Mr. JUMP. We will put in the correct answers to those questions, Mr. Chairman, but this thought has been running through my mind, that ever since we have had these seed loans, beginning in 1921, there have been many cases in which it has been necessary for the Secretary to exercise his discretion, in behalf of the United States as well as on behalf of the borrower, whereby an extension has been granted and new security accepted. Is not that correct, Mr. Hoffman? Mr. HOFFMAN. That is correct.

Mr. JUMP. Where a man could not pay, it has been the custom to grant him an extension and to get back the money as best we could, without too great a hardship on the borrower.

Mr. BUCHANAN. Now, Mr. Jump, if the Secretary had said to his agent, and had issued an order to that effect, to go out and collect these loans and, where you find it to the interest of the Government, to collect only 25 per cent upon condition they would give as security the next year's crop, or additional security, whatever they had, for the balance of the 75 per cent, which security and collection would put the Government in a better shape to collect its money in your judgment, why then it would be all right. But, as I understand it, this order went out, or this decree went out, or whatever you call it, "just pay 25 per cent of your loan and the balance will have to be adjusted according to the decision of Congress." Now that is what came out in the papers. I do not know what is in the order; do you know?

Mr. HOFFMAN. That is about what was in the statement.

Mr. JUMP. Well, we will have to have the properly qualified authorities put in the answers to these questions.

PERCENTAGE OF SEED LOANS COLLECTED

Mr. HART. What percentage of the seed loans has been collected? Mr. JUMP. Which of the seed loans-the department seed loans or Reconstruction Finance Corporation?

Mr. HART. The department's seed loans.

Mr. JUMP. The department's seed loans, up to the first of this year, including last year's loans, have been substantially 55 per cent collected, including interest deductions before the loans were made. Excluding interest deducted before the loans were made, there has been collected about 40 per cent.

Mr. HOFFMAN. No; the 55 per cent does not include interest; that is on principal alone.

Mr. JUMP. It includes warehouse receipts?

Mr. HOFFMAN. Yes.

Mr. SANDLIN. That means you have a lot of that stuff in the warehouse?

Mr. JUMP. Yes.

STORAGE OF COTTON, ETC., IN COOPERATIVE AND BONDED WAREHOUSES

Mr. HART. I have been informed that the agents who are out collecting these loans insist that these goods be delivered to the cooperatives; is that correct?

Mr. HOFFMAN. No, sir; that is not correct. We are permitting cotton or other products to be stored with the cooperatives or such

warehouses where the interests of the United States will be fully protected as well as those of the farmers.

Mr. HART. Now, what do you mean by delivered to cooperatives or such approved warehouses? Are the cooperatives approved without question and the others must be approved?

Mr. HOFFMAN. No, sir. There are two classes that were first covered in: They were the cooperatives and the federally licensed warehouses, bonded warehouses, whereby there would be full protection to the Government's money represented in

Mr. HART. Do not you require any protection by the cooperatives? Mr. HOFFMAN. The cooperatives, of course, in order to borrow money from the Farm Board or from any bank, have to store their commodities in bonded warehouses, so as to have negotiable warehouse receipts that are recognized and will be taken by any bank as collateral for a loan.

Mr. HART. If he delivers the goods to the cooperative, the cooperative itself is not bonded to the Farm Board?

Mr. HOFFMAN. No.

Mr. HART. But still you permit them to deliver to them?

Mr. HOFFMAN. Yes, sir.

Mr. HART. But require other warehouses to be bonded?

Mr. HOFFMAN. No, sir; but there are certain bonded warehouses that always do business

Mr. HART. That is not the point I am getting at. For instance, there is set up here in the city of Memphis, or take a small town in Texas-here is a cooperative here and here is a private warehouse here [indicating]: Neither one of them is bonded, either to the department or the Farm Board. The cooperative is eligible to receive cotton; the city line dealer is not. Is that correct?

Mr. HOFFMAN. Not exactly; no, sir. We are permitting cotton to be stored in good warehouses where the rates of storage are satisfactory and the warehouse can secure reasonable insurance rates to cover the commodity stored. If they can secure insurance at reasonable rates, we are permitting it to be stored there.

Mr. HART. Whether it is bonded, or not?

Mr. HOFFMAN. Yes, sir.

Mr. HART. There is no discrimination as between them?
Mr. HOFFMAN. No, sir.

