RURAL CREDITS HEARINGS BEFORE THE COMMITTEE ON BANKING AND CURRENCY OF THE HOUSE OF REPRESENTATIVES ON S. 4063 (H. R. 13033) TO PROVIDE CREDIT FACILITIES FOR THE AGRICULTURAL P87-14 RURAL CREDITS. COMMITTEE ON BANKING AND CURRENCY, The committee met at 10.30 o'clock a. m., Hon. Louis T. McFadden (chairman) presiding. The CHAIRMAN. Gentlemen, this is an informal meeting to hear discussed the rural credits plan as proposed in Senate bill 4063. Although an informal meeting, we are having it reported, for the benefit of those members of the committee and others who are not present, because of the importance of the subject at this time. I think we should first hear Mr. Fred H. Bixby, of Long Beach, Calif., who is president of the American National Live Stock Association, a man who is qualified by experience to speak of credits for the live-stock industry. We shall be very glad indeed to hear from Mr. Bixby at this time. STATEMENT OF MR. FRED H. BIXBY, LONG BEACH, CALIF., PRESIDENT OF THE AMERICAN NATIONAL LIVE STOCK ASSOCIATION. Mr. BIXBY. Mr. Chairman and gentlemen, I can do many things a good deal easier than I can talk, but, inasmuch as I am president of the largest live-stock association in the country, it devolves upon me to try to talk to you about this plan of carrying on our business. I am simply going to speak of the bill in general terms, and I am going to speak for 18 or 20 of the States in my part of the country in the West. I want to state that the War Finance Corporation has been a perfectly wonderful thing for the cattlemen. It has been very finely handled and it has meant that we are still alive. We would all have been out of business if it had not been for the War Finance Corporation; but the War Finance Corporation ceases to function June 30, 1923. That is the end of the time set by the law, and furthermore, it is the end of the time when the people who are on the committees are going to work for nothing. You can get lots of men to work for nothing that you can not hire. The CHAIRMAN. You think Mr. Meyer has been very successful in that. Mr. BIXBY. I should say he has. He must have chloroformed some of them. The proposition that is staring us in the face is what is going to happen to us after June 30, 1923. At the semiannual meeting of my association in the mouth of August, I had a long talk with Mr. Meyer and told him that my ideas of this business were these: No Government money, no tax-free bonds, no red tape with Government bureaus. We want to have our industry financed as any other important industry is financed. We do not want any more of this temporary financing and we do not want any more of the free-for-all financing that we had before the war and during the war. The result of that was very disastrous. It nearly broke us. At the time of the crash, the paper that was good was called and the paper that was bad was not called-the good men "paid the freight" right down the line. Mr. STEVENSON. Will the gentleman permit a question? Mr. BIXBY. Yes. Mr. STEVENSON. Who called the paper? Mr. BIXBY. The cattle-loan companies and the banks. Mr. STEVENSON. The local banks? Mr. BIXBY. Yes; and the cattle-loan companies. My theory has always been that if we have good security we can get the money. If we have No. 1 security, we can get it without paying any exorbitant interest rate. In order to make the security good, we must, in the first place, have the stock properly inspected for the loan. In the bill here we provide for that. The inspectors will have to be licensed inspectors, which they are not now. They will have to be inspectors who will be straight and square and whose names on an inspection report will mean something. The whole bill is founded on the fact that heretofore the banks 1 . have bought cattle paper largely because of the high rate of interest it has commanded. We want it fixed now so that the banks which buy our paper will buy it because the security is good and the loans are safe—not because of the high interest rate. We want this bill passed. The CHAIRMAN. Mr. Bixby, in that connection and in order to get this in the record, I infer that this bill, S. 4063, introduced by Senator Capper, has been very carefully gone over by you and your organization and covers what you want? Mr. BIXBY. I was called upon to appoint a committee to consider it and I did so. Eight of the 13 members of the committee came to Washington and have gone over this bill very carefully. We had considerable discussion as to what effect it would have on the rates we would have to pay. That was the principal point of discussion. We talked that over very carefully and we decided that the rate of interest would depend upon the goodness of the security. That was the point brought up continually. Prior to now we have been forced to pay exorbitant interest rates, but I believe this bill, if it is enacted into law, will go far toward correcting that situation because it will help us to improve our security. This committee has gone over the bill, which was framed by very competent attorneys having our ideas in mind, clause by clause. Mr. WINGO. You say you have gone over it clause by clause, Mr. Bixby. Will you explain just what the effect of the provision is that strikes out the proviso of the second paragraph of section 13 of the Federal reserve act. What do you understand is the effect of that? Mr. BIXBY. What is that? Mr. WINGO. The provision that amends section 13 of the Federal reserve act. What effect does that have? Mr. BIXBY. That is not the part of the bill I am discussing. I am talking about about the live-stock end of it. The provision to which you refer has to do with the cooperatives. Mr. WINGO. You said you had considered the bill clause by clause, and I want to know if you understand what the effect of the bill would be." Mr. BIXBY. I understand what the effect would be as far as the live-stock industry is concerned. The coopertive part Mr. WINGO (interposing). Understand, I am not trying to get into a controversy with you, but this is the first opportunity I have had to read the bill, and I notice you said you went over the bill clause by clause, and I wanted to get your viewpoint as a practical man as to what you understand the effect of that provision would be on cattle paper. The provision I refer to is section 1, Title II, page 