Mr. SILVER. Yes.

Mr. STEVENSON. These people made a contract, beginning the 1st of November, that they would sell each month one-eighth of their crop, which would mean finishing up about the 1st of July. That would mean one-eighth of their holdings, beginning in the midst of the time when everybody was selling. Naturally some did not sell. One in my State did not sell because the market was flooded. Here is what happened: The financial interests, or some of them, were terribly close to the cotton exchanges, and along about the 10th of January, when they were meeting here, they called on them and said, “You have not lived up to your contract; you have not sold one-eighth per month; you must sell in January to such an extent that you will sell enough to make up for one-eighth up to this time; it must go on the market.

Now what happened? That demand was made one morning. It was in New York by the time the cotton exchange opened and cotton dropped $5 a bale. There was a considerable amount of excitement about that. That was not carried all the way out. Somebody got pinched when cotton went up and a lot of fellows got pinched when it went down. There is the danger I see. If you concentrate too much power in a little coterie of men who have control of the financing of all of those associations and who may get close to New Orleans or New York, it is the easiest thing in. the world to give a tip to the effect that these cooperative associations have, by next Tuesday, to sell so many millions of bales of cotton and that you had better market your cotton now because it will drop down. That is a big danger that I am afraid of.

Mr. SILVER. With respect to the situation you have referred to, those men should have had the credit that they might begin their first selling at the end of the eighth month and have the remainder of the year to sell the crop. Here is a point that you must not lose sight of.

Once every year we are within two months of bare boards. If we did not have a harvest at that time we would be sold out. It is just a question of whether the producer-the farmer-shall go up to the market and during the consumptive year retain ownership of and title to his product, or whether it shall be the man who makes money off both the producer and the consumer. The thing must go around or we starve. We must always go around. But there is the biggest difference in the world between the different hands through which it goes around. The finances come from the same pool. We go into the money market and buy that money.

The CHAIRMAN. Your theory, as I understand it, is that in carrying that production which is in excess of the requirements at the time of the marketing, it is safer to have the commodity retained in the hands of the farmer producing it than it is to have it in the hands of the middleman?

Mr. SILVER. The farmer, of course, has his plant to protect. The speculator goes in at an opportune time and buys. The same thing applies to selling. There is no restriction or restraint on him.

The CHAIRMAN. What assurance is there if this is left in the hands of the farmer that Mr. Luce's factory that depends upon the farmer's production will not be taken advantage of; what assurance is there that the farmer will not take advantage of that situation and hold commodities for an additional high price? He can

Mr. SILVER. The farmer can only make money by producing more. not make money by carrying a crop into the second or third year. The CHAIRMAN. Your contention is, then, that the law of necessity will clear the boards every year?

Mr. SILVER. It certainly will. The farmer must do that in order to start again. The CHAIRMAN. Whereas the speculator might carry over from year to year? Mr. SILVER. Yes; because he has no plant to protect.

Mr. STEVENSON. There is one advantage in a cooperative association as it affects cotton. I do not know about wheat. I have dealt with the farmer for about 25 years. The tendency, as I have found it, is that if the price is going up, to hold it. Lots of them have been holding, we will say, for 25 cents. The tendency is to hold on as long as he can. Now, if he goes into a cooperative association, it is going to clear out once a year.

Mr. SILVER. Yes; that is his contract.

Mr. STEVENSON. That is the contract and it is beyond his control. one of the big advantages.

That is

Mr. SILVER. Yes; you can not have orderly marketing if you can not do that. Mr. STEVENSON. That, to my mind, is quite an advantage. There are, how

ever, some disadvantages. The one I referred to a while ago impresses me, and that is the disadvantage of getting too close to the New York exchange and being squeezed. They can get advance information regarding a sale and then they can hammer it down. I do not want to take part in fixing up financial machinery that is going to do that.

Mr. SILVER. Unless there are some questions you wish to ask I am going to wind up. I think I have made my points.

I want to say that Mr. Cunningham and Mr. Jewett, of the State of Washington, are here and that I would like to have the committee hear them.

The strong appeal that I want to make hinges upon the certainty of having this bill go through the committee by March 4.

The CHAIRMAN. Which bill?

Mr. SILVER. I am thinking of the Lenroot-Anderson bill.

The CHAIRMAN. If we could get only one through, which would you prefer? Mr. SILVER. The Lenroot-Anderson bill.

Mr. STEVENSON. We have some testimony here regarding warehouses and warehouse receipts. Is it construed that elevator receipts or warehouse receipts will be used?

