STATEMENT OF MR. WEARIN OF IOWA

One question America must face and solve if she is to preserve her economic structure is that of farm ownership. I would be considered trite indeed to dwell upon the fact that a man who owns the land upon which he dwells is more vitally interested in its improvement and likewise the development of his community than the man who is only at best a fleeting resident. The rapid increase of the number of tenant-operated farms since 1890 from a negligible percentage to better than 50 percent in the State of Iowa, the heart of the Nation's corn and hog belt, to more in southern regions and almost as much in the Nation as a whole has concentrated the attention of public officials upon the problem. Even though it is serious and justifies immediate action I trust that neither the executive departments of our Government or the Congress of the United States will rush blindly into a comprehenstive Nation-wide attempted detailed solution involving a maze of administrative functions and the assumption of an additional load of mortgage indebtedness on the part of those who may be carrying only obligations upon their chattels at the present moment. No one is any more vitally concerned with this problem or any more anxious that it be solved that I am. It has been very close to my heart since my earliest study of tenancy in other countries as well as America and its very seriousness prompts me to suggest to my colleagues and to the country that we proceed cautiously and carefully lest in our unbounded desire to be of service we give the patient an overdose of the medicine intended to cut that will result in his untimely death or at least produce complications resulting in an even more critical condition than the one that faces the recipient of our efforts at the moment.

I know there are innumerable suggestions and plans for solving the problem of increasing tenancy which, of course, in so many words means our intention to increase the number of owner-operated farms. I do not desire at this stage of the consideration of pending legislation to offer criticism, but I do venture to suggest that the first session of the Seventy-fifth Congress adopt a modest proposal that will not involve too great an expenditure of public funds and see how the experiment works. With this thought in mind I expect to introduce a bill which has a dual if not a triple purpose, aimed at relieving the Farm Credit Administration of a rapidly growing burden of land owned by that institution without an excessive expenditure on the part of the Federal Treasury and at the same time offer to the American farmer an opportunity to purchase such portions of it as are considered to be suitable at a reasonable price upon the basis of a long-term purchase plan. The question immediately arisesjust what would such a proposal involve and I hasten to summarize the situation briefly. We, as legislators, regardless of whether tenancy legislation of any kind is adopted or not, must face the fact that the Federal land bank, which, even though it is not a Government-owned institution, is a creature of our own creation; according to a statement I have from it, it now owns 29,718 farms in the United States of which it has repossessed itself, representing 6,446,1342 acres having a total value of $131,585,390.12 which, of course, represents an average per acre cost of $20.41 for the said 29,718 farms averaging 217 acres each. That condition is not the worst of the problem with which we are faced because we must know that 7,067 more farms carrying Federal land-bank loans are now in the process of being foreclosed and they in turn represent an estimated value based upon the average investment per acre of land already owned of approximately $1,368,640.

For my own personal satisfaction I desire to break down those figures in order to show the relationship of the problem as a whole to the Eighth Federal Land Bank district, of which I am a resident and which is an average example of a farming area. I only regret that time and space available will not permit me to carry the break-down to each of the individual districts which I assure you would be revealing and which is carried out to a certain extent by States in a report on H. R. 8386, introduced in the Seventy-fourth Congress by Congressman Hugh Peterson, of Georgia, and entitled, "Homesteads for Actual Farm Families," printed for the use of the Committee on Public Lands. The break-down I have made shows that the Eighth Federal Land Bank district, which includes Iowa, Nebraska, South Dakota, and Wyoming, owns 3.189 farms representing a total of 838,663 acres. The average value of this land per acre is $29.48 with the average size of the farm running to 262.99 acres. We are also having the added difficulty in that area of 424 additional farms being in the 127413-37-ser. a--21

process of foreclosure, representing an estimated 121,786.4 acres and a total investment of $3.790,265.15.

Now, the important thing for us to remember in connection with the situation as it affects the land banks and as I am attempting to deal with it in a proposed bill is the fact that the institution owns a total of 6;446,1341⁄2 acres having an average value of $20.41 per acre, with over a million and a quarter acres more in the process of foreclosure and none of these figures, of course, take into consideration existing delinquencies which will involve a considerable portion of added foreclosures, but we have on our hands at the moment almost 61⁄2 million acres of land in the United States which is not a large acreage when compared to the total farm acreage of the country, but in my mind sufficiently extensive to supply a very satisfactory experiment in the matter of land purchase and resale. I understand that one of the proposals before this committee is going to involve an annual expenditure of $50,000,000 a year. The suggestion that I am making at the moment provides that all land owned by the Federal land bank system be transferred to the Federal Government in return for the stock in the Federal land banks now owned by the Federal Government. That situation resolves itself into simply this: That the total value of the land so owned by the above institutions represents $131,585,390.12, while the stock owned by the United States Government represents a total value of $124,066,135. In other words, with a payment on the part of the United States Government of $7,519,255.12, the United States Government could acquire title to all of the land now owned by the Federal land bank without any loss whatever to the institution other than what it calls its financial cushion, but the necessity of that might be challenged when we realize that even the difference between the 31⁄2-percent interest rate and the old 5-percent rate on land-bank mortgages is made up by the Federal Government.

