Mr. BESTOR. I may be all wrong in my reasoning, but I do not see that it would have any marked effect, because people lend money based largely on whether they are going to get it back, or not, in their opinion. If they take a guaranteed proposition for a short term, why, they are ready to loan the money at a very low rate. If they loan money on a hazardous proposition, they demand a higher rate. It would have some effect, but I doubt whether it would have any marked effect.

The CHAIRMAN. Do you think the individual who wants to build a home in the city, millions of them, would still pay the commercial rate of 6 to 8 per cent when the farmer was getting it at 12 per cent from the Government?

Mr. BESTOR. I think they would, Senator, unless they demanded and got the same privilege as the farmer did. They might not pay quite as large a rate.

Senator FRAZIER. Do you not think it would be of general benefit if these interest rates were lowered?

Mr. BESTOR. Yes, sir.

The CHAIRMAN. What is the mortgage indebtedness of the farmers now, if you have the information?

Mr. BESTOR. As near as it can be estimated the first-mortgage debt is about $9,000,000,000.

The CHAIRMAN. Do you think $9,000,000,000 loaned to one group at 12 per cent would not have any effect on the public generally for commercial and home-building purposes?

Mr. BESTOR. Well, I say it might have some effect, but the man who has money to loan would be looking around to see where he could get the most for his money, and unless he can find a safe place for it where large hazards are not involved, I do not think he would be willing to loan it at such a low rate. However, the release of so large an amount of money for investment might have considerable effect on other rates.

The CHAIRMAN. Would a man have an opportunity to borrow, say, a farmer, to borrow at this low rate and then reloan to those who would pay a higher rate of interest?

Mr. BESTOR. I did not get that question.

The CHAIRMAN. Under the terms of this bill would it be possible for a farmer to place a loan at 12 per cent on his farm and then loan it to somebody else who is paying a commercial rate to-day? Mr. BESTOR. I am inclined to think it would.

Senator FRAZIER. Mr. Chairman, this money that is borrowed under this bill is to pay his existing indebtedness. He would have no opportunity or chance to loan it out for anything else.

The CHAIRMAN. Then one who would want to borrow from the Government originally, if this becomes an act, would not have the privilege of borrowing under this bill?

Senator FRAZIER. I beg your pardon?

The CHAIRMAN. If this bill should become a law, thereafter no one who wanted to place a mortgage on his farm would find money available under this bill?

Senator FRAZIER. No; not unless the bill was amended.

The CHAIRMAN. I mean, in this form?

Senator FRAZIER. This is for existing indebtedness.

Mr. BESTOR. It is to provide for the $9,000,000,000 we have now.

The CHAIRMAN. Now pass to section 4, Mr. Bestor, on page 3. That provides for chattel mortgages; first mortgages on livestock up to 65 per cent of the fair market value thereof. At the present time the Federal Farm Board does not loan on chattel mortgages. In your opinion is that a sound provision?

Mr. BESTOR. Where is that, Mr. Chairman?

The CHAIRMAN. That is on page 3, section 4.

Mr. BESTOR. I do not think there is anything unsound, Senator, in loaning money up to 65 per cent of the value of livestock, if it is done carefully. It depends to a large extent on whether it includes all livestock. If it includes hogs and mules, and so forth, there would be some question. On cattle and sheep, I would say 65 per cent would be a very fair loan.

Senator FRAZIER. That is for livestock used for agricultural purposes and breeding purposes?

Mr. BESTOR. Yes.

Senator FRAZIER. It is limited to that?

Mr. BESTOR. Yes.

Senator KENDRICK. Mr. Bestor, are you aware that the value of livestock has declined about 55 per cent in the last three years' time? Mr. BESTOR. Yes; that is true of certain classes of livestock. Senator KENDRICK. Well, that would make the loan unsafe, would it not?

Mr. BESTOR. If it were a short-term loan it would not be so bad. This provides for a loan of one year. If the loan is for a sufficiently short term, there would be little hazard. Ordinarily, I think a loan of 65 per cent on a bunch of cattle or sheep for a year to a responsible borrower would be all right.

