FARM SECURITY ACT OF 1937

JUNE 18, 1937.-Committed to the Committee of the Whole House on the state of the Union and ordered to be printed

Mr. JONES, from the Committee on Agriculture, submitted the

following

REPORT

[To accompany H. R. 7562]

The Committee on Agriculture, to whom was referred the bill (H. R. 7562) to encourage and promote the ownership of farm homes and to make the possession of such homes more secure, to provide for the general welfare of the United States, to provide additional credit facilities for agricultural development, and for other purposes, report it back to the House without amendment and recommend that the bill do pass.

This bill supersedes H. R. 6240 which has heretofore been reported to the House. The bill is the same as H. R. 6240 except that the amounts authorized to be appropriated are less than those heretofore recommended. Under this bill, authorizations of appropriations under title I (tenant provisions) are limited to $10,000,000 for the fiscal year 1938, $25,000,000 for the fiscal year 1939, and $50,000,000 for the fiscal year 1940. Under title II (rehabilitation provisions) the $75,000,000 authorization has been eliminated but the power of the President to allot relief funds for the purpose remains. Under title III (acquisition of submarginal lands) the appropriations authorized are $10,000,000 for the fiscal year 1938, and $20,000,000 for the two fiscal years thereafter.

GENERAL STATEMENT

Within the agricultural population of the country are large numbers of individuals whose inability by their own efforts to provide adequately for the welfare of themselves and their families presents a grave social and economic problem of national importance. Even in times of good agricultural prices, some of these people are unable to obtain the necessary funds and encouragement to conduct farming operations on a profitable basis. During periods of depression in agricultural prices, and when drought, crop failures, and floods occur,

the numbers of such people increase. It is the belief of the committee that if sound means are provided under which such unfortunate people may be able to secure land, or secure enough credit to make a crop, a large measure of the poverty, social unrest, and economic insecurity of that part of the population may be eliminated.

This bill proposes to do something for these people. It proposes methods to check the tendency of landholders to become tenants, tenants to become laborers, and laborers to become objects of charity. It proposes, too, to start each of these groups up the ladder into the next level and finally into a status of unencumbered landholders.

It seeks to reduce the numbers of persons moving from farm to farm each year, to make landowners of those who are capable of its responsibilities, and to give credit to those who are in need of a little credit to tide them over or to save what they now have.

The bill attacks the problem presented on three major fronts. First, it authorizes loans to be made to enable the acquisition of farms and farm homes; second, it authorizes liberal rehabilitation loans to finance the carrying on of farming operations and to refinance indebtedness; and third, it proposes to reduce the amount of submarginal land which, because of its low productive capacity, is incapable of supporting farming on a reasonable level and which contributes so materially to the depression of all farm prices.

The bill is the outgrowth of extensive hearings on the matters with which it deals. During the past session of Congress hearings were held on two bills, H. R. 7018 and S. 2367. At the present session, hearings were held on H. R. 8. Many witnesses appeared and were given every opportunity to express their views without limitation as to time. Every interested group was heard-Federal and State Government officials, farm leaders, university people, representatives of interested groups, and private individuals. The committee also had the benefit of the report and studies of the President's Committee on Farm Tenancy and the testimony of persons who, in connection with the administration of rehabilitation of farmers under the Relief Acts are experienced in the problems involved in the proposed bill. Protracted executive sessions were held at which the principles and details of the proposed legislation were worked out.

The experience of every country which has adopted a program looking to the solution of the problem presented has shown that the success of any such program depends in large measure upon starting modestly, and proceeding slowly and cautiously. Hence, even though the magnitude of the problem and the absolute necessity for its ultimate solution would justify larger expenditures over a long period of years, the committee proposes to limit the appropriation for loans to enable persons to acquire farms and farm homes to $10,000,000 for the fiscal year 1938, $20,000,000 for 1939, and $50,000,000 for 1940, to limit the amount for rehabilitation loans and debt adjustment to amounts allotted by the President out of relief funds available in the fiscal years 1938 and 1939, plus certain unexpended balances for the fiscal year 1938 and plus amounts which the President may allot out of relief funds, and to limit the appropriation for the acquisition of submarginal land to $10,000,000 the first year, and $20,000,000 a year for each of the two succeeding years. These authorizations make the provisions temporary and extensions beyond the time authorized will require further legislation. It is believed that since some of the fea

tures of this legislation are experimental, it is best to proceed cautiously and await experience to ascertain if the programs are successful. Farm tenancy and dependency of rural population is not the problem. They are but manifestations of the problem of farm income. Neither the landlord nor the tenant has had sufficient income, and the landholder who hires farm laborers has not had enough income. The Federal Government and the States have made efforts to increase farm income so that people may stay on farms and farming operations may be profitable. A bill which attempts to benefit farm tenants and farm laborers without recognition of the need of stable and reasonable farm income will be of little avail. The program here contemplated must be founded upon the principle that farming will be profitable enough to make the objectives of the bill realizable.

Not only must farm income be adequate to enable the fulfillment of the bill's objectives, but necessary items of expense of farming operations must be kept down. In recent years, there has been a substantial reduction in interest rates on mortgages on farm land and on loans for agricultural production. Recent legislation on this subject by the Federal Government has done much to reduce these rates. Taxes on farm property can and ought to be reduced. A land tax rate which is too high can diminish the farmer's return for his labors just as effectively as a high-interest rate or a low price. Here is a field in which State and local cooperation can do much to aid in furthering the objectives of this bill. If the taxing units will reduce tax rates on small tracts or abolish existing discriminations against the small tract, existing handicaps upon the low-income groups in the farm population will be diminished and a Federal program to improve their status will have a materially greater success.

