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Mr. Ludlow. What percent of these loans are paid on maturity, approximately?

Mr. Garwood. Our past collections have averaged, from 1921 through 1936, about 66 percent. We have outstanding crop loans uncollected of $114,516,169, numbering 1,119,510 loans, and the drought feed loans that we made in 1934 and 1935 are uncollected to the extent of $57,113,320, representing loans numbering 233,077.

That represents a total in loans outstanding of $171,629,489, numbering 1,352,587 loans.

Mr. WiggleSWORTH. Does that mean that those loans are delinquent?

Mr. GARWOOD. That means that they have been in existence from 1921 through 1937.

Mr. WIGGLESWORTH. What percentage of them may we expect to collect?

Mr. GARWOOD. A small percentage of them.
Mr. Taber. What do you mean by that?

Mr. CANNON. As a matter of fact, that amount might as well be charged off, might it not?

Mr. Garwood. No, sir. We collected last year, on 1936 and prior loans, $6,993,000, and on the drought loans $3,412,398 We are collecting around ten or fifteen million dollars on old loans some of which were made in 1921.

The Chairman. What is the nature of the security that you have for these loans?

Mr. Garwood. None. We take a first lien on the crop for that year. When the crop is gone, there is no security.

Under the drought loans, we loaned $70,000,000 on open notes, with no collateral. Of that, we have collected about $15,000,000, so that you might say that on these loans it is a question of good faith of the borrower whether he pays.

The CHAIRMAN. You have no security at all.

Mr. Garwood. In very few cases. In the years prior to 1932 there were a few loans on which there were liens on dairy livestock, but a very small percentage; not over half a thousand.

Mr. Ludlow. Does the Government attempt, where the borrower does not pay, to realize on the crop security at all?

Mr. GARWOOD. Yes, sir; we do. We collect many of those accounts. If they have a good crop year our collections on old loans would probably run up to $20,000,000. If you will look at the maps that I have handed you you can see where the money is. It is in the area colored blue. That is the reason why I have said that it is doubtful, because it is in the Middle West-in the drought States.

The CHAIRMAN. That takes in the dust bowl."

Mr. Garwood. Yes, sir. There is about $70,000,000 outstanding in five States.

Mr. CANNON. Are there any requirements in connection with your current soil-conservation agreements with these farmers which make it obligatory for them to liquidate these bad obligations in order to take advantage of payments?

Mr. Garwood. No, sir. In case of a default of a crop-loan borrower-where he has made a crop and has not paid us—the procedure is to turn it over to the Comptroller General for an offset, but only in cases of bad faith.

Mr. CANNON. The law provides that discrimination shall be made in connection with the drought areas, or the areas to be selected by the Government. What discretion have you made as to areas in making these loans?

Mr. GARWOOD. We did not understand that the law meant that. We make no discrimination. The President can remove that limit of $400, as I understand it, in areas that he decides are drought areas, but every farmer who can show that he has the facilities and ground, and that he cannot obtain credit from any other source, is eligible to receive a crop loan.

Mr. CANNON. Under what circumstances and in what cases have you exceeded the $400 provided for under that act?

Mr. Garwood. None, that I know of?

Mr. Cannon. You have never taken advantage of that provision in the act at all?

Mr. Garwood. No, sir. Our average loan runs around $200 throughout the United States.

Mr. CANNON. There is quite a disparity as to the amount loaned in the various States.

Mr. GARWOOD. Yes, sir.

Mr. Cannon. I notice from some data submitted here that your loans in excess of $500,000 have been confined to 15 States.

Mr. GARWOOD. $500,000 in total amount; yes, sir.

Mr. CANNON. And that the largest amount has been loaned in the State of North Dakota, where you loaned $5,523,415. The larger loans in some States are merely due to the fact that you have had more applications from those States, and that the situation in those States justifies more loans?

Mr. GARWOOD. No, sir. I do not think that those States are entitled to that amount of money. But there is nothing that I can do about it under the law. If a man qualifiies, there is nothing in the world that we can do, because he has produced evidence that he cannot get credit anywhere else, and he has the ground and the equipment and we have to make the loan to him.

