Senator SACKETT. You can not force him any other way.

Senator SMITH. But if you make it profitable, he will come.

Senator SACKETT. Make an inducement in some legal way to do it, and he will come in.

Senator SMITH. And we will never cure the smallpox by putting salve on the pimple. You have to vaccinate in order to cure the disease.

Senator RANSDELL. May I ask you if this bill of yours would take the place of these other bills that we have been giving so much time to?

Senator SMITH. No, no. Not any more than a dose of morphine to relieve the pain will interfere with you trying to cure the disease. Senator RANSDELL. Then there is no reason why we should not go on and report out the other bills we have been considering, as far as your bill is concerned? We do not need to hold them up on account of your bill?

Senator SMITH. No; except there might be danger of our mistaking a dose of morphia for the cure of the disease. We have done

that so long until the poor old patient is about dead.

Senator RANSDELL. That is what I am trying to get at, whether you are offering us a better remedy to kill this disease than anybody else, and if you want this committee to hold up the other bills that have been considered.

Senator SMITH. No, no.

Senator RANSDELL. Or if you want us to go ahead and report a bill if we can. I have been under the impression that we ought to report a bill on the floor of the Senate and go to debating it. I think this country would be much more benefitted if we devoted a week or two to discussing agriculture than to who is entitled to a seat in Iowa.

Senator HEFLIN. I think Senator Smith's bill would make it more inviting to these farmers to come into these farmers' cooperative organizations. Naturally, it would be to their interest to do so.

Senator SMITH. What I have attempted to do in this proposed legislation is to make the commodity itself stand for the credit and do away with the idea that the farmer is a bad risk. The thing that he produces is that upon which we risk our lives, and if he does not produce we have not got anything here to risk. I am trying to put the commodity on a commercial basis of credit, and when we put it in that shape, he is entitled to every privilege that any of the wealth produced is entitled to, and in place of having your intermediate credit, which has served a purpose, we will have direct credit. No intermediate credit. We will have direct credit.

Senator HEFLIN. So that when the marketing season opens up he can obtain money, if he needs it, and hold his product until the price is profitable.

Senator SMITH. And distribute it.

Senator HEFLIN. He ought to be able to do that.

Senator SMITH. Yes, sir.

Senator HEFLIN. That is the time to help him.

Senator SMITH. Yes; let him become a marketer, the salesman of his own product, without having the element of time, storage, and interest to absolutely discourage him.

Senator GOODING. I think you have got to provide locally some means besides what you would get from the Federal reserve, possibly. It will take a lot of money. You might have to give this organization credit direct from the Treasury to get started, and then they can get some help from the Federal reserve.

Senator SMITH. Senator, I want you to study the Federal reserve act and see whether or not you come to the conclusion that the Federal reserve act provides for the issuance of temporary

currency.

Senator GOODING. I do not know. They have not shown anything very friendly to agriculture, you know.

Senator SMITH. But in this bill I have put some "shalls."

Senator GOODING. You had better lay a foundation so that these men can not dominate you for credit too much. I have not forgotten the inflation that they forced on agriculture in 1920, which was the greatest crime ever committed in American history.

Senator SMITH. I have put in this bill-that might be questionable, but I put it there because I thought it was necessary-I put "shall" where the present law reads "may," because if this is an actual commercial commodity

Senator GOODING. I would like to see us get together and thresh this thing out.

The CHAIRMAN. Do you deal with the surplus?

Senator SMITH. Yes, sir.

The CHAIRMAN. How do you handle the surplus?
Senator SMITH. From this reserve fund.

The CHAIRMAN. Do you export it?

Senator SMITH. We export it or allocate it amongst the members. I think I have got a pretty good idea implied in here-that where there is a surplus, when it gets down to the cost of production it can be allocated amongst the members on a certificate that they are not to reproduce it on the farms.

The CHAIRMAN. On a certificate that they are not to reproduce it on the farms?

Senator SMITH. Yes. Suppose there was a surplus, and I was going to plant 400 bales of cotton and we were going to carry it over next year, I would purchase that 400 bales of cotton at that price, and they hola it for me under the promise that I am not to duplicate it on my farm next year. I make the cotton in the warehouse

in place of making it in the field.

