ation in 1921—a condition which requires the carrying of commodities for a longer period than any ordinary bank of deposit would be able to carry them. In such situations, I think the intermediate credit banks can be especially useful.

Senator FLETCHER. Giving the rediscount to that paper in the Federal reserve bank.

Mr. MEYER. I took the liberty at that time, Senator, to recommend that agricultural paper be made eligible in the Federal reserve system for nine months, and Congress did that. Now, I do not think many nine months' loans are being made for agricultural purposes, or any other purpose, in the Federal reserve system. But I did learn this in connection with our work in 1921 and 1922-at first loans having a maturity of more than three months were not eligible and later six months' paper was made eligible by Congress. Banks, of course, would consider loans from the point of view of eligibility, and naturally the tendency was to limit the loans to three or six months, as the case might be, so that the paper would be eligible if it should become necessary to discount it with the Federal reserve bank. I felt that if after a crop was harvested it was necessary to carry it for nine months, and it seemed to be good business to do so and conditions warranted it, then nine months' agricultural paper should be made eligible for discount. Eligibility was a factor in the psychology of the deflation period which people forget about.

Senator FLETCHER. What has the Farm Loan Board to do with fixing the rate of interest both on Federal land-bank bonds and joint-stock land-bank bonds?

Mr. MEYER. Approvals are asked of the board. The board is charged with the responsibility of seeing that the law is observed with respect to the differential between the interest rate on the loans made by the land banks and intermediate credit banks and the rate at which the banks borrow. In the matter of the fixing of the rateyou mean, on sales of farm-loan bonds?

Senator FLETCHER. On bonds.

Mr. MEYER. They ask the approval of the board for issues. Senator FLETCHER. And the board fixes the rate, does it not? Mr. MEYER. Well, the rate is fixed by the conditions, really. Senator FLETCHER. I know; but the board determines the rate that the bonds should bear?

Mr. MEYER. No; I would not say that. The banks work out their problem and consult the board, and if the board approves, why, that is all right.

Senator FLETCHER. And who sells the bonds?

Mr. MEYER. Which bonds, the joint-stock land-bank bonds or the Federal land-bank bonds?

Senator FLETCHER. The Federal land-bank bonds. The joint-stock land banks sell their own bonds, do they not?

Mr. MEYER. Yes; they have their bankers or they sell them themselves. The Federal land-bank bonds have been sold in the past through a nation-wide syndicate of brokers or bankers or both, headed by a group of managers-six in number, I think. On November 15, 1927, there was a sale of Federal land-bank bonds on a 4 per cent basis. That is the only sale that has taken place since I have been on the board, and they asked me to sit in on the situation. I

attended the conferences and worked with them. Judge Lobdell is fiscal agent, and he and I canvassed the matter with the group.

Senator FLETCHER. Is it necessary to have a fiscal agent as well as this syndicate, do you think?

Mr. MEYER. Well, the fiscal agent and the syndicate perform different functions. The syndicate is composed of bankers and brokers who distribute the bonds. Senators, I know that question has been the subject of considerable discussion in the past, but it is not a matter that is as urgent as a great many of the problems confronting the board, and I will say frankly that the board has never discussed it since I have been there. We have too many things to do that are pressing. We have reduced the rate of interest on intermediate credit debentures during the past six months from 334 per cent to 3% per cent, and, of course, the farmer borrowers get the benefit of the reduction in the case of new loans.

Senator BROOKHART. Is that the intermediate credit bonds you are selling?

Mr. MEYER. The notes. We sell notes, Senator.
Senator TYDINGS. Debentures.

Senator BROOKHART. Selling at 31⁄2?

Mr. MEYER. Yes.

Senator BROOKHART. Farm loan bonds selling at 4?

Mr. MEYER. Yes. You see, they are 30-year bonds. The notes, or debentures, usually run only four or five or six months and sometimes a year. It is an entirely different type of security. You can not sell a 30-year bond on the same basis as a six months' note.

Senator BROOKHART. A six months' note is a good deal higher sometimes.

Mr. MEYER. No; short-term paper generally commands a lower rate than a long-term indebtedness.

Senator BROOKHART. If the $400,000,000 of Iowa bank money in speculation in New York were taken out and put in legitimate business, the bonds would sell at a lower rate than they do now, would they not?

Mr. MEYER. That is a big question.

Senator TYDINGS. I wonder how we are going to stop people spending their own money to suit themselves.

Mr. MEYER. I have a great many pressing things to think about, and that matter falls in the general realm of economics and finance and has nothing to do with the farm loan system except indirectly. At any rate, we have no responsibilities with respect to it.

Senator FLETCHER. What is your feeling, Mr. Meyer, with reference to maintaining, enlarging, or extending the cooperative features of the farm loan bank?

Mr. MEYER. We want to maintain and develop them.

Senator BROOKHART. The farmers now own the Federal land bank. Mr. MEYER. They own all the capital stock in eight of the banks. The Government still holds some of the capital stock of four of the banks.

Senator BROOKHART. How much capital is left?

Mr. MEYER. I would like to send that figure to the secretary of the committee.

Senator BROOKHART. It is a small amount?

Mr. MEYER. A relatively small amount. It is not quite $1,000,000 out of $60,000,000.

NOTE. Of the Government's original subscription of $8,892,000 to the capital of the Federal land banks, $710,651 is still outstanding.