This year we put 17 percent of our total amount of money in North Dakota. They had a fairly good crop, but the minute we started collecting, the Governor issued a moratorium, which was given wide publicity. He sent a copy to the emergency crop loan office, which gave the people absolute protection. Whether the moratorium was justified or not, we could not collect. The moretorium is there.

The CHAIRMAN. And everybody takes advantage of it?
Mr. GARWOOD. Yes, sir; and there is no cooperation.

Mr. CANNON. In your opinion, the farmers of North Dakota are in a position to liquidate as large a percentage of their loans as the farmers in the rest of these 15 States?

Mr. Garwood. This year in North Dakota the farmers, according to a check that we have made, could have liquidated on their crop basis as well as the farmers in the South could have, on 7-cent cotton.

The CHAIRMAN. They were relieved of that payment by the action of the Governor of the State?

Mr. Garwood. Yes, sir; and I would like to make this statement, that under this resolution and this law, as long as the Governor's moratorium in North Dakota is outstanding, administratively I would not be justified in making a loan in that State this year.

Mr. Ludlow. Do we understand that in North Dakota they have not liquidated anything at all?

Mr. GARWOOD. We have collected, out of the $5,000,000 about a million and a half, but you can see from the statement the total amount of money loaned in North Dakota. The collections are just out of all proportion to the balance of the United States.

Mr. Cannon. Under the law, have you authority to exercise discretion to refuse to make loans where a farmer complies with all of the requirements of the law? Have you authority merely on the ground of this moratorium to decline to make further loans ?

Mr. GARWOOD. I take this position, that Congress has said in this act that I must get a first lien on the crop, and in appearing before the Agricultural Committee last year, I asked directly and specifically if it was intended that these loans should be collected, and their answer was that it was. Knowing that this moratorium is there, I know that I cannot collect the money, even though they make the crop and we have a first lien.

The CHAIRMAN. Are you not justified in refusing to make a loan where they have a moratorium and declare in advance that they can beat the Government out of it?

Mr. GARWOOD. That is my position, sir, that the moratorium was put in effect, after we made the loans, for the purpose of tying up collections, so I take the position administratively that I cannot carry out the provisions of the act. Therefore I cannot make any loan in North Dakota until that moratorium is rescinded.

Mr. CANNON. Unquestionably the committee would agree with you that you have that authority, and that you are warranted in taking that position.

The CHAIRMAN. Has any other State taken that action?
Mr. GARWOOD. No, sir.

Mr. CANNON. I notice that the second State in size of loans is the State of Texas, where you have made loans in excess of $4,000,000. Is that due to the large area covered in the State, or is it due to more acute conditions in that State than in adjoining territory?

Mr. Garwood. The large area covered, and due to the conditions in the Panhandle.

Mr. CANNON. It seems to be in the western part of the State.

Mr. GARWOOD. The Panhandle is the problem, but last year, after a number of years of crop failure that resulted in large outstanding wheat loans, they made a crop just about like that whole section did, and they came in and paid back 72 percent. When they make it, they pay.

Those loans are principally in the Panhandle, in the wheat area and in the eastern part.

Mr. CANNON. Is it your opinion that conditions justify a continuation of this loan program?

Mr. GARWOOD. We have about $171,000,000 out. If you notice the figures there, the large percentage of these loans in the South are less than $100. Probably 25 to 30 percent of them are under $50. There is no agency lending that small amount of money in the South, except at prohibitive cost. In the Middle West, there are practically no credit agencies. This money is put out quickly. It must be put out in about 90 days to get a crop started.

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There is no other agency that I know of that could handle it that quickly.

Mr. WOODRUM. How about the Resettlement Administration?

Mr. Garwood. Well, I cannot say as to that, except this from hearsay, that the Resettlement Administration makes a loan for the purchase of seed, fertilizer, and livestock as well as equipment, and it takes as security a first mortgage on the farmers crop and chattels. Therefore the chattel mortgage records must be searched and an investigation must be made. I would say that the best that they

I could do would be to handle an application in somewhere between 3 weeks and a month.

As to these loans, no committeeman in the United States, and we have three in each county, has ever drawn one cent from the Government. Our field men handle an average of 3,300 accounts. The reason they can do it is that no supervision of this loan is necessary. The man declares how much money he needs to start his crop, and after we make the loan there is no reason for us to contact the borrower until the crop is made. There is no supervision. It can be done quickly and economically.

