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Friday, November 24, 1922. 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.


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


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 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 I 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


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.

. 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,

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

five. Such persons shall enter into articles of association which shall specify in general terms the object for which the corporation is formed, and may contain any other provisions, not inconsistent with law, which the corporation may see fit to adopt for the regulation of its business and the conduct of its affairs. Such articles of association shall be signed by the persons intending to participate in the organization of the corporation, and thereafter shall be forwarded to the Comptroller of the Currency to be filed and preserved in his office.

SEC. 3. Requisites of articles and certificate: That persons signing such articles of association shall, under their seals, make an organization certificate which shall specifically state the name of the corporation to be organized, the city within which its principal place of business is to be located, the State or States in which its operations are to be carried on, the amount of its capital stock, and the number of shares into which the same shall be divided, and the fact that the certificate is made to enable the subscribers to avail themselves of the advantages of this act.

The name of each corporation organized under this act shall include the words “Rural credit."

The said organization certificate and articles of association shall be acknowledged before some judge of a court of record or notary public and shall, together with the acknowledgment thereof duly authenticated by the seal of such court or notary, be transmitted to the Comptroller of the Currency, who shall file, record, and carefully preserve the same in his office.

Upon making and filing the articles of association and organization certificate with the Comptroller of the Currency, and when the Comptroller of the Currency has approved the same and issued a permit to begin business, the said corporation shall be and become a body corporate, and as such and in the name set forth in the organization certificate shall have power

(1) To adopt and use a corporate seal.

(2) To have succession for a period of 50 years unless sooner dissolved by the act of shareholders owning two-thirds of its stock or by act of Congress or unless its charter shall be forfeited for violation of law.

(3) To make contracts.
(4) To sue and be sued, complain and defend in any court of law or equity.

(5) To elect or appoint directors and by its board of directors to appoint such officers and employees as may be deemed proper; to define their authority and duties; to fix their salaries; in its discretion to require bonds of any of them and to fix the penalty thereof; and to dismiss at pleasure any of such officers or employees.

(6) To prescribe by its board of directors by-laws not inconsistent with law or the regulations of the Comptroller of the ('urrency regulating the manner in which its general business may be conducted, its shares of stock be transferred, its directors and officers be elected or appointed, its property transferred, and the privileges granted to it by law be exercised and enjoyed.

(7) To exercise by its board of directors or duly authorized officers or agents all powers specifically granted by the provisions of this act, and such incidental powers as shall be necessary to carry on the business for which it is incorporated, within the limitations prescribed by this act, but such corporation shall transact no business except such as is incidental and necessarily preliminary to its organization until authorized by the Comptroller of the Currency to commence business under the provisions of this act.

(8) Under regulations to be prescribed by the ('omptroller of the Currency to establish and maintain branches or agencies within the States in which authorized to engage in business.

Sec. 4. Powers of the corporation: That each corporation so organized shall have power under such rules and regulations as the ('omptroller of the ('urrency may prescribe:

(1) To make advances upon, to discount, rediscount, or purchase, and to sell or negotiate, with or without its indorsement or guaranty, notes, drafts, or bills of exchange, and to accept drafts or bills of exchange, which

(a) Are issued or drawn for an agricultural purpose, or the proceeds of which have been or are to be used for an agricultural purpose;

(b) Have a maturity, at the time of discount, purchase, or acceptance, not exceeding nine months;

(c) Are secured at the time of discount, purchase, or acceptance by warehouse receipts or other like documents conveying or securing title to nonperishable and readily marketable agricultural products, or by chattel mortgages or other like instruments conferring a first and paramount lien upon live stock which are being fattened for market.

(2) To make advances upon or to discount, rediscount, or purchase, and to sell or negotiate with or without its indorsement or guaranty, notes secured by chattel mortgages conferring a first and paramount lien upon maturing and breeding livestock and dairy herds, and having a maturity at the time of discount, rediscount, or purchase not exceeding three years.

(3) To issue, subject to such regulations as the Comptroller of the Currency may prescribe, collateral trust notes or debentures, with a maturity not exceeding three years, and to pledge as security for such notes or debentures any notes, drafts, bills of exchange, or other securities held by the corporation under the terms of this act. The regulations of the Comptroller of the Currency may prescribe the form of such notes or debentures, and of notes, drafts, bills of exchange, warehouse receipts, chattel mortgages, or other instruments which may be pledged as security therefor, the provisions which may be made with regard to release, substitution, or exchange of such securities, and with regard to protection, supervision, inspection, and reinspection of the agricultural commodities or live stock pledged or mortgaged as security therefor.

(4) To subscribe for, acquire, own, buy, sell, and otherwise deal in bonds, notes, Treasury certificates of indebtedness, or other obligations of the United States to such extent as its board of directors may determine.

(5) To act, when requested by the Secretary of the Treasury, as fiscal agent of the United States, and to perform such services as the Secretary of the Treasury may require in connection with the issue, sale, redemption or repurchase of bonds, notes, Treasury certificates of indebtedness, or other obligations of the United States.

(6) To act as custodian, trustee, or agent for banks or trust companies which are members of the Federal reserve system.

(7) To purchase, hold, acquire, and dispose of shares of the capital stock of any corporation organized under the provisions of section 8 of this act, in an amount not to exceed at any time 20 per centum of its paid-in and unimpaired capital and surplus.

(8) To purchase, hold, and convey real estate for the following purposes, and for no others:

(a) Such as shall be necessary for its immediate accommodation in the transaction of its business.

(b) Such as shall be mortgaged to it in good faith by way of security for loans or advances made, or for debts previously contracted.

(c) Such as shall be conveyed to it in satisfaction of loans or advances made or debts previously contracted in the course of its dealings.

(d) Such as it shall purchase at sales under judgments, decrees, or mortgages held by the corporation or shall purchase to secure debts due to it.

Any obligation referred to in paragraphs 1 or 2 of this section which is secured by chattel mortgage upon live stock of an estimated market value at least equal to the face amount of such obligation may be additionally secured by mortage or deed of trust upon real estate or by other securities, under such regulations as may be made by the Comptroller of the Currency.

SEC. 5. Limitations: Except as hereinafter in section 8 provided, no corporation organized under this act shall incur liabilities, whether direct or contingent, in excess of ten times its paid-in and unimpaired capital and surplus; nor shall any such corporation make advances to or hold notes or other direct obligations of any person or corporation in an amount exceeding 20 per centum of the paid-in and unimpaired capital and surplus of such corporation, unless such advances, notes, or other obligations are adequately secured by warehouse receipts representing readily marketable and nonperishable agricultural commodities, in which event the amount of such advances to, or notes or other direct obligations of, such one person, association, or corporation shall not exceed 50 per centum of such paid-in and unimpaired capital and surplus. No such corporation shall purchase, own, or deal in any live stock except live stock taken in the course of liquidation of obligations held by it.

SEC. 6. Interest rates: Any corporation organized under the provisions of this act may take, receive, reserve, and charge on any loan or discount made, or upon any note, bill of exchange, or other evidence of debt, interest at the rate allowed by the laws of the State in which such obligation is by its terms made payable.

The taking, receiving, reserving, or charging a rate of interest greater than is allowed by the preceding paragraph, when knowingly done, shall be deemed a forfeiture of the entire interest which the note, bill, or other evidence of debt carries with it or which has been agreed to be paid thereon. In case the greater rate of interest has been paid, the person by whom it has been paid, or his legal representative, may recover back in an action in the nature of an action for debt twice the amount of the interest thus paid from the corporation taking or receiving the same, provided such action is commenced within two years from the time the usurious transaction occurred.

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