take 100,000 bales of cotton and sell it abroad on some questionable credit basis, you create a situation whereby the southern cotton farmer, as a matter of fact, can not sell 100,000 bales that he could have sold, because you are selling 100,000 bales from the surplus. The CHAIRMAN. What would have happened if the Farm Board had not bought 100,000 bales?

Mr. WILLIAMS. I think if the Farm Board had not entered into its original stabilization operation, that cotton to-day, which is lower than the average commodity, would be in a much better condition.

The CHAIRMAN. How would people consume these 100,000 bales, if they have not the money to buy it, no matter whether they bought it from you, or from the Farm Board?

Mr. WILLIAMS. We would not have had the 100,000 bales.
The CHAIRMAN. The cotton was in existence.

does it make which warehouse it was in?

What difference

Mr. WILLIAMS. I beg to differ with you, Senator. The cotton was not in existence. The Farm Board operations, in taking the surplus off the market, caused the farmer to create another surplus.

The CHAIRMAN. You mean the increase in cotton production is due to the hope held out by the Farm Board?

Mr. WILLIAMS. Not only the hope, but the fact, demonstrated twice in two years, that they would take the surplus off the hands of the farmer, and they did take it off, and he did produce the surplus for them.

Senator GORE. Is it true that cotton sold lower yesterday on the New York Cotton Exchange than it ever did?

Mr. WILLIAMS. Cotton sold yesterday on the New York Cotton Exchange at approximately 5.08 for July, which is the lowest price in 38 years.

Senator GORE. I saw a quotation of four and something, and the statement that it was the lowest price that was ever quoted.

Mr. WILLIAMS. That is probably spots. You are correct, sir. Senator GORE. The Farm Board owns outright nearly 1,500,000 bales of cotton.

Mr. WILLIAMS. One million three hundred thousand bales. Senator GORE. It controls, through financing operations, something like 2,000,000 bales, nominally owned by the cooperatives.

Mr. WILLIAMS. Two million one hundred thousand bales. But this is in effect owned and controlled by the Farm Board.

Senator GORE. The Secretary of Agriculture has taken over three or four hundred thousand bales, has he not, on these loans and advances made to farmers?

Mr. WILLIAMS. I think the Department of Agriculture to-day owns 356,000 bales of cotton.

Senator GORE. Is it not that enormous volume of cotton, held in two hands, that has frightened everybody who undertakes to deal with cotton, from the farmer to the factory?

Mr. WILLIAMS. Yes. A witness here just now spoke of the return of confidence. I want to state, with all the earnestness at my command, that with 3,500,000 bales of cotton hanging over the cotton market, in the hands of the Government, directly or indirectly, with carry

ing charges accumulating on that cotton at the rate of $21,000,000 a year, plus one other consideration, Senator, and that is that there are to-day before Congress just such proposals as are incorporated in the marketing act-all these things, the marketing act, the Farm Board, and these other proposals, have absolutely scared the investor out of the cotton market and he will not return until he is assured that the Farm Board, the Secretary of Agriculture, or the Department of Agriculture, and the Reconstruction Finance Corporation will not again attempt speculative operations in the cotton market. Senator GORE. Nobody can tell what they are going to do with their cotton, or when they are going to do it.

Senator BARBOUR. What would you suggest that they do with their cotton? I do not disagree with you, but what would you suggest that they do with their cotton, held in this way?

Mr. WILLIAMS. Senator, I can not make a complete answer, but I know

Senator BARBOUR. Those are the problems, you say, and not the mistakes that they have made.

Senator GORE. I introduced a bill that would have solved it, but the Farm Board thought it was a little too strong.

The CHAIRMAN. You did what, Senator?

Senator GORE. I introduced a bill to undertake to fix the time when the Farm Board could sell it, and regulate the sale over a fixed period of time, so much a month, so that everybody concerned would know exactly what was going to happen. It is the uncertainty of this situation that disturbs everybody, and has ruined the cotton market.

The CHAIRMAN. I am no defender of the Farm Board. I am one of the very few Senators who voted against the act when it was adopted by Congress, but is it not a fact, nevertheless, that we have a condition to deal with, and that this surplus will be a threat in the market until it is handled in some way?

Mr. WILLIAMS. That is right.

