Senator THOMAS of Oklahoma. Mr. Brinckman?`

Mr. BRINCKMAN. No, sir.

Senator THOMAS of Oklahoma. I understand there are some others who want to be heard to-day, and if there is nothing further, we will stand recessed to 2.30 o'clock in the commerce room in the Capitol Building. If there is anyone else wants to be heard, take the matter up with Senator McNary or the clerk and we will be glad to give you a hearing.

(Whereupon, at 12 o'clock noon, Friday, April 29, 1932, the committee recessed to 2.30 p. m. of the same day, in the Senate Committee room of the Capitol.)

AFTER RECESS

The Senate Committee on Agriculture and Forestry reconvened at 2.30 o'clock p. m., Friday, April 29, 1932, at the expiration of the

noon recess.

Senator THOMAS of Oklahoma (presiding). At the request of Senator McNary, I will assume the chair, unless Senator Norris wants to preside.

Senator NORRIS. No.

Senator THOMAS of Oklahoma. The committee will come to order. There are three or four, I understand, who want to be heard. Mr. Lemke, I believe, is the first, as he has to get away. So if there is no objection, we will hear from him at this time.

STATEMENT OF WILLIAM LEMKE, FARGO, N. DAK.

Mr. LEMKE. My name is William Lemke, Fargo, N. Dak.

Mr. Chairman and gentlemen, I may state that I appear on behalf of the Frazier farm relief bill, which is an emergency measure. I am glad that the three organizations got back of a permanent measure, which is as essential as the emergency measure, but the emergency measure is of the more vital importance to the farmers of North Dakota, South Dakota, Montana, Minnesota, Nebraska, Iowa, Kansas, and Illinois than even permanent relief, because in order to stay on their homes they must have relief immediately. I may state that in my own State of North Dakota 90 per cent of the lands and homes where the title still remains in the hands of the farmers are still in danger of being lost to them by mortgage foreclosure. In other words, there are not over 10 per cent of all of the farms and homes in North Dakota that are still free of mortgages, and I will say that 90 per cent of the lands owned by corporations and insurance companies were gotten through mortgage foreclosure or voluntary surrender within the last 10 years.

In 1924, out of 53 counties in my State there were 21,438 mortgage foreclosures in the last 10 years and only 854 redemptions. That does not show all of the transfers made because of indebtedness, because I will venture to say that an equal amount was surrendered, where the farmer became a tenant.

Therefore, the Frazier bill is of vital importance to those people as an emergency measure, and then the other measure, which is for permanent relief.

I am sorry that these different organizations did not get together with a little fire back of the Frazier bill, because I will say in the States that I have named, if this committee were to take a referendum, 9 out of every 10 farmers would put the Frazier bill first, because human preservation is the first law of nature, and they want to hang on, in hopes something will come later.

Therefore, I am equally strong for both of these bills, but the emergency must come first, if we do not lose our homes.

What is the Frazier bill? The Frazier bill provides that the United States Government shall refinance those farm indebtednesses at 112 per cent interest and 12 per cent on principal on an amortization plan, and that it shall issue Federal Reserve notes with which to get the money.

There has been some criticism made of that. I understand our friend, the Secretary of the Treasury, says it will seriously disturb the monetary system. I say a monetary system which has put 8,300,000 people out of employment and is producing 2,800 people every day who could go to bed and eat a little more, a monetary system that has wrecked the homes of this Nation, ought to be very seriously disturbed, and I feel the time is at hand when it will be seriously disturbed, and I think the Frazier bill will disturb the international bankers and Wall street. That is why there is such opposition to it.

The Secretary of the Treasury says it will take $10,000,000 to do it. I say that two or three billion dollars of Federal reserve notes to take up the existing mortgages will create a revolving fund, so that it will find its way back into the Federal reserve banks, so that every dollar will be paying off 10 or 20 obligations, and it can be reissued to take up the next mortgage, so that about two or three billions of new money will be sufficient to take up the entire $10,000,000,000 of mortgage farm indebtedness.

Now, if the United States Government will do that, whereby it will take two or three billion dollars to refinance ten or nine billion, as it is claimed, of farm indebtedness, if the United States Government will do that, in 47 years that entire indebtedness will be paid up, and the United States Government will have made a gross profit of $6,343,000,000.

