Fiscal Year Ended June 30, 1920
190
'
REPORT ON THE FINANCES.
SEED-GRAIN LOANS TO F A R M E R S .
During the past year the administration of the seed-grain loans
made during 1918 and 1919, as the result of war conditions, to farmers in certain drouth-stricken areas bf the West has advanced steadily under, the joint direction of the Treasury. Department and the
Department of Agriculture. These loans were made through the
Federal land banks of Wichita, St. Paul, and Spokane, as financial
agents of the Government, acting under the supervision of the Federal F a r m Loan Board, pursuant to joint circulars issued from" time
to time by the Treasury Department and the Department of Agriculture. ^ The creation and scope of the plan under which these loans
were made and the progress in administering them during 1918 and
1919 are set forth in detail in the annual reports of the Secretary of
the Treasury for those years.
Loans vvere made in certain sections of the West to about 15,000
farmers who were without means of obtaining commercial credit to
enable them to obtain seed grain for planting. If this aid had not
been extended, some farms would probably have been abandoned
and others lain idle, to the prejudice of the food, supply of the
Nation and the national securit}^ and defense in time of war. There
were three distinct plantings covered by these loans: (1) The
first fall planting in 1918; (2) the second fall planting in 1918
(restricted, however, to farmers whose first fall planting had
failed) ; and (3) the spring planting in 1919. Upon obtaining a
loan from the United States for any of these three plantings, the
borrower was required to execute a guaranty fund agreement under
the terms of which those farmers whose crops proved successful, as
defined therein, were required to contribute to a guaranty fund. The
proceeds from the guaranty funds were to be applied, under the direction of the F a r m Loan Board, on the loans of those farmers whose
crops had proved failures and who, therefore, Avould be unable to
repay their loans from the proceeds of the crops. I n this way a cooperative fund was created in connection with each of the three
classes of loans for the mutual benefit and protection of the unsuccessful farmers and the United States. Loans for fall planting were
made in the Wichita, St. Paul, and Spokane districts; second fall
planting loans were made only in the Wichita district; and spring
planting loans were made only in the St. Paul and Spokane districts.
As the appropriation under which these loans were extended expired June 30, 1919, all the loans under the plan adopted were closed
by that time. There remained, however, the arduous task of collecting the principal and interest from the individual farmers as the
loans matured, together with the contributions to the guaranty funds
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SECRETARY OF THE TREASURV.
191
in accordance with the ternis of the guaranty fund agreements. I t
was mainly with these features of the seed-grain loans that the Treasury has been concerned during the past year. In view of the large number of loans made and the evident difficulties incident to collecting
them, it may fairly be said that the work has progressed even more
satisfactorily than could have been anticipated, and with a fair
prospect of completion in the near future. While the auiounts contributed to the guaranty funds have not yet been applied upon the
indebtedness of those borrowers whose crops proved failures, the
preliminary arrangements are progressing steadily, and it is hoped
that a final settlement may be reached and the loans closed within
the next few months. The prompt and satisfactory manner in which
this large undertaking has been carried on by the Federal land banksconcerned, as well as the effective cooperation of the Federal Farm
Loan Board in supervising the activities of the land banks, has gone
far to insure early completion of the operation and is a substantial
testimonial to the efficiency of the farm loan organization.
As repayments of these loans began to come in, it was necessary,,
because of the large number involved, to institute some uniform
method of accounting for the receipts. On September 18, 1919,
letters were sent to the Federal land banks of Wichita, St.
Paul, and Spokane prescribing a method of accounting for the receipts in payment of these loans and for depositing them with the
Federal reserve banks of Kansas City, Minneapolis, and the Spokane
branch of the Federal reserve bank of San Francisco, respectively,,
as depositaries of the Government. Under date of September 2,
1919, Joint Circular No. 5 (Exhibit 82, p. 545) was issued by the
Treasury Department and the Department of Agriculture supplementing previous regulations relative to expenses incurred by Federalland banks in the administration of these loans.
As stated in the previous annual report, it developed during the
summer of 1919 that, where the yield per acre would not exceed 4
bushels, it would barely pay the reasonable cost of harvesting and
marketing, leaving no return to the farmer for his labor, and that
the destitute farmer would probabty abandon his farm and go elsewhere to labor for wages, unless he was permitted to retain the
proceeds for the immediate needs of himself and his family. By
letters dated August 13, 1919, to the Federal land bank of Spokane,,
and Septeniber 10, 1919, to the Federal land banks of St. Paul and
Wichita, signed by the Secretary of the Treasury and the Secretary
of Agriculture, the Federal land banks were authorized in "such
cases to release the Government's lien upon the receipt of a certificate from an agent of the Department of Agriculture. Pursuant to
these letters the Federal land banks have executed releases of the
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Fiscal Year Ended June 30, 1920
192
REPORT ON THE FINANCES.
mortgages held by the United States covering the crops planted by
virtue of these loans, as follows:
Bank.
Wichita
Spokane
State.
Kansas
Oklahoma
Texas
New Mexico
Montana
Washington
Amount
of note
secured
byNumber.
the
mortgage
released.
642
68
16
1
876
16
$168,126
12,909
3,281
120
270,768
5,585
I t should be remembered that the release of these mortgages did
not relieve the borrowers from their obligation to pay the principal
and interest of their notes. The Secretary had no authority to discharge the borrowers ^from this obligation as distinguished from the
lien on the crops planted. The Congress only could grant such
release.
