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them was still held by the farmers to whom the original certificates were issued.

The CHAIRMAN. Was that 12 percent of the number of certificates, or in amount !

Senator BANKHEAD. Twelve percent in amount.
Mr. Taber. What percentage in number, would you say?
Senator BANKHEAD. I do not know.
Mr. TABER. Twenty-five percent?

Senator BANKHEAD. I doubt that, because I think probably 12 percent in amount would be about the same percentage in number.

Mr. Taber. Would it not be around 25 percent? Mr. Johnson. Mr. Peyton was in the office the other day and I asked him that question, and he said four-fifths of all of the certificates have still not been transferred. Less than one-fifth of them have been transferred.

Mr. TABER. As I remember it, the number of original participants in this pool was something like 456,000, and the number remaining is approximately 307,000, from the testimony this morning, indicating that about 30 percent have been transferred.

Senator BANKHEAD. You mean the number of certificate holders?
Mr. TABER. Yes; it has been reduced by about 30 percent.
Senator BANKHEAD. I never got the number of holders. I got the
amount from the Department.

In fact, I never attached any importance to the question as to whether anybody was buying them at a profit or not. If they wanted some of them, it was all right, but, at any rate, it developed that only 12 percent in amount could possibly have gone into what you might call speculative channels. From what I heard very few of them were actually transferred except to creditors in payment of obligations. They did not know whether they were speculative or not. They just knew they had been transferred. At any rate we provide in the bill for the prevention of any speculative profit. You will note it in this bill. You will find it is provided that the transferees can recover only the amount they actually paid for it plus 4-percent interest. In order to collect the transferee must file a paper showing the amount he paid for it, and he cannot get any more than that plus t-percent interest from the date of his purchase and the payment is limited, of course, to $1 a bale, because that is the only amount of money available.

The bill passed the Senate. It was never acted on by the House. I do not know whether the House committee reported on it or not. They held hearings on it an debated the question in the Senate when the matter came up on the passage of the farm bill. We had quite a discussion, and it again passed the Senate. Mr. Oscar Johnston testified, and I tried to get his testimony.

Senator Smith. Here is a verbatim copy of the testimony of Mr.
Oscar Johnston before the committee, and here is what he said.
Mr. TABER. Who is Mr. Oscar Johnston ?
Senator Smith. He was manager of the pool.
Mr. WIGGLESWORTH. What does he do in private life?

Senator SMITH. He is a cotton farmer and he is in charge of that 40,000-acre tract for a British syndicate down in the Mississippi Delta.

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Senator BANKHEAD. Twenty-thousand acres is in cotton. He has a 40-000-acre farm.

Mr. WIGGLESWORTH. He has had that position for years?

Senator SMITH. Yes. He was appointed by the administration here as manager of the pool. Now, here is what he said:

My personal opinion, as manager of the pool and as a lawyer, is that when this pool is liquidated, every dime over and above the amounts required to pay the Treasury of the United States the amount advanced and to pay operating costs is entitled to be distributed to the participating trust-certificate holders.

Mr. TABER. Was there not a loss of $443,000 on the liquidation of that pool?

Senator SMITH. No, after it was all liquidated, after the pool that we are talking about was liquidated, there was $1,800,000.

Mr. TABER. The Department gave us to understand that there was a loss of $443,000 to the Government on the pool.

Senator Smith. Where did they get that $1,800,000? Mr. TABER. Out of another budget. Mr. Bacon. They made $1,800,000 on some other transaction. Senator SMITH. No, this account was all merged in the pool, the whole thing was covered into the pool, and Mr. Johnston was made the manager.

Now, as far as the pool account was concerned, it was merged under Mr. Johnston, and first there was a 10 cent loan, then it was raised to 12 and then to 15. When the whole thing was liquidated under Oscar Johnston there was a profit of $1,800,000.

