I thought it would be difficult to get so many together, in the first place; and then, in the next place, I thought it would be unwieldy; but Mr. Lubin's idea, which I think turned out to be a good one, was that the purpose would be to educate two capable men in each State, and when they saw these systems in operation and observed what was going on they would be able to come back home and tell their people about those systems and keep up the work in that way throughout the various States.

We took the matter up with the National Grange and the Farmers' Union and other agricultural organizations, and they approved the plan. We then also suggested provisions in the platforms of the various political parties as they met, the Republican convention at Chicago and the Progressive convention at Chicago, and then we went to the Democratic convention at Baltimore; and planks were written in the platforms of the parties favoring this plan for investigating this subject in those European countries where agricultural finance has obtained a high development, and has wrought great benefits to the people of those countries, and to agriculture in particular.

We also took the matter up with the governors of the various States, and they were in accord with the idea. We prepared bills for the legislatures that met after our convention. Some of the States did not have their legislatures meet before the commission had to go, but other States did.

We figured out that it would cost $1,200 for each delegate. And we had various applications by people who wanted to go on the trip and enjoy the privileges and that sort of thing accorded the commission, but we wanted men who were seriously bent on working out an adaptation, if possible, of those systems to conditions in this country.

And so we were not looking for men who were willing to pay their own expenses, but we wanted the States to furnish the money, or organizations, farmers' unions, and societies of that kind, so as to identify these men with the work, and have them feel that they were responsible to these States and to the people of their States, and have them go with a determination to accomplish results.

Some of the States passed special laws-California, Oregon, and Washington. I think Ohio appropriated $2,400 for two delegates. Some of the governors had funds in contingent accounts which they could employ and have provided means in that way. Other delegates raised the necessary money through the farmers' organizations, commercial bodies, and the like.

So that on the 26th of April last the representatives, including two delegates from each of 35 States, left New York. I may say that in the meantime certain Canadian Provinces had applied for permission to join us, and we had delegates from five Canadian Provinces as members of the commission, and they sailed from New York on the 26th of April, 1913, and went direct to Rome, Italy, where they were received by the King and Queen.

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And in the meantime Mr. Lubin had arranged with the delegates

Mr. HAYES (interposing). The International Institute of Agriculture? Senator FLETCHER. Yes, the International Institute of Agriculture, which is participated in by 53 nations, by the way. Delegates from

these various countries had outlined a program and made arrangements in advance for this commission.

In the meantime, there was an amendment put on the agricultural appropriation bill, which was approved March 4, 1913, which provided for a commission of seven to be appointed by the President, to cooperate with this American commission being assembled by the Southern Commercial Congress in this study. And that commission was appointed, and five of the members of the commission joined the American commission in New York, and sailed with them, and cooperated with them throughout the investigation.

Two members of the United States commission, Senator Gore and myself, were unable to go on account of the tariff bill and other matters pending, and the five remaining members of that commission, consisting of Representative Moss, Dr. J. L. Coulter, Dr. Kenvon L. Butterfield, Mr. Harvie Jordan, and Dr. Clarence J. Owens, represented the United States commission and, as I say, cooperated with the American commission in that investigation.

Senator HOLLIS. Senator Fletcher, I understand that it is a fact your interest in the subject of rural credits arises largely from the fact that you are a member of the Committee on Agriculture and Forestry of the Senate?

Senator FLETCHER. NO.

Senator HOLLIS. You say it was not on account of

your connection with that committee that you were particularly interested in the subject?

Senator FLETCHER. No; it was largely because of this movement which originated, as I have stated, with the Southern Commerical Congress, of which I am president. I am not a member of the Committee on Agriculture and Forestry.

Senator HOLLIS. I thought you were.

Senator FLETCHER. No; I was, however, elected by the American commission chairman of that commission, and also elected by the United States commission chairman of that commission. Senator HOLLIS. Yes.