Mr. SILVER. We have a picture in mind of a warehouse receipt. It is a thought that we have been working on fore some time. Let me illustrate my point: When the farmer delivers his wheat, as an illustration, he will take his receipt at the local elevator and then follow on through, after being properly insured and properly protected, from the car or local elevator or warehouse to the terminal elevator or warehouse, so that the farmer can have his instrumentality on which credit is based in his hand at the start, without the necessity of having it exchanged along the line. That is one of the things that we are looking to in the future and that is one of the things that will be helpful when it is worked out.

Mr. STEVENSON. That is intended to embrace elevator receipts, whether initial or terminal?

Mr. SILVER. Yes.

Mr. STEVENSON. The initial receipt is to carry the property through to the terminal?

Mr. SILVER. Yes.

Mr. STEVENSON. In other words, you can put it through two or three different elevators and it will still be the same?

Mr. SILVER. Yes.

Mr. STEVENSON. We had testimony this morning to the effect that they did not keep the original elevator receipts. Do you know just what the custom is? Mr. SILVER. We have one of the best elevator men in the country right here to tell you about it. Mr. Jewett will tell you.

Mr. STEVENSON. I think it was testified that it depends upon the solvency of the elevator man. The elevator man is able to protect himself by simply checking on the Chicago wheat fund. If wheat went way up yonder and he sold for 80 cents and the time for delivery came and it cost $1, the testimony was that he would be likely to go broke.

Mr. SILVER. I was not present this morning when that testimony was given. From what I have heard, however, it brings to mind the case of the man who came from Youngstown, Ohio, and appeared before this same committee. He said very earnestly, "I am tired of this talk about the farmer's production being basic; steel is the basic thing. If we did not have steel to make rails and steel to make cars, how could we deliver stuff and how would the farmer deliver his stock?" That man was surrounded by a steel atmosphere to such an extent that he could not see other things. What use would they have for steel if we did not have the products of the farmer to carry on the steel rails, for instance? I think similarly our friend this morning was not sound in his contention.

Mr. STEVENSON. I hope not. He was putting himself in a position where he would go broke.

Mr. SILVER. We could not go into the market like that.

Mr. STEVENSON. That is not marketing; that is speculation.

Mr. SILVER. That is exactly right.

Mr. STEVENSON. In addition he referred to charging for storage. If he got it to-day he would sell it to-morrow, but there might be a six months' charge for storage.

The CHAIRMAN. We will hear Mr. Cunningham.

STATEMENT OF MR. E. H. CUNNINGHAM, SECRETARY OF THE IOWA FARM BUREAU FEDERATION.

Mr. CUNNINGHAM. My principal business is farming. I am also secretary of the Iowa Farm Bureau Federation. That occupies a considerable part of my time, but my main business is farming.

When I left home I had two objects in mind, as secretary of the federation. I was instructed to come to Washington and look into this question of intermediate credits, and also into the question of the amendment of the Federal farm loan act, the amendment which provides for an increase in the loan limit. Since leaving home I find that you have acted, in the Strong bill, on that matter. While your action was not exactly what the Iowa farmers had asked for, yet we feel that it was a step in the right direction and that your intentions were good when you favorably passed on that bill. I am somewhat of a horse trader, so if I can not get just exactly what I want 1 take what I can get, without admitting that it is entirely satisfactory. We really wanted a $25,000 limit, especially in our State, as we know the conditions that exist. A man who can not borrow $25,000 on his land, if he is the owner, in the State of Iowa. is not adequately financed. I know that there are a great many who would not agree with that statement, but that is the status.

We have in our organization approximately 100,000 members who are actual farmers. This association was organized for the purpose of looking after their wants and wishes and to help them in their economic problems, particularly with regard to financing their farms and marketing their crops. Now that the Strong bill has carried that provision and is probably going before the House, you having made your recommendations, I want to speak with reference to the Lenroot-Anderson bill. I want to indorse that measure as the most practical thing, as we look at it out in that country, that is before your committee at this time. I am not opposing in any way the Capper bill that has been under discussion somewhat, but we do not look upon it as the most practicable bill for our country and for the farmers in Iowa. The necessity for that class of financing is very, very great for people in the Middle West. I want particularly to impress the committee with that fact. It is essentially necessary for the proper functioning of the farms in the Middle West. If the Lenroot-Anderson bill, or something that is similar to it, becomes law it will be of great benefit.

