these personal credits being taken care of by a separate department of the present Federal land banks?

Mr. ANDERSON. That is correct.

Mr. WINGO. Each bank will have a separate capital of $1,000,000 for that department, and then each bank, subject to the approval of the board, could sell debentures for the purpose of getting the funds other than capital funds; in other words, you propose to get your funds through the debenture plan.

Mr. ANDERSON. Exactly.

Mr. WINGO. Now, what amount do you estimate will be necessary in order to make the system function properly and meet the credit requirements of the American farmer?

Mr. ANDERSON. Well, that is a very, very difficult question to answer. I think it would develop rather slowly and that its maximum development in the course of five years would not exceed $240,000,000.

Mr. WINGO. You think, then, the entire system in the course of five years would have an operating turnover of $240,000,000 of current, existing, outstanding loans, for which they would have outstanding debentures, and your idea is to issue debentures in keeping with the average maturities of the paper so as to meet the demands?


Mr. WINGO. What are you going to do to take care of the rest of the personal, farm credits of America ?

Mr. ANDERSON. Just what do you mean, of this character, or do you mean the short-time requirements?

Mr. WINGO. I mean the short-time credit that is not now possible to take care of under the Federal reserve system at commercial banks; in other words, the longer loans of the farmer which necessitate a credit covering the turnover period of the cotton grower or the wheat grower or any other of the basic agricultural divisions.

Mr. ANDERSON. I would not suggest at all that $240,000,000 was the capacity of a system of this kind. I think it would be the maximum which ought to be turned over on the basis of the capital which this bill carries; but it would be a relatively easy matter, and, as I said the other day, I'think it is altogether probable, that the capital which the bill carries ought to be increased; and certainly if the system developed as we hope it would, it would only be necessary to increase the capital from time to time to provide the necessary margin for the expansion of the system as it grew.

Mr. WINGO. Here is another thought which occurs to me, and I have had some suggestions made to me with reference to it: In view of the fact that the present Federal land-bank system has been unable to meet the demands of the small borrowers and they are limited to $10,000, and there have not been sufficient bonds sold even in these flush times when money is so easily obtained, and these bonds could be sold easily at par for 4 per cent, yet loans are hanging fire for a long time because, as they say, for lack of funds. Now, if you can not meet the current need for one, two, and three thousand dollar land loans, it is contended by those responsible for the administration of the system that there is a certain point of saturation or absorption by the bond market, and it will not take over what we are getting out now, and if that is true in this period of easy money on the bond market, where are you going to get a sale for this $240,000,000 of additional bonds.

Mr. ANDERSON. I do not think you will have the same market at all.
Mr. Wingo. You think you will have a different market?

Mr. ANDERSON. I think so. For instance, I take it that the average investor who buys bonds is like the average human being, generally, and does not like to put all his eggs in one basket. I know quite a number of men who are buyers of Federal farm loan bonds, but the amount of those bonds which they will take represents the amount of that particular kind of investment which they are willing to make. They scatter their investments around over a number of different kinds of securities. Now, in addition to that, this is a short-time debenture and would largely find a market among people who want to tie their money up for relatively short periods.

Mr. STRONG. At higher interest?

Mr. ANDERSON. At higher interest, and I suspect a good deal of this money perhaps would come from sources which now furnish time deposits to the banks, or at least to some extent it would.

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Mr. WINGO. You mean that where a lot of banks have separate funds non that possibly those funds might be diverted to these short-time debentures of from one to three years on the theory that if they needed the funds earlier they could find a ready market for them.

Mr. ANDERSON. I think so.

Mr. Wingo. You make provision somewhere in the bill that where they have less than six months to run the Federal reserve banks can rediscount-the paper or the debentures?

Mr. WINGO. You take care of both of them in that way?

Mr. Wingo. What limitations do you put as to any interest charges that the farmer would have to pay?

Mr. ANDERSON. The bill carries no limitation whatever.
Mr. WINGO. The farmer buys the credit at the market price?

Mr. WINGO. Your idea is that he needs the machinery for marketing this credit, and if you establish that machinery the market price will be very reasonable and such as he can afford to pay ?

Mr. ANDERSON. My conception is that credit has to be obtained from one who has it and has to have a value that will sustain it.

