U5A5 1921 b New York State College of Agriculture At Cornell University Ithaca, N. Y. Library HEARINGS BEFORE THE IJoint Congressional Committee short-time rural credits SIXTY-SEVENTH CONGEESS FIRST SESSION TESTIMONY OF A. A. ELMORE Of SPOKANE, WASH April 16, 1921 WASHINGTON your State by the directors or trustees of your corporation ? I ask that for this reason, that in some of the States where they have a corporation not for profit — and presumably they have no property or assets — there is a liability on the part of the directors or trustees for the indebtedness of the association. Have you any such lia- bility as that ? Mr. Elmore. Senator, of course, I am not familiar with the laws of our State and the particular law under which we are incorporated, and I could not answer that question. However, I may say that a law has been recently adopted in our State known as the farmers' market- ing act, which does not place any liability either upon the grower or upon the director of the association except those that are voluntarily assumed. Senator Gore. Have you a copy of that act with you, Mr. Elmore ? Mr. Elmore. No ; I have not. Mr. McFadden. Mr. Elmore, how are the expenses of your associa- tion met ? Mr. Elmore. The expenses of the association are met by deduction from each bushel of wheat which goes through the association. Mr. McFadden. What is that deduction ? Mr. Elmore. I do not know yet. It is going to be rather high this year, and we only handle a couple of million bushels of wheat. We will have approximately the same overhead in handling that amount as we would have in handling 25,000,000 bushels in 1921. Senator Gore. That makes it large per unit ? Mr. Elmore. Yes. Mr. McFadden. Is there any difference in the assessment of the farmers as to whether they borrow or whether they do not borrow ? Mr. Elmore. No; every bushel of wheat bears its proportionate share of all the expenses. Mr. McFadden. No matter whether they have any advances or not ? Mr. Elmore. No. Senator Norris. It is optional with them. They can let it go if they want to, or get interest on it? Mr. Elmore. Yes. Senator Pomerene. You have just told us that the farmers send in their wheat checks to the association, which is done partly with a view of getting advances and partly with a view of getting interest on the value of these wheat checks, etc. What is the ratio between those two classes of depositors, if I may so term them ? Mr. Elmore. I will say that one pays interest and the other receives interest. Senator Pomerene. I know; but what proportion? What is the proportion that pays interest and what is the proportion that receives interest ? Mr. Elmore. I imagine in our country possibly 20 per cent would receive interest and 80 per cent would pay interest. 14 SH0KT-T1ME EURAL CREDITS. Mr. McFadden: Who pays that 8 per cent. Mr. Elmore. Who pays the 8 per cent? Mr. McFadden. Yes. Mr. Elmore. There is a deduction made from every bushel of wheat that pays all our interest, insurance, and taxes. Mr. McFadden. That is charged up as part of the operating ex- penses ? Mr. Elmore. That is charged up as part of the operating expenses. Senator Pomerene. What do you assume that deduction will be ? Mr. Elmore. I imagine — and this is only an estimate ; I could only make it in that way — possibly 5 cents a bushel this year. (See Exhibit M.) Senator Pomerene. Five cents a bushel ? Mr. Elmore. Yes. That is exceedingly high, gentlemen. The Vice Chairman. It occurs to me that 8 per cent paid is rather a high rate of insurance. Mr. Elmore. A high rate of interest. The Vice Chairman. Insurance. It is really insurance. Mr. Elmore. Well, it is exceedingly high, Mr. Haugen; but we are operating under very abnormal conditions, as you realize. The Vice Chairman. You are experimenting! Mr. Elmore. Indeed, we are experimenting ; certainly. Senator Norris. Of course, every time a man accepts that 8 per cent on his certificate it makes it unnecessary for the association to borrow that same amount of money that is given to him as a credit ? Mr. Elmore. Yes; certainly. Senator Norris. You issue your bonds at 8 per cent. If you have to pay 8 per cent on them and pay 8 per cent to the man that does not get any advance, you have washed one hand with the other ? Mr. Elmore. Exactly. Mr. Chairman, I would like to say this, rhat our present facilities are totally inadequate to meet our present demands and our requirements. But in making these demands I hope we are not unreasonable. This is the thing we are trying to get at : We are trying to keep from dumping our product the moment the harvest is over. We are trying to have the demand for this product function as well as the supply. We can only do that by making an advance to our growers, and the present facilities are en- tirely inadequate to meet that situation. Senator Norris. Now, right on that point while you are talking about the facilities. What legislation, if any, do you feel is neces- sary for Congress to enact ? Mr. Elmore. I am mighty glad you asked me that question, Sen- ator. I have something very definite in my mind regarding that. Senator Norris. I would like to get your idea about that. Mr. Elmore. This applies only to' wheat and does not apply to a general crop credit program, this suggestion that I shall make. I have been told and have read it a number of times in the papers that the grain corporation made some millions of dollars in its opera- tion on wheat. We take the position that the Grain Corporation had no moral or legal right to make a profit on wheat; but since that profit has been made we would like to see it set up into some kind of a permanent revolving fund for the benefit of moving wheat crops. SHORT-TIME RURAL CREDITS. 15 I would like to draw a parallel example between the Canadian wheat board and the United States Grain Corporation. The Canadian wheat board, as I am told by representative men in Canada, made some $60,000,000 or $70,000,000, but they returned this profit to the growers through a form of a participation certifi- cate. In other words, they paid to the growers at the time a guaran- teed price of $2.15, based on the head of the Great Lakes. They gave them this participation certificate, which set up the fact that if the wheat board could sell the wheat for more than the guaran- teed price each grower would participate according to his deliveries. Senator Norris. That was in Canada ? Mr. Elmore. Yes. The wheat board sent a statement out some time ago that it would return to the grower, I think, 48 cents per bushel in addition to the initial price or guaranty of $2.15, which made, I understand, $2.63 per bushel. Senator Pomerene. What did the grain corporation make in the United States? (See Exhibit N.) Mr. Elmore. I was told by a Senator down at the Biggs Building last night that they made some $61,000,000. Senator Norris. I was under the impression that they made more than that. I may have the Grain Corporation and the Sugar Cor- poration mixed up in my mind. Mr. Elmore. I am unable to verify my information. The Vice Chairman. The Sugar Equalization Board made over $39,000,000, of which amount $30,000,000 was turned into the Treas- ury of the United States. Mr. Elmore. Not the Grain Corporation ? The Vice Chairman. No ; the Sugar Equalization Board. Mr. McFadden. The Grain Corporation made in excess of $50,- 000,000. Mr. Elmore. I would like to say this : In making this suggestion we are not asking the Government to give the farmers money belong- ing to the Government, but we are taking the position that we are asking the Government to set up into a permanent revolving fund the money that actually belongs to the growers. Senator Norris. That is, these profits ? Mr. Elmore. Yes. Senator Gore. Your contention is that the profit really belongs to the farmers ? Mr. Elmore. Yes, sir ; and if you gentlemen see fit, the administra- tive machinery might be set up through the Federal land bank. Senator Gore. You would not ask that the money be contributed to the producer? That would be impracticable. Mr. Elmore. No. Senator Norris. Have you a definite idea in your mind as to the kind of a law we would have to enact? Would Congress turn that profit over into some organization similar to the one you have now ? Mr. Elmore. I might say that the growers in associating them- selves together through these contracts, bringing their wheat to- gether, could issue bonds or debentures which might be sold to this fund. 51425—21 2 16 SHORT-TIME BUBAL CREDITS. Senator Norris. Of course, there would have to be some sort of an organization made up of these growers that would be recognized by statute to which organization the profit could be turned over. Mr. Elmore. Exactly, sir. Senator Gore. Either that, Senator Norris, or some machinery reproducing to some extent the long-time land bank system, a sys- tem based on these warehouse receipts as security, perhaps, of the note of the farmer in addition to the warehouse receipts, and an organization instituted by the Government selling these bonds based on these warehouse receipts and farmers' notes. It could be made, it seems to me, an endless-chain system or process, and I think that is the solution that we have got to come to by and by. Senator Norris. Do you think that this organization, which is now in the course of formation, that was outlined by the committee of seventeen, recently approved by the National Farmers' Union, could be put in such shape that it would be proper for Congress to recog- nize that organization by a statute and turn this money over to them as a revolving fund ? Mr. Elmore. I do not know whether it would be just the proper thing for Congress to endeavor to turn this money over to some par- ticular organization. I am rather inclined to think that it should be administered through the land bank — that is my idea — but made so that such organization as approved by the committee of 17 might avail itself through that channel. Senator Norris. Of course, if it were turned over to the land bank it would have to be, by the land bank, turned over to the association. In other words, there must be some machinery by which this property is turned over to them ; otherwise they would not use it for the pur- pose you have in mind. Mr. Elmore. Exactly. Mr. McFadden. Mr. Elmore, do I understand that your difficulty is in marketing these securities which your organization creates ? Mr. Elmore. Our difficulty has been this year in marketing them. It has been very difficult to market anything. Mr. McFadden. You would advocate a superorganization, national in scope, for the purpose of doing what — selling your product or negotiating your securities? Mr. Elmore. Selling securities. Mr. McFadden. What are your plans about the marketing of your product? Mr. Elmore. We have the machinery for marketing in our asso- ciation. We have a general manager and a sales manager and all the necessary facilities for selling wheat, the same as any grain concern. Mr. McFadden. Then this superorganization you speak of will simply be a financial organization. Mr. Elmore. Yes. Mr. McFadden. For the sale of securities? Mr. Elmore. Exactly. I may say, gentlemen, in connection with the bonds which we sell, that of course ties our collateral up with this trustee, but we have a provision in the face of our bond that we may redeem the bond any time after 30 days by a bonus of 1 per cent of the amount. Mr. McFadden. You spoke of utilizing the farm land bank system? SHORT-TIME RURAL CREDITS. 17 Mr. Elmore. Yes. Mr. McFadden. You would not use the same class of securities that are now being issued ? You would not class these obligations in the same as farm securities, and just issue the one class, but you would prefer to hare a separate class covering them, the advances simply to be handled by the farm loan association. Is that the idea ? Mr. Elmore. Yes. Senator Gore. It would be more like the short-time certificates that the Treasury Department issues? Mr. Elmore. Yes. Mr. McFadden. Simply utilizing the facilities of the Federal farm loan system? Mr. Elmore. Yes. Senator Gore. You told me that there was a gentleman here with you who was formerly connected with the Federal reserve branch bank? Mr. Elmore. He is in the city, but I was unable to get hold of him this morning. I was hoping to have him up here. He was secre- tary of the branch bank in Spokane. He is our general manager. Mr. McFadden. In the early part of your statement I got the impression that you meant to convey to the committee that the reason this letter of the Federal reserve bank went out was due to the pressure of the milling people on the board. Did you mean the committee to have that impression? Mr. Elmore. Of course, you could deduct several kinds of con- clusions. I would not want to make that emphatic. Senator Norris. Do you not think, Mr. Elmore, that the objection they gave was, under the law, at least, technically right? Mr. Elmore. Yes ; they were technically right. Senator Norris. It rather seems to me they were. They were within their constitutional and legal functions when they rejected it, although it does seem to me that when they finally took it they did not make a change that amounted to anything. They took the same thing afterwards. Mr. Elmore. I did not mean to convey the idea that the Federal reserve bank is dominated or particularly influenced by reason of the fact that there are some grain men upon their branch boards. Senator Gore. This objection to the trade acceptance, while it appears technical, really came within their fixed rules? Mr. Elmore. Yes, indeed ; there is no doubt about that. Senator Gore. Do you suppose it would be possible to get the man whom you mentioned as being in the city with you to prepare a statement to go into the record with yours ? Mr. Elmore. I think without question he would do that. (See Exhibit O.) - Senator Gore. He was formerly connected with the branch Fed- eral land bank, of Spokane, and is now the general manager of your organization? Mr. Elmore. Yes. Senator Norris. Before you leave the stand, Mr. Elmore: To carry out this plan or any modification of it in a governmental way would it not be necessary for a large amount of warehouse capacity to be constructed all over the wheat-growing belt? I do not believe 18 SHORT-TIME BUBAL CBEDITS. that the balance of the country is supplied, like your country seem to be, with storage warehouses ? Mr. Elmore. If you endeavor to hold wheat back in the countr it would be necessary to build a large amount of additional storag capacity; but if the association handles the wheat it makes no differ ence whether it is at the terminal or at the local elevator. Senator Norris. Do they send it to the various terminals ? Mr. Elmore. The association may send it in any direction the; may see fit. The wheat has not been sold or has not been transferred and may be held in storage at terminals as well as in the countr; stations. Senator Norris. Is there enough storage capacity in the countr; now ? I suppose there must be, because wheat is stored and has to bi stored every year? Mr. Elmore. I am told that only probably 25 or 30 per cent of th( capacity in Chicago is used at this time. Senator Norris. Would the plan or any modification of it involvi any scheme by which the farmer himself could hold it on his owi farm and have a certificate issued? Mr. Elmore. I see no reason why that could not be worked out i: everybody were so disposed. Senator Pomerene. That would be pretty risky. Mr. Elmore. You could have your stuff insured properly and prop erly protected. That is a matter, of course, to be carefully considered Senator Pomerene. It is pretty difficult to do, because here yoi have got an old shack of a place that a man with average discretioi would not put his wheat into at all. Senator Norris. Oh, no; that would have to be provided by law I mentioned that because under this plan all the wheat growers im mediately, or after they went into this pooling of their wheat, woulc turn the wheat over to this association just as soon as they could. I: that happened there would not be any wheat left on the farm, t( speak of, for sale, and if that occurred there would not be storag( capacity enough in the country to hold it, would there ? Mr. Elmore. Of course, if the association endeavored arbitrarily to hold the wheat back, naturally it would cause a block. But th< association is not formed for that purpose. Senator Norris. Oh, no ; I am not thinking but that the associatioi would market it properly. If they had all the wheat immediatel] after it was harvested dumped on their hands they would not havi any place to put it. In other words, it seems to me the plan woulc have to offer to the farmer who held back his wheat a little bettei price for holding it back. He would be entitled to it, of course. Any body who holds his wheat is entitled to interest on his money whili he is holding it. Senator Gore. Do they have a system of insuring it on the farm ' Mr. Elmore. Yes. Senator Norris. If you and I had adjoining farms and you deliv ered your wheat to the association the 1st of August and I waited unti the 1st of December my wheat would be in the same pool and I woulc get the same price you would ? Mr. Elmore. Yes. Senator Norris. The result would be that I would deliver my whea inst as soon as I thrashed it? SHORT-TIME RURAL CREDITS. 19 Mr. Elmore. The association wants you to deliver it, because they may have a particular call for that particular wheat, and they want to be in position to make delivery. Senator Norris. But by the 1st of December we would have wheat enough to last until the next July. You would have it all on your hands at once. If part of the wheat were kept back on the farms it would be a most ideal condition, but you would have to offer to the man who held his wheat back a little better price than you would offer to the man who delivered it first. Mr. Elmore. That is a matter that can be negotiated between the grower and the association. Senator Gore. Let me ask you this, because I think it is vital to any scheme: lour organization has the power and discretion to sell this wheat when it sees fit and when the market price justifies it? Mr. Elmore. At any time. Senator Gore. Is there any method by which the sale of the crop before the expiration of the year or before the coming in of another crop could be insured? In other words, any system of marketing farm products that holds one crop over to the time when another is harvested would be disastrous in the long run. Mr. Elmore. I would suggest that a wise and discreet board repre- senting the farmers of this country would not hold one crop into another. I am taking this from the fact that carrying indiscrimi- nately some 250,000,000 bushels of the 1919 crop into the 1920 crop has been a direct liability upon the marketing of the 1920 crop. Senator (tore. That is one of the troubles, and it is a drag on the next crop. Mr. Elmore. This would prevent that. Senator Gore. You have not yet taken into consideration an in- crease in your interest rates that would have a tendency to urge the crop onto the market along toward the end of the year. The interest rate increases on these Federal reserve notes, does it not, the longer they are out ? It did under the Aldrich plan, I know. Mr. McFadden. There is a provision in the Federal reserve act that they do not increase, because we have had a fixed amount of over $3,000,000,000 worth of them. The Federal Reserve Board has the power to recall those notes. Senator Gore. There was a scheme under the Aldrich plan which had a tendency to penalize the notes if they stayed out too long, and this made a tendency for them to come back. This thought occurs to me : Suppose, Mr. Elmore, your association were carrying a large amount of wheat at this time of year and the reports showed that there was a decreased amount of wheat being- produced this coming year. Would your association feel justified under those conditions in holding over the crop of the previous year? Mr. Elmore. I presume we would. I can not answer that off hand, because we are a little new in the game to say what steps would be taken. Senator Norris. Would it not be natural that you would do that? Senator Gore. If the incoming crop was extremely short? Mr. Elmore. It certainly would be natural with the individual. Mr. McFadden. I think it is reasonable to suppose that a man would take into consideration all conditions surrounding the mar- 20 SHORT-TIME RURAL CREDITS. keting of the wheat in deciding whether he would sell now or hold over. In other words, you would look beyond one year; you would make it a two-year proposition. Mr. Elmore. We made this kind of statement and put out this kind of propaganda as an inducement to our growers to join the association; that the association would make a very careful survey of the world's situation; and that we would not be moving the product as the individual grower is moving it at this time. Mr. McFadden. Senator Norris was asking you about the induce- ment to control the farmers' crop. Would not the fact that you were offering to the farmer an 8 per cent interest if he Avill deposit his wheat with your association be an inducement to pull the wheat from the farms into your association ? Mr. Elmore. We are not offering that as an inducement for a man to join the association at all. Mr. McFadden. Would not, as a matter of fact, that 8 per cent rate induce him to do that ? Mr. Elmore,. It has a bearing upon certain farmers, without any doubt ; but I say that a portion of that 8 per cent is offset by the fact that a deduction is made from his wheat for the payment of interest. Senator Norris. He pays his share ? Mr. Elmore. He pays his share of the carrying of the entire crop from harvest until the crop is cleaned up. Mr. McFadden. He would be sure of getting some rate of interest — probably around 6 per cent ? Mr. Elmore. Yes. Senator Gore. When he handles a full crop and bears the overhead that would reach a very considerable proportion ? Mr. Elmore. Exactly. Senator Norris. It does seem to me that while it would have that tendency, yet the ultimate effect would be the same thing; that is, the wheat would all be in the same pool; the wheat delivered in September would be in the same pool with the wheat that came in in the next January. The tendency would be, then, for the man to get this 8 per cent if he did not want to get the advance, and if he was in such fix that he had to have money then he would bring it in in order to get the advance that goes with it. So that under all viewpoints the tendency would be to bring in immediately the crop just as soon as harvested and turn it over to this association. Mr. Elmore. That is a matter that could be negotiated. Senator Norris, between the association and the grower. If the association desired the grower to withhold his wheat back in storage, then they could make certain definite arrangements for him, to do it and allow him certain compensation for doing it. Senator Norris. He would be entitled to certain compensation, certainly. In other words, a man who sells wheat in September can make just as much money and sell at a less price than the man who holds wheat until February, because the one who has got the wheat on his farm is threatened with the expenses of covering it. Senator Gore. He has to adjust himself to hold it. Senator Norris. And it does not seem to me that we want all wheat delivered at once ; in fact, if it was all delivered at once, there would not be any place to put it, unles« we provided storage facilities, SHORT-TIME BUBAL CBEDITS. 