I can not agree with the statements that have been made about not helping the individual farmer. As I view it, it does help the individual farmer; it helps all farmers. We are sincere in our belief that when the farmer solves his marketing problem he is going to do it through cooperative marketing and not by allowing other men to have control of his products. A financing system that would be so far-reaching as to go down to the individual in every particular and only allow the individual to approach this source of revenue would, we feel, defeat the very object we have in view. I want to make the statement that the individual farmer as a marketing man can never cure his trouble or solve the problem that we are trying to solve. It must be solved cooperatively and collectively. Even where the farmer is thoroughly financed, which is the case in many instances, the problem is not solved. This is particularly true in a State like Iowa, where 50 per cent of the farmers are tenants and are forced to meet their obligations as soon as the crops are produced. That has been the custom. I have gone through the problem of farming in Iowa from the ground up; first, as a tenant farmer and later as owner, and I know what the custom has been and what it is now. I have never seen the time, I may say, when I could not get all the money I needed to produce a crop, but I have seen the time on many occasions when I could not get enough money to pay my store bills until after my crop was harvested. Consequently, I loaded it up and took it to market. That was never conducive to an orderly system of marketing and never will be as long as the thought prevails in the mind of any man that an orderly system of marketing can be worked out through the action of any individual. The farmer who owns his land and who can carry his product might be willing to join with his neighbor who owns his land and hold the crop, but you must never forget that 50 per cent of the farmers are tenants or renters. They must meet their obligations when their crops are ready. Those tenants who make up 50 per cent of the farmers of Iowa can upset any plan that the others undertake to set up.

The CHAIRMAN. Do the tenant farmers as a rule take out memberships in the organization?

Mr. CUNNINGHAM. Quite generally. In the cooperative organizations that I have come in contact with I would say that is generally true. That applies to the live-stock market and the grain market, and that is where my experience has been. I would say that that is absolutely true of the Dakotas, of Montana, and of Minnesota. I believe that way out in your country, Mr. Jewett, if the tenants do not join in the movement, there is no movement at all. In other words, the tenant is stronger in his position than the actual landowner.

The CHAIRMAN. In your organization you have many tenant farmers? Mr. JEWETT. Yes.

Mr. CUNNINGHAM. It is absolutely true. Therefore we recognize that in any plan we undertake to set up the tenant farmer must be considered a part of the program or your marketing proposition will be upset.

For a There

During the past year we have had a good system of orderly marketing forced upon us. It has been hard for the farmer to get into a position where he could operate, but the farmer is fast coming to it. The orderly marketing of grain during the last year came about through an enforced situation which was the result of a shortage of cars. There has been no surplus of grain cars. while there was no surplus of stock cars. That was a bad situation. fore this plan that is now in the minds of the farmers and in the mind of the country generally-that the farmer must be given better means of financing crops during the consumptive as well as during the productive year-has resolved itself into a conviction. The farmers out West, and especially the farmers whom I represent, are strongly in favor of some such plan as we are discussing. In fact, I believe that many ordinary farmers who do not follow legislation are so convinced that this legislation is going to prevail that they almost think it has become law to some extent.

The CHAIRMAN. I noticed that some agricultural papers stated that the bill had passed. Some of them refer to the bill as having passed Congress, but say that the House is still considering it. [Laughter.]

Mr. CUNNINGHAM. I will say that if the average farmer knew the situation and the danger lurking in the situation with the bills in the position they are you would hear from home. Of course, that does not mean your home, but you would hear from Iowa pretty strong. They are demanding this kind of legislation. They are not insistent upon it to the extent that they want to undertake any theoretical or wild idea about the marketing of grain. There never has been any such thought uttered by any sound mind. You can not

go into Iowa and sell any theoretical ideas to-day.

The CHAIRMAN. How extensively is Iowa organized from the standpoint of cooperation?

Mr. CUNNINGHAM. I would say that out of about 1,700 elevators 850 of them are farmers' cooperative elevators. Possibly they exceed that number. We have in Iowa 800 cooperative live-stock shipping associations.

The CHAIRMAN. If the Federal reserve act were amended so that cooperative paper could be rediscounted in the Federal reserve system, would that afford sufficient facilities in Iowa to take care of your needs?

Mr. CUNNINGHAM. I would have to coincide with Mr. Wingo's statement. It would depend upon what the regulations of the board were. Basing my answer upon the past actions or procedure of that board I would say absolutely not; that it would not be popular, but that it would be disastrous.

In that connection Mr. Harding came into Iowa. Before he came to Iowa we had what we call a farmers and bankers' conference in different cities. The CHAIRMAN. You are speaking of Governor Harding?

