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 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. WIGGLESWORTH. 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%1⁄2 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. 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

must be made within the 90 days. If I have the time, I can use my regular force and do the job promptly. But as we go beyond the planting season, we have to put on extra people. It takes about 3 days from the time the application and supporting documents are completed until the application is in the regional office for disbursement. If we delay, instead of receiving 15,000 applications a day, we will receive 25,000.

Mr. CANNON. When do you begin to make your earliest loans? I take it for granted that in the extreme southern part of the United States, where they are making arrangements to plant their cotton, they will begin operations in the near future, will they not?

Mr. GARWOOD. Yes, sir. If the funds were available now we would have a few applications coming in that would be cleared through the mill and the checks made ready. If this bill is passed the first disbursement will be made about February 15. That is when they need the first money.

Mr. CANNON. And that would relieve the pressure on your staff from the work which otherwise would accumulate?

Mr. GARWOOD. That is right.

Mr. LUDLOW. You said something a while ago about the bank of North Dakota. What has it done in refusing to cooperate with the Government?

Mr. GARWOOD. I had reference to a State elevator and not a State bank. In the State of North Dakota, where they hold the grain and put it into the elevators, we notify the elevators that we have a first lien. The responsible elevators, of course, cooperate with us. But this moratorium is directed to peace officers, and they under it will take no part in enforcing our lien. In the first case that came up, the farmers went down, after the grain was in the elevator in the name of the Government and the borrower, and took the grain out, and no peace officer would stop them.

Mr. CANNON. Of course, you have no jurisdiction over the soilconservation program, but, as a matter of opinion, would it not be possible, through the administration of that program, to refuse to extend its advantages to any State which declined in this way to meet its obligations?

Mr. GARWOOD. I do not know. There are a lot of legal questions there. In other words, if it were going to be done, I would like to have it apply to one particular thing, and then we would know just what we were supposed to do.

There are good people-do not misunderstand me-there are many good farmers that would pay.

Mr. CANNON. And as a matter of fact, some have paid, I think. Mr. GARWOOD. That is right, but they are told in the papers of the moratorium, and on the radio, and told to treat the Government collectors like chicken thieves. That was his statement over the radio, and then this bank of North Dakota————

Mr. WOODRUM. That was the Governor's statement?

Mr. GARWOOD. Yes, sir, and this bank (of North Dakota) sent out letters direct, as did the Governor, telling the farmers that if certain elevators would not protect them, to send the grain to this organization and they would handle it, regardless of who had the lien, and the minute the moratorium came up, our collections went down to nothing, and as long as the law is like it is, I just have to take the administrative position that I do, because under the crop loan law they would be

eligible to receive this loan again if they have the land and the farmer cannot get credit arywhere else, and shows us that. Of course, we cannot get a first lien with this moratorium.

Mr. LUDLOW. The law contemplates a reciprocal obligation on the part of the borrower?

Mr. GARWOOD. Yes, and I cannot make a loan while the moratorium is in effect. All that they have to do is to remove the moratorium.

Mr. WOODRUM. Have you a statement here showing the breakdown with respect to the money that is in arrears?

Mr. GARWOOD. Yes, sir.

Mr. WOODRUM. Does that show the number of loans in each State that are in arrears?

Mr. GARWOOD. Yes, sir. It shows as to every State the total amount, and the total collected.

Mr. WIGGLESWORTH. In that connection, you have also furnished us a break-down by periods?

Mr. GARWOOD. Yes, sir.

Mr. WIGGLESWORTH. And I understood you to urge a continuation of this policy so long as the amount required for administration is less than the amount that we are able to collect from these outstanding delinquencies?

Mr. GARWOOD. Well, I say that, just as good business, whatever we gain over and above the cost of operation in my opinion is just that much salvage.

Mr. WIGGLESWORTH. The point that I have in mind is this, that if I understand your break-down correctly, in respect to the year 1936 we are practically $4,000,000 delinquent, and for the year 1937, we are $17,500,000 delinquent, or 53.6 percent for the past calendar

year.

