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Mr. O'NEAL. Edward A. O'Neal, president, and Charles E. Hearst, vice president.

Senator THOMAS of Oklahoma. Both here?
Mr. O'NEAL. Both here.

Senator Thomas of Oklahoma. And the National Grange? Who
represents the National Grange?
Mr. BRENCKMAN. Fred Brenckman, Washington representative.
Senator THOMAS of Oklahoma. Is there anyone else with you?
Mr. BRENCKMAN. No, sir.

Senator THOMAS of Oklahoma. If there is no objection, and if agreeable to the committee, I would like to have the present shorthand reporter give this list to the first shorthand reporter who was here this morning, so that this list of representatives of these organizations may appear at the beginning of these hearings.

Mr. BRENCKMAN. Mr. Chairman, I would like to add to that that Mr. Fred Freestone, a member of the executive committee of New York, is also in the room.

Senator THOMAS of Oklahoma. He is here for the particular purpose of participating in these proceedings?

Mr. BRENCKMAN. Yes, sir.

The CHAIRMAN. Mr. Simpson desires to ask some questions. Proceed, Mr. Simpson.

Mr. SIMPSON. Mr. Bestor, do you notice in this bill, in section 3, there are two limitations to the amount that can be loaned to a farmer?

Mr. BESTOR. That is right.

Mr. SIMPSON. One of them is the limitation that somebody else puts on there. That is the loan that is already on. It might be a land bank. The other limitation is the present value of the land and 50 per cent of the value of the buildings. There are two limitations; is that right?

Mr. BESTOR. Yes; except that the first limitation is the existing debt and not the amount of the original first loan.

Mr. Simpson. What is there unsound in the principle of refinancing farm loans on a basis of what other loan companies loaned them and on a basis that if they loaned them more than the present cash value, that we will not grant them?

Mr. BESTOR. If you will limit the loan to the present cash value of the farm, it might be safe.

Mr. Simpson. There is no cash value at the present time to the farming business.

Mr. BESTOR. Is not that just what you said?

Mr. SIMPSON. Yes. You do not know what you could get for your farms, do you?

Mr. BESTOR. No; I do not.

Mr. SIMPSON. Do you think the present principles and policies and plans have proven to be sound?

Mr. BESTOR. You mean the valuations of the insurance companies?

Mr. SIMPSON. I mean I am covering the whole economic situation—the plans, the policies, the principles under which we have got into the conditions that we find ourselves in to-day. Do you think they are sound? Mr. BESTOR. Some of them are and some are not sound.

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Mr. SIMPSON. Are you really sure that to refinance these farmers on the basis of the Frazier bill would be unsound !

Mr. BESTOR. I am, in my own mind; yes.

Mr. SIMPSON. Would it be unsound as to helping the farmers to pay their debts?

Mr. BESTOR. Your question is, Would this bill be unsound!
Mr. SIMPSON. As to helping farmers to pay their present debts.

Mr. BESTOR. Well, if you mean would it enable them to pay their present debts, I would say apparently it would.

Mr. SIMPson. Did we have good and prosperous times in 1918 and 1919 in this country?

Mr. Bestor. My recollection is things were pretty good.
Mr. SIMPSON. Ďid we have high prices at that time?
Mr. BESTOR. Yes.

Mr. SIMPSON. Did we have a large per capita circulation of money in this country at that time?

Mr. BESTOR. I presume we did.
Mr. SIMPSON. Did we have an abundance of credit at that time?
Mr. BESTOR. A good deal of it.

Mr. SIMPSON. Do you think this bill increases per capita circulation in this country?

Mr. BESTOR. You mean under the latter provisions there?

Mr. SIMPSON. Yes. I mean we are going to refinance farmers on a basis of 112 per cent interest and, if necessary, the Government will put money out to do it with.

Mr. BESTOR. It certainly ought to put some sort of money into circulation.

Mr. SIMPSON. Do you agree that it increases credit in the country?
Mr. BESTOR. This would ?
Mr. SIMPSON. Yes.
Mr. BESTOR. It would increase credit to the farmer.

Mr. SIMPSON. There is at least $9,000,000,000 of loans that could come in and be taken up under this bill; is that right?

Mr. BESTOR. Yes; I think you could even take up three or four million junior mortgages under this bill.