As to the certificate holders, the certificates were made negotiable. If a farmer needed money, he would go to a bank and he might sell the certificate. Nobody knew how much was coming to them, and some of them paid as high as $3 and some of them got them at less, but there still remains $1,800,000 due to these farmers and to those that accommodated them.

An honest transaction is an honest transaction, and if we, as a Federal body authorize a thing to be made a negotiable transaction as between the certificate holder and the man that wants to purchase it, it should be honored.

The CHAIRMAN. Are they negotiable in the general sense that they can be transferred to anybody?

Senator SMITH. Yes, to anybody.
The CHAIRMAN. They are not merely assignable to some person?

Senator SMITH. No, sir; they are negotiable. Get one of the certificates and read it. Unfortunately I happen to have some of them, or did have a very few of them, not to amount to more than $100, perhaps. What we are contending is that since it has passed the House and passed the Senate and every honest man says that this money does not belong to the Government, it belongs to the people who furnished the stock out of which this profit was made, the Treasury is no more entitled to it than it is entitled to the money that is in my pocket. All that we are asking this body is that since the Budget has provided for it, and since the House has passed it, and since the Senate has passed it, that it be returned to these people.

Mr. Johnson. Mr. Johnston and the President recommended payment of it.

Senator SMITH. Why, certainly. Here is Mr. Oscar Johnston, the man who managed it, who testified that it belonged, every penny, to the participating holders of the certificates.

The CHAIRMAN. I think what Mr. Taber was getting at was whether or not in this legislation which we had which was designed to protect the cotton there was not an enormous loss some place. I do not know where it was.

Senator BANKHEAD. That is still in the cotton that they have still got.

Mr. TABER. That is another thing.
The CHAIRMAN. That has nothing to do with this.

Senator SMITH. Nothing, no more than you have got with how many teeth are in a hand saw.

Mr. WIGGLESWORTH. From where did this cotton come!

Senator SMITH. It was cotton that the farmers had up on the 10-cent loan that was made years prior.

Mr. JOHNSTON. They permitted the farmers that wanted to go into this pool to get a 6-cent advance. They got a 6-cent advance. They could either take a straight 4 cents and surrender their certificates, or if they wanted to take a chance on a profit, they issued them these certificates. They made more than the fellows who took a chance on it, because they got more money out of it. Even with the payment of this additional dollar a bale the farmers that took a chance on it will receive less than those who took the full cash payment.

Senator BANKHEAD. They paid the farmers who did not take these certificates 4 cents a pound.

The CHAIRMAN. The object of this legislation was to prevent a glutting of the market.

Senator SMITH. That is right.

Mr. Johnson. It was to prevent glutting the market, and this pool handled the cotton for the farmers instead of the farmers selling it.

Senator SMITH. I happen to be the author of title I. The Government had this cotton on hand. They said: “We will sell you 25 or 30 bales of cotton at 6 cents a pound, if you will obligate yourself not to duplicate it in your current crop. In other words, if you cut that

crop down to 20 bales and take 20 or 30 of these bales here." The CHAIRMAN. If they called it a gamble, it was one that the Government authorized ?

Senator Smith. It was, pure and simple.
Mr. TABER. This was a Government lottery.

Senator Smith. Yes; a Government lottery, and now somebody is trying to reneig

Mr. TABER. And the farmers who went into this lottery made a profit of 5.28 cents per pound. They did receive that amount additional.

Senator SMITH. No; the others did. The holders that took the cash did. The farmers were given the option of settling at that time for $20 a bale and taking a chance on whatever profit was made on the balance. So, a lot of them in the pool said just give me 4 cents a pound and take the account. Now, the balance of them held on to the participating certificates and still have them.

Mr. TABER. How many of them held on to the participating certificates?