21 and the man who holds back in this pool ought to get an advantage over a man who puts it in early enough to save the extra expense and risk and loss for the use of the money. Mr. Elmore. I agree with you on that. The Vice Chairman. Are all the warehouse men in your State required to register and take out a license ? Mr. Elmore. Yes. The Vice Chairman. And give a bond? Mr. Elmore. Yes. The Vice Chairman. That is not provided for in all the States. It would be necessary to put a provision in the Federal warehousing act in order to provide for the proper storage houses, I take it ? Mr. Elmore. There ought to be some kind of a national act re- quiring all of the warehouses and elevators to be public warehouses and elevators and to be bonded. Senator Gore. You have that in Washington? Mr. Elmore. Yes; and it works very successfully there, and no- body questions our warehouses or their receipts. Senator Gore. I would like to reserve the right to print in con- nection with Mr. Elmore's statement a discussion of this subject theoretically. His has been a concrete discussion based on experi- ments, and I would like to put in a brief statement discussing the theoretical points. Mr. McLaughlin. Is it your own statement ? Senator Gore. It is not. The Vice Chairman. Without objection, it is so ordered. (See Exhibit P.) Mr. Lee. What percentage of these warehouses are bonded ware- houses, under the Federal act? Mr. Elmore. I do not think there are any under the Federal act. We have a State warehouse act that they operate under in our section. Mr. McP'adden. Your plan as outlined to the committee only differs from the present plan of a farmer storing his grain and getting the warehouse receipts and taking them to his bank and getting the money on it or negotiating it, in the respect that you create an agency ; that is, your association, which takes the warehouse receipts and assists in the negotiation of the farmer's note? Mr. Elmore. Yes. Mr. McFadden. That is practically the only divergence from the present plan, is it not ? Mr. Elmore. Exactly. I may say this, that sometimes the grower finds his bank unable to make advances to him. The association may be able to make such negotiations entirely outside of the community of the farmer. I have in mind an instance where we obtained credits from the First National Bank in Seattle of $50,000 this fall. Senator Gore. Unless there is great care exercised over the whole country when the crops go to market, it would have an effect on the price ? Mr. Elmore. Yes. Senator Gore. If the farmers were forced to go to market with their crop because of inability to get whatever credit was necessary it would have the tendency of lowering the price, and this is de- signed to meet that difficulty ? 22 SHORT-TTME RURAL CREDITS. Mr. Elmore. Exactly. Mr. McFadden. Your difficulty is in getting the necessary funds to finance the crop and market it — those two things are your problems ? Mr. Elmore. Those are our problems absolutely, and they are very great problems, too. Senator Gore. You see no reason why this principle could not be applied as well to cotton, do you ? Mr. Elmore. I see no reason why this should not be applied to any nonperishable staple article. The Vice Chairman. Mr. Lyman, do you desire to be heard? Mr. Lyman. I came up to hear Mr. Elmore, who is a member of our organization, and I do not believe I am prepared at this time to make any statement. The Vice Chairman. Would you care to be heard later ? Mr. Lyman. This is a hearing generally on the question of short- time rural credits? The Vice Chairman. It is. Mr. Lyman. I think that our group will be here next week and will undoubtedly want to take some action. If you are in session at that time, I think there will be representatives here of the Farmers' Union and other organizations who will be glad to appear before you. In advance of that meeting next week, I think it best for me not to say anything. The Vice Chairman. If you will kindly indicate when you would like to be heard, we will be glad to accommodate you. Without objection, the committee will adjourn subject to call. (Whereupon, at 11.45 o'clock a. m., the joint committee adjourned to meet at the call of the vice chairman.) Exhibit A. United States Senate, Washington, D. C, March 3, 1921. The CoMPTBOIXER OF THE TREASURY, Washington, D. C. My Deak Sin: This is to notify you that the joint committee of the two Houses of Congi-ess on short-time rural credits, authorized by public act No. 234 of the Sixty-sixth Congress, page 41, met at 10.30 o'clock this morning and perfected an organization. The duly appointed membership of the joint com- mittee is as follows : Representing the Committee on Agriculture and Forestry in the Senate : Asle J. Gronna, North Dakota ; George W. Norris, Nebraska ; Thomas P. Gore, Oklahoma. Representing the Committee on Agriculture in the House of Representatives : Gilbert N. Haugen, Iowa ; James C. McLaughlin, Michigan ; Gordon Lee, Georgia. Representing the Senate Committee on Banking and Currency : George P. McLean, Connecticut ; Henry W. Keyes, New Hampshire ; Atlee Pomerene, Ohio. Representing the Committee on Banking and Currency in the House of Repre- sentatives : Louis T. McFadden ; Pennsylvania ; Frank D. Scott, Michigan ; Henry B. Steagall, Alabama. I was duly elected chairman of said joint committee, Congressman Gilbert N. Haugen, of Iowa, was duly elected vice chairman of the joint committee with power to act in Washington during the absence of the chairman. Miss M. L. Flint was duly elected temporary secretary, with a salary base of $150 a month at present, and she is designated as the disbursing officer for the committee and her bond fixed at $1,000. She will assume duties March 4, 1921. Very respectfully, A. .T. ftliftNNA (ThnAirvYijvn. SHOET-XIME KTJRAL CBEDIXS. 2H Exhibit B. [Public — No. 234 — 66th Congehss.] Short-Time Rural Credits Committee: There is hereby constituted a joint committee of the Senate and House of Representatives, to consist of the chair- man of the Senate Committee on Agriculture and Forestry, the chairman of the House Committee on Agriculture, and the chairman of the Committee on Banking and Currency of the two Houses, and two other members of each of said committees, to be designated by the chairmen of the respective committees, and it shall be the duty of said joint committee to investigate and report at as early a date as may be possible as to the practicability of establishing a system of sliort-time rural credits in the United States and to recommend such legislation as may be practicable and desirable to that end. The said committee is hereby authorized to hold meetings either during or between sessions. The sum of $5,000 is hereby appropriated,, the same to be immediately availa- ble, out of any funds in the Treasury not otherwise appropriated, to defray all necessary expenses of said joint committee, payment of said expenses to be made upon vouchers approved by the chairman of said joint committee, who shall be selected by the committee. [Public — No. 367 — 66th Congress.] [H. E. 15812.] AN ACT Making appropriations for the Department of Agriculture for the fiscal year ending June 30, 1922. To enable the joint committee of the two Houses on short-time rural credits constituted and appointed in pursuance of Public No. 234, Sixty-sixth Congress, "An act making appropriations for the Department of Agriculture for the fiscal year ending June 30, 1921," to continue and 'complete its labors and reports, $5,000. Exhibit C. WASHINGTON WHEAT GBOWERS' ASSOCIATION AGREEMENT. Whereas the undersigned propose to organize a nonprofit, cooperative associa- tion under the laws of the State of Washington for the purpose of promoting, fostering, and encouraging the business of growing and marketing wheat co- operatively and for eliminating speculation in wheat and for stabilizing the wheat market ; for cooperatively and collectively handling the problems of wheat growers, and for improving in every legitimate way the interests of the growers of Washington, and for other pertinent purposes. Now, therefore, we, the undersigned, in consideration of the premises and of our mutual undertakings and of the agreement of each and every other party hereto, do hereby agree as follows, each for himself and collectively for the express benefit of and as the association to be organized : 1. We will become members of the Washington Wheat Growers' Association, a nonprofit cooperative association to be organized under the laws of the State of Washington. 2. The said association may include in its membership any wheat grower in the State of Washington, or the owner or lessor or lessee of any land in Wash- ington whereon wheat is grown or suitable and available for wheat growing. 3. The affairs of the said association shall be controlled and managed by a board of 15 directors, to be elected by the members from among the members at the annual meeting; and the office of the association shall be at Spokane, Wash. The members shall elect 14 directors from among members actually growing wheat in the districts here specified : 1. Benton, Klickitat, Yakima, and Kittitas Counties, one, director. 2. Walla Walla County, two directors. 3. Asotin and Garfield Counties, one director. 4. Columbia County, one director. 5. Whitman County, two directors. 6. Spokane, Stevens, and Pend Oreille Counties, one director. 7. Adams and Franklin Counties, two directors. 8. Lincoln County, two directors. 24 SHORT-TIME RURAL CREDITS. 9. Grant County, one director. 10. Douglas, Chelan, Perry, and Okanogan, and any other wheat-producing counties, one director. The members growing wheat in each district as specified shall meet for a primary election, to be held and conducted as, where, and when specified by the directors, and shall select the name or names to be presented as the nomi- nee or nominees to represent such district and such nominee or nominees shall be elected as directors of the association at the annual meeting. The directors by a three-fourths vote may change the said districts and the representation thereof so as to maintain a fair and equitable representation of the wheat-producing districts at all times. One director shall be a member nominated in writing by the dean of the College of Agriculture of Washington, and he shall be elected and have full authority as director, representing the interests of the general public in the con- duct of this association. The board may appoint an executive committee of five members to conduct the affairs of the association, subject to the general control of the board of di- rectors. 4. Every member of the association shall have one vote. 5. Every member shall have one unit of property interest in the association and shall pay an entrance or membership fee of $10 to the association. 6. The association shall have suitable articles of incorporation and by-laws stating the purpose and powers of the association ; the rights and duties of members ; manner of forfeiture of membership ; expulsion or withdrawal from the association; maximum value of property interests on withdrawal and any other necessary, pertinent, and important points of organization, as determined conclusively by the organization committee. 7. All of the subscribers hereto agree (1) to execute at the proper time, as conclusively determined by the directors of the association, agreements with the association for the marketing of their wheat, in terms substantially the same as those set forth in the agreement- following and made a part hereof; or (2) at the option of the said board of directors, to be bound by the terms of the said market ng agreement, and for such purpose, signature to this association agree- ment shall be deemed to all effects the same as signature to the said marketing agreement, and as acceptance of each and every provision thereof and here'n, as of the date of the exercise of such option by the said board of directors, notice thereof to be mailed to each of the subscribers at his address as noted below, such notice to be conclusively presumed to have been given upon the making of an affidavit of such mailing by the secretary of the association. WASHINGTON WHEAT GROWERS' ASSOCIATION MARKETING AGREEMENT. This agreement between the Washington Wheat Growers' Association, a non- profit corporation, with its principal office at Spokane, Wash., hereinafter called the association, first party, and the undersigned grower or growers in said State, hereinafter called the Grower, second party, wltnesseth : In consideration of the mutual obligations herein and of the admission of the grower to membership in the association, and in pursuance of the express aims of the association for cooperative market'ng, for eliminating speculation and waste and for stabilizing the food markets in the interests of the growers and the public and in accordance with similar obligations undertaken by other growers. First. The association agrees to buy and the grower agrees to sell and deliver to the association all of the wheat grown by or for him at any place in Waslvng- ton, during the years 1920, 1921, 1922, 1923, 1924, and 1925. The grower may retain wheat for his own seed and feed. All other seed wheat shall be pooled separately and be sold by and through the association only and the premium thereon shall be paid to the individual grower delivering the •seed wheat. Second. The grower expressly warrants that he has not heretofore contracteed to sell, market, consign, or deliver any of his said wheat to any person, firm, or corporation, except as noted at the end of this agreement. Any wheat covered by such existing contract shall be excluded from the terms hereof for the period and to the extent noted. Third. The association agrees to resell such wheat, together with wheat of like variety and grade, delivered by other growers under similar contracts, at the best prices obtainable under market conditions ; and to pay over the net SHORT-TIME BUBAL CREDITS. 25 amounts received thereby as payment in full, to the grower and growers named in contracts generally similar to this contract, accord ng to the resale value of the wheat delivered by each of the growers, after deducting therefrom the costs of maintaining the association and of transporting, handling, grading, storing, selling, and marketing such wheat, and of other proper activities, and also reserves for advertising, credits, and other general commercial purposes, said reserves not to exceed 1 per cent of the gross resale price, all within the conclusive discretion of the association. Fourth. The association may sell the said wheat to millers, brokers, or others, within or without this State, at .such time and upon such conditions and terms as it may deem fair and advisable ; and it may sell all or any part thereof through any agency for the cooperative marketing of the wheat of the Pacific Northwest or of other States or groups of States or of the United States, under a term contract or otherwise, and under such conditions as will serve the joint interests of the growers and the public of this State and of the United States ; and any proportionate or other expenses connected therewith shall be deemed marketing costs under paragraph third. Fifth. The association may establish selling, statistical, or other agencies in any city in the world. Sixth, (a) All wheat and the warehouse receipts covering it shall be deliv- ered to or at the order of the association, as. when, and where directed by the association. (6) Any deduction or allowance or loss that the, associat'on may make or suffer on account of inferior grade, quality, or standard or condition at de- livery, shall be charged against the grower and deducted from his net returns thereunder. (c) The association may make rules and regulations and provide inspectors to standardize the quality, method, and manner of handling, sacking, and shipping of such wheat ; and the grower agrees to observe and perform any such rules and regulations prescribed by the association and to accept the grad'ng established by the State and Federal authorities and the association. Seventh. The grower shall have the right to plant any crop at any time in his free discretion ; but if the grower produces any wheat or acquires or owns an interest in any wheat, during the term hereof, it shall all be included under the terms of this agreement and must be .sold only to the association. Eighth. The association may, for any purposes herein, pool or mingle wheat of the grower with wheat of a like grade and variety from similar districts, delivered by other growers named in contracts generally similar to this con- tract. The grower agrees that his wheat may be so mingled and that the re- turns therefrom, less all costs, advances, and charges, as set forth in paragraph three hereof, shall be credited and paid to him on a proportional basis out of the receipts from the sale, marketing, or other disposal of all such wheat of like variety and grade each season, all as and when determined by the associa- tion. Ninth. The grower further agrees that the association shall have the power, without limitation, to borrow money in its name and on its own account for any purpose on the wheat delivered to it or on any warehouse or grain receipts or on any accounts for the sale thereof or on any drafts, bills of exchange, notes, or acceptances, orders, or any commercial paper delivered therefor; and to exercise all rights of ownership without limitation, and to pledge in its name and on its own account such wheat or receipts or accounts or drafts, bills of lading, notes, acceptances, orders, or other commercial paper as collateral there- for. The association shall have the right to prorate the money so received among the growers and to pay to each grower his proportionate amount thereof, •or to use the same for any proper association purpose or activity. Tenth. The grower expressly agrees that the association may handle in its • discretion some of the wheat in one way and some in another ; but the net pro- ceeds of all wheat of like variety and grade from the similar districts, less all charges, shall be divided ratably among the growers in proportion to their de- liveries or shipments of such varieties and grades. Such division or distribu- tion shall be made from time to time, in such amounts as the association may deem advisable, until all the accounts of the season are completely settled. Eleventh. The grower hereby expressly authorizes the assoc'ation to deliver to the Washington Growers' Warehousing Corporation, intended for practical cooperation with the association, any or all of his wheat for inspecting, grading, storng, handling, and shipping, at the rates provided by law for such services •or under an obligation to pav, under a long-term contract, all proportionate costs 26 SHORT-TIME BTJBAL CREDITS. of such services and of taxes, insurance, administration, legal expenses, interest on investment, depreciation, retirement of 16f per cent of the preferred stock annually, beginn ng with 1921, creation of a cash reserve for general commercial purposes, and of a reserve to retire preferred stock and of an experiment and betterment fund, and payment of an 8 per cent dividend on all outstanding pre- ferred stock, and of a reasonable dividend, not to exceed 8 per cent per annum, on the common stock thereof, and of such other costs, charges, or advances and on such other or different terms and conditions as the assoc.at!on, in its con- clusive judgment, may deem advantageous and profitable to its grower-members ; and the grower hereby authorizes the association to enter into any contract for such consideration and on such terms and cond tions as it may deem adv .'sable and profitable for the inspecting, gracl.ng, handling, storing- warehousing, and shipping of the wheat covered hereby, or any portion thereof, and for the use of the security thereof as collateral w.thin the general purposes of th s agree- ment by the association. Twelfth. This agreement shall be binding upon the grower, h s representa- tive, successors, and assigns during the period above mentioned as long as he ra ses wheat, directly or indirectly, or has the legal right to exercise ownership or control of any thereof, or any interest therein or of any land on which wheat is grown during the term of this contract. Thirteenth. This agreement is one of a series generally similar in terms, com- prising, with all such agreements, signed by individual growers, one single con- tract between the associat on and the said growers, mutually and individually obligated under all of the terms thereof. The association shall be deemed to be acting, in ito own name, for all of such growers in any action or legal proceeding on or arising out of this contract. Fourteenth. From time to t me each year the grower will mail to the associa- tion as requested a statement of his expected acreage of wheat for that year and its condition on the forms provided for that purpose by the association. Fifteenth. If the association brings any action to enforce any prov'sions hereof, or to secure specific performance hereof, or to collect damages of any kind for any breach hereof, the grower agrees to pay to the association all costs, of court, costs for bonds aHd~otIierwise, expenses of travel and all expenses arising out of or caused by the litigat'on and any reasonable attorney's fee expended or incurred by it in any such proceedings, and all such cos^te and expenses shall be included in the judgment and shall be entitled to the benefit of any lien securing any payment hereunder. Sixteenth. Inasmuch as the remedy at law would be inadequate and inasmuch as it is now and ever will be impracticable and extremely difficult to determine the actual damage resulting to the association, should the grower fail so to sell and deliver all of his wheat, the grower hereby agrees to pay to the association for all wheat delivered, sold, consigned, or marketed by or for him other than in accordance with the terms hereof, the sum of 25 cents per bushel as liquidated damages for the breach of this contract, all parties agreeing that this contract is one of a series dependent for its true value upon the adherence of each and all of the contracting parties to each and all of the said contracts. Seventeenth. The grower agrees that in the event of a breach by him of any material provision hereof, particularly as to delivery or marketing of any wheat other than to or through the association, the association shall, lipon proper action instituted by it, be entitled to an injunction to prevent further breach hereof, and a decree for specific performance hereof, according to the terms of this agreement ; and the association and the grower expressly agree that this agreement is not a contract for personal services or demanding exceptional ca- pacity or talents ; and that this is a contract for the purchase and sale of per- sonal property under special circumstances and conditions and that the buyer can not go into the open markets and buy wheat to replace any which the grower may fail to deliver ; and that this contract will be the proper subject for the remedy of specific performance in the event of a breach thereof. Eighteenth. The parties agree that there are no oral or other conditions, promises, covenants, represnta tions, or inducmnts in addition to or at vari- ance with any of the terms hereof, and that this agreement represents the voluntary and clear understanding of both parties fully and completely. Read, considered, and signed by the grower as of the date determined in the association agreement, in the State of Washington. ~ , Grower. SHORT-TIME RURAL CREDITS. 