Mr. Wingo. Is there any probability under your plan or have you contemplated that you might run up against the same situation that the Federal land banks have encountered? Of course, we know that we could put out more Federal land bonds than we have out now. They are giving out the excuse that it is a physical impossibility to go through the red tape necessary and have the necessary inspection, and the people are having to wait from 6 to 8 or 10 months to have the inspection made, and yet there is plenty of money available. I know men who are anxious to get the bonds. I know one man who has been trying to get hold of some of these bonds and he can only get them at 103. Of course, if he had gone in with the syndicate he could get them for 1021.

Mr. ANDERSON. I think you have there a different situation, Mr. Wingo. In the first place, your Federal land banks are absorbing a considerable amount of existing capital credit, and its field for absorption is the total field of farmmortgage capital credit. Now, of course, if you are going to absorb all of that credit into the farm-loan system it is going to take an enormous amount of money, running not into the hundreds of millions but into the billions of dollars. That is not only taking care of the current capital credit which is required but it is absorbing credit now furnished by other institutions, because it is furnished at a low rate of interest. I doubt very much if you will ever be able to sell enough farm-mortgage bonds to absorb that entire credit, and I doubt whether it is desirable to do it, even if you could; whereas, in this case you are furnishing a turnover credit which is constantly liquidated by new property created.

If the committee will indulge me, I would just like to give you a more or less accurate definition of credit, as I have evolved it in my own mind. I think it might perhaps help to clarify somewhat the conception of what credit really is. I do this rather diffidently, because I know it is a difficult job, and I do not claim to have done it as well as it can be done ; but, so far as I am able to get it in my own mind, credit is a representat on of a portion of either the capitalized realizable income of insurable property or services. Now, that is the kind of capital which is represented in the farm-loan system.

Mr. WINGO. Pardon me; what did you say about insurable property?
Mr. ANDERSON. Insurable property or services.
Mr. WinGO. That is your definition of credit?
Mr. ANDERSON. hat is my definition of capital credit.

Or (b) a prospective realizable value of property in process of marketing, or (c) the anticipated realizable value of property to be produced or services to be performed, all expressed in terms of a medium of exchange.

Now, that contemplates three classes of credit, all of which is based upon current income the capitalized realizable income of insurable property or sers. ices; property in process of market'ng which has a realizable value of course, wheat, for instance, so far from market that it can not be gotten there has no realizable value as a basis of credit-or it might represent the realizable value of property to be produced or services to be performed. That is in large measure the class of credit which would be furnished under this bill.

Mr. WINGO. Well, that goes back to the old definition that credit is nothing but the present 'realizable value of services or commodities to be created or rendered in the future.

Mr. WINGO. Your definition does not involve any new element.
Mr. ANDERSON. I do not think there is anything new in the definit'on at all.

Mr. W'INGO. Now, getting back to the question of the absorbing power of the market, offhand, just what is the outstanding volume of Federal land-bank bonds at this moment?

Mr. ANDERSON. I do not have that figure. Mr. WINGO. What is the outstanding amount of farm credits of the Nation, of all character; that is, land mortgages?

Mr. ANDERSON. I can give that to you, but I do not have it in mind.
Mr. WINGO. Do you remember, roughly, in approximate figures, what that is?

Mr. ANDERSON. My recollection is that there is not any absolute, accurate measure of the total agricultural loans, either personal loans or real-estate loans, but there are some figures which, I think, give that substant'ally accurate, if I can find them.

Mr. WINGO. Suppose you give your best recollection and then you can correct the figures later.

Mr. ANDERSON. My recollection is that the total of both personal and

Mr. WINGO (interposing). I am talkilng about land mortgages-outstanding real-estate farm mortgages.

Mr. ANDERSON. Well, I can not find that at the moment, I am sorry to say. Mr. WINGO. As I recall, your joint committee has statist.cs on that.

Mr. ANDERSON. Yes; we have some figures on it. They are really the figures of the Agricultural Department obtained by a questionnaire.

Mr. STRONG. I suggest that Mr. Anderson put those figures in the record at this point.

Mr. WINGO. You do not recall, roughly, what that amount is?
Mr. ANDERSON. I would not want to guess at it.
Mr. WINGO. I know there is a very wide range of estimate.

