Mr. CANNON. In view of the fact that the Government has lost millions in these transactions; and the further fact that the producers who took advantage of the Government's proposition made a very material profit; and in view of the fact that the Government is under no legal obligation to spend further money in this way; taking into consideration the fact that neither the House nor the House Committee on Agriculture approved this proposition, isn't it asking a good deal to request payment of certificates that are worthless? Did the Department report on the legislation for this purpose at any time?

Mr. TAPP. Mr. Chairman, the Department originally recommended against this legislation.

Mr. CANNON. And the committee recommended against it, too. Mr. TAPP. The House committee?

Mr. CANNON. Yes.

Mr. TAPP. The House Agricultural Committee simply took no action on it.

Mr. CANNON. Suppose you include in the record at this point excerpts both from the report of the committee and the statement by the Department, including the recommendation that they made with reference to this proposal.

Mr. TAPP. The House committee, if I understand the record, Mr. Chairman, did not go on record with reference to this item. They simply did not include it in their draft of the bill. But it was included in the conference report.

Mr. CANNON. That is sufficient. Suppose you include the statement of the Secretary, also.

Mr. TAPP. Also they had previously failed to report out this bill as a separate bill, which passed the Senate last June.

Mr. TABER. Could you give us the date of the Department's recommendation and by what officer it was signed, and quote sufficient from it to give us the substance of it, for the record?

Mr. TAPP. The first recommendation by the Department was on June 8, 1937, signed by the Acting Secretary, Mr. Wilson, which stated in part as follows:

As has been indicated, there has been advanced to the pool, and the pool in turn has advanced to its members, or holds in reserve to be advanced, the sum of $559,626.24 in excess of the credits to which the pool is entitled from the sale of its interest in the cotton acquired by the Secretary. The balance of $1,803,391.78, which was left in the cotton account of the Secretary of Agriculture after all obligations incurred by the Secretary of Agriculture in connection with the cotton operation and all obligations of the pool had been discharged or provided for, accrues from sources in which the pool is not interested. In accordance with the provisions of section 4 (f) of the Agricultural Adjustment Act, as amended, $1,300,000 of this balance already has been covered into the Treasury of the United States as miscellaneous receipts. In connection with the transfer of this sum to the Treasury of the United States, it was determined that no part of this sum was obligated to members of the pool. In view of the facts set forth, the Department cannot approve the legislation proposed in this bill.

The letter goes on to state that in view of these circumstances, we recommend against the legislation.

On December 1 the Secretary addressed a letter to Senators McGill and Pope with reference to the farm bill which was under consideration in the Senate. On page 9 of that letter he said:

Attention is also directed to title IX of the bill. This is almost identical with similar legislation on which this Department made an unfavorable report

to the Senate Committee on Agriculture and Forestry on June 8, 1937. In that report, it was pointed out that the obligations of the cotton producers' pool have been discharged and that the remaining balance of funds of approximately $1,800,000 accrued from sources in which the producer members of the cotton pool were not interested. Available information also indicates that speculators have purchased some of these certificates from many of the original producer members of the cotton pool at prices ranging down to 40 cents per bale. The proposed legislation would have the effect of redeeming certificates now in the hands of such speculators on the basis of $1 per bale.

Since that particular statement was made a new provision was inserted to deal with that speculative angle providing that certificates which have been transferred should be redeemed at cost plus 4 percent interest, but in no event at more than $1 per bale.

Mr. TABER. Where does that appear?

Mr. TAPP. In section 407 of title IV of the new farm bill.

Mr. TABER. How much of that stuff is in the hands of speculators? Mr. LAMKIN. As soon as we can check the transfers in the Comptroller's Office on the C-5-I certificates we will know, but the amount is slight, something like 40,000 bales, a very small amount.

Mr. TABER. That is about 10 percent of the total amount?

Mr. LAMKIN. It would not be 10 percent. There is a total of 1,951,000 bales.

Mr. TABER. Four hundred and forty-three thousand out of how many producers involved?

Mr. LAMKIN. There were only about 8,000 producers involved. Mr. TABER. How many of these holders of these C-5-I certificates are there now?

Mr. PEYTON. Transferees?

Mr. TABER. Yes; current holders.

Mr. LAMKIN. I can get that information for you.

Mr. PEYTON. There are approximately 310,000.

Mr. TABER. Three hundred and ten thousand?

Mr. PEYTON. Yes, sir.