The CHAIRMAN. Suppose they do reproduce it?

Senator SMITH. There is a penalty.

The CHAIRMAN. Do you mean the individual producer of cotton has his cotton that you have bought? Is that segregated and kept separate?

Senator SMITH. No, no. It is graded. It goes by grade lots.
The CHAIRMAN. Then, you buy that cotton again?

Senator SMITH. Yes.

The CHAIRMAN. And he agrees, when you buy it, that you will not produce cotton next year?

Senator SMITH. No; not me. I am a member, and we have got a surplus. My idea is that if Senator Ransdell was to make 500 bales of cotton and it got down to where it was not profitable, the surplus had come down, he would enter into an obligation that if they would

allocate to him the amount of cotton that he would produce-let us say he produces 500 bales, and we buy the surplus, we would allocate 500 bales to him at a stipulated price, and that is held, and he enters into an obligation not to plant any cotton on the land owned or held by him.

The CHAIRMAN. No cotton?

Senator SMITH. No cotton.

Senator RANSDELL. What happens to the supply for the following year if you do not plant anything?

Senator SMITH. You have just eliminated that surplus. You have allocated it.

Senator RANSDELL. You let some people plant but you would allocate enough to take off the surplus? Is that the idea?

Senator SMITH. Oh, yes.

Senator RANSDELL. Who would do that allocating?

Senator SMITH. Why, your organization could do it. I wish you had an organization right now and a lot of men

Senator RANSDELL. Would they say to me that I could not plant any cotton? If they did, that would disorganize all of my labor and tear all of my plans to pieces.

Senator SMITH. It is entirely optional with you and you can do it if you want to or let it alone.

Senator RANSDELL. If it is optional I do not see how you can force anybody to do it.

Senator SMITH. Because you have your accumulated fund.

The CHAIRMAN. If nobody obeys that, and they would all produce cotton next year, then this cotton you had held over would not sell. There would be an oversupply next year.

Senator SMITH. The surplus cotton has to be governed by the law of supply and demand, and when you are within the organization and all the money that you make goes directly through the processes of this bill, any member within it knows that it is not practicable, even where there is no outside interference-if he then goes on and produces beyond the point of profit, he himself is responsible. That is the danger that I see in our attempting to take care of the surplus.

The CHAIRMAN. I do not quite understand the way it is going to operate yet. If you had an oversupply this year you would buy

cotton?

Senator SACKETT. You always do have an oversupply every year. The CHAIRMAN. All right. You would buy this surplus?

Senator SMITH. No, no; not right then. My idea in working out the terms of this law is this: I provide that this credit shall extend for at least two years, and we provide that a certain per cent of its value shall be issued at the rate of discount herein provided, so that we will sell what we can this year and sell what we may within the limit of the time that we have got this credit, which is the lowest possible form of credit that can be gotten in this country. Now, if in the face of those advantages, a surplus is still piled up, as a matter of course, it is a total disregard of the business principles involved in every business. I have attempted to make it purely a business proposition, with the value of the article itself in the hands of the producer, which shall be determined by the law of supply and demand, and if the membership gets sufficiently large to control the major part of that credit, they can control, within reasonable limits, the volume of the credit.

The CHAIRMAN. I do not have in my mind yet just the operations that are going to take place in regard to the surplus. Have the other members of the committee?

Senator RANSDELL. No, sir. I haven't got it. I do not quite understand how that would work.

The CHAIRMAN. Please explain it in detail.

Senator SMITH. This does not deal with an emergency, which you have on now, at all, as to taking care of the surplus. It provides a means which, when developed, will obviate any surplus in any one of our crops.

The CHAIRMAN. I understand that is what you say about it. What I am anxious to know is, how does it do that? How would it operate?

Senator SMITH. In one provision of the bill, section 4, on page 11:

The member will limit acreage or production to the extent the Federal association may require under section 52, and in case of violation of such restrictions the member's pro rata share of his member association's interest in the reserve fund under section 64 may be forfeited to the Federal association and loans and advances under this act may thereafter be denied the member.