Mr. WINGO. Do you recall the outstanding volume of industrial investment securities? And by industrial I mean railroad bonds and bonds of different industrial plants, like steel corporations.

Mr. ANDERSON. I do not have those figures.

Mr. WINGO. Do you recall and have you the figures available so that you could furnish them to the committee the amount of farm mortgages that were executed last year and also the amount of industrial bonds that were issued last year?

Mr. ANDERSON. I do not think there are any such figures in existence.
Mr. WINGO. You do not think such figures are available?

Mr. ANDERSON. No; there would be some estimates, but they would be only estimates.

Mr. WINGO. Of course, they are all estimates. You think the absorption point would be reached in the normal debenture credit market quicker than in the industrial investment market; and if so, what reasons have you from your investigations to support that conclusion ?

Mr. ANDERSON. I do not see any reason why the absorption point should be reached any quicker on agricultural loans than on industrial loans, except that the tendency in this country, to a much greater degree than in any other country, I think, is in the direction of shorter period loans and shorter period credits.

Mr. WINGO. Is it not also true that there may possibly be a readier market for industrial investment bonds as compared with farm-mortgage bonds based on the farm-loan system, because there has been a longer experience of investors in investing in that type of security.

Mr. ANDERSON. I think that would be a perfectly natural assumption.

Mr. Wingo. You think, though, as they appreciate the value of these farm debentures and bonds, they will get more nearly on a par from the standpoint of public demands, do you not?

Mr. WINGO. You regard one as sound as the other, I suppose.

Mr. ANDERSON. Well, that is a pretty general question to answer. It is quite conceivable that a short-time debenture could be issued by a private corporation which would be fully as valuable as these debentures, and perhaps more so, and there may be such debentures on the market to-day. I could not say.

Mr. Wingo. Well, is not the whole theory of these proposals, including your own, based on the thought that we have, over a long period of years, evolved through the private commercial banking systems a safe, sound machinery by which a rediscount market is available for commercial credits.


Mr. WINGO. The experience of bankers and of others has demonstrated that farm credits, if properly handled, with the same degree of caution that men use in handling commercial and industrial credits, that you can build up a machinery that will accommodate and market that credit just the same as commercial credit.

Mr. ANDERSON. Exactly so.

Mr. WINGO. So it is not a question of soundness but the fact that it is predicated upon basic industries susceptible of intelligent consideration and conclusions being reached by business men and the only question involved is being able to build up the proper machinery to market the credit.

Mr. ANDERSON. That would be my view of it.

Mr. Wingo. Is not the only problem building up a machinery that will be responsive to the peculiar turnover needs of this long-term credit.

Mr. ANDERSON. Exactly.

Mr. WINGO. Such as the commercial credit system built up on a 30 or 60 or 90 day system, whereas the farmers' credits are basically bottomed upon one to three years' turnover needs, so is not the whole problem not one of trying to evolve a sound farm credit, but evolving machinery that will be practicable and will, with expedition, market this other class of credit with the same facility and the same degree of elasticity that the commercial banking system markets its commercial credit.

Mr. ANDERSON. Exactly so. Credit is a commodity and you have to have machinery through which it is distributed just as you have to have machinery through which to distribute wheat or flour, and we do not have ade. quate machinery for marketing that kind of credit. What we seek to do here is to build such a machine.

Mr. Wingo. Now, the relief under your bill comes through two different avenues; in other words, you have two different marketing agencies for this one to three year personal credit to farmers; one is the Federal land bank system, by having a personal credit kitchenette, so to speak, for it, and then also giving them a kind of seasonal invitation to operate with the Federal reserve system. You still tie it on to farm-investment credit—that is, the land creditand you tie it on to the short-time commercial credit system. Is it not possible for you gentlemen who have devoted a great deal of time and attention to this matter to build up an independent credit system for the American farmer that will handle these turnover credits from one to three years, and one that will be just as safe and sound as the investment credit of the industrial world and the short-time commercial credit of commerce and trade?

Mr. ANDERSON. If you are putting that question up to me personally, I might say, without egotism, I think I could draw up such an independent system of that kind. It would take much longer to put it into operation, especially if you did not utilize the points of contact which you now have with the farmer. It would operate much more slowly and with a good deal more red tape than the scheme which is proposed here. We have gone over this before, but I may repeat it, perhaps. In suggesting this particular plan, we suggest it, first, because most of the agencies we already have.