Mr. TABER. What is the largest item involved amongst that 310,000? Mr. LAMKIN. There were one or two that might go to 2,000 or 2,500 bales, but most of these certificates were for small amounts. Mr. TABER. How many would you say went to 2,000 or to 2,500? Mr. LAMKIN. I would say there were only two or three. The average will be less than four bales to the producer.

Mr. TABER. It would be more than that. It would be over six, because there are 310,000, and 1,800,000 bales; it would be six.

Mr. LAMKIN. There were C-5-I certificates, and there were some C-5-D's not exercised, and that amounts to about 1,609,000 bales. Mr. TABER. You have a few of these 2,000 and 2,500. How many would you think there were over 2,000?

Mr. LAMKIN. I would not think over two or three of them would run that high.

Mr. TABER. How much would you say were over 1,000?

Mr. LAMKIN. That is purely guesswork; I do not know.
Mr. TABER. Can you give that to us for the record?

Mr. LAMKIN. No, not accurately. It would only be a guess. I would not know.

Mr. TABER. You would not know?

Mr. LAMKIN. We can only do it by a complete check of the records.

Mr. CANNON. Can you give us a break-down of this $1,800,000; that is, how much is for administrative expenses, and what the other items are?

Mr. LAMKIN. We estimate the administrative expenses will run between $75,000 and $100,000.

Mr. CANNON. Suppose you include in your testimony a break-down of that.

Mr. TAPP. Yes, sir; we can do that.

(The break-down referred to is as follows:)

Break-down of expenditure of $1,800,000

Outstanding C-5-I certificates, 1,596,702 bales; outstanding C-5-D
certificates, 12,485 bales; total, 1,609,187 bales at $1.
Estimate of administrative expense_-

Total-----

$1,609, 187

100, 000 1, 709, 187

The CHAIRMAN. There are a lot of small fellows that would only get a bale or two bales or three bales, are there not?

Mr. LAMKIN. Yes, sir; some of them will have less than a bale. The CHAIRMAN. About how many of them would have less than a bale?

Mr. LAMKIN. A great number. I would say that probably 75,000 would have less than one bale.

Mr. MCMILLAN. I want to get a little information on that. This $1,800,000 that you are asking for is going to be available if the committee allows it to redeem these outstanding certificates; is that right? Mr. LAMKIN. Yes, sir; that is right, at $1 per bale.

Mr. MCMILLAN. And those certificates are owned by farmers, as I understand it, who now have received on an average of $162 plus; is that correct?

Mr. PEYTON. Yes; that is on the basis of 10 acres with a yield of 150 pounds of lint cotton per acre.

Mr. MCMILLAN. That is on the basis of 10 acres?

Mr. PEYTON. Yes, sir.

Mr. LAMKIN. However, that might not apply as a general proposition.

Mr. MCMILLAN. If this appropriation were allowed, it would mean about $1 additional per bale for this group of farmers who have participated in this program?

Mr. LAMKIN. Yes; that would be the original producers who held these certificates.

Mr. MCMILLAN. What is going to happen, in your judgment, if this money is allowed, to this group of farmers who went out here and participated in this program on a cash basis, and then received only $110?

Mr. BACON. Yes; on the basis of 10 acres.

Mr. MCMILLAN. Yes; on the basis of 10 acres. What then will be their claim if this committee allows this appropriation, what will be that group's claim, if any, on Congress for the difference between $110 on a 10-acre basis, as against $165 for this group?

Mr. PEYTON. That was a question of their own choice.

Mr. MCMILLAN. Well, assuming they had that option, that is true, but if they took their option of $110 on 10 acres of cotton, will they have any claim now against the Government for this difference?

Mr. BACON. There is no legal claim, but there might be a political claim.

Mr. TABER. How many were there who took the straight $11 an acre, or $110 for 10 acres, as compared with the 443,000 original participants in this speculative proposition?

Mr. TAPP. I will supply the exact figures for the record. My estimate is it would be about twice as many took the cash option. Mr. TABER. Probably 800,000 or 900,000?

Mr. TAPP. Yes.

Mr. TABER. So that we might be asked to pay $55 to every one of the 900,000, if we paid the others at the rate of $1 a bale.

Mr. MCMILLAN. That is what concerns me, because it seems to me if this is going to be based on a gratuity, why, then, the $110 class would have just as much right to come in here and file a claim and insist that Congress recognize their position as much as the others. Mr. TAPP. My estimate was not very good, Mr. Taber. It is about 580,000 other producers.