Mr. CANNON. You think that this loan program serves a need that cannot be met in any other way, produces credit that cannot be secured from any other source?

Mr. Garwood. I do, due to the small amounts. In addition to that, I think that a reasonable amount appropriated will aid in salvaging part of this $171,000,000, whereas if it were cut off now, with no collateral on those loans and no incentive on their part caused by the idea that they might get another loan, the collections would just go to nothing. If you can gradually work it down, you can salvage part of the $170,000,000.

Mr. WIGGLESWORTH. The Commodity Credit Corporation does not come into this picture at all?

Mr. GARWOOD. No, sir.

Mr. CANNON. You think the salvage would be sufficient to warrant a continuation of the program, in view of the heavy percentage of loss which experience indicates you will suffer?

Mr. Garwood. Yes, sir. As long as the collections of the 1936 and prior loans exceed by a reasonable amount the annual cost of handling those loans, it is good business from that point of view.

Mr. CANNON. Are the losses taken into consideration when you say that?

Mr. Garwood. No, sir; the losses are not taken into consideration. But on these old loans we have been collecting substantial amounts in excess of the cost of handling them.

The CHAIRMAN. Do you continue to make loans to a man who is in arrears and has not paid up?

Mr. Garwood. Yes, sir; except in cases of bad faith.

The CHAIRMAN. How do you know that, if you do not have any supervision?

Mr. Garwood. We do have supervision to that extent. We know what he owes, and we know what he has made.

The CHAIRMAN. Could any of these men borrow that money, put it into their pockets and walk away?

Mr. Garwood. No, sir. Every one of these loans has been verified, and checked.

The CHAIRMAN. How much have you loaned out?
Mr. Garwood. $32,000,000 during 1937.

Mr. TABER. What would you do in a case like this: Suppose that a man had the money to pay, say in a State like North Dakota, but he did not pay, would you consider him qualified to get a loan the next year?

Mr. GARWOOD. No, sir; if we get the facts to support what you say. Mr. TABER. Do you get the facts to support these situations? Mr. GARWOOD. We do as best we can. Mr. TABER. If a man gets crops, sells them, and receives the money, what are you going to do about it? In a State where there is a moratorium, like the one that was declared in North Dakota, how can a man sell his crops when you have a lien on them, and not turn the proceeds over to you up to the amount of the lien?

Mr. GARWOOD. Well, he bootlegs them, sells them to somebody else and says that he does not have any. There are any number of ways in which that may be done.

After the crop is made, our men go to the farm and determine approximately what he has. Of course, we cannot force the farmer to sell it.

Mr. WIGGLES WORTH. Under what terms are the loans made?

Mr. Garwood. They are made to mature at the approximate time the crop will be harvested and sold, so from that time, of course, they become past due.

Mr. WIGGLESWORTH. At what rate of interest?

Mr. GARWOOD. Four percent per annum, and that in itself means about 1 percent on the amount of the loan, because the loan is ordinarily outstanding from 3 to 3 months.

Mr. Ludlow. About how long do you think this program should be continued?

Mr. Garwood. I do not know. It just depends on what other agencies do. I just do not know how long it should be continued.

Mr. Cannon. In case the program is continued, do you consider that an emergency exists or will exist under which 'legislation should be enacted in the near future, or can we wait until later in the session to act on this matter?

Mr. Garwood. You have reference to~~
Mr. CANNON. The bill which is before us here.

Mr. Garwood. I think that it should be done promptly. The longer you wait, the more money it costs. At best it will take from now to the 1st of February before this money is available.

Mr. Ludlow. Is there a dead line for receiving applications?

Mr. GARWOOD. No, sir; but there are seasonal demands. We generally stop about May 15 and later go into winter wheat. But these bills should be passed promptly, because we can then handle the applications more economically.

nomically. We also get better collections. We begin lending in the South in February, when the season starts, and in the North

Mr. CANNON. Inasmuch as one of the advantages for continuing the loan program is that it gives you better opportunities to collect what is already outstanding, you think that the prompt enactment of this legislation would benefit you in collections between now and the time when the bill is enacted?

Mr. GARWOOD. Yes, sir; because 300,000 loans must be made in about 90 days. I have a force of less than 1,500 men. The loan

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