PROVISIONS OF THE BILL

GENERAL ARRANGEMENT

The bill is composed of four titles. The first relates to loans to enable persons to acquire farms, the second, to rehabilitation loans and the voluntary adjustment of indebtedness between farm debtors and their creditors. The third title relates to the retirement of submarginal lands. The fourth title contains general provisions applicable in accordance with their terms to titles I, II, and III.

ADMINISTRATION IN SECRETARY OF AGRICULTURE

Since the activities authorized under the bill are to be carried out in rural areas and the beneficiaries of its provisions are confined to the farm population, the administration of the bill has been entrusted to the Secretary of Agriculture. No other agency of the Government has the facilities to carry on the various different activities authorized. Since, however, many of the problems involved will be common to many of the various activities, it has been considered undesirable to divide the functions among a number of agencies. Further, concentrating all these functions under a single Cabinet head is in line with the recent recommendations of the President with respect to organization of the executive branch.

LOANS FOR ACQUISITION OF FARMS

Section 1 authorizes the Secretary of Agriculture to make loans to farm tenants, sharecroppers, farm laborers, and other individuals who obtain, or who recently obtained, the major portion of their income from farming operations, to enable such individuals to acquire farms. Preference is given to persons who are married, or who have dependent families, or, wherever practicable, to persons who are able to make a down payment, or who own livestock and equipment necessary successfully to carry on farming operations. Farms for the acquisition of which loans are made must be of such size as the Secretary determines to be sufficient to constitute an efficient farm-management unit and to enable a diligent farm family to carry on successful farming of a type which the Secretary deems can be successfully carried on in the particular locality.

COUNTY COMMITTEES AND THEIR POWERS

Section 2 and section 42 relate to county committees. Since successful administration of a scheme such as the one embodied in title I is dependent upon local cooperation and good will and, since it is desirable to decentralize administration, the committee believes that placing considerable responsibility for carrying out the plan in local organizations is necessary. Local people are more familiar with the character and habits of prospective farmers and their prospects as landholders. Such people also know local farms. Conferring some administrative powers on such local organizations can do much to assure the desired community cooperation and at the same time render valuable assistance to the Secretary. The provisions of the bill make the local committees Federal employees so that they may constitutionally exercise the powers conferred. The bill does not give them an entirely free hand, however. The Secretary is the final judge as to who may get a loan, how much the loan shall be, and what farm may be security for the loan. The county committee's powers create limitations on the person, land, and amount beyond which the Secretary may not go. Section 42 directs the Secretary to establish in each county, in which activities are carried on by the Secretary under title I, a county committee, composed of three farmers residing in the county. Each member of the committee is to receive compensation at the rate of $3 per day while engaged in the performance of their duties, but such compensation is to be allowed with respect to no more than 5 days a month. In addition to their compensation, the members are to be allowed such amounts as the Secretary may prescribe for necessary traveling and subsistence.

expenses.

Section 42 further provides that the county committee must meet at least once in each month, that two members shall constitute a quorum, and that the Secretary shall prescribe rules governing the procedure of the committee, furnish forms and equipment necessary for the performance of its duties, and authorize and provide for the compensation of any clerical assistants which he deems the committee may require. The Secretary is authorized to impose additional duties under the act on the committee.

The county committee receives applications of persons desiring loans from the Secretary for the acquisition of farms, and examines and appraises the farm with respect to which the application is made. If the committee finds that the applicant is eligible, that his character, ability, and experience is such that he is likely successfully to carry out the loan agreement, and if the committee further finds that the farm with respect to which application is made is of such character that there is a reasonable likelihood that the making of the loan will carry out the purposes of the title, it must so certify to the Secretary. The committee also certifies to the Secretary what it finds to be the reasonable value of the farm. The committee may not make any certification with respect to any farm in which any member of the committee has any property interest, direct or indirect.

No loan may be made by the Secretary to any person unless the certification provisions with respect to such person and the farm in connection with which the application of such person is made have been complied with.

TERMS AND AMOUNT OF LOANS

Section 3 authorizes the making of a loan for the acquisition of a farm in an amount up to 100 percent of the value of the farm as certified by the county committee, but does not preclude the making of a loan in a lesser amount if the borrower is able to make a down payment. The section provides that loans under title I shall be in such amount as may be necessary to enable the borrower to acquire the farm, except that the loan may not exceed the amount certified by the county committee to be the value of the farm.

Each loan must be secured by a first mortgage or deed of trust on the farm, and must be repaid within an agreed period of not more than 30 years from the making of the loan, in installments in accordance with amortization schedules prescribed by the Secretary. The interest rate is fixed at 3 percent per annum. The loan agreement and the instruments under which security is given for the loan must be in such form and contain such provisions as the Secretary shall prescribe to secure its repayment, together with interest, to protect the security, and to assure that the farm will be maintained in repair, and waste and exhaustion of the farm prevented. They must provide that the borrower shall pay taxes and assessments to the proper taxing authorities, and insure and pay for insurance on farm buildings. They must further provide that upon the borrower's assigning, selling, or otherwise transferring the farm, or any interest therein, without the consent of the Secretary, or upon involuntary transfer or sale, the Secretary may declare the amount unpaid immediately due and payable. Neither the loan agreement nor the instruments under which security is given for the loan may prohibit the prepayment of any sum due under them.

EQUITABLE DISTRIBUTION OF LOANS

Section 4 provides that the amount available for making loans under title I shall be distributed equitably among the several States and Territories on the basis of farm population and the prevalence of tenancy, as determined by the Secretary.