27 The subscriber here applies for membership in such association, when or- ganized, and expressly agrees that his signature to this association agreement and to the marketing agreement herewith embodied and to this application for membership herewith embodied shall be irrevocable, except as provided in para- graph 9, and that he has given such signature in order to induce other wheat growers to sign this agreement for his benefit as well as their own general bene- fit and the public welfare. Acceptance of such marketing agreement by the association shall be deemed conclusively made and established upon the mailing of the notice above re- 'ferred to. 8. The association shall be organized by an organization committee consist- ing of N. B. Atkinson, of Waitsburg, chairman ; W. J. Robinson, of Pomeroy, secretary ; Charles Flathers, of Prescott ; F. A. Maxwell, of Dayton ; Harry Goldsworthy, of Rosalia ; R. V. Peringer, of Belmont ; B. T. Manchester, of Winona ; William Huntley, of Spokane ; A. A. Elmore, of Spokane ; Mike Tan- ner, of Davenport ; H. Jurgenson, of Wilbur ; Paul Oehlschlaeger, of Oonnell ; Jake Smith, of Ephrata ; C. N. Campbell, of Bridgeport ; and E. D. Knight, of Wapato ; and the said organization committee may increase its members, elect new members in the place of any who may resign or be unable to act, and take such steps and exercise such power and authority, subject hereto, as it may deem advisable in order to secure subscribers for this agreement and members for the association and to organize the association. 9. (a) If by July 1, 1920, signatures by growers of wheat or the owners or lessors or lessees of land covering 25 per cent of the production of wheat by "bushels in 1918 in Washington, Idaho, and Oregon, taken as a whole, shall not iave been secured for this agreement and similar agreements being circulated in Idaho and Oregon, the organization committee must so notify every sub- scriber hereto before July 8 by notice mailed to him at the address noted below, and the subscriber shall have the right to withdraw his signature hereto by written notice to the Secretary of the organization committee between July 8 and July 20, 1920. If all signatures are not then withdrawn the oroganization committee shall, in its discretion, determine whether or not to proceed with the organization work and with the marketing plans under the marketing agreement hereinbefore set forth ; but under no conditions shall the committee proceed at all unless at least 10 per cent of the said total production have permitted their signatures to stand. (6) If signatures covering 25 per cent of the said production shall have been secured by or before the said date, then this agreement shall be binding upon all of the subscribers in all of its terms and there shall be no right of withdrawal whatsoever. (o) For all matters of acreage, bushelage or percentages or signatures, and for all statements of fact in connection herewith, the written statement of the organization committee, signed by its chairman, shall be absolutely conclusive, with or without notice to the subscriber. 10. (o) Each subscriber hereto agrees to pay to A. D. Cross, as trustee for the subscribers and the organization committee, at the time of signature, the sum of $10, to create the organization fund, to be expended as, how, and when ■deemed necessary by the said organization committee, in its discretion, for the purposes of the organization hereof. The said trustee shall provide a satisfactory bond. (6) The organization committee and the said trustee shall keep a full, true, and detailed account thereof, including expenses, salaries, fees, and costs of every kind and shall render a written report thereon to the board of directors of the association, when organized, and shall turn over to the association the balance remaining in the hands of the organization committee or the trustee at the time of the selection of a secretary by the said board of directors. (c) The association shall thereupon give due credit to all of the subscribers for the full amount of such payments as they have made hereunder, for the entrance or membership fees of the said subscribers in the association. (d) If the signatures covering the said 25 per cent of production shall not have been obtained by July 1, 1920, and the committee does not proceed to organ- ize, or if for any reason the association is not legally organized by January 1, 1921, the funds then remaining in the hands of the organization committee shall be returned to and prorated among the subscribers ; and the organization com- mittee and the trustee shall have their accounts audited by a certified public accountant, and the report thereof shall be filed with the secretary of the organi- 28 SHORT-TIME RURAL CREDITS. zation committee and shall be available for inspection and examination by any of the subscribers or their representatives. (e) If the committee organizes with more than 10 per cent but with less than 25 per cent of the said production, the committee will return to the sub- scribers withdrawing the.r signatures their prorated shares of the funds on hand, and free of obligation on July 1, 1920. 11. We do hereby authorize the organization committee, as the representative of all the subscribers, to take such steps as it may deem 1 necessary and proper to secure as subscribers hereto growers representing at least 25 per cent of the said production; to select and name 15 organizing directors, conforming as closely as the d seretion of the committee may approve, to the provisions of paragraph 3 (but not restricted thereto), and including one person to be named by the dean of the College of Agriculture ; and to take all steps necessary or advisable, in the discretion of the committee, to organize the Washington Wheat Growers' Association. 12. (a) The organization committee shall, after due investigation, organize a corporation, with common capital stock in a nom'nal amount, as the law iway permit, and with preferred capital stock in an amount, estimated as sufficient. at par value, to purchase, lease, or construct 1 sufficient warehouses to store and handle ail of the wheat covered by the contracts of the association and at least an equivalent estimated amount, in addition, if the committee may deem such additional capacity desirable. The corporation shall be called the Washington Growers' Warehousing Corpo- ration. The preferred capital stock shall be divided into six equal classes, all bearing S per cent cumulative dividends, and having similar preferences, subject to re- tirement at the rate of one class, or one-sixth thereof annually, beginning with December, 1921, all as the said committee as the organizers of the said corpo- ration, may deem proper. (6) The committee shall organize such a corporation with such powers and privileges as it may deem proper to carry out the general purposes hereof and provide means whereby the wheat of the members of or owned by the associa- tion and any other wheat may be stored and handled until shipment. (c) The association shall then make a cross contract with the corporation providing substantially as follows : That the corporation shall inspect, grade, store, handle, ship, and deliver, all as required by the association, the wheat delivered to it by or at the order of the association, on a nonprofit basis, as far as the law will permit, and will receive for such services only the actual costs of such operations and an amount, apportioned over the entire operations of any one season, to pay a dividend up to 8 per cent per annum on the issued common stock and an annual dividend of 8 per cent on the outstanding preferred stock of the corporation and an amount sufficient to retire in each of the six calendar years, beginning with 1921, one-sixth of the entire issue of preferred stock of the corporation, or one class thereof, and sufficient amounts for taxes, insurance, depreciation, betterments, development work, the general commercial hazards, and other secondary charges, all in the discretion of the directors of the association. (d) Shares of the common capital stock of the corporation shall be sold and issued to the assoc.'at on, as such, in consideration of the said contract. (e) The preferred stock of the corporation may be sold to the growers, or any other person, firm, or corporation whatsoever. (f) The corporat on, through its directors, and the organization committee acting for the corporation, prior to incorporation, shall take every step per- mitted by l;iw to secure the necessary funds and the warehousing accommo- dations here referred to. (g) These provisions are subject to modification or amendment by the or- ganization committee, so as to carry out the general purposes thereof. 13. It is expressly understood and agreed that this instrument is one of a series substantially identical in terms herewith, intended to be circulated for subscr'pt on concurrently herewith. All such instruments shall be deemed to be one contract for the purpose of binding the subscribers, to the same extent as if all of said subscribers had signed only one of said instruments. 14. The parties agree that there are no oral conditions or other conditions, promises, covenants, representations, or inducements in addition to or at vari- ance with any of the terms hereof, and that this agreement represents the voluntary and clear understanding of both parties fully and completely. Read, considered, and signed at , Washington, this day of , 1920. SHORT-TIME KTTRAL GEEDITS. 29 DO NOT SIGN WITHOUT BEADING. Subscribing grower ± P. O. address Total production of wheat in 1918 bushels Total production of wheat in 1919 ._ bushels Exhibit I>. UNITED STATES OF AMERICA, STATE OF WASHINGTON. $100.00. No. 140. Srt'ies A -1920. Washington Wheat Growers' Association — Idaho Wheat Growers' Associa- tion. 8 per cent wheat gold bond. The Washington Wheat Growers' Association, a corporation, organized and existing under and by virtue of the laws of the State of Washington, and the Idaho Wheat Growers' Associat on, a corporation organized and existing under and by virtue of the laws of the State of Idaho, for value received, jointly and severally hereby promise to pay on June 1, 1921, to , the registered owner hereof, one hundred ($100.00) dollars in gold coin of the United States of America of the present standard of weight and fineness, with interest thereon from date at the rate of 8 per cent per annum, payable at maturity, principal and interest being payable at the office of the Lincoln Trust Co.. in the city of Spokane, State of Washington. This bond is one of a series of bonds of like tenor, except as to amount and number, aggregating five hundred thousand ($500,000) dollars, and is secured by certain wheat belonging to said associations, the title to which has been assigned to the trustee herein named to hold as security for the payment of this bond, said security being in the amount of one (1) bushel of wheat for each dollar represented by the principal of this bond, provided that if the market value of the said bushel of wheat declines below the price of one dollar, then the associations agree to place with the trustee additional warehouse receipts so that the market value of the collateral will be maintained at not less than the par value of the bond. This bond shall be registered with the trustee at its office. After registration of ownership, duly indorsed hereon, no transfer, except on the books of said trustee, shall be valid unless the last registration shall have been to bearer, and this bond shall continue subject to registration and to transfer to bearer at the option of the holder. And it is further agreed that the makers hereof shall pay a reasonable sum as attorney's fees, taxed as costs, in event of suit being instituted for the col- lection of this bond, or any interest thereon. This bond may be redeemed at any time 30 days after date thereof, at the option of the maker thereof, by repaying the principal with interest then accrued, plus one-half of one per cent per month on the principal of this bond for the term of the bond unexpired. This bond shall not become obligatory for any purpose unt'l it shall have been authenticated by the certificate thereon indorsed by the Lincoln Trust Company, trustee. In witness whereof, the said Washington Wheat Growers' Association and the said Idaho Wheat Growers' Association has caused these presents to be- signed by its general manager and the corporate seals of each corporation to be hereto affixed, and to be attested by its secretary-treasurer, this 1st day of December, 1920. Washington Wheat Geowers' Association, By , General Manager. Attest : Secretary-Treasurer, Washington Wheat Growers' Association. Idaho Wheat Growers' Association, By , General Manager. Attest : Secretary-Treasurer, Idaho Wheat Growers' Association. 30 SHORT-TIME RURAL CREDITS. Exhibit E. COPY .OF WAREHOUSE TICKET. Washington and Idaho Wheat Growers' Associations. Address all comruur cations to 610 Empire State Build.ng, Spokane, Wash. Idaho office, Lewisto Idaho. Washington office, Spokane, Wash. Seattle Grain Compnny. No. Spangle, Wash. , 192__. Th is to certify that we have received ;ind hold in storage sacks containir bushels pounds of and will deliver the same to or order, at this warehouse, upon the surrender of this receipt properly ii dorsed, and payment of charges and advances as indicated below. Provide however, that said is held at owner's risk of fire not occurring from or. negligence, and is subject to owner's risk from unavoidable damage. Handling charges, $ per ton. Advances, $ Gross, lb, Tare, lbs. Net, lbs. Storage charges at rate of cents per month after days. Partial d< liveries noted on back of this receipt. All rights of subrogation or recovery against the railroad company upo whose land this warehouse is situated or by whom sidetrack facilities are fui nished, for loss or damage by fire, injury, or otherwise, is hereby specificall ■waived. Exhibit F. Washington and Idaho Wheat Growers' Associations. No. 100. $1.00. Spokane, Wash., April 1, 1921. Ninety days (90) after date pay to the order of John Doe, wheat growe: one and 00/100 dollars (with exchange). Value received, and charge the sain to the account of John Doe, wheat grower. To Washington Wheat Growers' Association, Spokane, Wash. Accepted April 1, 1921. Payable at any bank in Washington. Washington Wheat Growers' Association. By Secretary-Treasurer. Countersigned : General Manager. Trade bills in the sum of $5,000 or more must be countersigned by the presi ■dent, vice president, or general manager. Exhibit G. (Section 6 of the Clayton Act, referred to in the foregoing testimony, is a follows : ) Sec. 6. That the labor of a human being is not a commodity or article o commerce. Nothing contained in the antitrust laws shall be construed to forbii the existence and operation of labor, agricultural, or horticultural organiza tions instituted for the purposes of mutual help, and not having capital stoc] or conducted for profit, or to forbid or restrain individual members of sue] organizations from lawfully carrying out the legitimate objects thereof; no shall such organizations, or the members thereof, be held or construed to to illegal combinations or conspiracies in restraint of trade under the antitrus laws. Exhibit H. ARTICLES OF INCORPORATION OF WASHINGTON WHEAT GROWERS' ASSOCIATION. We, the undersigned, all of whom are residents of the State of Washington do hereby voluntarily associate ourselves together for the purpose of forminj a nonprofit cooperative corporation, under the laws of the State of Washington SHORT-TIME RURAL CREDITS. 31 First. The name of this corporation shall be Washington Wheat Growers' Association. Second. The purposes for which this corporation is formed are : («) To engage in any activity in connection with the production, cleaning, grading, shipping, storing, warehousing, handling, and marketing of wheat, and in the financing of any of said operations. ( S ) To borrow money and to make advances to members. (o) To act as the agent or representative of any of its members in any of the above activities. (d) To purchase or otherwise acquire and to hold, own, exercise all rights of ownership, .--ell, transfer, or pledge shares oi the capital stock or bonds of any corporation or association engaged in any related activity or in the handling or marketing of any wheat. (e) To buy, hold, and exercise all privileges of ownership over such real or personal property as may be necessary or convenient for the conduct and opera- tion of any of the business of this corporation. (f) To do each and every thing necessary, suitable, or proper, in the judg- ment of the trustees or directors of this corporation, anywhere throughout the world, for the accomplishment of any of the purposes or attainment of any one or more of the objects herein enumerated or which shall at any time appear conducive to or expedient for the interests or benefits of this corporation, and to contract accordingly. (#) This corporation is not formed for the carrying on of a business, trade, avocation, or profession for gain, nor is it the purpose of this corporation to enter into any agreement or combination in restraint of trade, or to fix or estab- lish the price of any commodity, or to limit or regulate the production or dis- tribution of any commodity, or to attempt so to do. All the activities of this corporation shall be nonprofit and cooperative in character, for the mutual benefit of its members, and shall be limited to the activities arising out of the financing of its members or the shipping, cleaning, grading, storing, warehousing, and marketing of the wheat of its members only. The association shall encourage, foster, and promote the production of wheat, and shall do everything possible to eliminate or minimize speculation and manipulation by speculators in marketing wheat in the Pacific Northwest, and shall do everything within its power to secure the planting of the most desirable and profitable varieties of wheat in the Pacific Northwest, and to secure the largest possible quantity production thereof, and to market the same as directly as possible to the millers of the Pacific Northwest, and to extend the distribution of wheat to the manufacturing consumers thereof throughout the world markets under conditions that will tend toward the economical manu- facture of flour therefrom and will enable actual consumers of flour and wheat products to secure the same with the least possible waste due to extravagant or manipulative channels of trade; and the association shall make every effort to secure for the growers of wheat the best current prices for the particular grade, quality, and variety of wheat grown by them under normal market conditions ; and generally the association shall make every effort to prevent unnecessary transactions in the commercial handling of wheat between the producer and the consumer, and to reserve for the grower and the public generally the profits and economies which may result from the establishment of direct channels of trade between the growers, acting as a cooperative association, and the millers, acting as manufacturers of wheat and wheat prod- ucts, on a stabilized basis. (ft) This corporation shall have and exercise all powers and rights author- ized by the laws of this State and all powers and rights incident thereto, and all other powers, rights, and authority granted to profit corporations by the laws of this State, excepting such powers, rights, and authority as may be in- consistent with the special character of this corporation. Third. The principal place of business of this corporation shall be in the city of Spokane, county of Spokane, State of Washington, and offices may be located at any other point within this State or within any other State of the United States of America, or anywhere throughout the world. Fourth. The term of duration of this corporation shall be for 50 years from and after the date of incorporation. Fifth. The number of trustees or directors of this corporation shall be 15, and the names of the trustees or directors who shall manage the affairs 51425—21 3 32 SHOBT-TIME BUBAL CBEDITS. of the corporation for the first two months of its existence and until the election of their successors are : Walter J. Robinson, Poineroy ; O. Clifford Minnick, Walla Walla; P. F. Oehlschlaeger, Connell ; R. M. Jonas, Dayton ; C. C. Williams, Kennewick ; Walter E. Price, Waitsburg ; O. A. Stevenson, Reardan ; P. B. Kramer, Mar- cellus ; H. Jurgenson, Wilbur ; R. V. Peringer, Belmont ; H. E. Goldsworthy, Rosalia ; J. H. Smith, Ephrata ; Aimer McCurtain, Davenport ; C. N. Campbell, Bridgeport; Oscar W. Collins, Uniontown. Sixth. This corporation shall not have any capital stock, but shall admit members into the corporation upon payment of a membership or entrance fee of ten dollars ($10) per person, and other uniform conditions. Seventh. The voting power of the members of this corporation shall be equal, and each member shall have one vote only. Eighth. The property rights of each member shall be equal, and each mem- ber shall have one unit of property rights only. Ninth. Any person, firm, or corporation, or a manager or officer of any cor- poration, or a member of any firm engaged in growing wheat in the State of Washington, or owning or leasing land in Washington on which wheat is grown or suitable and available for wheat growing, may be admitted as members into the corporation, and shall have voting power and property rights therein on the same basis as all other members, in accordance with the general rules here- inabove stated. , In witness whereof, we have hereunto subscribed our names and executed these articles of incorporation in triplicate, this 28th day of July, 1920. (Signed) : Walter J. Robinson. H. Jurgenson. C. Clifford Minnick. R. V. Perinuer. P. F. Oehlschlaeger. H. E. Goldsworthy. R. M. Jonas. J. H. Smith. C. C. Williams. At.mer McCurtain. Walter E. Price. C. N. Campbell. O. A. Stevenson. Oscar W. Collixs. P. B. Kramer. Exhibit K. r Lincoln Trust Co., investment bonds and firsfcmortgage loans; Sprague and Howard Streets, Spokane, Wash. Phone Main 1066.] Washington Wheat Growers' Association and Idaho Wheat Growers' Associa- tion $500,000 wheat gold bonds, 8 per cent ; dated December 1, 1920 ; due June 1, 1921. Issued in denominations of $100, $500, and $1,000. Price : Par and accrued interest (yielding S per cent) ; interest payable at maturity. Redeemable at the option of the makers at any time 30 days after date at par and accrued interest plus one-half of 1 per cent per month for the term unexpired. The above bond issue is the joint obligation of the Washington Wheat Grow- ers' Association and the Idaho Wheat Growers' Association, which associations are duly incorporated under the laws of their respective States. They have for their purpose the promoting, fostering, and encouraging the business of growing and marketing wheat cooperatively, and for eliminating speculation in wheat and for stabilizing the wheat market ; for cooperatively and collectively handling the problems of wheat growers ; and for improving in every legitimate way the interests of the growers of Washington and Idaho. They are authorized by law : (a) To engage in any activity in connection with the production, cleaning, grading, shipping, storing, warehousing, handling, and marketing of wheat, and in financing any of said operations. (6) To borrow money and make advances to members. (c) To act as the agent or representative of any of its members in any of the above activities. The Washington association is governed by a board of 15 directors, chosen from members actually growing wheat in the following counties : Benton, Klicki- tat, Yakima, Kittitas, Walla Walla, Asotin, Garfield, Columbia, Whitman, Spokane, Stevens, Pend Oreille, Adams, Franklin, Lincoln, Grant, Douglas, Chelan, Ferry, and Okanogan. SHORT-TIME RURAL, CREDITS. 33 The Idaho association is governed by a board of 11 directors, chosen from aembers actually growing wheat in the following counties : Benewah, Bonner, Joundary, Clearwater, Kootenai, Latah, Lewis, Nez Perce, Idaho, Adams, Washington, Ada, Boise, Canyon, Elmore, Gem, Owyhee, Payette, Valley, Good- Qg, Blaine, Camas, Cassia, Lincoln, Minidoka, Twin Falls, Jerome, Bingham, Jonneville, Butte, Custer, Lemhi, Jefferson, Madison, Teton, Fremont, Clark, Sannock, Bear Lake, Franklin, Oneida, Power, and Caribou. The grower covenants with the association that he will deliver to the associa- ion for a term the wheat grown or controlled by him and that the association nay resell said wheat at the best price obtainable under market conditions, and o that end may establish selling, statistical, or other agencies in any city in he world. The association is empowered to make and sign contracts to provide rules and egulations for the grading, handling, sacking, and shipping the wheat to the •est interests of the growers, and shall have the power, without limitation, to lorrnw money in its name and on its own account for any purpose on the wheat ielivered to it or on any warehouse or grain receipts or on any accounts for the ale thereof or on any drafts, bills of exchange, notes, or acceptances, orders, or ny commercial paper delivered therefor ; and to exercise all rights of owner- hip without limitation, and to pledge in its name and on its own account such pheat or receipts or accounts or drafts, bills of lading, notes, acceptances, rders, or other commercial paper as collateral therefor. For the purpose of serving the best interests of their members and in order provide means of financing their operations and to make advances to their lembers when desired, these associations have resolved to provide a bond issue f $500,000, to be secured by the wheat in their possession, and to that end have xeeuted a trust agreement with the Lincoln Trust Co., as trustee, and have ssigned and delivered to it wheat receipts in the amount of 500,000 bushels, phich is to stand as security for the above bond issue. The provisions of this rust agreement are as follows: (a) The associations will assign to the within trustee, wheat receipts in be amount of 1 bushel of standard grade wheat for each dollar of amount of lie par value of the bonds to be issued, provided that if the market value of tie said bushel of wheat declines below the price of $1, then the association grees to place with the trustee, additional warehouse receipts so that the larket value of the collateral will be maintained at not less than the par value f the bond. (6) The associations also covenant and agree that they will at all times until aid principal sum and interest thereon shall be fully paid, keep all wheat so ledged insured in a reliable insurance company, and cause all such insurance } be made payable in case of loss, to the trustee, and in case of the associa- :ons failing to provide such insurance the trustee is empowered to effect such lsurance, and all moneys expended for insurance shall be repaid to the trustee q demand. (c) All bonds that are a part of this issue shall bear the trustee's certificate, srtifying that the within bond is one of the bonds described in the indenture of •ust therein mentioned, and that the proper collateral has been deposited to- 3ther with the insurance thereon. (d) Each bond shall be registered with the trustee at its office, and after sgistration of ownership duly indorsed thereon no transfer except on the joks of said trustee shall be valid unless the last registration shall have been i bearer, and this bond shall continue subject to registration and to transfer i bearer at the option of the holder. (e) The entire issue, or any part thereof, may be redeemed at any time 30 lys after date thereof, at the options of the maker thereof, by repaying le principal with interest then accrued plus one-half of 1 per cent per month 1 the principal of the bond, or bonds redeemed, for the term of the bond or mds unexpired. (f) If at any time after demand, the associations shall make default, or iglect, refuse, or omit to pay the amount necessary to pay interest upon any 1 the said bonds, as therein provided, together with the compensation of the ustee, expenses, taxes and insurance as herein provided, and such default iall continue for 60 days after the same shall have become due and payable i aforesaid, or shall, after demand, make default, or neglect, refuse, or omit pay such amount as may be necessary to pay the principal sum of each and 34 SHORT-TIME BUBAL CREDITS. all of the said bonds intended to be hereby secured, for any period exceeding 60 days after the same shall have become due and payable as mentioned in this agreement, then and in either such case the trustee may, in its discretion and shall, upon the written request of the holders and registered owners oi one-fourth in amount of the said bonds outstanding and unpaid, proceed tc foreclose and sell the whole of said securities held by it in the manner pro- vided by the laws of the State of Washington, for the sale of mortgaged personal property, or may sell at public sale, for the best price that can be obtained therefor, the whole of said securities in possession of the said, trustee. or as much thereof as may be necessary to pay 'said bonds, all arrears of in- terest, taxes, and insurance, the compensation of the trustee, and all expenses attending as well as the execution of this trust as the said sale, and any other cost and charges necessarily incurred in consequence of such sale, in such lots or parcels, however, as the trustee may deem most beneficial, and with authority to the said trustee for the time being to adjourn from time to time, at its discretion, the sale of the whole or any part of said securities. (g) If the principal and interest of the said bonds issued as aforesaid shall be paid to the holders and registered owners thereof, when and as the same shall become due, according to the tenor and effect thereof, and in accordance with the provisions of this agreement, then the said trustee or trustees, upon receiving proper evidence thereof, shall cancel and destroy said bonds, aw upon payment to said trustee of any compensation or expenses due it, all th said securities pledged and deposited with the said trustee shall at once be re delivered by the said trustee to the said associations and, upon such delivery and full settlement of its trust account the said trustee shall be thenceforth discharged from further duties under this trust. It is further expressly under- stood and agreed, by and between the parties hereto, that any action or pro- ceeding at law or in equity to enforce any of the covenants of the said associa- tions contained in this agreement, shall be in the name of the said trustee for the benefit of the holders and registered owners of all bonds then outstand- ing and unpaid, and. in any such proceedings said trustee shall be entitled to recover necessary costs and expenses, including reasonable attorneys fees to be fixed by the court. How to purchase. — Mail checks to Lincoln Trust Co. for amount desired. Orders or reservations may be telegraphed at our expense. Deliveries will be made at any responsible bank, charges prepaid. Exhibit L. department oe taxation an.d, examination. State of Washington, Banking Department, May, 11, 1921. Miss M. L. Flint, Secretary Joint Committee on Short-Time Rural Credits, WashviigtQn, D. C. Dear Sir : Your favor of May. 4 is at hand. I ana, sending you a copy of the cooperative marketing act and crop credit act, passed by the legislature of this State during its recent session. These acts will not become laws until June 10, 1921. More than a year ago there was incorporated in this State the Washington and Idaho Wheat Growers' Association. The object of this association was to handle the wheat crop of Oregon, Idaho, and Washington. There lias been some question as to the. right of the association, to do the things which it is attempting to do; therefore, the legislation embraced in the two acts, above referred to. The Washington and Idaho Wheat Growers' Association is doing substantially what these acts permit. Section 21 of chapter 115 provides how associations heretofore fornjed may be brought under the provisions of the new law. You ask for a statement of my views concerning the success of their method. I have sincerely hoped to see them meet with success and have done what I could to aid them. The success of an undertaking of this kind depends largely upon the moral character and business efficiency of the man- agers. If the association is handled honestly and overhead expenses kept down, I see no reason why it should not meet with success. If, on the other hand. SHORT-TIME RURAL CREDITS. 35 those In control of the finances make improper use of their power the chances 5f success will be greatly lessened!. The farmers seem to be impressed with the idea that the fall price of wheat Is lower than it should be by reason of the fact that so many are forced to sell upon the early market. The association was formed with the view of an orderly marketing of the crop throughout the whole season. If this idea can really be carried out it seems to me it might prove of advantage to the farmers is well as to millers and the general public. There is some question, however, in my mind as to how much of an advantage it would be to the producer. I have been closely in touch with wheat raising and marketing for over 30 years and I unhesitatingly say that it is my belief that the grower who markets tils crop at once is ahead in the long run. At this time it is too early to say how successful last year's operations were. [ think the association is still holding some wheat and has therefore made no settlement with its members. You will note that in the new law settlement is required to be made not later than July 1 of each year for the crops handled >f the preceding year. (Sec. 15.) Section 17 provides for an annual audit by :bis department. The crop of 1920 was the first crop handled by the association. Settlement not having been effected and no audit made, I am utterly unable to mswer your question as to how successful the operations of the association lave been up to the present time. I presume the association will bring itself mder the operation of this law before the next crop season, and as soon as they lo I shall hope to haye an audit so that we can determine some of the questions ?ou have asked. If in the future I can be of service to your committee please command me. Yours very truly, E. L. Fabnswobth, Director of Taxation and Examination. [Inclosure No. 1.] COOPERATIVE MARKETING ACT. [Effective June 10, 1921.] Shaptee 115 (H. B. 255). An act to promote the marketing of agricultural >roducts through cooperation ; and the distribution thereof from the producer to :he consumer ; prescribing the duties of the director of agriculture and the lirector of taxation and examination in relation thereto ; and providing penal- ies for the violation thereof. Be it enacted by the Legislature of the State of Washington: Section 1 (a). The term "agricultural products" whenever used in this act hall include horticultural, viticultural, forestry, dairy, live stock, poultry, bee, md farm products. (b) The term " members " wherever used in this act shall include actual mem- icrs of associations without capital stock and holders of common stock in asso- iations organized with capital stock. (c) The term " association " wherever used in this act means any corporation rganized under this act. (d) The term "person" wherever used in this act shall include individuals, Inns, partnerships, corporations, and associations. Associations organized hereunder shall be deemed nonprofit, inasmuch as they re not organized to make profits for themselves as such or for their members s such, but only for their members as producers. This act shall be referred to as the " cooperative marketing act." Sec 2. Five (5) or more persons engaged in the production of agricultural roducts may form a nonprofit, cooperative association, with or without capital tock, under the provisions of this act. Sec. 3. An association may be organized to engage in any activity in connec- ion with the marketing or selling of the agricultural products of its members, or 'ith the harvesting, preserving, drying, processing, canning, packing, storing, andling, shipping, or utilization thereof, or the manufacturing or marketing of ie by-products thereof; or in connection with the manufacturing, selling, or applying to its members of machinery, equipment, or supplies, or in the financ- lg of the above enumerated activities ; or in any one or more of the activities jecified herein. Sec. 4. Every -group of persons contemplating the organization of an associa- on or corporation under this act shall communicate with the director of agri- ulture. whose duty it will be to advise with and assist them regarding the 36 SHORT-TIME RURAL CREDITS. the corporation formed or to be formed and the members thereof: Provided, That such corporation shall not commence business or solicit members thereof until the form of said marketing contract shall have been approved by the director of agriculture. Sec. 5. Each association incorporated under this act shall have the following powers : (a) To engage in any activity in connection with the marketing, selling, harvesting, preserving, drying, processing, canning, packing, scoring, handling, or utilization of any agricultural products produced or delivered to it by its members; or the manufacturing or marketing of the by-products thereof; or in connection with the purchase, hiring, or use by its members of supplies, ma- chinery, or equipment, or in the financing of any such activities ; or in any one or more of the activities specified in this section. No association, however, shall handle the agrcultural products of any nonmember. ( 6 ) To borrow money and to make advances to members. (o) To act as the agent or representative of any member or members in any of the above-mentioned activities. (d) To purchase or otherwise acquire, and to hold, own, and exercise all rights of ownership in, and to sell, transfer, or pledge shares of the capital stock or bonds of any corporation or association engaged in any related activity or in the handling or marketing of any of the products handled by the associa- tion. (e) To establish reserves and to invest the funds thereof in bonds or such other property as may be provided in the by-laws. U) To buy, hold, and exercise all privileges of ownership over such real or personal property as may be necessary or convenient for the conducting and operation of any of the business of the association or incidental thereto. (g) To do each and everything necessary, suitable, or proper for the accom- plishment of any one of the purposes or the attainment of any one or more of the objects herein enumerated ; or conducive to or expedient for the interest or benefit of the associations, and to contract accordingly, and in addition to ex- ercise and possess all powers, rights, and privileges necessary or incidental to the purposes for which the association is organized or to the activities in which it is engaged ; and in addition any other rights, powers, and privileges granted by the laws of this State to ordinary corporations, except such as are inconsistent with the express provisions of this act ; and to do any such thing elsewhere. Sec. 6. (a) Under the terms and conditions prescribed in its by-laws, any association may admit as members, or issue common stock only to persons en- gaged in the production of the agricultural products to be handled by or through the association, including the lessees and tenants of land used for the production of such products and any lessors and landlords who receive as rent part of the crop raised on the leased premises. (6) If a member of a nonstock association be other than a natural person, such member may be represented by any individual associate, officer, or member thereof, duly authorized in writing. (c) Any association organized hereunder may become a member or stock- holder of any other association or associations organized hereunder. Sec. 7. Each association formed under this act must prepare and file articles of incorporation, setting forth : (a) The name of the association. (6) The purpose for which it is formed. (c) The place where its principal business will be transacted. (d) The term for which it is to exist, not exceeding 50 years. (e) The number of directors thereof, which must not be less than five and may be any number in excess thereof, and the term of office of such directors, which term shall not exceed two years. (f) If organized without capital stock, whether the property rights and in- terest of each member shall be equal or unequal ; and if unequal, the articles Shall set forth the general rule or rules applicable to all members by which the property rights and interests, respectively, of each member may and shall be determined and fixed ; and the association shall have the power to admit new members who shall be entitled to share in the property of the association with the old members, in accordance with such general rule or rules. The provision of the articles of incorporation shall not be altered, amended, or repealed ex- cept by the written consent or the vote of two-thirds of the members. (g) If organized with capital stock, the amount of such stock and the num- ber of shares into which it is divided and the par value thereof. The capital SHOBT-TIME BUBAL CBEDITS. 