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My idea at present is that the situation should be handled with tact and diplomacy; that methods be used which would cause the least comment and friction, and that these methods must be evolved from time to time to fit the situations as they confront us. It seems necessary for me to add that I feel competent to handle the matter in such a way that your board will not be embarrassed, and that our bank will not be subjected to any great amount of adverse criticism.

Mr. Chandler is in a position now to advise with his associates to show that it would be unwise to precipitate a frank expression on our part as to our reasons for being unwilling to make loans in Imperial Valley. In other words, the crowd of Los Angeles capitalists are well aware that I am in possession of information which, if publicly expressed, would not redound particularly to their advantage. This was rather a delicate matter, but I am very glad to say that I left Mr. Chandler on terms, more intimate and friendly possibly than have heretofore existed. Our understanding is, I think, very clear.

As the question of loans in the Imperial Valley will come up again the latter part of this month or the first of next, may I ask that your board instruct me in the matter.

You will note that I have written this letter in the first person. The reason for this, of course, is apparent to you.

Yours, very truly,

W. H. JOYCE, President.

Mr. BARBOUR. That is a carbon copy of the letter?

Mr. YAGER. That is a carbon copy of the letter.

Mr. BARBOUR. Absolutely authentic?

Mr. YAGER. Yes, sir. And I should like to incorporate this letter together with these others into the printed record.

Mr. HAYDEN. Where did you obtain it?

Mr. YAGER. I would rather not state.

Mr. HAYDEN. This committee has a right to know where you obtained that letter and whether it is authentic.

Mr. ROSE. We took it up with the board here and they admitted it was authentic. We submitted it to the chairman, they admitted it was authentic and asked us "What can we do? Now, gentlemen, what do you want us to do to square this thing up?"

Mr. HAYDEN. What did the Federal Farm Loan Board offer to do? Mr. ROSE. To send a committee again; they said we did this on the report of the engineer. I told them that you didn't do it, this was made a year before that; the engineer told you he was glad you did it because he couldn't make up his mind to do it.

Mr. HAYDEN. This is a copy of a letter obtained from the files of the Federal Land Bank of Berkeley?

Mr. ROSE. Yes, sir.

Mr. HAYDEN. Mr. Lobdell said that the text of that letter was correct, word for word?

Mr. ROSE. Mr. Norris was vice chairman; Lobdell had gone to the West then.

Mr. HAYDEN. To whom did you talk?

Mr. ROSE. Mr. Norris and Mr. Lever.

Mr. HAYDEN. Did Mr. Lever know anything about this letter himself?

Mr. ROSE. No; not himself, but Mr. Norris did. Lever was just recently appointed.

Mr. HAYDEN. You present a matter of such importance that the committee ought to satisfy itself as to the authenticity of the letter. Mr. YAGER. If there is any question as to its authenticity I think your committee can get it from the files, to see if that is correct, but

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I want to bring to the attention of the committee that it is a deplorable situation we are presented with for a Government department to say that it would not redound to the benefit of a crowd of capitalists of Los Angeles and San Francisco to make loans to us. When those capitalists bought 43-year bonds in the valley at 83 per cent and sold them in a few weeks at 97 and advised the farm loan bank that they couldn't make 40-year loans in that valley.

Mr. HAYDEN. What kind of a board of directors did you have that permitted a deal of that kind to be made whereby your bonds were sold at 83 and then resold within 90 days thereafter at 97?

Mr. YAGER. I would say what kind of a Government department have we. These interests had the financial control of that district, as that correspondence shows, and Imperial could not get any more; you couldn't get any more than they would allow. Imperial had to take what they could get. It was a matter of life and death with Inperial whether they sold the bonds or not.

Mr. HAYDEN. Do you mean to say that the Imperial irrigation district was compelled to do business through certain people in Los Angeles and if they did not take your bonds nobody else in the United States would purchase them?

Mr. YAGER. It seems they controlled not only the bond market of that district but directed the farm loan bank's policy.

Mr. ROSE. That is very largely true. If our credit was not impaired by those interests who own lands in Mexico and controlled we would need no legislation to put the canal through, you might say. You have heard the testimony that has been testified to in the former hearing that we sold our bonds at 83 cents and they sold them at 97 cents in 90 days time. Recently the same trust company, Los Angeles, bid 95.15 cents for $2,500,000 on bonds of a recent issue. The Southern Trust & Commerce Bank of San Diego has bid 95 cents. Mr. BARBOUR. What kind of bonds?

