Mr. Chairman?

The CHAIRMAN. That is on page 3, section 4.

Mr. BESTOR. I do not think there is anything unsound, Senator, in loaning money up to 65 per cent of the value of livestock, if it is done carefully. It depends to a large extent on whether it includes all livestock. If it includes hogs and mules, and so forth, there would be some question. On cattle and sheep, I would say 65 per cent would be a very fair loan.

Senator FRAZIER. That is for livestock used for agricultural purposes and breeding purposes?

Mr. BESTOR. Yes.

Senator FRAZIER. It is limited to that?

Mr. BESTOR. Yes.

Senator KENDRICK. Mr. Bestor, are you aware that the value of livestock has declined about 55 per cent in the last three years' time? Mr. BESTOR. Yes; that is true of certain classes of livestock. Senator KENDRICK. Well, that would make the loan unsafe, would it not?

Mr. BESTOR. If it were a short-term loan it would not be so bad. This provides for a loan of one year. If the loan is for a sufficiently short term, there would be little hazard. Ordinarily, I think a loan of 65 per cent on a bunch of cattle or sheep for a year to a responsible borrower would be all right.

Senator KENDRICK. Well, you are also sufficiently familiar with the production of livestock, no doubt, to know that a great deal more depends upon a close supervision of the loan on livestock than almost any other thing.

Mr. BESTOR. Yes; I know that is true.

Senator KENDRICK. And under that sort of a situation, would it be advisable for the Government to embark on that kind of a loan or become responsible for that kind of a loan?

Mr. BESTOR. Well, of course, it has its hazards, all right, and you have pointed out the weak place. In any loan, the lender needs some one who can handle the cattle and see that they are properly cared for. The commercial banks have made it a policy for a feeder loan on cattle, to loan 100 per cent to a good responsible borrower who is familiar with the feeder-cattle business, with cattle, feed, hogs as security.

and

Senator KENDRICK. That is a very different proposition from what is proposed here.

Mr. BESTOR. Well, this would involve livestock on the farm.
Senator KENDRICK. For breeding purposes.

Mr. BESTOR. Yes, or for agricultural purposes.

Senator KENDRICK. The feeder proposition is recognized all over the country as a short-term loan. For instance, it involves, as a rule, only the time required in finishing the cattle that are already grown and ready to mature.

Mr. BESTOR. That is right.

Senator KENDRICK. That is what is known as a feeder's loan.

Mr. BESTOR. Yes.

Senator KENDRICK. It runs about 90 days to 120 days.

Mr. BESTOR. Yes, sir.

Senator KENDRICK. So that it would be a different loan from that which is suggested here.

Mr. BESTOR. Yes, sir.

Senator KENDRICK. My thought is that-of course, we are trying to determine a way out, and I am agreeable to the needs of the legislation that is suggested; but we can hardly afford to venture on a system of finance here that will remove the safeguards and restrictions that are positively necessary in connection with any kind of a loan.

Mr. BESTOR. I think you are right, Senator, to this extent: This would provide for a loan to be made direct. Now the intermediate credit banks will discount paper secured by farm livestock. But this is a departure, in that you loan money directly to the individual. Whereas in the case of the intermediate credit banks the loans are made by a livestock loan company and discounted by the bank.

I understood the chairman to ask as to the safety of the loan. As to the percentage basis, I think that under ordinary conditions with proper safeguards, the percentage is not out of line. And for the Government to go into it, as you have pointed out, would be a very radical departure from anything that has been done.

Senator KENDRICK. Well, it seems to me so, and in view of the questions asked, I want to say that all of the experience in the livestock business which I have had opportunity to note reflects two things: First, that the security on livestock, as a rule, is a desirable form of security in a loan; it is a liquid sort of asset and can be cashed and the loan liquidated without very much delay. That is one thing. The next thing is that the stability of the loan depends almost entirely upon the closest kind of personal supervision on the part of the lender, as to the way the stock are handled and matured. Senator THOMAS of Oklahoma. Are there any further questions any member of the committee desires to ask Mr. Bestor? [After a pause.] Is there any question that any member of the farm organizations desires to ask Mr. Bestor?

Mr. SIMPSON. Mr. Chairman, I want to ask a few questions.

Senator THOMAS of Oklahoma. At this point I would like to have the record show the names of the representatives of the farm organizations represented. Is there any objection to having that incorporated in the record? [After a pause.] If not, will the members of the farm organizations who are here represented give their names to the shorthand reporter? I believe the National Farmers' Union is represented. Mr. Simpson, will you give your name to the shorthand reporter?

Mr. SIMPSON. John A. Simpson, president of the Farmers National Union. And Mr. A. W. Bowen, Washington representative of the Farmers National Union, is also here.

Senator THOMAS of Oklahoma. Is there anyone else here representing your organization?

Mr. SIMPSON. Not here to-day.

Senator THOMAS of Oklahoma. The American Farm Bureau Federation is represented, I believe. Who represents that organization?