Should we not take into consideration those losses, those delinquencies, as well as the administrative cost of the operation?

Mr. GARWOOD. Yes, sir. As to the $17,000,000 in 1937, not all of that is due, because part of that is on wheat that carries over. Mr. TABER. The crop was put in in the fall?

Mr. GARWOOD. Yes.

Mr. TABER. And it does not come in until June or July.

Mr. GARWOOD. That is right.

Mr. LUDLOW. Do you have complete cooperation in all of the other States?

Mr. GARWOOD. Yes, sir; of the very best. Our weakness is in the drought States, but they have cooperated.

Mr. LUDLOW. They have done the best that they could?

Mr. GARWOOD. Yes, sir.

The CHAIRMAN. They do not deliberately repudiate their obligations?

Mr. GARWOOD. No, sir.

Mr. CANNON. In that connection, these graphs which you have submitted to us here seem to indicate that certain territories have received unusually large crop and seed loans as of October 1, 1937, as is the case in connection with the emergency crop and seed loans made and collected from 1921 to 1936, inclusive. I see very little difference there, if any.

Incidentally, what is the significance of this line drawn at 100?

Mr. GARWOOD. That is the one hundredth meridian.

Mr. CANNON. As a matter of fact, the division in all four of these graphs seems to be identical. There may be a very slight variation in the State of Texas, but too small to be noticeable.

Mr. GARWOOD. A higher percentage of loans in 1936 and prior was made in the white territory, which is the South. Then there was a change and a higher percentage of the total amount loaned went into the blue area, and the South's percentage decreased. As to the drought feed loans, if you take the figures at the top of each, you will see where the percentage shifted, and if you take the table showing loans from 1921 to 1936, the amount loaned in the so-called white territory was 51 percent of the total, and in the blue, only 36. If you go to 1937 you see the blue having 51 percent of the loans, and a smaller percentage was made in the South. That was due to better conditions.

Mr. CANNON. On the crop and seed loans in the continental United States, as of October 31, 1937, Montana, Wyoming, Colorado, New Mexico, North Dakota, South Dakota, Nebraska, Kansas, and half of Oklahoma and Texas, received more than half of the entire amount loaned, that is, 51.2 percent.

Mr. GARWOOD. Yes, sir.

Mr. CANNON. And the conditions this year, that is, as of October 31, 1937, are more nearly normal throughout the United States than they have been for the last 3 years, and perhaps further back than that, as to crops made. Is it the situation that an extreme drought in 2 years, and extreme rain in the intervening year, brought about the biggest crop failure in that region?

Mr. GARWOOD. Prior to this past year.

Mr. CANNON. And this last year was normal?

Mr. GARWOOD. Yes, sir.

Mr. CANNON. How do you account for the fact that within that territory marked off in blue, in seven States and half of two other States, it would have been necessary to loan more than half the money loaned for this purpose in the United States?

Mr. GARWOOD. Because of the conditions, there is no other credit available.

Mr. CANNON. Then that is due to credit conditions, rather than crop conditions?

Mr. GARWOOD. Yes, brought about by crop conditions. I would say this, that although the amount is greater, the number of loans would probably be as great or greater in the South, because the average is $70 per loan, if I remember correctly. It takes more money for wheat farmers than it does to take care of the small borrower in the South. Getting back to North Dakota, there is a law in the State of North Dakota, as I understand it, that no agency can take a mortgage in the State except the Government agencies; no one else can get a mortgage under their crop laws, so that that throws everything into the crop loan, because under the law, on the face of it, the man says that he cannot get credit, and he is right.

Mr. CANNON. The 51.2 percent is the amount loaned, and I see that you have here in North Dakota not only the largest amount loaned in any State, but you have largest-sized loans.

The average is $205.74.

Mr. GARWOOD. Yes, sir.