That is one reason why the banking fraternity is not very strong for this bill, because it is the first time that the United States Government has made money out of issuing Federal reserve notes. At the present time it is issuing Federal reserve notes, giving them to Federal reserve banks, to be used by insurance companies, banks, and so forth. I am not objecting to that, but I do not think they should have a monopoly on it. It gives them those notes at a low rate of interest, but at the end of 10 years Uncle Sam has no more money than what he started out with, while at 112 per cent interest under this bill, the Government will make $6,343,000,000 gross.

That is the operation of this bill. The farmer is willing to pay Uncle Sam the money. I do not know how many of your members have looked up this situation, but you will see that before you pass the Glass-Steagall bill, before you pass the $2,000,000,000 reconstruction bill, that before that, within the last year, the United States Government, through the Federal reserve bank, increased the currency in circulation by about $800,000,000, and mostly to four large

cities, Chicago, New York, Boston, and Philadelphia. If they had added $1,200,000,000 more, they would have had enough to handle the entire existing farm indebtedness, and then they would have made a profit on it.

Senator NORRIS. How did they increase the circulation?

Mr. LEMKE. By issuing Federal reserve notes, by having securities put up through the local banks. They say you must have a 40 per cent safe reserve, or gold reserve, rather. I feel if I were a

banker and went to the Government with Federal reserve notes and asked for $400,000 worth and they gave me $400,000 worth of gold, I could then turn around with that and get $1,000,000 in reserve notes, with which to finance securities for individuals who needed the financing.

Senator NORRIS. I suppose they increased that currency in the regular operations of the Federal reserve bank.

Mr. LEMKE. Yes.

Senator NORRIS. The local bank sent its eligible paper to the Federal reserve.

Mr. LEMKE. Yes.

Senator NORRIS. And they issued notes for it.

Mr. LEMKE. And they issued notes for it. And I imagine they were stretching it pretty far. The banks were closing. I have a letter from the Secretary of Treasury saying that it was necessary because people were hoarding.

Senator NORRIS. You said the increase took place in these four large cities you mentioned.

Mr. LEMKE. Yes.

Senator NORRIS. You do not mean that the currency stayed in those cities, do you?

Mr. LEMKE. I imagine it stayed largely there.

Senator NORRIS. I am not speaking from knowledge of it, but from the operation of the Federal reserve bank, this currency went out to the local banks, I suppose, in return for the securities they put up to the Federal reserve banks.

Mr. LEMKE. Yes.

Senator NORRIS. So that the circulation would go to the local banks.

Mr. LEMKE. In those cities.

Senator NORRIS. Yes.

Mr. LEMKE. Not out in the country. I will guarantee you, Senator, there was not any of it found its way into North Dakota.

Senator NORRIS. That may have happened. I do not know what happened there.

Mr. LEMKE. Yes.

Senator NORRIS. But under the law, taking at Chicago, for instance, the Federal reserve bank has a certain district there. Mr. LEMKE. Yes.

Senator NORRIS. In your case, you are at Minneapolis.

Mr. LEMKE. At Fargo, N. Dak. But Minneapolis is our district. Senator NORRIS. Minneapolis is your district.

Mr. LEMKE. Yes.

Senator NORRIS. A bank in your State, if it put up the notes that were eligible, in Minneapolis, would get the money for it, but that

money would be sent back to your local bank, that is where it would finally reach out to the public. Is not that true of all of the others? Mr. LEMKE. But, Senator, in our district they did not increase it but very little, only thirty millions.

Senator NORRIS. I am only using that as an illustration.

Mr. LEMKE. The reason for doing it is that the banks have more money than they know what to do with. They say they make loans on the proper security, and still they won't loan you $250 on a half section of land with buildings worth far more than the loan that is asked for.

Senator NORRIS. What I am trying to get at is to find out just wherein the circulation went to the banks in these cities. If it went out through the operations of the Federal reserve bank, it seems to me it would be scattered over the districts represented by these four cities. It would not necessarily be confined to the cities.

Mr. LEMKE. Except this, Senator; that you will find that Chicago had 48 banks closed in one or two weeks, and it went to local banks in Chicago.

Senator NORRIS. That is what I am trying to find out.

Mr. LEMKE. Yes.