37 stock may be divided into preferred and common stock. If so divided, the arti- cles of incorporation must contain a statement of the number of shares of stock to which preference is granted and the number of shares of stock to which no preference is granted and the nature and extent of the preference and privileges granted to each. (ft) The articles must be subscribed by the incorporators and acknowledged by three or more of such incorporators before an officer authorized by the law of this state to take and certify acknowledgments of deeds and conveyances ; and shall be filed in accordance with the provisions of the general corporation law of this State ; and when so filed the said articles of incorporation, or certified copies thereof, shall be received in all the courts of this State and other places, as prima facie. evidence of the facts contained therein and of the due incorpora- tion of such association. Sec. 8. The articles of incorporation may be altered or amended at any regu- lar meeting or at any special meeting called for that purpose. An amendment must first be approved by a majority of the directors and then adopted by a vote representing a majority of all the members of the association. Amendments to the articles of incorporation when so adopted shall be filed in accordance with the provisions of the general corporation law of this State. Sec. 9. Each association incorporated under this act must, within 30 days after its incorporation, adopt for its government and management a code of by- laws not inconsistent with the powers granted by this act. A majority vote of the members or stockholders or their written assent is necessary to adopt, alter, or amend such by-laws. Sec. 10. In its by-laws each association shall provide for one or more regular meetings annually. The board of directors shall have the right to call a special meeting at any time, and 10 per cent of the members or stockholders may file a petition stating the specific business to be brought before the association and demand a special meeting at any time. Such meeting must thereupon be called by the directors. Notice of all meetings, together with a statement of the pur- poses thereof, shall be mailed to each member at least 10 days prior to the meeting. Sec. 11. The affairs of the association shall be managed by a board of not less than five directors, who shall be residents of the State of Washington and who shall be elected by the members or stockholders from their own number. The by-laws may provide that the territory in which the association has mem- bers shall be divided into districts and that the directors shall be elected ac- cording to such districts. In such a case the by-laws shall specify the number of directors to be elected by each district, the manner and method of reappor- tioning the directors, and of redisricting the territory covered by the association. The by-laws shall provide that primary elections shall be held in each district to select the directors apportioned to such districts, and the result of all such primary elections must be ratified by the next regular meeting of the associa- tion. The by-laws shall provide that one or more directors shall be appointed by the director of agriculture. The director or directors so appointed need not be members or stockholders of the association, but shall have the same powers and rights as other directors, and shall be regarded as representing the in- terests of the public. An association may provide a fair remuneration for the time actually spent by its officers and directors in its service. No d'rector during the term of his office shall be a party to a contract for profit with the association differing in any way from the business relations accorded regular members or holders of common stock of the association, or to any other kind of contract differing from terms generally current in that district. When a vacancy on the board of directors occurs other than by expiration of term, the remaining members of the board, by a majority vote, shall fill the vacancy, unless the by-laws provide for an election of directors by district. In such a case the board of directors shall immediately call a special meeting of the members or stockholders in that district to fill the vacancy. Sec. 12. The directors shall elect from their number a president and one or more vice presidents. They shall also elect a secretary and treasurer, who need not be directors, and they may combine the two latter offices and designate the combined office as secretary-treasurer. The treasurer may be a bank or any depository, and as such shall not be considered as an officer but as a function of the board of directors. In such case the secretary shall perform the usual accounting duties of the treasurer, excepting that the funds shall be deposited only as authorized by the board of directors. SHORT-TIME RURAL CREDITS. Sec. 13. When a member of an association established without capital stock > paid his membership fee in full, he shall receive a certificate of member- p. No association shall issue stock to a member until it has been fully paid . Except for debts lawfully contracted between him and the association, member shall be liable for the debts of the association to an amount ex- ding the sum remaining unpaid on his membership fee or his subscription the capital stock, including any unpaid balance on any promissory notes en in payment thereof. No stockholder of a cooperative association shall a. more than one-tenth of the issued common stock of the association; and association in its by-laws may limit the amount of common stock which ■ member may own to any amount less than one-tenth of the issued common ck. Any association organized with stock under this act may issue pre- red stock, with or without the right to vote. No member or stockholder ill be entitled to more than one vote. Such stock may be redeemable or re- ible by the association on such terms and conditions as may be provided by the articles of incorporation and printed on the face of the certificate. a by-laws shall prohibit the transfer of the common stock of the association • persons not engaged in the production of the agricultural products handled the association, and such restrictions must be printed upon every certificate stock subject thereto. The by-laws and the marketing agreement of the ociation may provide for the retiring of the common or preferred stock of association. ■ec. 14. Any member may bring charges against an officer or director by filing in in writing with the secretary of the association, together with a petition ned by 10 per cent of the members, requesting the removal of the officer or ector in question. The removal shall be voted upon at the next regular or :cial meeting of the association and, by a vote of a majority of the mem- s, the association may remove the officer or director and fill the vacancy. e director or officer against whom such charges have been brought shall be ormed in writing of the charges previous to the meeting and shall have an )ortunity at the meeting to be heard in person or by counsel and to present nesses ; and the person or persons bringing the charges against him shall . 7 e the same opportunity. In case the by-laws provide for election of di- tors by districts with primary elections in each district, then the petition removal of a director must be signed by 20 per cent of the members residing the district from which he was elected. The board of directors must call a icial meeting of the members residing in that district to consider the re- val of the director. By a vote of the majority of the members of that dis- ?t, the director in question shall be removed from office. Sec. 15. The association and its members may make and execute marketing ltracts, requiring the members to sell, for any period of time not over 10 irs. all or any specified part of their agricultural products or specified com- dities exclusively to or through the association or any facilities to be cre- d by the association. The contract may provide that the association may 1 or resell the products of its members, with or without taking title thereto ; :1 pay over on a proportional basis or otherwise to its members the resale ce, after deducting all necessary selling, overhead, and other costs and ex- lses, including interest on preferred stock, not exceeding 8 per cent per annum 3 reserves for retiring the stock, if any ; and other proper reserves ; and erest not exceeding 8 per cent per annum upon common stock : Provided, at the form of such contract shall be approved by the director of agriculture 1 shall state the maximum amount of any such reserve to be deducted from i sale price of the products of the members of such association: Provided ■flier, That said contract shall contain a date upon which settlement will be de between the association and each of its members for the crop or product rketed by said association during the preceding marketing season, which te shall not be later than July 1 following the year in which any such crop product has been produced. The by-laws and the marketing contract may as liquidated damages specific sums to be paid by the member or stockholder the association upon the breach by him of any provision of the market'ng ltract regarding the sale or delivery or withholding of products: and may 'ther provide that the member will pay all costs, premiums for bouds, ex- ises and fees in case any action is legally maintained under the contract by ; association; and any such provisions shall be valid and enforceable in the irts of this State. In the event of any such breach or threatened breach of ;h marketing contract by a member the association shall be entitled to an unction to prevent the further breach of the contract and to a decree of SHORT-TIME RURAL CREDITS. 39 -specific performance thereof. Pending the adjudication of such an action and upon filing a verified complaint showing the breach or threatened breach, and upon filing a sufficient bond, the association shall be entitled to a temporary restraining order and preliminary injunction against the member. .Sec. 16. Whenever an association organized hereunder with preferred capital stock shall purchase the stock or any property or any interest in any property ■of any person, firm, or corporation, or association, it may discharge the obliga- tions so incurred, wholly or in part, by exchanging for the acquired interest shares of its preferred stock to an amount which at par value would equal a fair market value of the stock or interest so purchased, as determined by the board of directors. In that case the transfer to the association of the stock or interest purchased shall be equivalent to payment in cash for the shares of :Stock issued. Sec 17. Each association formed under this act shall prepare and file in the office of the director of agriculture an annual report, on forms furnished by the ■director of agriculture, containing the name of the association, its principal place of business, and a general statement of its business operations during the fiscal year, showing the amount of capital stock paid up and the number of stockholders of a stock association or the number of members and amount of membership fees received, if a nonstock association ; the total expenses of operations ; the amount of indebtedness or liability, and its balance sheets. An examination and audit of the affairs of all associations incorporated under this act and doing a gross business of at least $200,000 per year shall be made annually by the department of taxation and examination and at such other times as the director of agriculture may require. The director of taxation and examination is hereby authorized, empowered, and directed to cause such exami- nation and audit to be made. One copy of such audit shall be filed with the director of agriculture, one shall be sent to the secretary of the association, one to the president of the association, and another shall be kept in the files of the office of the department. A charge of not more than $10 per day and expenses for each examiner shall be made to the association to pay the actual expense of making such audit. Associations doing a gross business of less than $200,000 annually shall provide in their by-laws or otherwise for the making and filing of annual audits of their books, provided that upon demand of one-tenth of the members of such association said audit shall be made by the department of taxation and examination in the manner provided herein for larger associations. Sec. 18. If the director of agriculture shall find that any associat'on is operating in violation of law or is insolvent, and after 10 days' notice has failed or refusal to comply with the law., he may by proper proceeding in the superior court of the county where the principal place of business of said asso- ciation is located, cause a receiver for such association to be appointed, and the affairs of such association immediately liquidated under the direction of said superior court. Sec. 19. An association may organize, form, operate, own, control, have an interest in, own stock of, or be a member of any other corporation or cor- porations, with or without capital stock, and engaged in preserving, drying, processing, canning, packing, storing, handling, shipping, utilizing, manufac- turing, marketing, or sell'ng of the agricultural products bandied by the asso- cirtion, or the by-products thereof. If such corporations are warehousing corporations they may issue legal warehouse receipts to the associat'on or to any other person, and such legal warehouse receipts shall be considered as adequate collateral to the extent of the customary percentage of the on-rent value of the commodity represented thereby. In case such warehouse is licensed or licensed and bonded under the laws of this State or the United States, its warehouse receipt shall not be challenged or d'seriminated against because of ownership or control, wholly or in part, by the association. Sec. 20. Any association may, upon resolution adopted by its board of ■directors, enter into all necessary and proper contracts and agreements and make all necessary and proper stipuations, agreements and contracts and arrangements with any other cooperative corporation, association or aw rela- tions, formed in this or in any other State, for the cooperative and more economical carrying on of its business, or any part or parts thereof. Any two or more associations may, by agreement between them, unite in employing anil using, or may separately employ and use the same methods, means and agen- cies for carrying on and conducting their respective businesses. A duplicate ■copy of each of the contracts mentioned in this section shall be filed in the SHORT-TIME BUBAL CREDITS. ce of the director of agriculture immediately after the execution and ivery thereof. Sec. 21. Any corporation or association organized under previously existing tutes, may by a majority vote of its 1 stockholders or members be brought ler the provisions of this act by limiting its membership and adopting the er restrictions as provided herein. It shall make out in duplicate a state- nt signed and sworn to by its directors, to the effect that the corporation or iociation has, by a majority vote of its stockholders or members, decided to- :ept the benefits and be bound by the provisions of this act. Amendments to icles of incorporation shall be filed as required in sections 4 and 7, except it they shall be signed by the members of the board of directors. The filing shall be the same as for filing an amendment to articles of incorporation : ivided, That any such corporation or association organized pr or to the jroval of this act shall be admitted to the benefits hereof, subject to all of i requirements of this act except that the marketing contract between such lociation and its members need not be approved by the director of agriculture. ■^EC. 22. The members of any association may by two-thirds vote of all such rubers, at any regular meeting or at a meeting regularly called for that rpose, vote to dissolve said association, and thereupon such proceedings ill be had for the dissolution of said association as is provided by law for s dissolution and disincorporation of corporations organized under the gen- ii law. Sec. 23. The provisions of the general corporation laws of this State, and powers and rights thereunder, shall apply to the associations organized ■eunder, except where such provisions are in conflict with or inconsistent with ! express provisions of this act. 3ec. 23-a. Other than the usual salary or director's fees paid to any officer, ector, or employee of any association organized, incorporated, or reincor- •ated and transacting business under this act, and other than a reasonable i paid by such association to such officer, director, or employee for services idered to such association, no officer, director, or employee shall be a leficiary of or receive, directly or indirectly, any fee, commission, or other isideration for or in connection with any transaction or business of such iociation : Provided, however, That nothing in this act contained shall be istructed to prohibit a director, officer, or employee who may also be a mber of such association from receiving all the ordinary and usual benefits iich other members receive. Any officer, director, or employee of any such iociation who violates any of the provisions of this section shall be guilty a felony. Sec. 24. Any person who shall knowingly subscribe to, or make any false itement or entry in the books of any association, or who shall knowingly ike any false statement in any report required to be filed with the director agriculture, or who shall knowingly with intent to deceive or misrepresent the airs of the association to any person authorized and directed by the depart- mt of taxation and examination to examine such associations shall be guilty a felony. Sec. 25. Every officer, director, employee, or agent of any association who, • the purpose of concealing any fact or suppressing any evidence against nself or against any person, shall abstract, remove, mutilate, Sestroy, or irete any paper, book, or record of any association or of the department of riculture shall be guilty of a felony. Sec. 26. The director of agriculture may maintain an action in his own me for the use of any association upon any unpaid contract of subscription the capital stock of such association, or upon any promissory note given to ch association in payment thereof, or to cancel any stock issued by it in )lation of law. 3ec. 27. It shall be the duty of the attorney general to appear and act for ; director of agriculture in all actions or proceedings involving any ques- n under this act. Sec. 28. Every order, decision, or other official act of the director of agricul- :e> shall be subject to review, and any party aggrieved by such order, deci- >n, or act of the director of agriculture may appeal therefrom to the superior rrt of the county of Thurston by serving upon the director of agriculture a tice of such appeal, specifying the order, decision, or act appealed from, and ng the same with the clerk of the superior court of the county of Thurston thin 60 days after the date of such order, decision, or official act. Where- on the director of agriculture shall, within 10 days after filing of such notice SHORT-TIME SURAL CREDITS. 41 of appeal, make and certify a transcript of all the records and papers on file- In his office affecting or relating to the order, decision, or act appealed from, and upon the payment of the fee therefor by the appellant, the director of agriculture shall file the same in the office of the clerk of said superior court. Upon the hearing of such appeal the burden of proof shall be upon the appel- lant, and the court shall receive and consider any pertinent evidence, whether oral or documentary, concerning the action of the director of agriculture from, which appeal is taken. Any party to such appeal to the superior court who is aggrieved by the judgment of said court rendered upon such appeal may prose- cute an appeal to the supreme court of the State of Washington. The general laws relating to bills of exception, statements of fact, and appeals to the supreme court, shall apply to all appeals taken to the supreme court under this act : Provided, That no supersedeas of the judgment of the superior court shall be allowed, except at the discretion of said superior court. If supersedeas is- allowed, it shall be upon such bond and with such condition as the superior court may require by its order. Sec. 29. Each association organized hereunder shall pay an annual license fee of $15, but shall be exempt from all franchise or license taxes. Sec. 30. For filing articles of incorporation an association organized here- under shall pay $25, and for filing an amendment to the articles $10. Sec. 31. If any section of this act shall be declared unconstitutional for any reason, the remainder of the act shall not be affected thereby. Passed the house March 2, 1921. Passed the senate March 8, 1921. Approved by the governor March 18, 1921. [Inclosure No. 2.] CROP CREDIT ACT. [Effective June 10, 1921.] Chapter 121 (S. B. 62). An act relating to rural credits and agricultural' cooperation providing for the organization and regulation of crop credit asso- ciations, the duties of the director of marketing in relation thereto, and pre- scribing penalties for the violation of the provisions hereof. Be it enacted by the Legislature of the State of Washington: Section 1. This act shall be known and may be cited as the " Washington crop credit act." Sec. 2. The purpose of this act is to promote the orderly marketing of stand- ard crops grown in the State of Washington by . providing credit facilities whereby the growers thereof may finance the harvesting, storing, and market- ing of same. Sec. 3. Any number of bona fide growers of standard crops in the State of Washington, not less than 10, may associate themselves together to form a crop credit association in the manner hereinafter provided. The term " stand- ard crops " as herein used means wheat, hay, apples, potatoes, and such other crops as the director of marketing of the State of Washington shall hereafter designate. Sec. 4. Such crop credit associations shall be divided into two classes: (a) Temporary crop credit associations, which shall exist for one year and for the purpose of establishing credit facilities for the handling of one crop. (6) Permanent crop credit associations, which may incorporate for a term not exceeding 50 years, with such powers and privileges as are hereinafter set forth or may be conferred thereon by law. Sec. 5. The director of farm marketing of the State of Washington shall have general charge and supervision of all such crop credit associations as herein provided. Before beginning his duties as the director of crop credit associations he shall make and file in the office of the secretary of state a bond in the penal sum of $5,000, to be approved by the secretary of state, condi- tioned upon the faithful discharge of his duties as such director of crop credit associations. The word " director " wherever it shall hereafter appear in this act shall mean the director of farm marketing of the State of Wash- ington. Sec. 6. Any qualified persons desiring to form a crop credit association as herein provided shall execute in quadruplicate and acknowledge before some officer authorized to take the acknowledgment of deeds articles of association,. 