In

We might, of course, go a step further and call the attention of the Congress to the fact that the said institution has already set up a reserve fund of $30,031,716.38 against possible losses on the resale of land. In other words, the actual carrying value of the land they own represents $101,553,673.74. other words the loan agency to which I refer should be willing to exchange the total acreage of their land for the stock now owned by the Government without any additional payment which would still leave them a reserve fund of $22,512,461.26 that we should by act of Congress require them to maintain in a permanent reserve fund against contemplated losses on foreclosures that will occur in the future out of a total of 7,067 farms now in the process of foreclosure, unless we arrange to take over that land when it comes into their possession. It should be evident to the Congress that such an acreage of land, presumably of a comparatively productive nature in its class, such as farm lands and ranch lands, would constitute a very comfortable and certainly satisfactory model set-up from the standpoint of a land-purchase program, even though it is not comprehensive and when compared to such commendable propositions as the Bankhead-Jones bill is, of course, small indeed. Regardless of what the Committees on Agriculture of the House and Senate or the Congress does about the pending Bankhead-Jones bill or any other comprehensive tenancy measure those groups should by all means cooperate in the enactment of a measure such as I propose because in either event it constitutes an ideal arrangement that will cost the Federal Government not to exceed 71⁄2 million dollars in view of the fact that we already own the land-bank stock. My bill proposes that the acreage when acquired can be resold to tenants upon the basis of a long-term lease proposition. In other words, the lease would incorporate a provision whereby if the land was properly operated, taking into consideration the matter of erosion control, moisture conservation and crop rotation that at the end of the conditional period the tenant would have an opportunity to exercise an option to purchase the land so occupied and to apply a percentage of his rentals paid during the period of his lease upon the purchase price, the said purchase price to bear interest at 3 percent. It would be necessary, of course, for the tenant to make an additional payment at the end of the 10-year period equal to the accumulation of 11⁄2 percent per annum, representing payments upon the principal. It is obvious that from such an arrangement he would not be financially obligated in any way nor would the term of his lease incorporate any additional expense to him in the event that he desired to terminate it without exercising his option to purchase.

Under the proposal that I am suggesting, an agency of one of the existing departments of the Government would, of course, be obligated to make a careful survey of the entire acreage so owned by the Federal Government with a

view to selling to contemplated owners only such portions thereof as should be brought under cultivation, the remaining acreage to be supervised from the standpoint of controlling erosion, reforesting certain areas that were considered to be untillable and restoring the fertility through the proper grazing of sections where the land should be so used. There would be nothing to prevent the sale of such lands, of course, to private owners under the same lease and contract arrangement provided for the sale of it in the first instance at such time as the land became sufficiently reconditioned to offer a possibility of profitable ownership.

There is no question but what either the Seventy-fifth Congress or some Congress that succeeds it in the near future will meet and cope with the growing problem of farm tenancy. The expanse and varied characteristics of the United States is such that it is going to be difficult to draw legislation that will deal properly with the situation in all areas. I feel that many leaders high in the public service agree with me that we should proceed cautiously with the problem of increasing the number of farm owners. For that reason I expect to introduce the plan I have proposed, which incorporates a purchase plan involving approximately 6,500,000 acres of land to be "set up", so to speak, in an experimental project. In doing this I do not depreciate the importance of the problem but rather I amphasize that condition with the hope that when we do arrive either at the beginning or at the ultimate conclusion of the national problem in this field that the final result will be satisfactory and that we will not have complicated the existing seriousness of the situation. I am inclined to think that there are two powerfully important factors that have resulted in present conditions insofar as farm ownership is concerned; namely, low farm prices, and, secondly, the burden of farm mortgages.