Mr. SIMPSON. You might make it twelve billion. The farmers are probably in debt twelve billion, are they not?

Mr. BESTOR. Very likely they are.

Mr. SIMPSON. When the farmers pay the creditors that $12,000,000,000, what will the creditors do with the money?

Mr. BESTOR. What will the creditors do with the money?

Mr. SIMPSON. Yes; when the $12,000,000,000 are turned over to the creditors, what are they going to do with the money?

Mr. BESTOR. They may pay some of their own debts. They might hoard it under the present conditions or they might spend it.

Mr. SIMPSON. Do people hoard when there is an abundance of money in the country!

Mr. BESTOR. Well, † think they might under some circumstances.
Mr. SIMPSON. Did they hoard back in 1918 and 1919 ?
Mr. BESTOR. No.

Mr. SIMPSON. Is it not a fact that when you make the dollar cheap, that money is not hoarded at all?

Mr. BESTOR. Well, it would have a tendency, of course, to stop hoarding if money were placed in circulation. That is if it were sound money. There is no doubt about that.

Mr. SIMPSON. If prices of commodities come up, does not the price of a dollar have to go down?

Mr. BESTOR. Surely.

Mr. SIMPSON. Then is there anything unsound in the principles of a bill that provides for a bigger crop of money that will make the value of the dollar come down in purchasing power?

Mr. BESTOR. Well, according to your theory, if you could go out and print all the money that printing presses could print, immediately we would

have prosperity. Mr. SIMPSON. Where do you get that is my theory?

Mr. BESTOR. You say the cheaper you make the dollar the higher prices will go.

Mr. SIMPSON. This provides for money based on the most substantial wealth of the Nation—that is, the farms; is not that right?

Mr. BESTOR. That is right.

Mr. SIMPSON. Is there anything that savors of unsoundness in that?

Mr. BESTOR. I do think it would be ruinous to use such loans as this on farm lands as a basis for the issuance of Federal reserve notes.

Mr. SIMPSON. In the local money situation you know that it is a fact that the local bank out there in the agricultural districts is not loaning to farmers. It does not make any difference whether they want money to buy tractors or whether it is needed to pay for medicine for the family. Is not that right?

Mr. BESTOR. I think very few of the commercial banks are loaning much money.

Mr. SIMPSON. To farmers?
Mr. BESTOR. Yes, or anybody else.

Mr. SIMPSON. The fact is I have had a case before your department of a farmer who has had 400 acres of good land in the very heart of the good land of this Nation and who has borrowed money of his bank to carry on his feeding operations through the winter and has his hogs and cattle out ready to market. He could not even borrow on his land locally, could he?

Mr. BESTOR. Probably not. Mr. SIMPSON. How many land-bank bonds have we sold in the last 60 days?

Mr. BESTOR. No new issues have been offered.
Mr. SIMPSON. How do you know the market is better?

Mr. BESTOR. Well, I know only from the sales that have taken place and the quotations on the market. There are some $165,000,000 Federal land-bank bonds outstanding.

Mr. SIMPSON. This $100,000,000 that was given to your department has not sold a single bond to make more money.

Mr. BESTOR. It stabilized the bond market.

Mr. SIMPSON. It was good for those that were drawing interest on those bonds.

Mr. BESTOR. Surely.

Mr. SIMPSON. They got their interest that they otherwise would not have got.

Mr. BESTOR. They would have received their interest anyway.

Mr. SIMPSON. What was the money given for? Mr. BESTOR. For one thing the money was to stabilize the position of the banks to the point where they could issue new bonds at a low rate to obtain additional money to loan and also to permit the banks to defer action on as many deserving delinquent borrowers as it was possible to do.

Mr. SIMPSON. What percentage is the land-bank loans of the total farm loans of the country?

Mr. BESTOR. About 19 per cent, including loans of both Federal and joint-stock land banks.

Mr. SIMPSON. And you have 500,000 loans ?
Mr. BESTOR. That is right.

Mr. SIMPSON. If the same ratio runs, that would mean there would be about 4,000,000 farmers that would have loans, would it not? It would be about eight times as many, would it not? How do you account for more than half the farmers having no mortgages on their farms?

Mr. BESTOR. I said that the statistics of the Department of Agriculture showed that to be the case.