Mr. CUNNINGHAM. Yes; of the Federal Reserve Board. He sent a man there and that man read a statement in which he demanded liquidation of Iowa farmers in 1920. It was a rather cold-blooded statement, I will say, under the conditions that existed. We had borrowed money. They asked us to borrow money. They asked the bankers why they did not use some of their money. The bankers were thrown off their guard, and certainly the farmers were. Everybody had anticipated deflation some time. Prices were high. Money was flush in 1919; that is, Federal reserve funds. A few months afterwards they came in and demanded liquidation. Now what happened? Notes were given in Iowa. Corn was $1.75 a bushel in the spring of 1919. It was, generally speaking, around that on an average. When the deflation came a few months later that corn went down to 50 cents and later to from 25 cents to 35 cents.

Mr. STRONG. The deflation came in 1920.

Mr. CUNNINGHAM. But the corn was raised in 1919.

Mr. STRONG. Oh, yes.

Mr. CUNNINGHAM. It was sold in the winter and spring of 1920. That deflation came along and they could not stand it. They were under the impression that we were a little wild. It was impossible for us to liquidate. We had four or five meetings that were not the most harmonious ones in the world, I will say, but I will tell you that we had a better understanding of each other's problems after we had the meetings. Then Mr. Harding came out there. He told those men, the bankers and the farmers who were together, what the conditions were. The banks in Iowa had practically nothing but farm paper. Mr. Harding came out and said that the Federal reserve system was never set up for or intended for the purpose of financing agriculture. I presume that the Federal Reserve Board, under the Capper bill, is to be given authority to do those things which Governor Harding said it was not set up to do, but the question is whether that board would make such regulations or rules that would or could meet the situation and be able to function efficiently.

Mr. STEVENSON. The scheme which I suggested was to create or, rather, set aside a fund for the purpose of discounting farm paper, all of this class of paper, from six months to three years, and to make it mandatory that that class of paper be discounted. Then, where there was a surplus of demand in one region and a surplus of funds in a bank in another region, make it obligatory on the bank that had the surplus to meet the needs of the region that had a surplus demand. I think there was a disposition to pass on that.

Mr. CUNNINGHAM. There is a question I would like to ask in connection with that, just to get the inside trend of that thing. The amount of the fund would be absolute and final?

Mr. STEVENSON. How do you mean?

Mr. CUNNINGHAM. I mean that if you had, say, $110,000,000, when you absorbed that you would be through?

Mr. STEVENSON. Oh, no. That proposition involved leaving there for five years all the accumulated franchise taxes that were to go to the Government, supplemented by war-finance capital. Say, for instance, that they can issue Federal reserve notes on paper not exceeding 12 months to run; in other words, this paper would be paper that could not run more than 12 months when put up with the Federal reserve agents. So you can see it would enable them to finance more than $300,0000,000.

Mr. CUNNINGHAM. As I understand it, the Anderson bill would practically allow us to finance to the extent of $1,000,000,000.

Mr. STEVENSON. Yes. Under that bill only the live-stock paper or the breeder's paper can run over nine months, so that practically the large bulk of the paper could be used as Federal reserve notes. There is no limit so long as the gold reserve is behind it. The gold reserve is very large.

Mr. CUNNINGHAM. It has been said that the land banks should not have anything to do with commercial credits, but we must recognize these facts: Agriculture must have a different system of finance. There is no question about that. Ordinary commercial financing will not do for agriculture. We must have a system that will adapt itself to that kind of business. Let me illustrate the point I have in mind. Over in Iowa we have a farm-credit association, which was organized in the year 1921. It was organized by bankers and farmers. That institution has about a million and a quarter dollars of paid-up capital. We have it loaned out to the farmers. We do not have deposits. We issue debentures. The bankers have joined us in it. It is a very popular movement in Iowa. When the financial interests of the State saw the farmers taking that stock up to a million and a quarter dollars they recognized that it was a matter that was being taken seriously. Now, what has happened? The War Finance Corporation has passed upon this. We got out there and rolled up that million and a quarter dollars, and we wanted some rediscounts. We lent the money to the farmer at 6 per cent. For some reason that was looked upon as wrong in principle. Counsel for the War Corporation passed favorably upon our corporation. We wanted, as I say, the rediscount privilege. The War Finance Corporation was set up, as we understood it, for the relief of the country. They told us that if we could get the State committee of the war finance board in Iowa to approve our paper it would be eligible for rediscount. We went to the committee, and the committee did indorse it, and then the War Finance people told us it was not acceptable under their rules; that we must have a chattel mortgage. We went back and got the chattel mortgage in some instances, and yet to-day we have not got any money on it. That is the trouble