42 SHORT-TIME RURAL CREDITS. one copy of which shall be filed in the office of the director, one copy in t office of the secretary of state of the State of Washington, one copy in t office of the county auditor of the county where the principal place of busine of such association is located, and one copy shall be kept as part of the p« manent records and files of such association. Sec. 7. If such association is to be a temporary association, said articles slu state the name of the association, its principal place of business, the amou of the membership fee to be charged, and the amount of credit in the aggi gate which it is estimated Its members will require. In addition thereto, tl organizers of such association shall file the application for a permit to trar act business as hereinafter more fully set forth. The organizers of such tei porary organization shall also pay to the director a fee of $5, and to tl secretary of state of Washington a fee of $10. Sec. 8. The organizers of a permanent crop credit association shall likewi execute in quadruplicate and iile as above provided original copies of proposi articles of association therefor. Said articles of association shall set forth : (ft) The name of tin- 1 association, which shall contain the words " crop cred association." (6) Its principal place of business. (c) The term for which it is to exist, which shall not exceed 50 years. (d) The amount of membership fees required of its members, not to excet $100 each. (e) The business desired to be transacted by said association, if any, i addition to the powers and privileges hereinafter set forth. Sec. 9. If the director shall be convinced that there is a need for the propose crop credit association and that the business which it is to do, as shown by sai articles of association, is in accordance with the provisions of this act, he sha issue a certificate authorizing the filing of the said articles of ascsociation in tl office of the secretary of state of Washington and in the office of the couni auditor of the county wherein is located the principal place of business of sa: association. Sec. 10. The organizers of any permanent crop credit association shall ps the following filing and license fees : To the director, $10 ; to the secretary < state, $15 ; and the annual license fee required of corporations to be collects by the secretary of state as in the case of other corporations; and thereafti said association shall pay to the secretary of state annually on or before tl 1st day of July a license fee of $15. Sec 11. Upon the issuance of said certificate of authority by the directf and the issuance of a license by the secretary of state, every such associatir shall be a body corporate and politic in fact and in name, by the name stated i the articles of association, and shall have power — (1) To sue and be sued in any court having competent jurisdiction. (2) To make and use a common seal. (3) To purchase, hold, own, mortgage, sell, and convey real and person! property to borrow money as shall be necessary for the needs of said corpon tion and to lend same, or any part thereof, or any of the funds of the associ: tion to its members upon such security, real or personal, as it shall require ; an to execute, as evidence of money borrowed, any and all forms of notes, bond debentures, and certificates, and secure same by the execution of any mortgag lien, deed of trust, or the surrender of any property owned or held by it, an to pay, cancel, satisfy, and renew the same, and to receive any of the abo"\ evidences of indebtedness and securities for money loaned. (4) To engage in the warehouse and storage business for the benefit of ii members, and to handle, prepare for market, store, ship, and sell all agricu tural crops for or on account of its members, and to charge and receive cor pensation for any such service. (5) To appoint such officers, agents, and servants as the business of tl corporation shall require, to define their powers, prescribe their duties, and f! their compensation. (6) To require of them such security as may be thought proper for the fu fillment of their duties and to remove them at will ; except that no trustee sha be removed from office unless by vote of a majority of the members thereof. (7) To make by-laws not inconsistent with the laws of this State or ( the rutted States. (8) To manage its property, to regulate its affairs, to provide for tl transfer of membership therein, and to carry on all lends of business withi the objects and purposes of said association as expressed in the articles ( «nirl sissocintion or contained in this act. SHORT-TIME RURAL CREDITS. 43 (9) To act as broker for its members in disposing or selling of their crops, ami to advance and lend money to any such member on the security of such crops or such other security, real or personal, as it may require. (10) To hold, own, and vote stock or other evidence of ownership in any other cooperative association or corporation. (11) To buy, sell, and deal in and to procure for its members such supplies as shall be necessary or useful in and about the growing, harvesting, and mar- keting of any agricultural crop grown or to be grown by them. Sec. 12. No crop credit association shall engage in the business of buying or selling for its own account, directly or indirectly, any crop grown, ra sed, or produced by its members or others, Dut such association may lie and aft as broker, as in this act provided, for the sale of the crops of its members. None of the funds or assets of any such association shall ever be used for or ex- pended in and about the business of buying, selling, or dealing in any such crops. Sec. 13. The organizers of every crop credit association shall before it commences business adopt by-laws for the government of said association, in which provision shall be nrade for the admission of members thereto, the terms of admission, lapsation, and expulsion, and the membership fee of not to exceed $100 which shall be required from each member. Upon the full pay- ment of any such membership fee the association shall issue a certificate of membership, which shall be transferable only to bona fide growers of standard farm crops under such conditions and regulations as shall be provided in such by-laws. No person shall become a member of any crop credit association who is not at the time of becoming such member a bona fide grower of standard farm crops in the State of Washington. Such by-laws shall also contain rules and regulations for the proper and orderly government of such association and the exercise of its lawful powers. Every association shall submit its proposed by-laws to the director for his approval that the government of all crop credit associations in the State of Washington shall be uniform. If said by-laws are not approved by the said director, the same shall be suspended by his order until by-laws approved by him shall be adopted by such crop credit association. Sec. 14. Such association shall be managed by a board of not less than three trustees. The trustees shall be elected by and from the members of the asso- ciation at such time and for such term of office as the by-laws may prescribe and shall hold office during the term for which they are elected and until their successors are elected and qualified, but a majority of the members shall have the power at any regular or special meeting legally called for that pur- pose to remove any trustee or officer for cause and fill the vacancy. The officers of every such association shall be a president, vice president, secretary, and treasurer, who shall be elected by the trustees. Each of said officers must be a member of the association. All elections shall be by ballot. Each member of the association shall be entitled to 1 vote only. Sec. 15. Any crop credit assoc ; ation organized under the provisions of this act shall have authority to make loans to its members, in accordance with their credit needs, not to exceed 6S| per cent of the fair market value of the standard farm crops grown by such member, and in turn may mortgage, transfer, or hypothecate the said crops as direct or collateral security for the borrowing of money necessary to make such advances and loans to its members. Each loan by the association to its members shall be evidenced by the nego- tiable promissory note of the member borrower in an amount exceeding the credit extended to such member by 10 per cent, with interest at a rate fixed by the association and maturing at least 15 days prior to the maturity of the crop credit notes herein provided for, which note shall be secured by a nego- tiable warehouse receipt covering said standard agricultural product ; a policy of insurance against loss by fire, and a certificate of inspection by the proper authority of the State of Washington as to the quality and variety of the farm product offered as such security. All such crops so offered as security for such loans must be free and clear of all incumbrances, except inspection, ware- house, and insurance charges accruing against same : Provided, That when the standard crop used as the basis of credit is wheat, 75 per cent of the fair market value may be loaned thereon and no certificate of inspection thereof shall be required. Sec. 16. Every crop credit association which shall desire to issue its notes or commercial paper, secured by the crops of its members as hereinabove pro- vided shall make application to the director for authority to issue crop credit 44 SHORT-TIME RURAL CREDITS. notes of the association, which application shall be made upon blanks furnish for that purpose by said director and shall show : (1) The name and place of business of the association making such applii tion. (2) The kind of standard farm crop to be used by it for credit purpos and only one standard farm crop shall be used for each issue of crop cre< notes. (3) The estimated quantity and quality of the crop to be so used. (4) The estimated amount of money desired to be borrowed against any su «rop. (5) The period of credit desired, not to exceed six months. (6) The estimated number of growers of such standard crop. (7) The name of the trustee. Said application shall be signed by the president and secretary of sin association and attested by its seal, and shall be accompanied by a fee of $5. Sec. 17. Upon the receipt of said application and the filing fee by the direct he shall cause investigation thereof to be made covering the information co tained in such applicat on, and if he finds the said application in all respects accordance with this act he shall issue a certificate of authority to the trusti named in said application, in which certificate shall be stated a fair price f< credit purposes of the farm crops mentioned in said application, to be used { the basis of credit in the issue of crop credit notes. Said fair price shall t determined by said director from any and all information obtained by hi] with reference to the particular farm crop, covering the condition of the ma kets in the United States and elsewhere ; the visible supply of such produi and the kind, quality and condition of same. Said fair price shall not be coi sidered as in any manner fixing the price at which said products may or sha he bought or sold, but same shall be fixed only for the purpose of furthe assuring the purchasers of any securities or paper issued on the basis of th credit of such farm crop. Sec. 18. Upon the issuance of said certificate of authority to the truste named in any such application, said trustee shall immediately so inform the ofl cers of the association making such application. The association shall thereupo forthwith deliver to the said trustee all notes, warehouse receipts, securities insurance policies, and certificates of inspection held by it or which shall b required by the director as security for the proposed issue of crop-credit notes and shall convey full title of all property and securities represented by an; evidence of indebtedness or constituting a lien thereon to the said trustee to be by said trustee used as the security for the issuance of the proposed cro] credit notes by said association. Sec. 19. Thereupon said crop credit association may issue, under the sea and signed by the president and secretary of such association, crop credit note in the aggregate not to exceed the amount of such issue of notes stated ii the certificate of authority of the director to the trustee. Said notes shall be ii denominations of not less than $50 nor more than $5,000, payable at a fixe( period of maturity, not to exceed six months from the date of the certificati of authority, as shall be determined by the said board of trustees. Said notes shall thereupon be delivered to said trustee, who shall countersign same anc deliver them at such times and in such amounts and at such discount as shal be determined by the board of trustees by resolution entered upon the minutes of their proceedings. Said notes shall contain the number of the certificate oi authority and the date of issuance thereof, together with the facsimile signa ture of the director and a series number, and shall state the kind of standarc crop held by said trustee as security therefor, and shall otherwise be in suet form as the director shall prescribe. Sec. 20. Said trustee shall deliver said notes properly countersigned, and receive the proceeds of the sale thereof, which proceeds shall be by said trustee immediately distributed to the members of said association in accordance with their their credit requires as shown by a schedule signed by the officers of said association and filed with the trustee shown the name and address of each member borrower, the kind, quantity, and value of the crop pledged by him as security for his loan, and the amount borrowed thereon, less a brokerage charge of not to exceed 2 per cent thereof for the use of the association as determined by its trustees. Sec. 21. The trustee holding the said securities herein provided shall be entitled, as compensation for all of its services rendered under this act, to a fee not to exceed 1 per cent of the par value of notes issued by it where such SHORT-TIME RURAL CREDITS. 45 issue shall be $50,000 or less, and not to exceed one-half of 1 per cent for any such issue of more than $50,000, payable from the brokerage charged by the association, as shall be agreed between the association and said trustee, which agreement shall be approved by the director. Sec. 22. All such crop credit notes shall be general obligations of the crop credit association issuing same and shall be secured by the entire number of collateral notes of the members of said association, participating in such issue, deposited with said trustee. Sec. 23. Upon maturity of the notes evidencing the members' indebtedness to the association, the said trustee shall collect and place same in a fund for the retirement of said crop credit notes. Upon the collection of said indebted- ness, which shall include the 10 per cent excess, as hereinbefore provided, any and all warehouse receipts, insurance policies, certificates of inspection, or other security deposited for the security of the indebtedness of said member, shall be delivered to the said member or to his order. The funds so repaid by the members of the association, upon the order of the trustees of such asso- ciation, may be used for the immediate retirement of any outstanding crop credit notes of said issue, at a price not to exceed the face value of such crop credit notes. All members' notes, money, certificates, and securities remain- ing in the hands of said trustee, after permission given it by the director, shall be returned to the crop credit association issuing same, which associa- tion shall collect as quickly as possible any remaining indebtedness under said issue then due to it. All sums so collected, less collection fees and ex- penses, shall be divided among and paid to the members of said association in proportion to the loan severally made to its members: Provided, however, That before any such division of moneys remaining after the retirement of any issue of crop credit notes, a full report of the issuance and sale of said notes and the retirement thereof shall be made to the director, and same shall not be distributed to the members of such association until the approval thereof by said director has been made in writing. Sec. 24. A full report of every issue of such crop credit notes shall be made to the director by the trustee at the time of sale of said notes and again at the time of the redemption thereof, said reports to be made upon blanks fur- nished therefor by said director. The director shall at all times have the right and privilege of inspecting the crops, securities, warehouse receipts, and accounts of the said association or the said trustee until the issue secured by same shall have been fully paid and retired. Each association shall make an annual report to the director of markets, showing the gross returns to said association from the business of the previous year ; an itemized statement of its expenses ; the amount of its net gain, if any, which shall have been trans- ferred to a surplus account ; and the amount of money distributed to its members. Sec. 25. Every permanent association organized under this act may estab- lish a capital account which shall be its working capital. It may transfer thereto any membership fees, commissions, fees, or charges against its mem- bers or profits from sale of supplies to its members, and may use said capital fund in the transaction of any lawful business conducted by the association. Sec. 26. Any bank, trust company or mutual savings bank organized under the laws of the State of Washington may be and act as the trustee for the issuance of any crop credit notes provided for herein, and any bank organized under the laws of the United States, may also act as such trustee, subject to the supervision of the directors as in this act provided. Sec. 27. No issue of crop credit notes shall be made without first having secured the authority of the director, nor shall any such issue be founded upon any other than standard agricultural crops grown in this State. The director shall make general rules and regulations governing the issuance of such notes and for the proper administration and enforcement of this act. Sec. 28. For good cause shown the director may permit the issuance of refund- ing hotes to take up any balance of a series upon maturity thereof : Provided, TheA shall be ample security for said refunding issue in accordance with the requirements of this act, said refunding series to be issued at or prior to the maturity ttf- said first series of notes covering any such crop. Sec. 29. Upon default by any crop credit association in the payment of its crop credit notes promptly at the maturity thereof, notice of protest of which shall be immediately given by the trustee to the director, said director shall take charge of all the business, property, security, and assets of said association, whether the same be in possession of said association or in the hands of the 46 SHORT-TIME RURAL CREDITS. trustee of its issue of crop credit notes, and shall have the power and author! immediately to market to the best advantage any crops remaining on hand security for the remainder of said notes. He may make composition with t creditors of said association holding its crop credit notes ; he may arrange f an extension of the time of payment thereof, and may otherwise fully liquida the affairs of said association, with all the powers of a receiver, duly and reg larly appointed by the court having jurisdiction of the association involved ; ai said director may make application to the superior court in the county whe the principal place of business of such association is located for any addition authority necessary to enable him properly and promptly to liquidate the affai of said association and to pay its creditors. In any such liquidation the credito holding crop credit notes shall be considered to have a first lien upon all tl property and assets securing said notes, and thereafter shall share equal with the unsecured creditors of said association in any unencumbered asse thereof. Sec. 30. No liability shall attach to the director nor to the trustee issuii said certificates by reason of the exercise of the authority granted by this a( except that said trustee shall be liable for misfeasance or malfeasance in tl administration of said trust. No liability in excess of the membership fi charged by said association shall accrue to or against any member thereof I reason of such membership. Sec. 31. Any cooperative marketing association, stock company, or associatic engaged exclusively in harvesting, storing, preparing for market, or marketir the crops or products of its members or stockholders may take advantage of tl provisions of this act and shall be entitled to all of the privileges hereof upc filing the application for authority to issue crop credit notes as hereinbefore pr vided for temporary and permanent crop credit associations. Any certificai of authority issued to or for any corporation so applying shall be deemed to t for one crop season only, as in the case of a temporary crop credit association. Sec. 32. Every member borrower, personally or through his duly authorize agent or broker, shall have the exclusive right to sell and dispose of the cro pledged by him for his loan : Provided. That after the maturity of the indebtei ness from him to the association the association may forthwith and withoi notice to the borrower sell said crops to the best advantage and discharge sai indebtedness. Skc. 33. All fees collected by the director shall inure' to the benefit of tli State College of Washington for use in the work of the director of marketin and shall be available therefor without any other or further appropr atio thereof. A statement of all receipts and expenditures by the director shall b made in Irs annual report. Sec. 34. Every person who shall violate or knowingly aid or abet the violf tion of any provision of this act. and every person who fails to perform an act which it is made his duty to perform herein, shall be guilty of a gross mii demeanor. Sec. 35. If any section or part of a section of this act shall for any cause h held unconstitutional, such holding shall not affect the rest of this act or an other section hereof. Sec. 36. When the director of agriculture shall have been appointed and qua! fied and shall assume and exercise the duties of his office, all powers and dutie herein conferred and imposed upon the director of farm marketing shall b transferred to the office of the director of agriculture and be assumed an exercised by the incumbent thereof. Passed the senate February 28, 1921. Passed the house March 7, 1921. Approved by the governor March 19, 1921. Exhibit M. Wheat Growers' Associations, Washington and Idaho, Spokane, Wash., April 22, 1921. Senator Thomas P. Gore, Woodward Building, Washington, D. G. My Dear Senator: I am in receipt this day of your telegram dated Apr: 21, and in reply will say that I am inclosing herewith trade bill which we ar using in financing our wheat. I am also inclosing a copy of warehouse ticke which we use in our country. SHORT-TIME RURAL CREDITS. 