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gestions. This bill provides for the inspection of the security back of live-stock loans by inspectors licensed and supervised by the Secretary of Agriculture. The matter of inspection has been one of the most troublesome things in connection with our live-stock loans—that is, how to get competent and reliable men to examine and report on the security.
We have run into difficulties also in connection with the legal protection of titles to live stock. Laws differ widely in the different States. In some they are good; in others bad. When a man sells his wool or his lambs or his calves, we have frequently found it difficult to release to the borrowers, for their current expenses, some of the proceeds of the sales and at the same time maintain the validity of our security.
The American National Live Stock Association is going to undertake to standardize the legal protection in the various States, and this will make necessary, of course, a detailed study of the State laws. I think the association is in a better position than any other agency to bring about uniform legislation on the subject.
The CHAIRMAN. Mr. Meyer, you have personally gone into this bill very carefully?
Mr. MEYER. We have collaborated with the committee in studying the matter and a good deal of the drafting has been done by the counsel of the War Finance Corporation. The bill is the product of much discussion and a good many meetings.
The CHAIRMAN. You think it fairly covers the situation?
Mr. MEYER. It seems to me, Mr. Chairman, in view of certain natural difficulties that are involved in financing the breeding end of the live stock industry, it represents the nearest approach to a solution of the problem.
Then there is the supervision of brands and shipments, which in some States is very good. The association is going to take this matter up also.
If the industry will put its house in order and the gentlemen representing the industry see the necessity of doing that—then I think the financial machinery provided for in this bill will bring the industry in touch with adequate capital at reasonable rates.
As Mr. Bixby has said, we have men serving on our committees without compensation whom we could not hire under normal conditions at any price. We have had every advantage in that way, but now we must look ahead to what is going to happen in he long run. It would be a pretty expensive proposition to operate any system of live stock financing from Washington. This bill contemplates decentralization and not centralization; local loan companies, locally owned, with locally subscribed capital and with all the moral value that comes from local supervision and ownership. At the same time, there would be agencies—the rediscount corporations—for establishing contact, along sound lines, with the larger capital centers of the country which are looking for safe investments.
The whole matter has been approached from the point of view of improving the industry and the financial institutions directly affecting it, and of attracting into the industry more money at reasonable rates than was formerly available at high rates, when the speculative element was so much a feature of the business.
Mr. HAYDEN. With reference to the inspection service which you mentioned, did
Mr. MEYER. No. They will merely be licensed and supervised by the Secretary of Agriculture. They will not be employees of the Government at all. I imagine that before a man is licensed as a certified public live-stock loan inspector-let us call them that--the Secretary of Agriculture will make inquiry regarding his character and qualifications. I have met a number of live-stock loan inspectors who struck me as being thoroughly high class, competent men, men who are irreproachable in character, and I believe that, under this bill, there would be developed a force of licensed inspectors whose reports would really mean something.
Mr. HAYDEN. How are the inspectors to be compensated ?
Mr. HAYDEN. The thought I wanted to develop was that it is not proposed to create another corps of public officials depending upon the civil service for their appointment.
Mr. MEYER. The Department of Agriculture would merely pass upon the qualifications of the men to be named as live-stock inspectors under this plan of organization.
Mr. Bixby. That will probably be handled by the State associations saying that we indorse so and so. Then it will be brought up to the national association, and the
national association will say that they indorse him, and then it will come to the Secretary of Agriculture and he will be asked to license that man. I presume that will be the way this will be handled.
Mr. Wingo. Do you think you have it safeguarded so that you can what Mr. Meyer has suggested; that is, secure men who know something about the local situation. In other words, have it safeguarded so that you will not have a Texas man selected, for political reasons, to go up into Kansas to inspect cattle there.
Mr. Bixby. Absolutely.
Mr. Wingo. I hope you can because most of the other branches of the service are cursed with a lot of carpetbaggers riding over my district, for instance, that do not know a thing on earth either about the Postal Service or the timber business.