Senator GORE. That is the major problem, Senator.

Mr. WILLIAMS. There is no way, Senator, out of this mess that we are in, this congestion, without getting hurt. We can not get out of all this without being hurt, but we must look for the best way out. I think it is absolutely imperative that first we impound the stocks now in the hands of the Farm Board and its subsidiaries, and the Department of Agriculture-thoroughly impound them. Let us not depend on statements to the effect that "cotton will not be dumped on an unwilling market"; "plow up the third row"; and shoot the tenth cow," to bring back confidence. Let us lock the stocks up for the time being.

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Then, I subscribe to the principle as contained in Senator Gore's bill, of an orderly mandatory liquidation. We have suffered too much from leaving things to somebody's discertion. It has to be a mandatory liquidation of these stocks over a period of time. I think Senator Gore's bill anticipates liquidation of 2,000 bales a day; 2,000 bales a day in a market that will absorb 40,000 bales a day is not any weight on that market, and the best part of it is that we who are interested in buying cotton, and the farmer who is interested in selling his cotton, would know what was going to happen.

Senator FLETCHER. What is the proportion of cotton that goes abroad?

Mr. WILLIAMS. From 50 to 60 per cent of the American crop is ordinarily exported.

Senator FLETCHER. I can not see for the life of me how it hurts the grower here. On the contrary, it seems to me it would greatly advantage him if you could find markets abroad to dispose of your cotton.

Mr. WILLIAMS. May I read you some very interesting figures? The CHAIRMAN. You said the carrying charge was $21,000,000 a year?

Mr. WILLIAMS. Yes.

The CHAIRMAN. Have you in mind the present value of the crop that you refer to?

Mr. WILLIAMS. The cost?

The CHAIRMAN. The present market value of it. In other words, how many years will it take, under present conditions, to absorb the present value in storage charges or carrying charges?

Mr. WILLIAMS. About four to five years.

The CHAIRMAN. Wheat is worse than that. It will be absorbed in less than five years.

Senator GORE. Here is my point: If the Farm Board disposes of 100,000 bales which it owns, and the Secretary of Agriculture disposes of 100,000 bales which he owns, it closes that market to 200,000 bales of cotton produced by Oklahoma and Florida farmers this fall. Senator FLETCHER. You have to do something with it some time. Senator GORE. I know you do.

Senator FLETCHER. The idea was to get it out of the way now. Senator GORE. You can not leave it in the hands of these people subject to their discretion as to when they will sell it and when they will dump it. You have to require, by law, the sale of a fixed amount of it during a fixed period, so that everybody will know what will happen and can adapt themselves to it.

Mr. WILLIAMS. May I give the Senator some figures? Prior to the entry of the Farm Board into the cotton business-and they are in it with both feet-American cotton, in 1927 and 1928, supplied 48 per cent of foreign consumption. In 1928 and 1929 it supplied 44.6 per cent of foreign consumption. Then the Farm Board stepped in with their first stabilization operation. That year the consumption of American cotton dropped to 40 per cent. After one more year, in 1930 and 1931, of Farm Board control, or attempted control, it dropped to 34.3 per cent. The point I am making is this: Legitimate cotton merchants, operating for reasonable profit, using initiative, with the desire to expand and to make money on a reasonable basis, can find foreign outlets. We can finance it, too; but we are not going to finance it to-day, with this awful amount of cotton hanging over us.

Senator GORE. Is it not true, Mr. Williams, that during the régime of the Farm Board, foreign spinners have been changing their spindles to adapt them to foreign cotton, instead of American cotton?

Mr. WILLIAMS. I can answer your question by saying this. This displacement of the use of American cotton abroad was replaced

with foreign-grown cotton. Now, then, Senator, when we get down to 1930 and 1931, at a low of 34.3 per cent, American cotton is again creeping into foreign commerce, but at a price which means insolvency to every planter in the South. Certainly we can compete with the world at 5 cents, but we will also ruin ourselves.

I will not take up any more of your time, gentlemen, except to say that if we ship it abroad, we are going to displace American cotton. It is going to be a gift. If we give away cotton, let us give it away to our own people.

The CHAIRMAN. But the suggestion is that it be disposed of in an orderly way over a period of time?

