Mr. SILVER. Mr. Chairman and gentlemen of the committee, in my judgment there is no more important measure before this Congress than the rural credits bill.

As to the Capper bill, we have no objection to it. We think that it will liberalize the Federal reserve and enable farmers to do things which so far they have not been able to do. However, it is not the farmer's idea of in. termediate credits, nor is it in any sense the alternative system the farmer needs if he is to do the things he wants to do and that need to be done for the welfare, not only of the farmer but of all phases of our national life; in fact, Secretary Hoover says it is 80 per cent. So that it is reflected in all phases of our national life.

Unless the farmer is so financed that he can produce economically and abundantly, and then having so produced, can warehouse and carry over and sell in an orderly way, we have failed to equip him so that he can do the very thing that is necessary for his preservation.

The production credit, as provided in that bill, is essential, and then comes the marketing credits.

Now, in order to get to the matter in your minds from the right angle, so that we will all be talking to the same purpose, I want to begin in this way.

The CHAIRMAN. Let me ask you a question before you go any further. Do I understand it is your view that Congress should pass both bills in the present form?

Mr. Silver. Well, while they are overlapping, in our judgment they are not conflicting, so that there would be no reason for Congress, if it saw fit to pass them, not to pass both of them. However, I am particularly urging the Lenroot-Anderson bill.

Mr. STEVENSON. Why not embrace the provisions of both in one bill, and thus prevent any overlaj g?

Mr. SILVER. The overlapping features relate largely to the million-dollar corporation and kindred things of the Capper bill. The cooperative features of the Lenroot-Anderson bill are the ones that appeal most strongly to the people whom I represent.

Mr. STEVENSON. To what features do you refer?

Mr. SILVER. I refer to the method of getting money. When they approach their bank of deposit they have not been able to secure their immediate credits. Now, there is an alternative; that is, to go by another route, and that route is what the farmer has very close at heart. Under the Lenroot-Anderson bill he can go through the cooperative operations described therein, and through the departments set up can go into the reservoir of national credits or into the Federal reserve system as his needs may cause him to do. That gives him a safe standing. While, as I say, he may be refused credit at the bank of deposit, he has this new avenue of approach. It is not always the fault of the bank of deposit, for the banks, for one reason or another, may not be able to accommodate the farmer. That, however, is not a sufficient reason why the farmer should not be financed. He should, on the contrary, be helped just the same, and in much greater degree when a bank has exhausted its resources as if it were still able to function properly. That is really where his real distress begins. Once he can turn to another source for assistance, and by that procedure pledge his crop, whether it be of the warehouseable kind or of the livestock kind, as provided there, and secure the necessary credits to carry him along, it prevents him from having to do what he had to do for so many years, namely, dump his crop at harvest time. As the records plainly show, 80 per cent of the harvested crops is marketed within 90 days, to the injury of the consumer and the farmer alike.

Now, with your permission, I am going back to where I started a moment ago.

Mr. STEVENSON. You spoke a moment ago of the cooperative features under the Lenroot-Anderson bill. I did not quite catch your point. What is the cooperative machinery in that bill?

Mr. Silver. That is the alternative when the deposit bank does not supply the credits.

Mr. STEVENSON. The only provision there is that there will be $5,000,000 in each Federal land bank for the purpose of discounting paper.

Mr. SILVER. You have to go some place-bank, cooperative or finance corporation-before you get to that bank.

Mr. STEVENSON. I do not find any provision of that kind. Do you mean that it is a cooperative association?

Mr. SILVER. Yes. It works through the farm-loan department and the intermediate credit departments of 12 banks; likewise, they go into the national reservoir of money credit, or the Federal reserve. In that way they are rendering a service.

Mr. STEVENSON. The point I have in mind is this: Through what source is this carried on, unless you come through the local bank? To whom do they go to get a rediscount, except a large cooperative marketing association ?

Mr. SILVER. It would not be so large.

Mr. STEVENSON. I have been reading this Capper bill rather carefully, but I do not see any machinery for that purpose in it.

The CHAIRMAN. May I interrupt at this point to suggest that the committee has not held hearings on the Lenroot-Anderson bill. This is not a hearing on the Lenroot-Anderson bill. The subject before the committee is the Capper bill. The general subject of rural credits is before us, but we have been considering the Capper bill particularly.