Senator FLETCHER. So that, as chairman of both commissions, I have been pretty closely identified with the movement. And we received reports here in Washington constantly, while the commission was pursuing its investigation. Every week we would have letters from the members of the commissions in Europe, and we kept up with them pretty well in that way. And since then the commissions have joined in a report which is found in Senate Document 214, setting forth these various systems as they found them in operation in some 14 European countries.

That report is not entirely complete. There are other matters to be submitted by the commission which will form part 2 of that report. And then the report of the United States commission is found in Senate Document 380, which sets forth our conclusions in regard to long-term land mortgage credit; and also there is attached to that report the suggested bill which we have submitted, both in the Senate and in the House; and the United States commission is now at work on the other part of the problem, the short-term or personal credit phase.

Senator HOLLIS. Senator Fletcher, you have introduced Senate bill 2909, entitled "A bill to provide for the establishment, operation,

management, and control of a national rural-banking system in the United States, and for other purposes"?

Senator FLETCHER. Yes.

Senator HOLLIS. Will you please tell the committee how you came to prepare that bill, Senator Fletcher, and all about it?

Senator FLETCHER. That bill was introduced in August, as I recall.

Senator HOLLIS. It was introduced August 9, 1913, was it not? Senator FLETCHER. Yes, sir; and as I stated at the time, of course I have been at work on the matter quite actively ever since the commission sailed. We had some other material before that; for instance, Mr. Cahill's report, which is made a Senate document, and which gave me considerable data to work on in that connection. I got information and assistance from every source I could from the farmer's standpoint. I knew something of the farmer's problems from personal experience and observation.

Mr. HAYES. Excuse me, Senator Fletcher, but what is the number of the Cahill report?

Senator FLETCHER. The Cahill report is Senate Document No. 17. This is it [indicating].

And I had been studying the subject, with the help of that report and other documents; and I introduced this bill as I said, at the time, not as the final word on the subject, but in order to keep the subject before Congress and before the country as far as possible and as being my first impressions regarding the subject.

Of course that bill is still pending; and it differs from the bill as finally reported by the commission, in some material respects.

For instance, it provided for the organization of local banks in communities by farmers, and then the organization by local banks of a State central bank; and the organization of the United States central bank, through these State central banks, and the final issuing of the bonds by the United States central bank.

My impression at that time was that that would standardize the farm-land bonds and secure a lower rate of interest and a wider market, not only in this country, but abroad, and that the objection to central banks as commercial institutions would scarcely obtain, in my view, in the case of a central bank of this kind.

But the commission dealing with the matter thought we ought to get away from the central bank proposition, so that the present bill as reported varies in that respect from the first bill.

Senator HOLLIS. Pardon me, Senator Fletcher, but the second bill that you referred to was introduced in the Senate January 29, 1914, and is Senate bill 4246, and the title of it is "A bill to provide for the establishment, operation, and supervision of a national farmland bank system in the United States of America, for the creation of depositories for postal savings and other public funds, and for other purposes." Is that not correct?

Senator FLETCHER. Yes. Another idea, I might say, which I had in introducing S. 2909 was that I felt it important to impress as far as I could on the Senate, and also on the House, what seemed to me a fundamental idea that ought to be considered in connection with the then pending Federal reserve act. A certain effort was being made, as you will recall, to extend the provisions of that act so as to meet the needs of the farmer, and in studying this subject I became

thoroughly convinced that it is utterly impossible to provide in a commercial banking system for the requirements of those engaged in agriculture.

Mr. HAYES. Do you not think it would be unsafe to try to do so? Senator FLETCHER. Absolutely. And I was a little afraid that we were going to try to go too far in the then pending measure in that direction, realizing, as of course all Congress did, the importance of making these provisions as far as possible to meet the needs of agriculture; yet it seemed to me that some of them were losing sight of the principle that commercial banks can not possibly have their funds tied up in long-term loans or provide for such accommodations in a financial way as the farmer ought to have.

And for that reason I wanted to get that idea as far as possible before Congress. I wanted to make as broad and liberal provisions as could be safely made for agriculture, but I felt we needed plemental system to take us all the way.

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Now, perhaps in this matter we should have a starting point and gradually lead up to what we have done.