47 The articles of incorporation are now on the press, and I am leaving instruc- tions to have a copy forwarded to you as soon as they are off. Mr. Jewett has not returned from Chicago yet, hut I am leaving a request that he furnish you a detailed statement of the operation of the company. I went over the matter of the cost of operation with Mr< Jewett, and I wish to say that the statement of 5 cents per bushel as an overhead expense in this year's operations is approximately correct ; but I hope you will appreciate the fact that we have had to set up a full and complete institution from the ground up, and that with the present force and overhead which we now have we could just as well handle fifteen or twenty million bushels as the two or two and a half million handled this season. We feel that for the coming season our overhead should not exceed 1 cent per bushel. I trust the matter contained herein is about whatl you want, and hope to see something definite come out of the committee in the way of a crop credit program that will assist the farmer in moving his crop. With kind personal regards, I am, i Sincerely, yours, A. A. Elmore. Exhibit O. Wheat Geowebs' Associations, Washington and Idaho, Spokane, Wash., May 5, 1921. Senator T. P. Gore, Washington, D. C. Dear Senator: Mr. A. A. Elmore, until recently president of the Farmers' Union of this city, has handed me your telegram under date of the 21st ultimo, with the request that I make a statement in reference to rural credits that might be used you in connection with hearings on that subject. Mr. Elmore afforded me the opportunity of reading the stenographic notes of his remarks made before your committee at the time he was in Washington, and I am pleased to be able to verify them in substance. It seems to me in approaching the subject of short-time rural credits we get two views: One is credits based on the group method, whereby the members of the group will indorse the obligations of their individual members and col- lectively, to their full financial responsibility, be liable for all loans made. This method has been widely discussed, and in all probability should be the basic method on which the loans are to be made. However, I am firmly of the opinion, brought out by many years' experience in the banking business, a part of which was with the Federal land bank, that there should be an opportunity for farmers to make loans based on the commodities they produce for the purpose of carrying such commodities over a reasonable period of time in order that orderly marketing may be provided and the necessity for enforced mar- keting under unfavorable marketing conditions avoided. The need for this has been very apparent in the past few years, and I regret to have to say that the banking facilities of the country and the attitude of the Federal reserve system have been such that adequate service to bring about the desired results has not been available. A rural-credit act embracing this method of loans would necessitate the designating of trustees as agents for the Government to hold the collateral securities in behalf of the purchasers of the debentures which would be floated. It seems to me that the Federal land banks, being evenly distributed and well equipped, could function in such capacity without material additional expense. In our operations here we have developed a security known as wheat gold bonds, which has met with considerable favor by the investing public, and it provides an entirely new avenue of financing the farmer under present condi- tions. If the principle involved in their issue was placed in a Federal act, thereby giving them the prestige of Federal supervision, etc., such securities would find a ready market and at a very low rate of interest. I believe Mr. Elmore has furnished you with copies of these bonds and other data in reference to their issue. The question of rural credits is one in which the farmers of the Nation are very keenly interested and are anxiously looking forward to the present Con- gress for action in such respect. 51425—21 4 48 SHORT-TIME BUBAL CBBDITS. I thank you for the opportunity of making these statements and assure you that it will be a pleasure to respond further if in your opinion I can add any- thing of value either by letter or by personal appearance before your committee. Very truly yours, Geo. C. Jewett, General Manager. Exhibit N. THE GUARANTEED WHEAT PRICE. This huge fund had been administered in a manner to afford the producers of wheat every price protection that could reasonably be asked. That the interests of both farmer and consumer had been fairly conserved is abundantly manifest from the relative advance in the price of wheat to the farmer and of flour and bread to the consuming public. The relative prices at selected sig- nificant dates of wheat, flour, and bread are based upon the average price for 1913 in each instance. The actual (i. e., money) prices from which the above relatives were com- puted are : Average for — Average farm price per bushel of wheat on 1st of month. Average retail price per pound of flour in all cities. Average retail price per pound of bread in all cities. Year 1913 May, 1917 December, 1917 August, 1918... August, 1919 .. . April, 1920 80.79 2.46 2.09 2.05 2.17 2.34 Cents. 3.3 8.7 6.7 6.8 7.4 8.1 Cents. 5.6 9.6 9.3 9.9 10.1 11.2 The figures for the farm price of wheat are taken from the Monthly Crop Report, United States Department of Agriculture ; the retail prices of flour and bread are from the Monthly Labor Review of the Bureau of Labor Statistics. Average farm price of wheat. Average retail price of flour. Average retail price of bread. Year 1913 May, 1917 December, 1917 August, 1918... August, 1919... April, 1920 100 311 265 259 274 300 100 260 205 206 224 245 100 168 166 177 180 200 The total purchases of wheat and flour by the Grain Corporation during the three years of its existence amounted to the equivalent of 705,000,000 bushels of wheat. 1 From September 1, 1917, to May 31, 1920, its total purchases of all kinds aggregated the sum of $3,735,771,861.92, and its sales $3,685,546,644.28. The total operating expenses during this period were only about 0.17 per cent of sales, and the net profits on completed business about $50,000,000. Of this amount approximately $20,000,000 represents profits arising from sales of foodstuffs, chiefly wheat and flour, to European neutrals during the war, at prices above the Government buying prices. These neutrals took unconscionably high profits from their shipping business during the war, even upon the trans- port of supplies destined for the use of our own Army abroad, and it was deemed nothing less than right that they should be required to pay prices which would return some of that profit to this country. Also included in the profit item of the Grain Corporation were some $8,000,000 of " excess " profits which the flour mills were required to refund after detailed audits i Purchases of wheat were 435,001,462 bushels ; purchases of flour, 59,697,761 barrels. SHORT-TIME RURAL, CREDITS. 49 had been made of their accounts. These represented profits In excess of those which they were permitted to take under the regulations of the Food Adminis- tration governing the operations of flour mills in 1917-18. 1 At the end of June, 1920, the Grain Corporation returned $350,000,000 of its capital to the Treasury of the United States. This was the total amount that had been drawn from the Treasury out of the special appropriation of $1,000,- 000,000 provided by the wheat guaranty act of March 4, 1919. It was expected that the Grain Corporation's remaining capital of $150,000,,000 would be returned to the Treasury in full upon the final liquidation of accounts and claims still outstanding on June 30, These accounts included considerable debit balances (nearly $60,000,000) owing by several European governments to whom flour had been sold on credit for relief purposes. 2 Exhibit P. Putting Farming on a Modern Business Basis. [Being a copy of a letter to the secretary of the Kansas State Board of Agriculture. By Bernard M. Barueh.] New York, December 3, 1920. J. C. MOHXEK, Secretary Kansas State Board of Agriculture, Topeka, Keiix. Dear Sib : The world at large had not given much thought to the farmer and what he was doing for it until the great World War. Then it was learned that the farmer was one of the most vital factors in the success of the war, because the world had to be fed. After the war the high cost of living becoming acute soon brought vividly to everyone that farming was a matter in which not only the farmer was inter- ested but that the production and distributiton of his products were matters of vital and grave concern to the dweller in the city. I felt highly honored to be asked by your board to appear before it and give my views regarding some of the problems confronting the farmer in the mar- keting of his product. As I stated at that time, being unfamiliar with the subject, I preferred to see the problem and study it at closer range before giv- ing an opinion upon any phase of it. The subject has been given so much consideration not alone by the various farm organizations but by the depart- ments of agriculture of the various States, -and the Federal Government itself, that I hesitate to bring forward any suggestions. PRESENT CRITICAL MARKET CONDITIONS. Before going into the subject, it might be well to call attention to the present critical conditions in the market for commodities in the world. The congestion in marketing is one of the prime reasons why commodities are selling, in many instances, below their present cost of production. During the war various quantities of commodities were cut off from normal markets, owing to the lack of transportation by sea and the inability to finance. Upon the United States devolved the necessity not alone of financing the major part of the Allies' demands but also furnishing large amounts of raw mater, als and finished products. Thus our agriculture and industries were greatly stimu- lated. Even after the war there was still available to many of the Allies some of the credit extended to them during the war, which they used for purchases. This, together with the credit the Allies themselves could raise, continued the buying movement for necessities and gave a temporary appearance of a con- tinuance of the absorption of our products in the usual volume. But after the first great rush to some extent was satisfied, it soon became evident that the finances of our former consumers were being curtailed and that there was a necessity to husband resources. They also commenced to supply some wants from home production. » It should be pointed out that interest at the normal commercial rate on the national capital employed^? "the Grain Corporation would have amounted to considerably more tb »?.^ f ^ S i«| aI hv' r «nerial act in March, 1920, indorsed the Grain Corporation's plan to sell fome loob.Ooo'EaSels of flour on credit to relieve starvation in Austria, Poland, Armenia,, and other stricken regions. 50 SHOBI-TIME RURAL CREDITS. The ordinary trade routes through which we marketed our products have not been reopened, and we are witnessing a gradual curtailment of the purchasing power of our former customers. The markets of the world will not be reopened until we have peace and until Germany's payment for reparation is fixed. This, in my opinion, is the most important factor in the revival of our agri- culture and industry. BESTBICTION OF EUKOPEAN DEMAND. Europe, and particularly the Central Empires, were among the largest buyers of raw materials from the United States and the rest of the world. All Euro- pean countries, and particularly the Central Empires, have been restricted in their ability to buy, because of the nondetermination of the reparation which the Germans must pay. The allied Governments, in varying degree, are depending upon what they receive from Germany to rehabilitate their own impaired finan- cial and industrial structures. The Germans have to pay practically all the damages that will be assessed against the enemy States. The Germans will not resume purchases on the former scale until they know what bill will be deter- mined against them. They feel that, if they proceed to buy and revive tfieir indus- tries, the prosperity of their country will increase and that the reparation will be correspondingly increased. So it is that the commerce of those who will re- ceive payments from Germany, and the commerce of Germany itself, which makes the payment, will both have to wait until the damage has been definitely assessed against her. The principal recipient of payments from Germany will be France. And France will not in justice to her people accept a reasonable payment unless she can be secured against what occurred in the Franco-Prussian and World War. Upon the termination of hostilities, ships were released for the transporta- tion of commodities, such as wheat and wool, from Australia and the Argentine. These commodities, previously cut off by "the war, are now coming into competi- tion with our products in the markets of the world — markets limited in their consumption and buying capacity by the nondetermination of the reparation which Germany will be called upon to pay. The disturbed condition of the world markets and the nonreopening of old trade routes have resulted in the serious situation confronting us. Production of the mines and mills can be curtailed, although it would involve great loss to the operators and suffering to the workers in these industries. The corporations and individuals owning and operating mines and mills have facilities for financ- ing, which, to a certain extent, enable them to meet the situation. Most of them, in addition to the resources which they have accumulated, have allied with them great banking concerns, which can aid them in reaching whatever credits are available. THE FAKMEB'S LACK OF FINANCING FACILITIES. In the case of the farmer we have parallel conditions, with the exception that he is scattered and has not connected with his product the same facilities for financing or meeting the new critical conditions. The farmer can vary but not curtail production without injury to his farm and without very grave injury to the community. The curtailment of copper, steel, lumber, or manufactured products for six months or a year, or even for a longer time, may be a very serious injury to the community, but it can not begin to have the consequences that would follow a curtailment of agricultural production. The farmer now finds himself in the predicament of having a crop partly cut off from its usual market, former trade routes limited, and unable to finance himself unless he is willing to sell his products at very great sacrifices, in many instances well below the cost of production. This can not be permanently remedied until the trade routes of the world are reopened. They can be re- opened only through peace and the determination of a reasonable sum for Ger- many to pay under the treaty. If necessary credit is not extended so that the farmers may market their products according to consumption needs and secure a reasonable return for their efforts they will suffer very severely and will restrict their operations. And the consumer, who is vitally concerned in the maintenance of a normal flow of products, will suffer in the end. There are certain things which must be done, it seems to me, before a success can be made of cooperative marketing, which I des're at once to approve whole- heartedly. While I do not presume to be an expert on the subject, I would like SHOKT-TIME RURAL CREDITS. 51 to present certain suggestions for your consideration whether cooperative mar- keting is undertaken or not. PRODUCER MUST BE ON A PAR WITH BUYER. The theory of my recommendations is that, in the marketing of his products, the producer must be placed on a footing of equal opportunity with the buyer. First (and this is the corner stone of the whole subject matter), I believe that sufficient storage warehouses for cotton, wool, and tobacco, or elevators for grain, must be provided at primary points to carry the peak load in the distribu- tion of the product. These warehouses or elevators should be preferably under private ownership. But if private capital is not forthcoming they should be under State ownership. But under any condition they should be under State or Federal supervision. The question as to who should own or build these elevators and warehouses requires some thought. But that adequate warehouses and elevator facilities of the most modern type should be established is beyond question. The very well- being and prosperity of the different States and all of their citizens depends upon the proper marketing of their major products. The modern warehouse makes possible the handling of agricultural commodities at reduced costs, be- cause of the saving that could be effected in insurance, financing, and marketing. It also will play an immensely important part in the development of a practical plan of cooperative marketing. When the products are delivered to the warehouses or elevators they should be properly weighed, graded, and certified by licensed weighers or graders. For the lack of a better term I shall call this process a " certification " of the product. This certification should be so hedged about that underpayment, over- charging, and unfair grading will be avoided. It will be the basis of sale, or, in case the producer does not desire to sell, it should be and could be made the basis on which he could borrow money until lie is ready or willing to sell. FARMER BAFFLED BY SIMULTANEOUS LACK OF CREDIT AND TRANSPORTATION. As a rule, the farmers' products move to the market when there is a great con- gestion both in the money market and in traffic conditions. This operates to his d'sadvantage in the sale of them. Arrangements, therefore, should be made so that he can borrow a reasonable amount properly margined upon the products of his farm. This will enable him to sell when the market will take them whether he sells as an individual or through a cooperative movement. In none of my remarks do I wish to imply improper or sinister motives to any of the factors that take part in the marketing of our crops. They would not have survived if they had not been fulfilling a useful purpose. There may be too many of them, but most of them are performing a service. No changes should be made or contemplated that would destroy these factors, or any of them, unless there is something better established to take their places. But unquestionably the farmer must be placed in a position to deal on an equal basis with those who buy and market his crops. Preparations are made each summer for the movement of the crops in the fall. Yet almost every year we run into difficulties. This year they are accentuated by world conditions and the huge promotion, speculation, and hoarding which took place during ]919 and 1920. Bankers, financiers, promoters, speculators, and jobbers with the r many fac lit es and more marketable securities or ware- house certificates can always obtain more and cheaper credit than the farmer. CREDIT SHOULD BE ALLOCATED TO AGRICULTURE. If possible, a certain percentage of the credit facilities should be set aside for the movement of the crops. In other words, our banking system should be so adjusted that not less than a certain percentage of the credit facilities are held in reserve for the movement of crops. In a way, it is already being done, but the farmer, the merchant, and the manufacturer each has to bid for his share. Dealers and jobbers usually have little difficulty in securing credit to carry the very crops and products which they have bought from the farmer, but the farmer frequently is unable to obtain the credit he needs in order to finance the marketing of his commodities in orderly fashion. At this writing I am not certain whether it is possible and wise to make it mandatory upon the banks 52 SHOET-TIME RURAL CREDITS. to conserve a sufficent portion of their credit during a certain period for financ- ing the movement of crops, or, in other words, give a priority to credit for moving the crops. In fact, many of the best bankers are already doing this voluntarily, recognizing its wisdom and the obligations of their office. I may add that my personal contact with the bankers of the country convinces me that as a class they feel the responsibility of their calling and its opportunities for constructive service. NEW AGRICULTURAL FINANCING CORPORATIONS REQUEUED. In connection with the establishment and operation of the necessary ware- house facilities, institutions or corporations could be established for the pur- pose of making loans on the warehouse receipts. They should be large enough and so officered that they would gain the confidence of the investing public. Their capital stock should be open to public subscription. They could be made cooperative, but they need not necessarily be so. They could advance money to the individual, just as the banks do now, for any time from 30 days up to six months or a year. They would not take the place of the present arrangement wherein the merchant, the banks, and the Federal reserve system finance the marketing of the crop, but would supplement it. The finance corporation would deposits in its treasury in trust the farmers' notes maturing at various dates and secured by the warehouse receipts. It would then issue against the notes bearer certificates, as is now done by the large corporations in the issuance of short-time notes, in denominations of $100, $500, and $1,000. There would be no better short-time investment or collateral than these obligations. The present process, wherein the farmer gives his note to the merchant and the merchant his note to the local bank, and the bank sends it to the Federal reserve bank, amounts to practically the same thing. The only difference is that the secured bearer certificates would be in a negotiable form and would attract the private investor. There are large sums of money, even in the locality in which the production of the crop takes place, that would seek investment in small amounts, if it were made easy for investors to buy these negotiable, well- protected instruments. The finance corporation, being responsible for the repay- ment of the loans, would see to it that they are properly protected at all times. In other words, investments in bearer certificates would be protected by the resources of the corporation plus the farmer's individual credit plus the secur- ity of the warehouse receipt based upon a proper certification of the amount and grade of and insurance on the product covered by it. HOW THE PROPOSED SCHEME WOULD WORK. For instance, a farmer might deliver to a warehouse so many bales of cotton or so many bushels of grain. He could either sell his product on the basis of the warehouse receipt, or he could use it to secure indebtedness to the merchant, who, in turn, could go to the bank as at present ; or he could go to the finance corporation and borrow, let us say, at 6 per cent or 7 per cent, or whatever the rate might be, and thus be able to pay cash for his supplies. The corporation in turn would issue its own bearer certificates carrying a rate of interest which would allow a margin sufficient to cover the necessary expenses of the corpora- tion and earn enough profit to attract the necessary capital. The corporation would sell the bearer certificates in denominations of $100, $500, or $1,000 either to private investors or to the banks or financial institutions all over the country. This process, with the corporation's capital as a revolving fund, can be con- tinued and repeated to the extent that good business and financial judgment dictate. As the certificates become due, they would be forwarded back to the corporation which would meet them. This does not do away with the present method of financing, but only makes available for the marketing of agricultural commodities a large amount of money in the hands of private investors, who know, or would soon know, how safe this form of investment would be. There could be nothing more secure or more liquid than the bearer certificates based upon carefully guarded advances on farm products. I STATISTICS OF DEMAND ARE NECESSARY. The Government, through the Department of Agriculture, now estimates at frequent intervals during the growing season the probable condition of the crops and yield of the different farm products so that everyone knows approximately SHOET-TIME EUEAL CREDITS. 