Mr. SIMPSON. I wonder if there is not something wrong with the statistics. What is the interest rate charged farmers—that is, the drought-stricken, distressed farmers-on feed and seed loans ?

Mr. BESTOR. That is in the Department of Agriculture. I do not know.

Mr. SIMPSON. Do you know it is 542 per cent?
Mr. BESTOR. Well, it may be. I have not paid any attention to it.

Mr. SIMPSON. What is the interest on the land-bank loans to farmers?

Mr. BESTOR. Five and one-half per cent in all but three banks.
Mr. SIMPSON. How much capital stock do they have to take?
Mr. BESTOR. Five per cent of the loan.
Mr. SIMPSON. Do they ever get that back?

Mr. BESTOR. Yes, if they pay off their loan and the association is in good condition—the Farm Loan Association.

Mr. SIMPSON. Are you paying that back where they pay off now?

Mr. BESTOR. Where the Farm Loan Association is not indebted to the banks. The borrower, you know, takes stock in the National Farm Loan Association.

Mr. SIMPSON. And the stock is not worth 95, is it!

Mr. BESTOR. I do not know. You mean based on the average book value of the stock?

Mr. SIMPSON. I mean the market value.

Senator HATFIELD. Mr. Chairman, I wonder if Mr. Bestor would not prefer to sit down.

The CHAIRMAN. Mr. Bestor, I suggest if you are tired of standing, it is perfectly all

right to sit. Mr. SIMPSON. Really that investment in capital stock amounts to meaning more interest to the farmer than the 51/2 rate under present conditions; it not that right?

Mr. BESTOR. If he borrows his money for about 33 years, I believe it adds to the cost of his money about a quarter of a per cent if he does not get his stock back.

Mr. SIMPSON. What is the rate on intermediate credit loans to farmers?

Mr. BESTOR. Five of the banks have a rate of 5 per cent. And the others have 514 per cent.

Mr. SIMPSON. Not to the farmers?
Mr. BESTOR. Well, on loans to the cooperatives and on its discounts.

Mr. SIMPSON. How much does the farmer pay? That is what I want.

Mr. BESTOR. Those banks which have a 5 per cent rate are discounting paper at 5 per cent. The credit corporations and other financing corporations which discount paper may have a spread of 3 per cent, which would make the maximum cost to the farmer 8 per cent.

Mr. SIMPSON. As to those that have a higher rate, how high can they go?

Mr. BESTOR. Their rate is 514, which would make it 814 as a maximum. Many of the corporations do not take their full 3 per cent.

Mr. SIMPSON. It probably averages around 8 per cent the United States over to the farmer

Mr. BESTOR. I do not think so.

Mr. SIMPSON. Do you know what the shipping interests of the country have been getting money for in the last few years?

Mr. BESTOR. I hear they have been getting it at a very low rate.

Mr. SIMPSON. As low as three-eighths of 1 per cent interest; is that right?

Mr. BESTOR. I do not know. • Mr. SIMPSON. Millions of dollars have been loaned to the shipping interests of the country from three-eights to five-eights of 1 per cent in the last few years. Do you see any group discrimination there?

Mr. BESTOR. I do not know enough about the circumstances under which these loans are made to the shipping interests.

Mr. SIMPSON. Instead of the Frazier bill discriminating in favor of the farmers, they are still discriminated against when compared to the shipping interests, are they not? Do you know at how low rates this Government settled with some of the European countries?

Mr. BESTOR. I do not remember the figures.

Mr. SIMPSON. Some of them were as low as 11/2 per cent at least, were they not? You said yes?

Mr. BESTOR. That may be correct.

Mr. SIMPSON. You nodded your head. I want to get this in the record.

Mr. BESTOR. I do not remember the exact figures in those settlements.

Mr. SIMPSON. In the interest of the farmer do you not think you ought to be looking around to see how other folks are getting money and be able to come here and say, “ Yes, sir, the farmer ought to have lower rates”?

Mr. BESTOR. I have already said that I would like to see the farmer get a lower rate if it can be properly done. I am just as anxious as you are to see that, but I insist that it is not the rate of interest but the price of farm commodities that is of first importance.

Mr. SIMPSON. You are convinced the Farm Board is doing its best, you are doing your best?

Mr. BESTOR. You mean the Farm Loan Board ?
Mr. SIMPSON. The Farm Loan Board is doing its best?

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