Mr. HART. But, as a matter of fact, the agents who are out in the field recommend delivering it to the cooperatives, do they not? Mr. HOFFMAN. Do they recommend it?

Mr. HART. Yes.

Mr. HOFFMAN. No, sir, not especially. The statement which was issued by the department mentions cooperatives and Federally bonded warehouses and if a farmer stores cotton in any other warehouse and sends in their receipt, it is accepted.

Mr. HART. But their instructions are to store it with cooperatives or bonded warehouses, according to that statement?

Mr. HOFFMAN. Yes, sir.

Mr. HART. I knew there was some reason for it.

Mr. HOFFMAN. Yes, sir.

Mr. HART. And I have finally arrived at it.

Mr. BUCHANAN. I would not call those instructions.

Mr. HART. Well, they are tantamount to instructions.

Mr. BUCHANAN. It is a permission, as I understand.

Mr. HOFFMAN. They are permitted.

Mr. BUCHANAN. They are permitted to deliver this cotton, if it is cotton, to cooperatives or to store it in a bonded warehouse, orMr. HART. No; there is no other "or" in there.

Mr. BUCHANAN. Yes; there is or any other warehouse where insurance can be secured.

Mr. HART. No; it does not say so in your instructions?

Mr. HOFFMAN. The first announcement that came out covered those two classes; but, as a matter of fact, the various regional offices are accepting it and it is generally known throughout the whole territory that cotton will be permitted to be stored in any warehouse where the Government's interests will be fully protected.

Mr. HART. But if a farmer who made a seed loan received that kind of a notice, he naturally would go to either one of the two?

Mr. HOFFMAN. We did not send out any notice to that effect to the farmer direct.

Mr. HART. To whom did you send it?

Mr. HOFFMAN. It was just a public announcement that was given to the press.

Mr. HART. That is what he would receive, then?

Mr. HOFFMAN. Possibly.

Mr. HART. In other words, it is a discrimination against private industry; there is no question about it, according to your statement. Now what I would like to know is why it is that the Government has discriminated against its taxpayers.

Mr. HOFFMAN. Well, I can not tell you the reason why those two were mentioned at the very beginning. The cotton people of the South came to Washington to see the Secretary and urged the necessity immediately of taking in cotton at somewhat above

Mr. BUCHANAN. Taking it in at 9 cents a pound.

Mr. HOFFMAN. Taking it in at 9 cents a pound, so as to release a portion of the cotton grown that could be sold to enable the farmer to provide for this family and also permit the payment of other debts. By reason of the experience of last year and the year before, where we permitted cotton to be stored in any warehouse, a lot of the cotton was burned in Arkansas, Mississippi, and some other Southern States where there was no insurance whatsoever on that cotton. A considerable amount of it was stored in questionable warehouses; it is possible for an individual to rent a little wooden barn and store cotton in it and have it classed as a warehouse.

Mr. HART. But your cooperatives have some of those kind of warehouses, too?

Mr. HOFFMAN. No, sir.

Mr. HART. The cooperatives all have big, fine, warehouses?

Mr. HOFFMAN. The cooperatives, I believe, do not own any warehouses. They store their cotton in such warehouses where they can get rates and where they will issue negotiable warehouse receipts. Mr. HART. That is not any country town's warehouse receipt; is it? Mr. HOFFMAN. They do not as a rule keep it in country town warehouses; for instance in Texas, all of the cotton from the interior is moved to two ports in Texas; they do not store it all over that State. Mr. HART. Surely, but they must take it in somewhere. Mr. HOFFMAN. Yes; they take it in somewhere.

Mr. HART. And later concentrate it?

Mr. HOFFMAN. They are concentrating it all of the time. They do not leave it stored around at all little places.

Mr. HART. For instance, a lot of cotton that is received to-day is not shipped to-night, is it?

Mr. HOFFMAN, It may not be shipped to-night, but it is shipped to-morrow. The cooperatives have blanket insurance which covers every bale of cotton received by any one of their agents. In many instances last year, for instance in Arkansas, private warehouses could not or did not secure insurance on it, and in one place a thousand bales of cotton were burned, which was a total loss, because it was impossible to secure any insurance. The farmer thought he had paid the Government.