Mr. ROSE. They are all the same kind of bonds; Irrigation District bonds. I attribute the difference in the price bid to the disclosures made before this committee.

Mr. BARBOUR. Bonds for what purpose?

Mr. Rose. Bonds for building a canal and so forth in Mexico. And these bonds that were just sold were for the purpose of paying off a million and a half of registered warrants.

Mr. HAYDEN. So you have recently refunded your floating debt? Mr. ROSE. Yes; it was a short-time floating debt bearing a high rate of interest and we preferred to refloat it and paying a low rate of interest.

The school bonds and even the water-flood bonds sold above par; all the rest of the bonds were depending upon the same water system. But they were small bonds, but when you get up to a million and a half there are very few concerns in the West that could bid on these bonds.

Mr. HAYDEN. But recently a bond issue of more than a million and a half dollars was sold for more than 85?

Mr. ROSE. They have sold for 95.15. Three bids were submitted to the board, each for the full amount of the bond issue, $2,500,000, as follows: Blankenhorn, Hunter & Julen, $2,378,756, or to net 95.15 per cent of par, the successful.

The second highest bid was that of the Southern Trust & Commerce Bank of San Diego and El Centro, $2,375,000, 95 per cent of par, offered to accept the full issue.

Bank of Italy, Los Angeles, $2,354,625, 94.18 per cent of par was the third and low bidder.

They bought the bonds instead of San Diego.

Mr. BARBOUR. Why couldn't you now issue $30,000,000 in bonds and sell them almost at par?

Mr. ROSE. For this reason, the bonds were for work already done in Mexico for which they are receiving benefits. If it wasn't for the opposition those people are able to bring in the bond market I think we could do it. I don't think we would be here at all. But I don't think we could sell them for 95 or 85 with their opposition. I believe if the Government would pass legislation saying that if they were not sold at par the Government would buy them at par we would need no further legislation. It is not a question of security. They bought those other bonds themselves through manipulations that cost the farmers of that valley $400,000 that they would have sold for if it had not been for the fact of the manipulation. The farmers of the Imperial Valley have been a mighty easy mark for the capitalists of that country because it was on such a large scale it took large capital to handle it. The Government has spent $125,000,000 to irrigate less than twice the area which we have irrigated at a cost of between $15,000,000 and $20,000,00. It cost us less than $20,000,000 all told and we put it in as we went along, we didn't have it all at once.

Mr. HAYDEN. You certainly must have had very poor business men for directors when they allowed your bonds to be sold for 83. I know that the water users would not have permitted anything like that to happen in the Salt River Valley.

Mr. Rose. If you were in our situation you would have done what we did. We had good business men. We had a better business board than we have to-day. In fact we have three of the men to-day that we had then and I don't think the men did anything but the best they could. They advertised in the New York Bond Buyer. They advertised in two of the papers known as "bond-buying" papers in the East. They advertised them just the same then as they have advertised them now; but one thing the Imperial Valley has got better advertised and the breaking up of this clique has made them ashamed to bid on it. I think the very fact of the appearance before you has resulted in a saving of $400,000 to the people of Imperial Valley?

Mr. YAGER. That is the condition exists there. It is a condition that exists in the Treasury Department, in the Farm Loan Division. We are branded not through an engineer's report but by Harry Chandler who owns land down below the line in Mexico and is a Los Angeles capitalists, and who says that it is not a good place to make loans (the Imperial Valley) from the farm loan bank, while those same interests have bought and control the bond issues of Imperial Valley.

Mr. BARBOUR. Let me ask a question right there. If the situation as it exists down there now, so far as the water in Imperial Valley is concerned, is to the advantage of Harry Chandler, what would be his object in trying to depreciate the credit of Imperial Valley?

Wouldn't it be to his interest to maintain the present conditions down there?

Mr. YAGER. We have been trying to build an all-American canal and get out of Mexico and away from Mexican control.

Mr. BARBOUR. But I understand your purpose in building the all-American canal is so that you can get credit down there. Mr. YAGER. And get away from the Mexicans.

Mr. BARBOUR. And until this decision was made by the Farm Loan Board not to extend you credit, you had not contemplated in the near future of building an all-American canal? If they had loaned you money down there you wouldn't have been interested in building an all-American canal right now?

Mr. YAGER. The situation there is that the Mexicans are getting their water at the expense of American lands on one side, and capitalists are reaping a harvest by reason of this condition on the other side, and Imperial is in fact robbed on all sides.

Mr. BARBOUR. Then your purpose to build the all-American canal is not dependent upon or the result of the fact that the Farm Loan Board wouldn't loan you money?