We have the agency dealing directly with the farmer, interested in seeing that the loan is a sound loan, one of them in every locality and perhaps two or three or four of them in every farming community. We also have the Federal land banks located with particular reference to the agricultural needs of the country. The erection of a farm-credit department in the Federal land bank would take less time than it would to build a new system of equivalent banks. Again, these Federal land banks now have the contacts with the bond markets, and they can utilize those contacts and consequently, through the utilization of contacts already created, it seems to me, get into operation more quickly than a new system could be put into operation.

Mr. WINGO. Just when did they get in contact with the bond market? I have been hammering like the mischief to get them to do that. I kicked under the Democratic administration and I have been kicking under the Republican administration because you did not let your Federal land banks get in touch

with the bond market. You have got a little syndicate and you have to go through them. You can not, yourself, as a Member of Congress, buy such a bond without paying toll to this syndicate. Now, are you going to still keep that buffer up?

Mr. ANDERSON. I am not going to run the system. If it is desirable to change that situation it can be changed. That is not a matter involved in this proposition or in the farm-mortgage proposition either. If this committee wants to change that situation, it can report out a bill to-morrow which will change it. That is up to this committee.

Mr. WINGO. You have put your finger on the real trouble that you and other men have when you try to solve these problems, and that is the question of administration. The trouble about it has been that the public and even the men who were sincerely desirous of solving this problem have proceeded upon the theory that we were going into an untried realm and into something that was not sound like commercial credit, when, as a matter a of fact, there are banks that have been fluorishing for 50 years and have prospered on farm credits, even with the limitations of time, and the whole proposition is not to control this proposition but is one of service and of getting the machinery that will serve them and not control it.

They proceed upon the theory that here is something that will smash everything up if it is turned loose and they have got to erect something to control farm credits instead of erecting something to serve farm credits; that they have got to have an engine that will govern and restrain instead of an engine that will facilitate the operation of marketing the credit. Now, do not misunderstand me. If this is the best we can get-something that is tagged on as a kind of kitchenette to the credit departments of existing agencies-if it is the best we can get for the very same reason we do not report out a bill such as you suggest on this bond bill, and you know that for 10 years we have been working on this question and you remember the row we had in order to establish the Federal land bank system, and after we got that we proposed to take up the short-time credit question and, of course, the war came on and that divertéd attention from that. But it is the same old story of appointing a commission and having hearings, and I have noticed that the anxiety and the interest in this question reaches its highest point, and fluctuates somewhat like the bond market, up and down, and goes in cycles-but there is a remarkable coincidence between biennial elections and the public interest taken in the farmcredit situation, and I am just wondering when we will have the nerve to reach out and establish a separate, independent short-time personal credit system for the American farmer.

Farm credit is as sound and safe as any hardware store or any haberdasher store or any wagon factory credit and is founded upon a basic industry in this country. Of course, if we can not get anything better than just a little side-door arrangement, I guess the farmers will have to take that.

Mr. W'INGO. I happen to be in this situation : My party is not in power and I have no opponent and I have been hammering around at this table, in season and out of season, for the past 10 years on this proposition and I am going to keep it up.

Mr. ANDERSON. While this thing has been in a great many people's minds for a long time, I think it can be said that possibly within the last two years, and perhaps less than that, for the first time, not one but several concrete proposals for creating this machinery have been offered.

Mr. WinGO. I will have to differ with you about that. I can show you a carbon copy of a proposal and a copy of hearings suggesting this same scheme of tagging it onto the Federal land-bank system. It might be the first time it has been brought to your attention, but I can go back to my old files and show you a proposal almost identical with this.

Mr. STROXG. I would like to inject into this argument-
Mr. ANDERSON. I am not arguing with the gentleman, I will say.

Mr. STRONG (continuing). A reasonable defense of the present administrittion of the farm-loan system.

Mr. MACGREGOR. Why enter into that proposition now?
Mr. STRONG. It has already been brought up here.
Mr. BLACK. I would like to ask a question of Mr. Anderson.

Mr. MACGREGOR. I want to get the regular order. Mr. Strong, will you not defer that?

Mr. STRONG. It has been suggested that the system is not working promptly.

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