It was my pleasure to serve on a subcommittee of the Committee on Public Lands that held a few public hearings and conducted an exhaustive investigation into the various phases of the subject we are considering during the last session of Congress, and I here extend my tribute to the Honorable Hugh Peterson, of Georgia, who is certainly responsible for the extent and quality of that report, being chairman of the said committee. Our findings emphasized the fact that from 1890 to 1930 the percentage of farm losses grew by leaps and bounds from a total of slightly over $3,250,000,000 in 1910 to $9,250,000,000 in 1930. Of course, so long as free farm lands were available to the public farm families operating their own homesteads free of debt composed the predominating group of the nation's farmers. Such tenancy as existed was of a voluntary nature. Years ago all the desirable farm lands passed into private ownership and the Homestead Law of 1862 that was responsible in large part for the westward movement of our population became inoperative and at that very time farm losses and tenancy began to occupy a place of increasing importance in the nation's economy, and incidentally the plight of the tenant farmer and the owner-operator with a mortgaged farm has created a serious social problem different from any heretofore confronting our people.

In order to emphasize the effect upon the present problem we are attempting to deal with of farm prices, I would remind you of the following facts obtained from the census of 1930: In that year farm prices and farm production were both above normal and exchange values as between agriculture and industry were not far below normal, so that figures for 1930 may be relied upon as fairly representative. At that time the average net cash income of the average farm operator throughout the Nation, above operating expenses, was $26.50 per month. I am sorry to say that in 1934 it was only 18.42 per month, following upon the footsteps, of course, of the most terrific farm depression in history of 1932 and 1933, and a Nation-wide drought in 1934. It will be interesting to note the income of three outstanding groups of American farmers in that year of 1930. The average income per month of the average owner-operator free of mortgage debt was $26.66: the average income per month of the average owner operating with a mortgage debt was $15 per month, and the average monthly income of the average tenant farmer was $21 per month. Some of you gentlemen may be acquainted with conditions of farm life as a whole, and some of you, I dare say, are not, but certainly you should have no difficulty in imagining the problem of high finance incorporated in an effort on the part of any farmer to maintain his household and improve his property on an income that ranges from $15 to $36 per month. Out of the latter figure the owner-operator free of debt is supposed to supply management and supervision of his farm which had an average value of $9,103, support and clothe his family, provide household necessities, pay doctor bills and medicine bills, educate his children, pay his church dues and other religious and social obligations, take care of his

telephone charges, his electric bills, furnish and maintain an automobile if he had one, a radio perhaps, a sewing machine, and meet all the other obligations of the normal American family.

Obviously expenditures are often in excess of this exceedingly limited income. Especially is this true with credit and merchandise both plentiful, with fine farm lands available as collateral, and with loan agents anxious to make commissions. Once the farmer steps beyond the bounds of his income, whether deliberately or through the force of circumstances, the result is generally another farm mortgage. In other words, it should be evident to those of us who are trying to help people come into the possession of farms that we must also deal with the question of adequate income, and, in my judgment, deal in some manner with the farm mortgage.

After the average owner-operator has mortgaged his farm he finds that in addition to all the other operating expenses he is then forced to meet interest and retirement payments on the mortgage in order to prevent foreclosure. In 1930, after paying these additional expenses, his net cash income dwindled from $36.66 per month to an average of $15 per month (the average farm mortgage in 1930 amounted to approximately $3,500). With this sum it is obviously impossible for the farmer to meet his living expenses, which are just as great as they were before he mortgaged his farm.

As a result of this situation he becomes delinquent in payments on the farm mortgage, the mortgage is foreclosed, and his farm is placed in a group of tenant-operated farms.

Secretary Wallace said in an article that appeared in Wallace's Farmer on January 2, 1937:

"One of the essentials, if we are to stop the onward march of tenancy, is to bring about adequate stability of farm income, and another is to favor rules of the game which will prevent land values from going beyond a fair relationship with that stable farm income", and I might add that if it were legally possible it might become advisable to eventually prevent by law the mortgaging of land by its owner. Secretary Wallace went on to say in the same article that, "If gifts of land did not seem to check tenancy and promote ownership by the operators, can we be any more confident that the sale of land even at extremely favorable terms will be an adequate answer to our problem?" This question only serves to emphasize the very thing that I am placing before this Congress; namely, that tenancy is not a condition that sprung full born upon us, but it is a disease that has an origin in malnutrition of the economic body of agriculture. The mere appropriation of tremendous sums of money to stimulate the ownership of land is not going to cure this condition. In fact, unless there is a pronounced stability of farm prices and a phenomenal reduction in interest charges it may only serve to complicate the situation by spreading and increasing the percentage of farm mortgage indebtedness and you will recall that earlier in my remarks I emphasized the fact that according to deductions from the Census Report of 1930 that the farm owner-operator with a mortgaged debt had an average net monthly income of only $15 as compared to $21 for the average tenant farmer. We must have a system for agriculture that hastens not only the movement of the tenant farmer into the mortgaged owner-operator class but that likewise hastens the shifting of the mortgaged owner-operator into the category of the owner-operator without a mortgaged debt. I would like to quote further from the article by the Secretary of Agriculture, referred to above because he said, "The problem which we should discuss is not merely a tenant problem in the narrow sense of the term but also a problem of the landlord and the mortgaged owner-operator. In the long run nothing truly constructive can be done about the tenancy problem unless we recognize the difficult situation in which most landlords find themselves. We must recognize as a part of the tenancy problem the stranded landowner on poor land or on a farm which is too small for his type of farming. We must give consideration also to those farmers who are so heavily mortgaged as to be fighting a battle which they will almost surely lose."