Mr. YAGER. No; not entirely. The purpose of building the allAmerican canal is to sever ourselves from the Mexican interests. When I say Mexican interests, American capitalists that have gone down there and absolutely control it, and Mr. Harry Chandler is one of the largest controllers of this scheme. As long as he can control the bond market he can get his water for practically nothing, for when we go to get credit to build our own canal he says, "We will prevent them from getting credit to build that canal, and we will get our water for what we want it."

Mr. BARBOUR. Therefore, if you build the all-American canal, you control both the water and the credit?

Mr. YAGER. Yes; we want to get the water system away from the control of Mexico.

Mr. HAYDEN. It is perfectly clear that it would not be necessary to urge this legislation if the Imperial Valley had good credit. There is now in force a contract between the Secretary of the Interior and the Imperial Irrigation District which provides for the construction of an all-American canal. They say that the reason why the Imperial Irrigation District is not constructing that canal is because they can not raise the money. The last time he testified Mr. Rose said they could get but 83 for their bonds; to-day he says they can get 95.

Mr. YAGER. And one reason why they have depreciated our credit there is so we can not go ahead and control our own water supply, but making our water supply depend upon them. They have physical control of the water in a foreign country and consequently control Imperial Valley credit.

Mr. ROSE. The Farm Loan Board did loan in the Imperial Valley until this all-American canal movement was started. They withdrew afterwards. Since Mr. Yager filed this paper here representing the Coachella Valley and since this bill has been introduced they have withdrawn from Coachella Valley. But what I want to say is this: That there is an area of land on both sides, on the Mexican side about a million acres, land unirrigated, about a half million on the

American side that is unirrigated-there isn't enough water in the Colorado River to irrigate both. We are attempting to build this canal and get it for ourselves.

Mr. YAGER. As Mr. Rose has just said, after the introduction of this bill and after the Coachella Valley became interested in seeing that the arid lands of that valley were brought under irrigation by an all-American canal the Farm Loan Board has withdrawn loans from the Coachella Valley, which they were up to this time making. Here is a letter of date July 30, 1919, addressed to Mr. C. W. Lenox, secretary-treasurer of the Mecca National Farm Loan Association, Mecca, Calif., which is in the Coachella Valley. This letter reads:

DEAR SIR: We have your letter of July 26. We can not see that it would make any difference if we were to send an engineer appraiser in your district now. His report would be indeterminate, and the only methods which we could determine the water supply in the Coachella Valley is to wait and see after some time has passed that more land has gone under cultivation and more wells put down, which will be true in the next few years.

We are disinclined to change our position, and you must accept that letter as your instructions.

Yours, very truly,

THE FEDERAL LAND BANK OF BERKELEY, By A. W. HENDRICK, Secretary.

Mr. HAYDEN. What was that letter?

Mr. YAGER. That was a letter in response to a letter from the Farm Loan Association of Mecca to the bank at Berkeley asking that an engineer's report of the water conditions of the valley be made before refusing loans in Coachella Valley.

Mr. HAYDEN. Has the Berkeley Land Bank made loans in the Coachella Valley?

Mr. YAGER. Yes, sir.

Mr. HAYDEN. What is the reason why the Federal Land Bank does not make loans there any more?

Mr. YAGER. They go ahead and state that their position in the Coachella Valley is similar to that in the Imperial Valley.

Mr. HAYDEN. The conditions are not similar. You obtain your water entirely from underground sources in the Coachella Valley. The Imperial Valley obtains its water from the Colorado River, so there must be a different reason.

Mr. YAGER. Let me read you a letter from the Treasury Department, Farm Loan Board, August 18, 1918, addressed to Mr. Kettnear (reading):

MY DEAR CONGRESSMAN: In reference to your favor of the 1st instant, relative to the matter of Federal farm loans in the Coachella Valley, Calif., I beg to quote the following from a communication received this morning from ou Berkeley bank on this subject:

"This country is supplied with water by means of artesian and pump wells, and if this supply should fail the land would be utterly worthless. To some degree the same conditions apply here as they do in the Imperial Valley. Everything depends upon the water.

"In other localities, where there is a reasonable rainfall, the land would still have a substantial value for the purpose of dry farming, even though all artificial means of obtaining water should fail.

"In the earliest stages of our progress we made some loans in the Imperial and Coachella Valleys, but as the board knows, we have aways felt a little uncomfortable about them.

"There is not enough history back of the wells of the Coachella district, nor enough information at hand relative to their permanency, to justify a sufficient feeling of assurance that the water supply will continue indefinitely.

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