The act of 1864, establishing our banking system, was based on the Ohio statute, and it provided for a commercial system. It was never intended to be and is not capable of being made to meet the needs of the farmer.

In the second place, it discriminated against him by prohibiting loans on real-estate security. The effect was to place a ban on real estate as a basis of credit. This being the farmer's chief asset, the system absolutely discriminated against him in its operation.

The result has been that the farmer has been obliged to depend upon the factor, the merchant, and the money lender to obtain what accommodations he required, and to make the best financial arrangements that he could; with the further result that high prices were charged him, enormous profits were made at his expense, and burdensome interest charges and exactions were put upon him; and with the result, further, that his earnings were largely consumed in that way. His net returns were small, and with no prospect of growing larger.

Discouragement faced every young man growing up on the farm; hard work and the most meager remuneration were in store for him. It was impossible to improve rural conditions; there was no money to do it with. No wonder occupying owners decreased in number and tenants increased, and a steady flow set in to the cities and towns. The greatest and most important industry of the country, the one upon which we all depend for our food, clothing, and shelter, was not merely neglected and left unprovided for, as far as our financial system was concerned, but was given a severe blow and discriminated against.

Strange to say, this has been continued all these years until the good year 1913, and until the passage of that great measure, to my mind unsurpassed in importance and benefits to the country by any law put on the statute books since the War between the States-the Federal reserve act.

Now, there is no longer that ban on real estate as to loans by national banks. Now the farmers have some opportunity to get personal accommodations in the way the nature of his business calls for. To be sure, this is limited. No commercial system can be

made to meet the requirements of agriculture. The commercial bank must be ready to respond to all of its liabilities on demand, and therefore can not have its deposits or its capital and surplus tied up on loans on real estate running for years; neither can it have its funds invested in securities which can not be readily converted into cash.

Consequently while the Glass-Owen Act (or the Federal reserve act) goes as far as can be safely gone in providing for loans on real estate and for rediscounting six-months' paper, there is a very considerable and very important ground not covered by our banking and currency system, even as amended.

I therefore believe that in order to meet the needs of our farmers and provide for the necessary requirements of agriculture in a financial way we must supplement existing systems by providing for a system of farm-land banks, so empowered, supervised, and managed that the credit resources of the farmers can be made available, to the end that money can be got at cheaper rates, on long terms, with the privilege of paying on account of the principal as the interest is paid, for the purpose of acquiring homes, improving and developing the farm, and discharging existing liens drawing unreasonably high rates of interest. In addition to this, a further system of rural credit banks intended to promote cooperation and enable the members to utilize their collective credit resources to meet the temporary needs as they recur in producing the crops, would be most advantages.

Neither of these needs is fully met by the Federal reserve act. In the first place, the amount allowed to be loaned on real estate is wholly insufficient to give full relief to the farmers. There would probably be available for five-year loans on real estate some $200,000,000 under that act. The farmers of the country owe some $6,000,000,000, nearly half of which is secured by morgtages on their land. You can readily see that there is a very wide gap between $200,000,000 and $2,000,000,000.

Senator HOLLIS. Do you not mean $6,000,000,000?

Senator FLETCHER. I just named $2,000,000,000 as the amount secured by mortgages on land.

Senator HOLLIS. Yes; I see.

Senator FLETCHER. This gap should be abridged. Not only that, but our farmers are in need of more money for development purposes, and it would be in the nature of an investment rather than incurring a debt, if they could get it at sufficiently low rates of interest and have the privilege of paying back it out of the earnings of the farm from year to year.

Mr. WEAVER. May I ask you a question, Senator Fletcher?
Senator FLETCHER. Yes; certainly.

Mr. WEAVER. Do you think that these commercial banks are going to lend the $200,000,000 to the farmers? Now, while the law allows them to do that, it is a matter of option with them, and they are not compelled to do so; do you think, as a matter of practice, that they will loan the money to the farmers on five years' time?

Mr. HAYES. On real estate?

Senator FLETCHER. I doubt if there will be much money loaned in that way.

Mr. HAYES. Do you think there will be any?