Mr. WINGO. Mr. Chairman, in order to keep the record straight on that point, let me say that in your absence we did hear some gentlemen who discussed the Lenroot-Anderson bill. We suggested at the time to the reporter that he be careful to segregate them so as to keep them separate. We have, however, heard one or two gentlemen on the Lenroot-Anderson bill. In other words, some gentlemen desired that we hear them and permit them to go ahead, and we did, but gave instructions to the reporter to keep the hearings separate.

Mr. STRONG. We did hear some one on this bill before we adjourned, you will remember.

The CHAIRMAN. These special hearings have related almost exclusively to the Capper bill.

Mr. SILVER. May I proceed, Mr. Chairman?
The CHAIRMAN. Yes; go ahead.

Mr. STEVENSON. The point I am direction attention to is this: On page 2, under Title II, we find this:

Each Federal land bank “shall have power to discount for, or purchase from, any national bank, State bank, trust company, rural-credit corporation, incorporated live-stock loan or farm-credit company, savings institution, cooperative bank, or cooperative credit or marketing association of agricultural producers organized under the laws of any State or of the United States."

That is the only place where they refer to these things, but there is no machinery set up for the organization of those things at all.

Mr. SILVER. No, sir; because they would be set up under the State laws. They would be set up there. It does provide an alternative and a source of approach in the matter of getting needed credit.

Mr. STEVENSON. In other words, they should be allowed to discount through regular bank connections or come directly to the land bank?

Mr. SILVER. Yes; that is right.

Mr. STRONG. I want to say that when we made a motion to take up the hearings on this bill we mentioned the Lenroot-Anderson bill and other bills.

The CHAIRMAN. They may have been mentioned. I was simply calling attention to the fact that we had been considering the Capper bill and we were not familiar with the provisions of the Lenroot-Anderson bill.

Mr. NELSON. I think it should be agreed that since these different bills have been mentioned from time to time, each one who appears before the committee should state which bill he wishes to discuss. One witness may wish to be heard in connection with the Capper bill, while another may wish to speak on the Lenroot-Anderson bill. If each witnes will just announce which bill he intends to discuss, we can proceed in a more orderly way. There may be three, four, or five who wish to discuss one bill, while there may be one, two, or three who care to discuss the other.

The CHAIRMAN. I am quite sure there will be no confusion at all.

Mr. STEVENSON. I think the chairman was merely trying to let Mr. Silver know that we were not familiar with the provisions of the Lenroot-Anderson bill.


Mr. WINGO. May I make this suggestion, Mr. Chairman? I want to get some light along certain lines. From the information I gather, this is largely a credit-marketing proposition. The trouble has been that before the farmer



could get help he must put his crop on wheels and start it to the market. For some reason or other which I do not understand, it seems that it is considered a crime for the farmer to withhold his crop. They say in that case that he is a speculator. They say that they will not finance him; that that is frozen credit. At the same time there is continual agitation, continual legislation, and continual regulation that contemplates greater facilities for the man who takes the farmer's product and handles it. Now, Mr. Silver, what is there in the LenrootAnderson bill that makes the farmer more independent and enables him to handle his crop just as any other producer may handle his commodity, and not have to turn in distress to the bank or to other avenues of approach for credit?

Mr. SILVER. That brings me right back to the place from which I really wished to start. I will draw a little picture that will give you some idea of one kind of objective that we have not just a credit, but the purpose to which credit will be put in order to get helpful results.

Now, in connection with the warehousing bill which, I believe, you passed a day or two since, the hope is that when the farmer has produced abundantly and economically he will 'warehouse. This is the part of my story that I want to get across, so do not hesitate to interrogate me if I do not make myself clear.

Under the provisions and terms of the Lenroot-Anderson bill, when the articles are warehoused they are deliberately and intentionally warehoused, not to be marketed within a 90-day period or a 6-month period, but through the consumptive year. Then the farmer, being in possession and control of his commodity, just like any other producer of a commodity, can look across the table where he trades and say to the man who produces wagons, plows, clothing, or education, or any of the things used in our everyday life, “ How much in education, how much in a home for my family, how much in clothing, shoes, etc., can I trade for?"

Mr. WINGO. Did I understand from the first part of your statement that the farmer, in order to face that situation, under the Lenroot-Anderson bill has to join a cooperative organization ?

Mr. SILVER. No. He can go to a bank of deposit. He has this alternative.

Mr. WINGO. Does the Lenroot-Anderson bill give him any greater privilege or any greater credit than he now has in the banks of deposit?

Mr. SILVER. It does.
Mr. WINGO. In what provision ?