53 the amount of wheat, corn, oats, barley, rye, cotton, etc.. that the fanner pro- duces. The buyers and distributors are thus fully informed by the Government. The farmer, on the other hand, does not always have the same information re- garding the demand for consumption as the buyers and distributors have of the output of the farm. In other words, he is not on an equal footing with the buyer. I believe that there should be collected under the Department of Agriculture by the best talent obtainable full information from all the markets of the world, foreign and domestic. This information should be tabulated, summarized, and made available at frequent intervals — daily, semiweekly, or weekly. It should be posted at the post offices or printed in certain publications so that the pro- ducers may be as fully informed regarding the conditions of the selling market as the buyers and distributors are now informed regarding the condition of the buying market. The collection and dissemination of these facts will tend to avoid wide fluctuations in the market, and make it possible for the producer to deal with the buyer on an equal basis in the disposition of his products. Why should not the Government's activities along these lines be greatly enlarged so that the producer will have the same character and class of information that is available to the buyers and distributors? The producer is at a serious disadvantage when he does not know the condi- tions surrounding the consumption of his product. Yet these facts are in the possession of the great buyers and distributors of agricultural commodities. A SUMMARY OF SUGGESTIONS. To sum up, if the suggestions I have made were adopted the farmer would find himself in the following position : First, he would have adequate, modern storage facilities under public supervision. Second, his products would be cer- tified as to grade and amount by licensed graders and weighers. Third, the certificates issued by the graders and weighers would be used as the basis of sales and purchases, as well as the basis of financing. Fourth, a fair share of the credits of the banking and financial institutions of the country would be reserved during certain periods for crop movement. Fifth, all market in- formation would be collected and made available through trained experts by the Agricultural Department — this information to be of the kind and character now in the possession of buyers and consumers of the farmer's products. Sixth, a new source of credit, the private investor, would be reached by the establish- ment of financing corporations to make loans on warehouse receipts. This program if put into effect would in my opinion place the farmer in a position to market his crops advantageously whether he desires to do so indi- vidually or cooperatively. One of the best discussions of the subject of cooperation in agriculture, par- ticularly for marketing purposes, is to be found in an article by J. Harold Powell, general manager of the California Fruit .Growers' Exchange, which has been published by the University of California (Circular No. 222). Mr. Powell points out very clearly some of the fundamental points which should be con- sidered in formulating plans for collective marketing, and I can do no better than to quote some of his statements, which I append hereto. COLLECTIVE MARKETING. Collective marketing is less difficult where it covers a comparatively limited area and a specialized crop, as, for instance, in the case of the Fresno Raisin Growers' Association or Citrus Fruit Growers' Exchange of California. If all the wheat in Kansas were pooled for collective marketing there still would remain the wheat of the other States or other countries. If all the cotton of South Carolina or all the wool of Wyoming were pooled, there would still remain the cotton and wool of other States and other countries. But cooperative selling of -a product by communities or counties is advisable and possible, and would result in increased returns. Each community must organize according to local conditions and the character of the product to be marketed. This can gradually be extended to include larger areas and more units. The larger central organizations, on which the smaller units should be represented, should protect, direct, advise, and coordinate these units. I should like to emphasize the fact here that the system of distributing the products of the farm will be, and should be, changed only through evolution and not by revolution. For centuries we have built up a delicate machinery of 54 SHORT-TIME RURAL CREDITS. production, distribution, and finance, which can not be ruthlessly and suddenly- changed without injury to all parties concerned. There is no doubt that the farmers could buy collectively certain staple com- modities with advantage to themselves. But there are many things which they can not buy to advantage cooperatively, especially where the question of indi- vidual taste is involved, such as clothing for men and women. The great question is whether the farmers will be better served by collective buying, taking all the risks involved, than by the present system which involves paying a profit to those who undertake the risks. Some of the cleverest distributors and merchants, large and small, now find themselves faced with great losses on account of bad judgment in purchasing. Care must be taken either in collective marketing or in collective buying that the power which would come into the hands of agencies established for these purposes is not abused. I believe that what the farmer is striving for is not an advantage, but merely that he shall receive the full benefit of the results of his labor. That he is entitled to this, all honest men must agree. Collective buying ought to be confined, at least for the time being, to the staples. Doubtless the question of collective buying has come more to the front recently owing to the high prices and wide fluctuations that have prevailed. Before the farmer attempts collective buying, he must consider what he is endeavoring to replace, or whether he will really save anything by it. IMPORTANT K6LE OF THE MERCHANT. In many sections, the principal factor in the financing of the crop production and marketing is the country merchant, who makes advances or gives credit to the farmer until his crops are disposed of. Collective buying would result in the elimination of this most important factor in the situation without replac- ing it with better machinery unless the farmers, through their savings, are able to establish cooperative stores. These stores would have to make the advances now made, and take the risks now assumed by the country merchant, who, after all is said, has been of the friendliest assistance, and has a sincere and sympa- thetic interest in the success of the farmer. The whole question revolves around the point brought out above as to whether the farmer can be better served by collective buying or by the present agencies. There is no doubt that where the farmers have the credit and cash resources, they can establish for their mutual benefit collective buying machinery. A great difficulty in collective buying on a large scale is the financing of the project. This will require money, and a sufficient amount of it to buy in ad- vance, when conditions are favorable, large quantities of the various staples needed. The necessary capital will have to be provided, to a considerable extent, by the farmers themselves. Any large scale project will require time and patience before it can be built up to the point where it will be a real benefit. REFORMS SHOULD BE GRADUAL. The difficulties and opposition that the farmer is going to encounter in his efforts to secure, through cooperation, proper compensation for what he gives to the community will be greatly increased if he attempts too much at once. Many a good business venture has failed by undertaking too much at first. In many cases, we find that we started on the road to progress, reform, or betterment only to discover that we have failed when we should have been suc- cessful. In most instances this is clue to the desire to accomplish too much in too short a time. I recommend the Rochedale plan as a basis for cooperative buying, but believe each community will have to modify its beginning according to local conditions. It is a very curious fact that in towns, counties, States, and even in the great Federal Government, there is a lack of concentration, and indeed much com- petition, in the purchase of the same class of goods or materials. There is no reason why a city or a State, or the Government itself, should nof have one central purchasing agency, thus reducing overhead expenses as well as com- petition between various departments. I hesitate to state how much saving there would be in such an operation. But the cost of government would vastly decrease. The savings alone would help amortize a large part of the outstand- ing obligations in a reasonable period. During the war we had evidence of what the avoidance, even to a limited extent, of competition between the various departments in buying meant to the SHORT-TIME RURAL CREDITS. 55 Government. The elimination of competition between the allied and associated Governments in neutral markets through one collective buyer saved them many hundreds of millions of dollars. The total saving to our Government by a system that was not functioning perfectly — it was being gradually improved when the armistice was signed — aggregated vast sums. URBAN MSTKIBUTION. There is another phase of the problem of distribution which the city dweller may have to undertake and solve, and that is the handling of products in the city. It has been claimed by many that the supervision of the marketing of coal, milk, and bread is a matter of almost as much municipal concern as the super- vision of water, light, and street car service. It is in the transfer of products from the farm to the city dweller that the greatly increased price occurs. This, although vital to the farmer, is more the city dweller's problem. Of course, the whole question of marketing and distribution is vitally affected by transpor- tation. I could elaborate and go into greater detail in all these matters. But I have endeavored to make this statement as short as possible. The views outlined herein are presented for the consideration of those who are much more familiar with production and marketing. I have discussed them with many who are familiar with the subject, and I am convinced that they are practical and feasible. My investigations have led me to the conclusion that the farmer at present gets less results for his labor than any other member of the community. From this statement I would except only the great teaching fraternity, and in that I include both educational and religious teachers. I believe the things I have suggested can be done and should be done in the interest of the whole community. Further, they are only impossible to those who will not have them done. Some of them are now under advisement and contemplation, not only by the Federal Government but by many of the States and farm organizations. If they are desirable, it requires only united effort to bring them to a successful conclusion. We sometimes hear much about the farmer's great profits and his happier lot. The movement from the farms to the city sufficiently refutes this. In closing, let me say that in working for a solution of this most important matter we shall not find it either in an Aladdin's lamp or in any form of leger- demain. The only legislation needed will be that which grants the farmer an equal opportunity by opening wide all avenues of marketing and for cooperative effort. The great difficulty heretofore, it seems to me, has been the fact that the farmer has not been able to organize properly. But my contact with the move- ment for the improvement of agricultural conditions has convinced me that there has been developed the type of men who can successfully organize and direct the farmers in their efforts. Yours, very truly, (Signed) Bernard M. Bakuch. Appendix. [Excerpts from " Fundamental Principles of Cooperation in Agriculture," by G. Harold Powell.] A cooperative association is one in which the members form an agency through which they conduct their own business for their greatest mutual advantage. To be cooperative, it must be formed of producers exclusively and managed by them, and the benefits must be returned to them in propor- tion to the patronage of each. The capital necessary to create the agency and its facilities should be contributed by the members in proportion to the use which each makes of it. Also, the capital contributions of each member should be kept progressively proportional to the individual shipments, or pur- chases, or other uses made of the agency as nearly as this may be done. * * * There is a growing recognition of the economic need of organization by pro- ducers. The farmer, especially the small landowner, can no longer deal with with his business problems as an individual, because he now has to cope with organized industries in the production, distribution, and sale of his crops. If he is to meet these problems successfully in the future, he must join with .56 SHORT-TIME RURAL CREDITS. his neighbors in forming an organization through which they can solve their common problems cooperatively, and he must have laws provided that will enable him to do this. * * * Experience shows us that a farmers' association that has been organized under the general stock corporation laws is on an unstable foundation not only because the stock can not be controlled, but also because of conflicts that may arise between the stockholders and the members. * * * Unless a cooperative association of producers is adequately and soundly financed by its own members, it invites disaster. Two kinds of capital are usually required : A permanent capital for buildings or other facilities and a working capital from which to advance money to the members before the returns are received from the crops and to meet the running expenses of the organization. * * * A cooperative organization, if it is to be permanently successful, must grow out of economic necessity and must crystallize around a specific economic question. The reason for its existence must lie in some vital service which it is able to perform if it is to have strength enough to live in the face of the competition to which it will be instantly subjected. It will have to compete with existing organizations, and this competition will be directed toward its elimination. It will be vigorously attacked and every concevable form of mis- representation will be leveled against it, and every weapon known to com- petition, fair or unfair, will be used to put it out of existence. * * * A cooperative organization should be founded on a specialized crop. The best results are obtained in cooperation when an organization is founded to handle a special crop and when the locality in which it operates is compara- tively limited in area. When he steps outside his sphere as a producer, the average farmer does not often succeed except in the special agricultural in- dustries that have been developed by men of unusual experience and ability. Since each industry has its own individual problems to solve, its special diffi- culties to overcome, and its particular trade practices and connections with which to deal, an indiscriminate organization of growers is generally very un- satisfactory in practical results. * * * A large cooperative movement should be founded on independent local units which for greater business efficiency federate and form an agency through which they handle their common problems. This means that each unit builds a packing house or provides other facilities, employs a manager, installs the necessary equipment, the growers themselves thereby owning and directing fhe'r local units. The central agency is the cooperative whole and represents the personnel of the combined societies in their business and public relation- ships, but it must never be lost sight of that the central body must be repre- sentative of active, independent units rather than an organization which owns and controls them. * * * State-wide corporations are being attempted in which the farmer becomes a stockholder. The central association then owns the equipment and facilities of each local un't and manages thenr, the farmer thereby becoming a part owner in local facilities all over his State. It would be impossible to overem- phasize the unsoundness of such a movement from the cooperative point of view or the lack of stability which it presents as a bus'ness undertaking. Th's instability is due to the fact that no man takes as much interest or be- comes as active in a situation removed from h'm as he does in his own local, individual affairs. It is necessary in order to avoid confusion to point out here that there may be cases in which by establ'shing one or more general plants under the management of the central association for the final finishing of their product a group of local units may be spared the expense of ea^h establishing a similar plant. In that case it is apparent that the central asso- ciation has merely become more serviceable to its local units and has in no way attempted to assume control over them. The actvities of the central agency will, obviously, embrace all matters too large to be handled by the local units. It will naturally represent the local units in creating a national sales agency, in acquiring t'mberlands for the manufacture of box material, in advertising the product to the consumer under a trade-mark under which the product shall be sold and in establishing grad- ing rules to cover the use of the trade-mark, in handling transportation matters or legislation directly affecting them, and in all other common problems that are connected with the primary purposes of the local units. But the central organization should never do those things for the local units which they can SHORT-TIME BUBAL CEEDITS. 57 do efficiently for themselves. Rather should its underlying motive be to help the local units in the handling of their own problems; it should coordinate their activities, assist the weaker associations to grow, and in its capacity as representative of their personnel as a group give their industry dignity and husiness standing in the State and Nation generally. It should never be over- looked that the strength of a cooperative federation lies in the vitality of its local units and that a central agency formed in this manner can be no stronger than its individual components. * * * There is no way in which the community spirit can so well be developed as by the formation of locally controlled units. The product of each community differs from that of every other because of climate, soils, altitude, or other en- vironmental factors, and such community characteristics should be a local asset and should not be confused with that of any other locality. * * * Each community will become known by the quality of its produce and should use a separate brand of identification. This local brand will supplement the brand — or possibly the trade-mark — of the central agency and will be the means by which the trade identifies the quality of the produce of different localities, while the brand of the central agency will become known to the public generally. * * * The establishment of uniform grades for agricultural produce is one of the most important questions confronting American agriculture. * * * The future of cooperation rests not only upon the ability with which growers liandle their business problems but upon how well they meet the present vital questions which are leading to world-wide social and economic unrest. A co- operative organization can not live for itself alone. It must scrupulously fulfill its public or social relationship as well as its relationship to its own members.