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COMMITTEE ON BANKING AND CURRENCY

PETER NORBECK, South Dakota, Chairman WALTER E. EDGE, New Jersey.

DUNCAN U. FLETCHER, Florida. LAWRENCE C. PHIPPS, Colorado.

CARTER GLASS, Virginia. FREDERIC M. SACKETT, Kentucky.

EDWARD I. EDWARDS, New Jersey. LYNN J. FRAZIER, North Dakota.

EARLE B. MAYFIELD, Texas. W. B. PINE, Oklahoma.

ROBERT F. WAGNER, New York. SMITH W. BROOKHART, Iowa.

ALBEN W. BARKLEY, Kentucky. FREDERICK STEIWER, Oregon.

MILLARD E. TYDINGS, Maryland. JULIAN W. BLOUNT, Clerk

II

CONFIRMATION OF MEMBERS OF THE FEDERAL FARM

LOAN BOARD

FRIDAY, JANUARY 13, 1928

UNITED STATES SENATE,
COMMITTEE ON BANKING AND CURRENCY,

Washington, D.C. The committee met, pursuant to call, at 3 o'clock p. m. in the room of the Committee on Interoceanic Canals, the Capitol, Senator Peter Norbeck presiding.

Present: Senators Norbeck (chairman), Edge, Sackett, Frazier, Pine, Brookhart, Steiwer, Fletcher, Glass, Barkley, and Tydings.

Senator EDGE (presiding). Gentlemen, Senator Norbeck asked if I would call the meeting to order and sent word he would be here shortly, that he was temporarily engaged on other business. For the purpose of the record I will say that our meeting started this morning and was recessed until this time in order that Mr. Eugene Meyer might be invited to attend so that he could answer some questions to be propounded by members of this committee. The committee has under consideration the nominations of Eugene Meyer, George R. Cooksey, and Floyd R. Harrison for members of the Farm Loan Board.

Present also : Eugene Meyer.

Senator FLETCHER. Mr. Chairman, I protest these nominations on grounds which I set forth partially in a letter to the President dated May 3, 1927. I believe these appointments were made about the 5th or 6th of May, somewhere between May 3 and 7, 1927. I will ask that that letter be made a part of the record.

Senator EDGE. If there is no objection, that will be done.

(The letter referred to is here made a part of the record, as follows:)

JACKSONVLILE, FLA., May 3, 1927. Hon. CALVIN COOLIDGE,

The President, The White House, Washington, D. C. MY DEAR MR. PRESIDENT: With reference to proposed changes in personnel of the Farm Loan Board I wish to draw your attention to one objection to such changes.

A bill was introduced in the House by Mr. McFadden and in the Senate by Mr. McLean to amend the farm loan act. I did not believe the proposed amendments were wise or desirable, and the Senate Committee on Banking and Currency took no action. The House held extensive hearings. The result was the bill was not reported, and I was informed the proponents of the bill admitted it was objectionable.

The effort seems to be to place the Farm Loan Board, the Federal land banks, and the whole system under the control of the Treasury Department on a similar basis as national banks.

This, I believe, is a serious mistake and will result in wrecking the system. The next move will be to repeal the provisions in the farm loan act providing that the Federal land bank bonds shall be tax exempt, and if consummated would increase the interest to borrowers at least 2 per cent.

In candor I must say that it seems to me this whole effort to change the board, effect Treasury Department control, is instigated and pressed by land mortgage banks and other interests to serve their selfish purposes.

Some $2,000,000,000 have been furnished farmers, real farmers, under our present system at 512 per cent interest.

Its operation has had the effect of lowering interest rates generally, particularly to the benefit of agriculture, and it has been of great assistance to the borrowers.

That legislation has been more helpful to agriculture than any other ever enacted by Congress, unless it be the creation of the Department of Agriculture.

The purpose of the original legislation was to create a financial system, distinct from our commercial system, to meet the needs of agriculture.

It is not involved with banking and with currency. These land banks receive no deposits. The Comptroller of the Currency and the Treasury Department are particularly concerned with the protection of depositors. There are no depositors in these so-called banks. It was never intended there should be hence Treasury Department supervision is not required. Control was to be in the hands of representatives of agriculture.

I am certain Governor Cooper. Mr. Landis, and Mr. Jones properly conceived the spirit and purpose of the act. Their removal means a direct, distinct loss to agricultural interests. Their successors will doubtless be recommended by the Treasury Department. Behind that will be, whether the department knows it or not, the hand of the land mortgage banks. They have already been enemies of the system. They attacked the constitutionality of the act, which the Supreme Court unanimously, in a strong, unanswerable opinion, upheld. I wish you would read Smith v. Kansas City Title & Trust Co., decided February 28, 1921.

The court held the legitimacy of these banks did not depend on “their being technically banks; or on the extent of their banking powers"; and that “the fact that these banks were intended to facilitate the making of loans upon farm security at low rates of interest does not invalidate the enactment."

That is precisely their function. They have nothing to do with banking in the ordinary sense, with deposits, or with currency. There is no justification for treating them as a part of our commercial banking system,

I am trying to make this as brief as possible. My devotion to this great system designed to benefit agriculture, intended to be operated so far as possible by those in sympathy with and engaged in agriculture, prompts me to plead for its preservation and continuation along the lines heretofore pursued and in accordance with the plans of its organization. Very respectfully and sincerely yours,

Duncan U. FLETCHER. Senator FLETCHER. I have further grounds for objecting to these nominations on principle, and I have indicated them to the committee heretofore; but if there is no objection, I will just insert a statement of them into the record, so as to state somewhat fully the points raised.

Senator EDGE. Without objection, that may be done.

(The statement referred to is here made a part of the record, as follows:)

REORGANIZATION OF FARM LOAN BOARD

What is the limit to Executive power?
Where may its unlimited exercise lead?

Last May, after Congress had adjourned, through the Treasury the resignations of three members of the Farm Loan Board were requested. These were experienced and faithful members of that board, Messrs. Cooper, Jones, and Landes. In their places were appointed three officers of the liquidating War Finance Corporation, Messrs. Meyer, Cooksey, and Harrison. By this process the Treasury Department was placed in control of the farm loan system and all independent functioning of that bureau was restricted to the point of destruction.

A vital principle is involved.

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