Senator BROOKHART. Of course, you are familiar with the cooperative ideas of business, are you not?

Mr. MEYER. We did a good deal of business with the cooperatives in the War Finance Corporation.

Senator BROOKHART. Yes, and cooperative business is on a different basis from the commercial altogether. It is a sort of world of its own.

Mr. MEYER. Well, there are all kinds and descriptions of cooperation.

Senator BROOKHART. Well, there are in the United States where it has been muddled up, but in the cooperative countries they are quite consistent.

Mr. MEYER. I was speaking of our country.

Senator EDGE. Is that the reason our country is more prosperous? Mr. MEYER. I do not want to go into that.

Senator BROOKHART. That is the reason the steel trust and a few more are prosperous.

Senator EDGE. I have given two hours to this hearing, and I would be glad to give more if I could, but I must go to the office and keep some engagements. I am going to leave the city to-night for about a five or six day absence, perhaps seven or eight days, and I would like to have the permission of the committee to leave my vote with the chairman to report out these three nominees when the time comes.

The CHAIRMAN. If there are no objections that will be understood.
Senator FLETCHER. Shall we go on now, Mr. Chairman.
The CHAIRMAN. Yes.

Mr. MEYER. I will say, Senator, that I am for the administration of the act in accordance with the law. The cooperative features are a part of it, and I am for them.

Senator BROOKHART. I have a good many questions to ask in connection with that, but I do not want to interfere with Senator Fletcher until he is through.

Senator FLETCHER. How do the overhead expenses now compare with the same under the preceding administration?

Mr. MEYER. They are increased.

Senator FLETCHER. What officers or employees have you dispensed with and what have you added? Could you give an idea of that?

Mr. MEYER. Well, if the clerk of the committee will address that question to me, I can answer that in detail. We have added considerably to the counsel's staff. There was an inadequate legal staff. Senator, a board which is essentially regulatory in character is bound to be confronted with a great many legal questions, and we found that the legal staff was very inadequate. We have had four temporary people in the file room for some time, and have been compelled to increase the number in order to get the files in shape for use as promptly as possible.

(Thereafter the clerk of the committee addressed the question (as to personnel dispensed with) to Mr. Meyer by letter, and the following information was furnished by Mr. Meyer :)

FEDERAL FARM LOAN BUREAU

Resignations and appointments in Washington from May 10, 1927, to January

20, 1928

1928

1 Promoted to chief examiner.

Accountant..

Clerk...

Stenographer.

Resignations and appointments in the field from May 10, 1927, to January 20,

1

2, 100

1

1,800

1

1,800

1, 320

1, 320

1, 200

1, 200

2 Transferred from field.

24164112214

1,800

1,680

1,600

1, 560

5

Senator FLETCHER. How many have you added to the legal staff? Mr. MEYER. I think three or four only. The work of the bureau is differently grouped and organized from what it was before. The

total increase in personnel in Washington is 23, 9 of whom are temporary. The other 14 will be required for some time to come. I will not say that they are permanent employees because I think we may be able to reduce the force when we have straightened out some of the difficult situations. For instance, we have three receiverships which entail very much more work on the part of the board. The first receivership was on May 4; the second on July 1, and the third on September 1. It probably requires the full time of two people to handle this work, and may be more. We must increase the examining staff if the examinations are to be made as frequently as the law requires, and in the way in which we think the work ought to be done so as to be most helpful in the supervision and administration of the banks. That has all been discussed with the Appropriations Committee and they have approved the additional expenditures.

I might say, Senator, that the additional expenditures also have been discussed with the presidents of the Federal land banks, and the presidents of the joint-stock land banks. They pay the expense, you know. It is all assessed against the banks. It is not a Government expense. They have expressed their approval of a policy of additional expenditure at the present time in order that the system may be put in a position to function in the way which they feel, and we feel, to be necessary.

Senator FLETCHER. The receivership all applies to joint-stock land banks?

Mr. MEYER. Yes.

Senator FLETCHER. You have no receivership in the land banks? Mr. MEYER. No; of course, the Spokane bank has received assistance to the extent of $2,800,000 from the other 11 Federal land banks.

Senator BROOKHART. How did they get that?

Mr. MEYER. It was contributed by the other 11 Federal land banks. Of course, the obligation rests upon the Spokane bank to repay the money so contributed.

Senator BROOKHART. They owe it to the other 11 banks?

Mr. MEYER. Yes; but it will take years to pay it back.

Senator FLETCHER. That is based on the fact that all the banks are liable for the bond issue of each bank?

Senator BROOKHART. It is between the banks. The Spokane bank owes it.

Mr. MEYER. Yes; of course, when one bank helps another bank, it should be borne in mind that the help really comes from the dividends of the farmers in other districts. In other words, funds which ordinarily would go to the farmers of one district in the form of dividends have to be used to make good the misfortunes or mistakes of management in another district.

Senator BROOKHART. When you get down to the fact of the matter all this trouble is due to the agricultural depression.

Mr. MEYER. I told the Senator I could not agree to that, and I think it would be damaging to this system to admit it.

Senator BROOKHART. This system is not to blame for the agricultural depression.

Mr. MEYER. No; but there are eighteen hundred millions of bonds sold to the investors on the theory that the bonds are good under all