Mr. TABER. You gave 443,000 the other time.

Mr. TAPP. Those went into the pool.

Mr. TABER. And 560,000?

Mr. TAPP. There would be 574,000 that did not get an option contract.

Mr. BACON. In other words it would be on the ratio of about 5 to 4. Mr. CANNON. I asked you just now for a break-down of the $1,800,000. As I recall it, according to the testimony, this was profit. You stated just now that you had a loss of $450,000. How do you harmonize those two statements?

Mr. TAPP. You are dealing with two accounts, Mr. Chairman. The profit of $1,800,000 was in the Secretary's account, and the loss is in the pool account. The pool members had an interest in 500-pound bales of 8-inch middling cotton and after deducting expenses they received $452,000 in addition to the net sales value of those 500-pound bales. Now, by reason of the fact that some of those bales had more than 500 pounds in them, some of them sold for a premium, and the liquidation of the cotton account which was carried by the Secretary shows a profit of $1,800,000, whereas, as I say, the pool has paid out some $452,000 more than the liquidation of its particular bales of

cotton.

Mr. TAPP. The net on this particular basis would be the $1,800,000 as the pool deficit has already been taken out of the Secretary's

account.

Mr. TABER. Who paid the expenses of operating the pool?

Mr. LAMKIN. It was on the producers to pay the expense.

Mr. TABER. Who operated the pool; who paid the expenses of operating the pool and selling the cotton?

Mr. LAMKIN. The expenses were paid by and out of advances made by the Secretary to them, and all of the pool cotton that was sold, the proceeds were turned in to the Secretary.

Mr. TABER. Were not the producers who went into the pool charged with a part of that expense, or was that all paid by the Government?

Mr. LAMKIN. No, sir; they were charged with all of it.
Mr. TABER. They were charged with all of it?

54534-38-3

Mr. LAMKIN. Yes, sir.

Mr. TABER. Of these 574,000 who did not go into the pool, if they had gone in how many bales would they have been entitled to?

Mr. LAMKIN. I think the figures there are a little confused. There were 1,031,000 participants in the 1933 cotton program.

Mr. TABER. Yes.

Mr. LAMKIN. Yes; in that program. Of that number there were 456,000 that took all cash.

Mr. TABER. I thought it was 574,000?

Mr. LAMKIN. 575,000 took cotton option contracts.

Mr. TABER. How many of them took the cash option?

Mr. LAMKIN. 575,000 took the option contracts.

Mr. TABER. I thought you said 443,000 before.

Mr. TAPP. Those are the ones that went into the pool. All of them did not go into the pool.

Mr. LAMKIN. Of that number 575,000 took options. There were 132,000 that sold their options by direct sale, and the contracts were canceled. 443,000 of that number went into the pool and took the 4-cent distribution in the first instance, and later got a second distribution of $7.60 per bale.

Mr. TABER. Now, how many were there that did not go into the pool at all?

Mr. LAMKIN. That did not go into the pool at all, out of those that took options?

Mr. TABER. No; that did not take any options at all.

Mr. LAMKIN. 456,000.

The CHAIRMAN. You mean that did not plow under at all.

Mr. TABER. No; I mean that plowed under and got $110 for 10

acres.

Mr. LAMKIN. That took the total in cash? Mr. TABER. Yes; that took the $11 an acre. is it not?

That is what it figures,

Mr. LAMKIN. It is owing to the productivity of the land as to what the price per acre was.

Mr. TABER. How many of them took straight cash and no option? Mr. LAMKIN. Four hundred and fifty-six thousand of them.

Mr. TABER. How many bales would they have been entitled to if they had taken options?

Mr. LAMKIN. It all depends on what the land produced. Some of the land is more productive than other land.

Mr. TAPP. Figured at about the same average, Mr. Taber?

Mr. TABER. Yes.

Mr. LAMKIN. Let us see what the average figure would be in there. Say about four bales to the person, and that will get you pretty close to it.

Mr. TABER. About four bales to a person?

Mr. LAMKIN. Yes, sir; about four bales to a person.

Mr. TABER. That would mean about 1,800,000 bales?

Mr. LAMKIN. Yes.

Mr. TABER. If they were placed on a parity basis it would take 600.000 times $55, to put them on a parity basis with these people who went into the pool, 600,000 times $55 would be $33.000.000. Mr. TAPP. Yes, sir: $33,000,000.