But this section that I have read could not be operative except by a majority vote of all the member associations.

Senator SACKETT. Can you have a forfeit legally?

Senator SMITH. We can try it out.

Senator SACKETT. Has that been passed upon by anybody?

The CHAIRMAN. Now, those who were not members of the association would not be bound by that, of course?

Senator SMITH. No, no.

The CHAIRMAN. Suppose you bound your members and they all obeyed? Senator Ransdell was a member, and he did not raise any cotton this year because he was directed not to do so. Šenator SMITH. Or he reduced his acreage?

The CHAIRMAN. Or he reduced his acreage. He complied with the order. Suppose I was a producer of cotton. I did not belong to it. I went right on producing a bigger crop than ever, but, through the influence that you had with the members, the crop was very much reduced, I would make a big profit out of my crop that I produced, and Senator Ransdell would not produce anything, and he would not make anything by it?

Senator SMITH. Precisely, but back of that I tried to put in the antidote before you get to that poison by making it more profitable for the individual to be in the long run, year after year, than outside.

The CHAIRMAN. Would not that very opportunity that a man conceivably might have, keep him out of it?"

Senator SMITH. It might keep him out one year.

The CHAIRMAN. But he has made some money by staying out. Senator SMITH. Just one year. That is the only time he would make it.

Senator RANSDELL. You spoke about the wonderful profits of commerce. You said they were much more profitable than agriculture. Probably they are. Do you know of anything kindred to the idea you have there that exists in commerce?

Senator SMITH. Well, I will give you one. The railroads were financed to the extent of several million dollars by the Government at a rate of interest-6 per cent.

Senator RANSDELL. Don't you think that is a little different from agriculture? That is a great public utility.

Senator SMITH. Well, agriculture is needed.

Senator RANSDELL. Ágriculture is needed, but so are the merchandises of every kind needed, but a public utility like a railroad is certainly different from a farm.

Senator SMITH. I am going on this basis, Senator, that agriculture. taking the conaitions and taking those engaged in it, taking the kindly response of nature to the very most mentally and financially poorly equipped individual, nature will respond in some form, and yet, curiously enough, or basically true, upon the aggregate of our agricultural crops depends everything else, and now with the advance of education, with the higher piane of living that has been brought about by our inventions and otherwise, and the spread of universal education, you are going to have agriculture absolutely throttled if you do not make an exception in dealing with it as against other forms of commerce.

Senator RANSDELL. Certainly there is no objection to making an exception to help agriculture. I believe the whole American people wish to help, but the question is, how? Now, you say the railroads are an exception. There are certainly only a few nundred, and there are several million farmers. They run into the millions. You can have a practical proposition to help something where there are only two or three hundred, especially when we have done so much to build up these public utilities. We are legislating for them all the time, controlling them in a wonderful degree, but, how can we, as practical men, accomplish similar results for agriculture? That is what we have got to get down to.

Senator SMITH. I think you will find it in the terms of this bill if you will study it closely.

Senator RANSDELL. I will be glad to study it.

Senator HEFLIN. We could live without the railroads. It would be pretty hard to go along without them, but we could get along without them, but we could not get along without agriculture, and there is more money invested in agriculture than in the railroads of the United States. I think that something along the line that Senator Smith has suggested would be helpful to the farmer. I think it ought to be so that all the farmers could come in under it.

Senator SMITH. All that I am trying to do is to make it more profitable, in a practical way, to be inside than outside. If you solve that, you have solved the organization.

Senator SACKETT. Why do you object to my word "coercion"? Senator SMITH. Well, that is too harsh. You know, we say that a man has been guilty of coercion

Senator RANSDELL. Now, we have had these other bills under consideration for some time, and the people out in the Wheat Belt who have testified for us have been working three or four years on a concrete, specific proposition of how they are going to get relief for wheat. They have done the same thing, as I understand it, for pork, beef, and corn. They have been working and working. The producers, the executives of the various States, bankers of those States, and they have all got together. At least, I understand they are together. Would it not be best for us to take what those people have done and try to legislate for those products in this sessiou of Congress, or had we