Senator KENDRICK. Well, you are also sufficiently familiar with the production of livestock, no doubt, to know that a great deal more depends upon a close supervision of the loan on livestock than almost any other thing.

Mr. BESTOR. Yes; I know that is true..

Senator KENDRICK. And under that sort of a situation, would it be advisable for the Government to embark on that kind of a loan or become responsible for that kind of a loan?

Mr. BESTOR. Well, of course, it has its hazards, all right, and you have pointed out the weak place. In any loan, the lender needs some one who can handle the cattle and see that they are properly cared for. The commercial banks have made it a policy for a feeder loan on cattle, to loan 100 per cent to a good responsible borrower who is familiar with the feeder-cattle business, with cattle, feed, and hogs as security.

Senator KENDRICK. That is a very different proposition from what is proposed here.

Mr. BESTOR. Well, this would involve livestock on the farm.
Senator KENDRICK. For breeding purposes.

Mr. BESTOR. Yes, or for agricultural purposes.

Senator KENDRICK. The feeder proposition is recognized all over the country as a short-term loan. For instance, it involves, as a rule, only the time required in finishing the cattle that are already grown and ready to mature.

Mr. BESTOR. That is right.

Senator KENDRICK. That is what is known as a feeder's loan.

Mr. BESTOR. Yes.

Senator KENDRICK. It runs about 90 days to 120 days.

Mr. BESTOR. Yes, sir.

Senator KENDRICK. So that it would be a different loan from that which is suggested here.

Mr. BESTOR. Yes, sir.

Senator KENDRICK. My thought is that-of course, we are trying to determine a way out, and I am agreeable to the needs of the legislation that is suggested; but we can hardly afford to venture on a system of finance here that will remove the safeguards and restrictions that are positively necessary in connection with any kind of a loan.

Mr. BESTOR. I think you are right, Senator, to this extent: This would provide for a loan to be made direct. Now the intermediate credit banks will discount paper secured by farm livestock. But this is a departure, in that you loan money directly to the individual. Whereas in the case of the intermediate credit banks the loans are made by a livestock loan company and discounted by the bank.

I understood the chairman to ask as to the safety of the loan. As to the percentage basis, I think that under ordinary conditions with proper safeguards, the percentage is not out of line. And for the Government to go into it, as you have pointed out, would be a very radical departure from anything that has been done.

Senator KENDRICK. Well, it seems to me so, and in view of the questions asked, I want to say that all of the experience in the livestock business which I have had opportunity to note reflects two things: First, that the security on livestock, as a rule, is a desirable form of security in a loan; it is a liquid sort of asset and can be cashed and the loan liquidated without very much delay. That is one thing. The next thing is that the stability of the loan depends almost entirely upon the closest kind of personal supervision on the part of the lender, as to the way the stock are handled and matured. Senator THOMAS of Oklahoma. Are there any further questions any member of the committee desires to ask Mr. Bestor? [After a pause.] Is there any question that any member of the farm organizations desires to ask Mr. Bestor?

Mr. SIMPSON. Mr. Chairman, I want to ask a few questions.

Senator THOMAS of Oklahoma. At this point I would like to have the record show the names of the representatives of the farm organizations represented. Is there any objection to having that incorporated in the record? [After a pause.] If not, will the members of the farm organizations who are here represented give their names to the shorthand reporter? I believe the National Farmers' Union is represented. Mr. Simpson, will you give your name to the shorthand reporter?

Mr. SIMPSON. John A. Simpson, president of the Farmers National Union. And Mr. A. W. Bowen, Washington representative of the Farmers National Union, is also here.

Senator THOMAS of Oklahoma. Is there anyone else here representing your organization?

Mr. SIMPSON. Not here to-day.

Senator THOMAS of Oklahoma. The American Farm Bureau Federation is represented, I believe. Who represents that organization?

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.

1:

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. Did 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 12 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, I 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?