Mr. WILLIAMS. Over a long period of time.
The CHAIRMAN. Is that your suggestion?
Mr. WILLIAMS. The present holdings?
The CHAIRMAN. The present holdings; yes.

Mr. WILLIAMS. My suggestion would be the abolition of the Farm Board, and the total impounding

The CHAIRMAN. You traders are always telling us that. We are used to that. We have had a lot of advice on that.

Mr. WILLIAMS. That is all right.

The CHAIRMAN. We are not interested in your opinion on that, but we would like to have your opinion on some other matters. Mr. WILLIAMS. Leave my opinion on that out. May I speak as a farmer on that?

Secondly, impound these stocks temporarily.

Third, liquidate them in a mandatory fashion over a period of time, and tell the world, sir, that none of these organizations operated and financed by the Government are going to engage in the

cotton business.

I will tell you of one of these swaps. The Farm Board swapped some wheat for Chinese bonds. I have never examined a Chinese bond, and I am not sure that we know the Chinese Government that issued the bond. I understand the Chinese sold the wheat to the Soviet Government, but I am not positive of that, sir.

This, gentlemen, concludes what I have to say, except this. There are two ways that prosperity, to my mind, may be restored. One is the purely artificial measure which you propose in your bill, which probably is necessary in view of the emergency. Senator Wagner, if we can couple with that a boost to business, and not hamper business, if we can work these in combination, we will soon get to the time where we can drop your plan, which I know you would want to do, and get business started by taking the fear of Government interference away from the normal investor, who will not come back into the market until that fear is taken away.

The CHAIRMAN. Go just a little further on that. The Government has not gone into business in new ventures very much of late, except the farming business. Of course, we have had large programs of the Government in business before, but what business prosperity we also had in the same period!

Mr. WILLIAMS. That is true.

The CHAIRMAN. It does not necessarily follow that the depression is due to Government interference with business.

Mr. WILLIAMS. I am not charging the total depression to that, Cotton has declined from 1812 cents to 5 cents since the Farm Board has been in attempted control, a loss of a billion dollars. The CHAIRMAN. How much did it decline before the Farm Board got into control?

Mr. WILLIAMS. It was up

The CHAIRMAN. Go back a few years and take it by years.
Mr. WILLIAMS. Surely.

The CHAIRMAN. When was cotton last 19 cents?

Mr. WILLIAMS. Cotton was approximately 19 cents in 1929. It was 1812 cents.

The CHAIRMAN. All right. Go back five or six years, and you will find a decline long before you had the Farm Board.

Mr. WILLIAMS. In 1926 cotton dropped to 11 cents a pound.
The CHAIRMAN. There was no Farm Board then?

Mr. WILLIAMS. No.

The CHAIRMAN. It dropped off then 30 per cent or more. Go ahead.

Mr. WILLIAMS. Due to a cheapened price, production was curtailed, and it quickly recovered.

The CHAIRMAN. You can not jump at a conclusion that quickly; cheapening price does not always curtail production. You can not prove that statement, Mr. Williams.

Mr. WILLIAMs. I can not prove that

The CHAIRMAN. That the fall in that period was due to cheapening in production.

Senator BULKLEY. He did not say that.

Mr. WILLIAMS. I said an overproduction caused a cheapened price which quickly caused a readjustment by people not planting so much cotton.

The CHAIRMAN. Those fluctuations occurred before there was any Farm Board. Therefore, it does not necessarily follow that the Farm Board is responsible for the present depression. I have no defense to make of the Farm Board, and I do not want to enter into that.

Mr. WILLIAMS. All right. I will charge the Farm Board with only half of it.

Senator WAGNER. You noticed the President, in his message, recommended this very provision which you are criticizing? Mr. WILLIAMS. Yes.

Senator WAGNER. I am not the author of that particular provision.

Mr. WILLIAMS. I think that policy, Senator, would play havoc with the cotton farmers of the South.

Senator WAGNER. That provision?
Mr. WILLIAMS. That provision.

Senator FLETCHER. My idea was not to provide a means for the Department of Agriculture to dispose of its own cotton, but it would help the producer to build up a foreign market, and develop a foreign market, and then the Department of Agriculture would buy cotton from the producer.

Senator GORE. You would not want it to buy any more?