Mr. SILVER. In the provision which Mr. Stevenson read, where the cooperative organization is recognized.

Mr. WINGO. The question that I want to ask you is this: Is there anything in the Lenroot-Anderson bill that gives additional credit to the farmer unless he cooperates with other farmers?

Mr. SILVER. I think not.

Mr. Wingo. In other words, he must join the cooperative marketing association for the purpose that you have suggested?

Mr. SILVER. Not for the purpose alone of getting credit.
Mr. WINGO. I understand that.

Mr. SILVER. But for the purpose of accomplishing the objective, namely, that by this credit and with the cooperation of his neighbors he can in an orderly way market his crop.

Mr. WINGO. Do not understand me to be criticizing the cooperative-marketing idea, but the point I am trying to get at is just what this Lenroot-Anderson bill does.

Mr. SILVER. Yes; I see.

Mr. Wingo. Let us assume that it gives the farmer a broader credit agency for the marketing in an orderly and proper way of his crop.

Mr. SILVER. Yes.

Mr. WINGO. It does this through the cooperative-marketing association. It does not give anything to the farmer as an individual, does it?

Mr. SILVER. If you finance every farmer in the United States and each one acts independently, he fails and does not market his product in an orderly way, with the consequence that he can not reap the benefit which it is intended to provide.

Mr. Wingo. I am not discussing the wisdom of it. I am not discussing the question whether it is wise or not. Your theory, as I understand it, is that you think it is likely to be better for the farmer, the individual farmer, by enabling him to market his crops in an orderly way and feed the market according to current consumption. You say the practical way to do that is to have a farmers' cooperative agency and it is the intention of this bill to furnish credit agencies

for that kind of marketing. It is not the intention, as I understand you, to broaden the agricultural provisions of the Federal reserve act.

Mr. SILVER. Neither bill broadens the individual's privileges. Here the individual is given nine months instead of six months.

Mr. WINGO. But there again you have the ruling of the Federal Reserve Board. The only way you can benefit by the nine months' provision is to buy and sell bankers' acceptances.

Mr. STEVENSON. Suppose the Federal reserve bank had agricultural credits especially segregated by law that were to be used exclusively for discounting agricultural paper, coming from member banks and all banks, that would run from three months to six years?

The CHAIRMAN. You mean State banks as well as the system?

Mr. STEVENSON. Yes. My idea would be to let all above $15,000 capital discount for 12 months. If they did not become member banks at the end of that time they should be cut off. If it were taken for that purpose and required to be used for that purpose why couldn't every farmer get his credit right through the local bank and have that paper discounted as an agricultural credit fund in the Federal reserve bank, keeping the discount banks in one class and the land banks in another?

Mr. SILVER. If you will permit me, I will approach that from another angle. We picture the moneys and credits of the country as a great reservoir, from which are pipe lines running to the large industries and businesses of the country that need the money and credit. Some one is always drawing. There you have your circulation. Now, there is no way of knowing the amount of money that you would set aside for the purpose. It may or it may not be sufficient in amount. If it is insufficient, it does not serve the purpose. There is no benefit to be gained, as I see it, by separating the one from the other.

Mr. STEVENSON. This has nothing to do with commercial credit. This is to be used only in connection with one class of credit, and all may want money at the same time. When they borrow it all what is going to happen?

Mr. SILVER. It provides for getting debentures or going to the national pool.

Mr. STEVENSON. Why not have the national pool at the start? Every local bank could have that fund. The Federal reserve banks to-day have three billions of gold over the amount necessary to set aside for deposits, and they have two billion three hundred million of notes outstanding. They could go up to seven and a half billions. Therefore, the pool is absolutely bottomless to-day.

Mr. SILVER. I agree with you exactly, but under conditions as they exist to-day I find no fault with it. I say that with the reservation that I think there is an obligation to make it accessible to all persons alike. When you attempt to make it accessible to all persons alike it must be machinery that can work. For instance, if I go to a local bank of deposit and for any reason they are unable to serve me I am barred from the facilities of the Federal reserve system, but if I have a provision here by which I have an alternative, when I get to that point I can go around and come to the Federal reserve system and I find facilities available for my purpose.

Mr. STEVENSON. Let me suggest another idea that occurs to me: If we can segregate a $120,000,000 fund in the Federal land banks, we can segregate $200,000,000 in the Federal reserve banks. For instance, they have $218,000,000 surplus and $117,000,000 capital. You could have a $200,000,000 fund in the Federal reserve set aside to be used to carry the paper that is spoken of here; also, the farmer's paper where he discounts it with the local bank. Don't you think that would be a more feasible plan than the other one?