25. I would like to have your understanding of what you have been told would be the effect of that and the effect of all that part with reference to section 13, which is the rediscount provision of the Federal reserve act. Do you understand that or not? Mr. BIXBY. My committee has only to do with the live-stock sections of this bill, and I would rather not go into a discussion of those sections which do not relate to my end of the business. I would prefer to have some one discuss them who understands them better than I do. Mr. WINGO. As I understand it, you understand and have been told that that does does not apply to your cattle paper and will not affect it? Mr. BIXBY. That is our opinion about it-that it would really have no bearing on our end of the business. Mr. WINGO. You have been told then that the amendment to the Federal reserve act does not apply. You have been interested primarily in the creation of a new organization that will take care of your cattle paper. Mr. BIXBY. That is what I am here for-to discuss my own end of the business. Mr. WINGO. And you are not prepared to discuss the changes proposed in the Federal reserve act because you have been given to understand that that does not apply to the business you are interested in. Mr. BIXBY. I am prepared to discuss the provision which makes feeder paper eligible for rediscount with a maturity of nine months instead of present limit of six months. The CHAIRMAN. Mr. Bixby, I understand that, with the permission of the committee, you want to get away pretty early. Suppose you go ahead in your own way and make your statement, and when you get through, if we have time, we would like to question you then. Mr. BIXBY. Yes. We have considered very carefully the sections of this bill which have to do with our end of the business, and we want it passed. I am speaking because I know my business. I have been in it ever since I was 4 years old, and would be a fool if I did not know something about it. If I could say to my people that I had something to do with the passage of this bill, I would be glad to resign and say that I have done all I was expected to do--that my work is done. When you come to consider the bill, I hope that you will bear in mind the fact that it represents our views concerning the financing of our business, and that you will pass it without cutting it all to pieces and creating a new bill. I would like to have Mr. Sheehan, of Nevada, explain the details of the bill to you, and after he has done that we will be glad to answer any questions. Mr. WINGO. Mr. Chairman, if you will permit me, I presume you understand why I ask this: The gentleman says he has gone over the bill clause by clause, and he comes here as the head of an association approving the bill and says he does not want us to dot an i or cross a t. Mr. BIXBY. No; I did not say that. Mr. WINGO. I understand you to say you did not want us to tear it to pieces and give you a new bill. Mr. BIXBY. That is it. Mr. WINGO. You want it passed just like it is written. Now, is not this the position you really want to be in: You favor what you understand the bill does for your own business. You have stated you do not know the effect of a provision with reference to an amendment of the Federal reserve act, which I called your attention to, but you are interested in having for, the cattle paper the same facilities and credit agencies that you contend is now granted to short-term commercial paper. Mr. BIXBY. That is my whole interest. Mr. WINGO. In other words, you want equal treatment for the cattle paper of the country, so that you can conduct your business in a businesslike way, and you are not asking for any Government subsidy or aid. You simply ask for the establishment of an agency by which you can take care of yourselves, if we will just let you do it. Mr. BIXBY. Yes, sir. Mr. WINGO. Is that the idea you have? Mr. BIXBY. My idea is to put the financing of our business on such a basis that we will not have to borrow money for six months when we know, and the lender knows, that it can not be repaid in six months. Mr. WINGO. In other words, you understand that this bill will provide a practical agency for long-term agricultural paper. Mr. BIXBY. It gives feeder paper a maturity of not to exceed nine months, and therefore we will not have to sell cattle that are only half fat and thus run down the price of fat cattle. It makes provision also for three-year loans on breeding herds. That is the business I am in-the breeding and fattening of cattle. Mr. WINGO. And that is the thing you are talking about. Mr. BIXBY. And that is what I am talking about. I am representing the cattle industry of the West relative to the live-stock section of this bill. The CHAIRMAN. You do not object, Mr. Bixby, to our improving on your bill, if it will give you better service. Mr. BIXBY. Not a bit. You people know more about banking methods than we do, but I believe we know more about what we want in the live-stock business than you do. Mr. STRONG. What you want is the result that you claim will be derived from this bill. Mr. BIXBY. Absolutely, and this bill will produce the result. I have no objection, of course, to your changing the terminology or anything like that, as long as we are put in position to get money just as other industries get it—at a proper interest rate. Mr. STRONG. And on proper terms. Mr. BIXBY. Yes. With your permission I would like to insert the bill in the record of this discussion. The CHAIRMAN. Without objection, the bill will be incorporated in the record at this point. [S. 4063, Sixty-seventh Congress, third session.] A BILL To provide credit facilities for the agricultural and live-stock industries of the United States; to, amend the Federal reserve act; to amend the Federal farm loan act; to extend and stabilize the market for United States bonds and other securities; to provide fiscal agents for the United States, and for other purposes. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, TITLE I. That this title may be cited as "The rural credits act." SEC. 2. Agricultural credit corporations: That corporations, for the purpose of providing credit facilities for the agricultural and live-stock industries of the United States, may be formed by any number of natural persons not less in any case than |