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Mr. BUCHANAN. In this statement you have filed you have one heading here, “Farmers' seed loans, deposits”; that refers to all of the acts prior to the crop production loans authorized by the Reconstruction Finance Corporation?
Mr. HOFFMAN. That is correct.
Mr. BUCHANAN. It does not look like you are going to make a very good record in collecting these loans under acts prior to the Reconstruction Finance Corporation act?
Mr. HOFFMAN. The largest amount outstanding, of course, is in the Northwest, where the 75 per cent moratorium has been put into effect, which makes the uncollected amount, which we have no chance of collecting this year, a considerable amount to carry over.
Mr. SANDLIN. And that carry-over is just carried as an ordinary outstanding account; there is no privilege on next year's crop?
Mr. HOFFMAN. No, sir. We will have to endeavor to get security on next year's crop for the 75 per cent carry-over.
Mr. SĂNDLIN. You will endeavor; but, of course, the price of commodities and everything means you would be unsuccessful.
AUTHORITY FOR GRANTING MORATORIUM FOR PAYMENT OF LOANS
Mr. BUCHANAN. Is there anything in any of the acts that vested in the President, or the Secretary of Agriculture, or anybody else, authority to grant that moratorium?
Mr. HOFFMAN. Not in the acts themselves, except this, that in the moratorium that was granted the Secretary said he would grant the moratorium of 75 per cent under such rules and regulations; that is, the farmer had to pay 25 per cent and agree to give us a mortgage on next year's crop, in other words, substituting as security next year's crop for this year's crop.
Mr. JUMP. He did it under the authority of the act that empowers him to fix rules and regulations with reference to loans?
Mr. HOFFMAN. Then, of course, the President, in his statement said, as to how the balance would be paid, would be a matter for the consideration of this Congress.
Mr. Buchanan. Well you do not grant this 75 per cent moratorium to the farmer unless he gives you a mortgage on his next year's crop; is that it?
Mr. HOFFMAN. That is the idea.
Mr. BUCHANAN. And in every instance, where you have granted a moratorium, you have taken a mortgage on next year's crop?
Mr. Jump. No; he said he would endeavor to secure it.
Mr. BUCHANAN. I thought you said the Secretary granted the moratorium on the theory he would get a mortgage, for the 75 per cent he postponed for another year, on next year's crop.
Mr. HOFFMAN. That is what we are trying to do; yes, sir. In every case we are getting in, we are requiring the farmer to pay 25 per cent
Mr. BUCHANAN. You are doing that, anyway?
Mr. HOFFMAN. We are trying to make that a condition; but in view of the price of many commodities in the Northwest, many of the farmers are unable to pay even the 25 per cent.
Mr. Sandlin. They have nothing to give. Instead of giving security on next year's crop, they will have to give the security on next year's crop to get the money to make next year's crop.
Mr. HOFFMAN. That is right.
Mr. SANDLIN. We had just as well be frank about it, because that is the situation.
Mr. BUCHANAN. I was not talking about their ability to pay; I was talking about the authority of the President, the Secretary, or anybody else to grant a moratorium of their own volition. For instance, here are a lot of loans made for crop production; notes and mortgages are taken and recorded, and to make these loans requires a considerable appropriation. The notes are due this fall to the Government and an executive officer, whether the President, the Secretary of Agriculture, or both, says “We will not collect but 25 per cent of this note; we will not try to collect but 25 per cent of it.” The question I asked is what legal authority did they have to say that.
Mr. JUMP. I suppose that we ought to consult the people who are more directly in charge of this and put a statement in the record covering that point.
Mr. BUCHANAN. I think it ought to be answered.
Mr. BUCHANAN. If they had legal authority, I have nothing to say; if they did not, then no man is bigger than the law, no matter who he is.
Mr. JUMP. I do not believe there was any requirement in the legislation that stipulated this money was to be collected this fiscal year, was there?
Mr. HOFFMAN. No.
Mr. BUCHANAN. There may not be a requirement, but there was a contract entered into between the farmer and the Government, by the terms of which the loan was due this fall out of that crop, and its only security was that crop.
Mr. SANDLIN. The question you want to know is whether the Secretary has authority to alter the contract?
Mr. BUCHANAN. Without consideration to the Government-just to say to his collection agencies, "Do not collect but 25 per cent of that loan.” If he could say it to his collecting agency in that instance, then there is no department of the Government that could not say it in any other instance, or any other contract, however big it may be, without authority of law. Now if he had authority of law in this act, or any other act, I have nothing to say about it; I just believe in everybody living within the law. Another thing Mr. Orr has just suggested isare these contracts payable to the Government-or the corporation?
Mr. HOFFMAN. This year?
Mr. HOFFMAN. Payable to the Secretary of Agriculture acting pursuant to the act of Congress approved January 22, 1932, creating the Reconstruction Finance Corporation.
Mr. BUCHANAN. Then if the Secretary had instructions from the corporation to do this, let us know it-put that in the record. Of course, if he had instructions of that corporation, that would probably put him in the clear and then we will have to go to the corporation act and find out whether they had any authority to do it, or not.
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. 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. 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. 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. 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.
to the press.
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. 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. 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.