Mr. MEYER. Are they not employees of the Government?
Mr. Wingo. These men I refer to are nothing but carpetbaggers. That is all they are.
Mr. MEYER. Inspection is a very fundamental feature of the industry and we, in the War Finance Corporation, have had experience
Mr. Wingo (interposing). I am in sympathy with your purpose, but here is what I want to avoid. This is an illustration of what happened in the postal service: In order to take care of a political henchman out in Indiana who was too inefficient to put in his own country, they have sent him down to my district, and have put him in the postal service, when he does not know a thing in the world about it. That is the kind of thing I want to guard against.
Mr. MEYER. A loan company would not hire that kind of a man, because it would not consider him qualified to pass on a loan.
Mr. Wingo. That would be the first thing that would happen if you permitted it, or if you did not employ the right kind of man.
Mr. MEYER. The loan company is not compelled to employ anyone under this bill.
Mr. HAYDEN. I questioned you as I did because I was satisfied that such was not your desire, but I thought that the kind of inspectors to be selected and the nature of their appointment should be developed before the committee.
Mr. Wingo. I do not believe I have ever heard of your agency being guilty of that practice.
Mr. MEYER. I have not heard of any such criticism. Of course, if an inspector gets a license and he does not do good work, his loans will not be good and there will be a pretty good check on him. A loan company may make a loan originally upon the
a inspection certificate of one man, but there is no reason why it should not, in checking up the loan later, use another qualified man in the same district.
Mr. Wingo. I do not think a man who is familiar with Arkansas land is a very good man to appraise land in Iowa or Indiana, and I do not think a man who would make a good agricultural extension agent in the wheat belt is a good man to come down to Arkansas and work in the Cotton Belt when he would not know a cotton plant from a Jimson weed.
Mr. MEYER. It might interest you to know how we have met that problem in the War Finance Corporation. Some of our committees were at first inclined to feel that the inspectors should be selected from Washington. But how could we know the right kind of man to inspect the security back of a loan in Texas, for example. We have, therefore, lodged on these good men of ours—the best in the country—the maximum of responsibility in the matter of the supervision of inspection and the appointment of inspectors, and we have succeeded in getting them to take that responsibility. It was a fine thing for them to do because it is a big responsibility. Our committees have done the best they could, but their task would have been greatly simplified if there had been available a force of licensed inspectors selected under some such plan as that contemplated by this bill.
Of course, you realized when you passed the agricultural credits act a year ago, that we would have to do a whole lot of business quickly. We were compelled in the beginning to make a lot of loans without new inspections. If we had waited to establish an inspection system and to get new inspection reports on every loan, we would have come through after the fire. As rapidly as possible we improved our methods and were careful to get better statements, better inspections, and to supervise the business more intensively. Then we went up against the problem of obtaining qualified and reliable inspectors.
Mr. Bixby. In this connection, there is one case I would like to speak of. A neighbor of ours had a mortgage on 1,600 head of cattle. At the time of the crash
the cattle loan company from whom he had borrowed decided to go out and find out whether the cattle were on the ground. They found they were short some. They had to foreclose and they counted out, I think, 608. Of course, he was broke. He was out of business and is now hunting a job, and the catttle loan company lost a lot of money. That same thing happened I do not know how many thousands of times, giving us all an awful black eye.
Mr. Wingo. Of course, it is true that it is to the interest of the cattle grower, as well as the farmer or anybody else for whom you provide these agenices to make the business safe and sound, because that has a tendency to provide better security and a lower rate and great facility. He is the man who is interested in having safe and sound security.
Mr. Bixby. You may be rather surprised that we say we do not want Government agencies to finance us; that is, we do not want to be financed in that way. I have some cattle in a forest reserve and I have a number of friends who have some cattle under the Indian Service, and there is a certain amount of red tape that has to be gone through with which we do not like.
Mr. Chairman, we do not want to take up any more of your time. We thank you very much for granting us this hearing;
(Íhe committee thereupon adjourned.)