Even though I realize full well the extent of the criticism of the activities of the Resettlement Administration, especially in our Middle Western section of the country, and I also think their movements are not entirely satisfactory, I do think it worthy of note that the set-up has attacked the problem of farm poverty-poverty occurring as a direct result of causes beyond the control of the average farmer which strikes at the roots of the cause of farm tenancy. In my judgment it is absurd for this Congress to assume for a moment that tenant farming can be wiped out overnight with a single bill or a single

Stroke of the pen. It is likewise absurd to assume that a majority of tenants can be advanced to the position of farm owners overnight so to speak. Especially do we realize the truth of this statement when I call your attention to the fact that one of the aims of the Resettlement Administration for the coming year in Alabama is to see the last of its clients graduated from bulls to mules as farm power. To those who want to make farm owners, and I am in the vanguard of that group and have been for 10 years, I know, of course, that such an apparently infinitesimal gain seems small indeed. A few hundred cans of vegetables in the cellar of a home and the substitution of nutritious foods for a surplus of pickles may seem trivial indeed and entirely unrelated to the problem under consideration, but they both have a direct bearing upon the elimination of tenancy. They involve such things as home and farm management, conservation of family resources, or-in other words, a disposition of farm poverty. My own associates, farmers in the State of Iowa, may not realize that conditions such as I describe prevail in American farm communities not to a limited but rather to a tremendous extent.

I am inclined to think that a limited model farm-purchase program can incorporate the very things in many sections of the country that are fundamental. The development work that can be done with a limited farm purchase program such as I suggest can be coupled adequately and properly with efforts on the part of other agencies of the Government to alleviate and wherever possible to eliminate the threat of farm poverty. We must assist people toward making cash money go further toward providing store goods, showing the way to greater self-sufficiency which may even mean a return to the home processing of certain products in accordance with earlier rural customs. It would be an idle gesture to place a man on a farm without being of assistance to him in the management of his cropping and the conservation of his resources.

It is my understanding that the Rural Resettlement Administration expects to locate a thousand tenants who will finally be set up on farms they can hope to own. They will have a 5-year trial lease with option to buy at the end or to enter into a long-term lease. In order to purchase the farmer will have a cost of 1.3 percent per year in excess of the charge involved in leasing, on the basis of a 40-year amortization plan. The interest rate will be 3 percent. He can obviously have a $5,000 farm for 20 years for $150 a year, or he can buy it for $65 a year additional. This program has, of course, been limited because of the lack of funds. Once we get machinery of the type such as I suggest into operation we will be able to increase the rapidity of its application and the extent of its application to the problem. If we launch into the arena without a yardstick we will probably involve ourselves in an expenditure that may logically run to 13 billion dollars, which would not be out of the question or beyond the realm of either possibility or advisability if the proper preparations had been made for those expenditures so that unlike the wars of the past they will not incorporate so much money cast fruitlessly into the waters of time and which in this case might even aggravate the situation by increasing rapidly the number of mortgaged owner-operators whose incomes have been statistically less than tenants themselves.

As one who desires to increase the number of owner-operated farms as rapidly as possible, I urge upon the Congress and all those who are assisting with the solving of this problem to move as cautiously as possible with a view to improving the condition of the American farmer rather than attempting anything which may result in tying him unduly close to the whipping post of greater debts. Let us meet and solve this tenancy question but let us meet and solve it as statesmen desirous of the proper result in the end. We must not be like children who gleefully swing the pendulum to its extremity and weep in bitter anguish when it strikes us upon its return. I am confident that carefully drawn, modest provisions for beginning a trend toward farm ownership under the proper supervision and with safeguards which may seem a bit bizarre bring about the eventual solution of this most serious farm crisis in a satisfactory manner. We want more farm owners free of debt with an adequate income properly safeguarded from attacks upon it which are beyond the control of the farmer.

That concludes the list of those desiring to be heard, and the committee will stand adjourned. The hearings are closed on the farmtenancy bill.

(Thereupon, at 5 p. m., the hearings were concluded, and the committee adjourned.)