Mr. SILVER. The testimony is to the effect that this should be administered by a separate board rather than by the Farm Loan Board.

Mr. STEVENSON. In addition to the danger of discrediting long-time land bonds, you have the farm-loan system, and when it goes to the management of the stockholders, as it will when the Strong bill is passed, it will be to the interest of those stockholders, who are all land borrowers with long loans, to make the bank pay the biggest dividends possible, because it reduces their loans. You put a fund here to be administered by that same crowd. They want commercial credit. They haven't any representative on that board. They have not a word to say about it. Is there any protection for the fellow who meets with sharp practice? Isn't he absolutely helpless?

Mr. SILVER. Except where there is a limiting clause, I agree with you thoroughly. Some people believe that there should be a central fund such as you have suggested; others believe it should be a distributive fund. Every farm organization testified to the need for a separate organization in one form or another, so that so far as the farmer is concerned, it was not put in that shape to please him.

Mr. STEVENSON. What do you think of these farm loan debentures that are based on personal credits on live stock in the woods or on wheat in the elevators? As a gentleman testified this morning, that wheat was sold the very next day after it was put in there and the receipt was really evidence of a gambling transaction. What do you think of leaving the Federal loan system open and mixing your bonds with bonds that there will be some question about?

Mr. SILVER. So far as mixing them is concerned, they should not be mixed.

Mr. STEVENSON. But this money is to be loaned by the bank. It is a serious proposition to the land bank.

Mr. SILVER. I think it is to the land banks, as they testified. This was not done at the request of the land banks.

Mr. STEVENSON. In other words, they are not helping this.
Mr. SILVER. No; they did not reach out in this instance.
Mr. STEVENSON. I have not talked with any of them.
Mr. SILVER. I know it is not to the farmers' liking.
Mr. STEVENSON. I wanted to bring out your thought.

Mr. STRONG. I should like to say a word. I think I am somewhat responsible for the suggestion adopted in the Lenroot-Anderson bill. If you will look at the record of the hearings before the Committee on Agricultural Inquiry, you will find that on July 13, 1921, I was invited to go before that board by Charles Barrett, president of the National Board of Farm Organizations, and I made the suggestion that the farmer and cattleman should have a credit equal to the length of his turnover period. I suggested that as long as we took the farmer's mortgages and issued bonds on them to get the capital to make additional loans, we might take his personal credits and do the same thing by issuing short-time paper through Federal loan banks. It seems to have been considered seriously, and has finally found its way here in this bill from the Committee on Agricultural Inquiry.

I later introduced another bill providing for the discounting of long-time personal credits of agricultural by local banks through the Federal reserve system by using half of the surplus of the banks, which is now $218,000,000.

Mr. STRONG. Why not use this for the farmer?

Mr. STEVENSON. Ultimately it belongs to the Government. Dividends would be paid on that.

Mr. Wingo. I have never been able to understand the significance of the argument that agricultural paper should go into the back door of the Federal reserve bank or the farm loan bank. If it is going to go in, shouldn't it go in the front door?

Mr. STRONG. If you use commercial deposits and lend money on three-year paper, the depositor might come for his money and be able to get it.

Mr. STEVENSON. Mr. Wingo had reference to the roundabout manner in which the transaction occurred; that is, sending it around through the vermiform appendix.

Mr. STRONG. I agree with him on that.

Mr. WINGO. I am not differing from what you have said ; I am simply offering a suggestion,

Here is the point, Mr. Silver: Ten years ago when we sat around this table we had our fight over the agricultural provision of the Federal reserve act, section 13, as it was originally drawn. It developed that the theory of the author was that agricultural paper should not be eligible at the Federal reserve bank unless it was paper that was facilitating the feeding of that agricultural product into the market. I thought that it would be better for the American people as a whole and more economical if there could be a withholding of agricultural products from the market and the feeding of them into the market in an orderly way; that it would be better for the American people if that withholding could be done at the point of production. So I made a fight out of which grew a compromise in the Democratic caucus and on the floor of the House whereby we put into the original section 13 a proviso. Congress decided that if the farmer wanted to hold his crop at home

in a warehouse and to take his receipt that that should be his privilege and that that should be agricultural paper, but the Federal Reserve Board has nullified the clear expression of the legislative intention by its repeated

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