Senator BANKHEAD. 1,800,000, or at least holding that many bales. Mr. JOHNSON. This statement was given me by Mr. G. P. Peyton, who is director down there, and he says the C-5i certificates now outstanding represent 1,610.637 bales of cotton. There are approxi

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mately 340,000 outstanding certificate holders of C-5i certificates.
In other words, there are about 1,600,000 bales held by 343,000 different
people. There was of record as of May 1, 1937, approximately 8,000
assignees of C-5i certificates, representing about 43,000 bales. If
they had not been transferred and recorded in the office of the pool
here in Washington prior to May 31, 1937, the money will go to the
original parties who transferred before May 1, 1937.

Mr. Ludlow. You feel that there is a moral responsibility to
Senator BANKIEAD. Yes.
Mr. Ludlow. There is no legal responsibility ?

Senator BANKHEAD. Yes; there is a legal responsibility. They went into this with the understanding that they would share in the profits, and these are the profits resulting from the transaction.

Mr. Ludlow. They are legally entitled to it?
Senator BANKHEAD. Yes; they are.

Senator Smith. Both from a moral and a legal point of view it is their money, and I think it is just that it should be paid.

Senator BANKHEAD. The farmers own those certificates in my State.
Mr. JOHNSON. Yes; it is their money; that is the proposition.

Senator BANKHEAD. In conclusion I had assumed when Congress settled this thing it would be paid.

The CHAIRMAN. Why was it that the Committee on Agriculture turned it down?

Senator BANKHEAD. They did not turn it down.
The CHAIRMAN. I understood they did.

Mr. JOHNSON. Senator Bankhead introduced it in the Senate, and I introduced the same bill in the House. We had a hearing on our bill last session and they never did take any action on it. They declined to act on it because they had other legislation that was so pressing that they had to act on it. They did not act on this at all. Then they put that in title IV of the farm bill, the same as in the bill that Senator Bankhead introduced and I introduced in the House, and this title IV of the farm bill was passed by both bodies.

The CHAIRMAN. It was in the Senate bill and it was agreed to in conference.

Senator BANKHEAD. I was a member of the conference committee, and we had no controversy about it in conference.

Senator SMITH. Not a particle.

Senator BANKHEAD. Mr. Jones was in accord with it. They never resisted it at all. After they had hearings on it before the House committee we had no contest about it. It was unanimously agreed to.

The CHAIRMAN. Do you want to ask these gentlemen any questions!

Mr. TABER. I have no more questions.
The CHAIRMAN. Mr. Bacon?
Mr. Bacon. I have no more questions.
Senator Smith. I just want to state here that I was surprised when
I heard there was some objection to this.

Senator BANKHEAD. I had nothing to do, and I know the Senator did not, with stirring up this Budget bill. It came up here evidently as the result of an application from the Department. I did not know it existed until I was advised that the President sent up a recommendation that this amount be paid.

The CHAIRMAN. Do you desire to say anything. Mr. Johnson?



Mr. Johnson. I do not know that I can add anything to what has been said by Senator Bankhead and Senator Smith except to say that I have had considerable to do with this matter for the last year. I have had numerous interviews with the Department, and talked to them about the facts, and I know from correspondence that I have had with these holders of certificates that they feel that they are entitled to payment. I think that the Government is legally obligated to pay the amount of the profit that was made to these farmers who went into this pool under the terms that were prescribed by the Government. I do not think there should be any question about the legality of it as well as the moral obligation involved. Many farmers in my district are holders of these certificates and should be paid. The act was framed to protect against speculators acquiring them, and Congress having passed it, both the Senate and the House having passed it, the Conference Committee and the Budget having said it was not in conflict with the policy of the administration, and the President having approved, I think ́this committee would be acting very unwisely to turn down the proposition after it had been passed in that shape, and I think the facts justify it.

Senator Smith. God knows, if anybody needs it, it is these poor derils on the cotton farms.

Mr. Johnson. It will only be a dollar a bale to these farmers. If the committee needs further facts or information from the proponents of the legislation we would be pleased to go more fully into it, but I take it that our case is made out. Our position is that this $1,800,000 is profit from the pool operations and the farmers who accept these certificates did so with assurance from the Government that they would share in the profits, and they are therefore entitled

to this money.


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