As a matter of fact, we held the receipts only as collateral against that loan, but it was not a discharge of the obligation; and, in other cases, warehouses were closed-small warehouses which were opened up where the farmer stored his cotton and received a receipt, and later when the department checked or inspected the warehouse, the same was closed and the cotton gone. Because of the necessity of immediate action to assist the farmer and further in view of the fact that the department did not have the facilities to make a survey or inspection of every cotton warehouse throughout the cotton States and in order to protect the Government's interests and also that of the farmers', those two classes of warehouses were named; and there have been many instances of where owners of reputable houses have shown us that they had a concrete warehouse, where the insurance rates were sufficiently cheap and the cotton was stored at reasonable rates, they were accepted and cotton is being stored in those warehouses.

Mr. HART. But you have not made any announcement along that line?

Mr. HOFFMAN. Our field inspectors know it and the people themselves know it, as is evidenced by the fact that we are receiving and accepting cotton every day where they are sending receipts into the offices.

PAYMENT OF FREIGHT CHARGES TO CONCENTRATION POINT BY

FARMERS

Mr. BUCHANAN. Now I want to know something else. The Secretary authorized the collateralizing_of those crop-production loans on cotton at 9 cents a pound. In Texas, they are making the farmer pay the freight to the concentration point, or the warehouse. In the case of cooperatives, where they have two such points in Texas, one at Houston and one at Galveston, where the farmer in the interior of the State delivers cotton why he pays the freight down to the concentration warehouse. Are they doing that in the other States?

Mr. HOFFMAN. I do not know whether they are or not. Mr. BUCHANAN. I just want equal treatment; that is all. Mr. HOFFMAN. I do not know whether they are or not. In Texas, they do concentrate all cotton in those one or two points; whether or not they will concentrate to the extent of placing all of their cotton in one or two points in other areas, I am not sure.

Mr. BUCHANAN. Anyway, the crop-production loan authorities are requiring them to pay the freight from these interior points to the concentration point and the warehouse that the cotton is destined to from the cooperatives?

All

Mr. HOFFMAN. They are not requiring them to pay anything. they are asking them to do in those cases is, if the freight, say, is $2 a bale from where it is grown to the concentration point, they are asking that sufficient collateral be put up at 9 cents to take care of this $2 transportation charge.

Mr. BUCHANAN. Are they doing that in the other cotton States? Mr. HOFFMAN. I do not know, sir.

Mr. BUCHANAN. I wish you would look that up and insert it in the record.

Mr. HOFFMAN. Yes, sir.

NOTE. The cotton in Texas was collateralized at 9 cents per pound, the same as in all the western territory. The Dallas (Tex.) office used 9 cents as the port price and the collateral plan was applied accordingly.

AGRICULTURAL-CREDIT CORPORATIONS

Mr. JUMP. Now, Mr. Buchanan, at page 430, that language relating to agricultural-credit corporations is simply bracketed as being dropped from the bill. You will recall the amendment last year to authorize the financing of agricultural-credit corporations.

Mr. BUCHANAN. What is done with this fund?

Mr. HOFFMAN. That is the $10,000,000 fund?

Mr. BUCHANAN. Yes; and you want this provision out of the bill. Has it been transferred to some other department?

Mr. HOFFMAN. That is permanent legislation; the appropriation becomes a revolving fund, and that was the reason for dropping it from this bill. The money was appropriated last year.

Mr. BUCHANAN. It is a revolving fund?

Mr. HOFFMAN. Yes, sir.

Mr. BUCHANAN. And now it has become permanent law?

Mr. HOFFMAN. Yes, sir.

Mr. BUCHANAN. Is the Department of Agriculture still administering it?

Mr. HOFFMAN. Yes, sir.

Mr. BUCHANAN. Have you any money in that fund which is available for the organization of these agricultural corporations?

Mr. HOFFMAN. Yes, sir, $10,000,000, for direct loans to individuals

to purchase stock in these corporations.

Mr. BUCHANAN. Some of it has been used, has it not?

Mr. HOFFMAN. Only $60,000.

Mr. BUCHANAN. And the balance of it is still available?

Mr. HOFFMAN. Yes, sir.

Mr. BUCHANAN. And will be until when-always?

Mr. HOFFMAN. Always.

Mr. BUCHANAN. What per cent of this stock has to be subscribed by private individuals and what per cent by the Government? Mr. HOFFMAN. I am not sure as to the specific amount. Mr. BUCHANAN. I think that act fixed the amount, did it not? Mr. HOFFMAN. I do not think it did. The Secretary's regulations require that a specific percentage has to be subscribed by local interests and that he will loan up to a specific percentage amount.

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