Senator NORRIS. Take Philadelphia, for example. That is one of the cities, is it not?

Mr. LEMKE. Yes.

Senator NORRIS. Did that increased circulation stay in Philadelphia, or, as a matter of fact, did it go all over the district that is represented by Philadelphia?

Mr. LEMKE. In answer to that, Senator, I have not positive knowledge, but from information and belief, I would say it went to the largest cities, to take up some of the worthless bonds that insurance companies and others had gotten from foreign nations. Those worthless foreign bonds even got as far as North Dakota, because I have got some friends that got some of these Brazilian bonds.

Senator NORRIS. Oh, yes; they got into Nebraska, too.

Mr. LEMKE. But, as a matter of fact, among the farming community up there, there is not $2.50 in circulation to-day. We are becoming a nation of Indians up there. We operate by trading and bartering.

Senator NORRIS. It seems to me you ought to consider this: These banks, you said a while ago, have got lots of money.

Mr. LEMKE. Yes.

Senator NORRIS. They do not loan it.

Mr. LEMKE. They do not loan it.

Senator NORRIS. I speak of that without criticism. Maybe I would do the same thing if I were a banker.

Mr. LEMKE. I would.

Senator NORRIS. Because they are frightened; they are scared. Mr. LEMKE. Yes.

Senator NORRIS. But they have got more cash on hand in the banks than they have had in a good while, haven't they?

Mr. LEMKE. Yes. And we talk about hoarding. If there has been anybody hoarding, it is the banks.

Senator NORRIS. And it does not get out to the business men because the banks are afraid to loan to anybody.

Mr. LEMKE. The values have been so diminished that they are perhaps wise not to loan it out. I will say that if I had two or three thousand dollars I wouldn't lend it on any farm land anywhere in the United States, unless you got a refinancing system.

A question was raised this morning if it would not destroy the interest rate. It would not destroy it. But, as a matter of fact, is not the preservation of the farmer's home more important than clipping off a few coupons as interest? But, as a matter of fact, you are coming to this, whether you do it at this session or not, because this Nation is going to preserve itself, it will have to, and it will save it on interest. If you collapse the financial structure of the Nation, the whole thing will go with it.

Senator NORRIS. Mr. Lemke, under this bill, who determines how much shall be loaned on any particular farm where there is a present indebtedness that you are going to take up?

Mr. LEMKE. The Federal Land Bank. The existing machinery is used. We have had so much trouble with those kinds of animals that we created a farm board to watch them and supervise them and make complaint, because if the man is not fair in his actions, it is the duty of the President of the United States to remove him and put somebody in that will function properly in that capacity. But our experience has been with the Federal Land Bank that it has not been representing the farmers, but, rather, we feel that it representing the moneyed interests of the East.

Senator NORRIS. You would not feel, would you, that we ought to take up all farm indebtedness?

Mr. LEMKE. Oh, no; the bill does not provide for that. The bill puts limitations on it. To give you a concrete example, I drove by a farm the other day in Minnesota that was being foreclosed for $15,000, three-quarters of a section, with beautiful buildings on it. I was told that that farm was worth $65,000 not many years ago, and the poor farmer couldn't get $15,000 on it. If he were refinanced under this bill, if the Federal land bank, after going out there and seeing what the value of that farm was, had advanced him enough to take off that indebtedness of $15,000 and refinanced him, he would have to pay $450 a year, and at the end of 47 years his farm would be clear, whereas at straight 6 per cent interest at the end of 47 years he would have to pay $28,000 worth of interest.

me.

Senator NORRIS. There is one thing on that illustration that bothers The fact the farmer gets cheap interest does not bother me at all. I would not care if it went down lower. I think we can afford to go a good way in that respect. But suppose that farmer now, who under your system would have to pay $480, you say, a yearMr. LEMKE. $450.

Senator NORRIS. Besides that, of course, he has got to live.

Mr. LEMKE. Yes; and taxes.

Senator NORRIS. And taxes, and all that.

Mr. LEMKE. Yes.

Senator NORRIS. Under present conditions, could he do that? Mr. LEMKE. Senator, I want to say that Mr. Stone hit the nail on the head the other day when he answered the Senator here in regard to that, when he said that if this bill passed it would raise the level of farm products. And it would. Plenty of money always raises it.