Since it appeared that many farmers who had sustained crop failures, as defined in the joint circulars, would be unable to pay their
notes in whole or in part and that the continued obligation to do so
might cause severe hardship, the Congress authorized the cancellation of the indebtedness in such cases by the following provision of
law, which was incorporated in the Agricultural appropriation act
for 1921, approved May 31, 1920:
That a yield of 5 bushels or less per acre of wheat on lands owned by those
in the drought-stricken regions who borrowed money from the Government of
the United States for the purchase of wheat for seed be, and the same is hereby,
declared to be a failure, and the borrower whose yield was 5 bushels or less
per acre be, and he is hereby, released from repayment of the amount borrowed
by him from the Government: Provided, That nothing herein shall release the
borrower who signed a guaranty fund agreement and whose crpp was not a
failure, from making the contribution provided for in such agreement, but said
guaranty fund shall be used as stipulated in the agreement to the settlement of
the loans to those whose crop was a failure.
The act authorizes the discharge of loans only for wheat planting,
so that loans made to farmers for the planting of rye or other grains
are not released, and as the act makes no provision for refunding
payments made prior to the date on which the law became effective
by borrowers whose crops had failed, such borrowers will be unable
to obtain any benefits from the present legislation.
Pursuant to the provisions of this act, a circular entitled " Joint
Circular No. 6," dated August 10, 1920, prescribing " Eegulations
relative to release of farmers' seed-grain loans for wheat planting in
drought-stritken areas " (Exhibit 83, p. 545), was issued by the Treasury Department and the Department of Agriculture. Under the
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Fiscal Year Ended June 30, 1920
193
SECREI:ARY OF T H E TREASURY.
terms of this circular applications for release of seed-grain loans for
wheat planting may be filed with the Federal land bank from which
the loan was received. These applications will be examined and, if
the statements therein contained are true, will be approved and certified by the Federal land bank and forwarded to the F a r m Loan Board
which, in turn, will examine the application and transmit it, with its
recommendation thereon, to the Treasury Department for approval.
A copy of the form prepared by the Treasury Department to be used
in making these applications for release is appended as Exhibit 84,
page 547. Upon approval of the application, the Federal land bank
will forthwith be authorized to cancel and deliver up the borrower's
note and deliver a release of the mortgage given as security for the
note. I t is provided in the joint circular that the release of the mortgage shall not operate to waive the right of any insurance company
to any lien thereunder which it may have acquired by virtue of any
policy of insurance taken out by any of the Federal land banks pursuant to Joint Circular No. 4. No refunds of payments made prior
to May 31, 1920, are authorized under the circular. Pursuant to this
circular the notes of those borrowers who have ° sustained a crop
failure as defined in the agricultural appropriation act for 1921,
and whose obligations remain unpaid are being canceled and the
mortgages on their crops held by the banks as financial agents of the
Government are being released.
While it is too early as yet to determine finally the exact amount
which the United States will realize as repayments on these loans, the
collections to date, including the collections covering the principal
and interest of the notes and the contributions to the guaranty funds,
probably approximate the total amount which the Government may
expect to receive. The following table shows the total disbursements
made through the Federal land banks of Wichita, St. Paul, and Spokane in the form of loans to farmers, together with the amount^ received up to October 20, 1920, as collections in payment of the loans,
including the contributions to the guaranty funds:
Table showing disbursements and receipts covering seed-grain loans to farmers.
Disbursements in
form of
loans.
Bank.
Wichita
St. Paul
Spokane
Total
13799—FI 1920
13
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Receipts in payment
ofloans.
"^
Principal
of note.
Interest
on note.
Contributions to
guaranty
funds.
$1,801,955
358,370
1,950,129
$1,341,630
66,823
9,780
$72,235
1,746
469
$243,456
443
24
$1,657,321
69,012
10,273
4,110,454
1,418,233
74,450
243,923
1,736,606
Total.
Fiscal Year Ended June 30, 1920
194
Wi•ij
^
.
REPORT ON THE FINANCES.
As this table indicates, the majority of farmers in the Wichita
district, i. e., Oklahoma, Texas, and a portion of Kansas, were
favored with full harvests and were, therefore, able to pay not only
their individual indebtedness, but also to make substantial contributions to the respective guaranty funds. I n the St. Paul and Spokane
districts, particularly the latter, unprecedented drouths, however,
resulted in almost complete failures in these sections. I t is for this
reason that the collections made in these districts compare rather
unfavorably with the amounts collected by the Wichita bank.
Under the terms of the guaranty-fund agreements, the contributions to the respective funds are to be applied in the first instance
in payment of the obligations of those borrowers whose crops have
proved to be failures. As the contributions to the guaranty funds
will be insufficient to meet the total amount still due on the notes of
those borrowers whose crops have proved unsuccessful, the contributions to the guaranty funds collected eventually will be received by
the Government on the administration of these funds. I t may be
said, therefore, that of loans approximating in all slightly over
$4,000,000 the Government may expect to realize in return a little
less than $2,000,000. I n view of the widespread assistance which
these loans gave to the farmers in the sections involved, and
the encouragement which they furnished to the communities as a
whole through the realization that the Federal Government was interested in and desirous of assisting them to meet the problems growing out of war-time conditions, it may fairly be said that the cost
to the United States is insignificant and is amply justified as a war
emergency action.
B U R E A U O F INTERNAL REVENUE.^
Internal-revenue collections for the fiscal year ended June 30,1920,.
aggregated $5,407,580,251.81, as compared with $3,850,150,078.56 for
the preceding fiscal year, an increase of $1,557,430,173.25. This increase in collections is due principally to an increase of $1,356,152,100.90 in the collections of income and profits taxes, which aggregate for the.fiscal year 1920, $3,956,936,003.60, as compared withi
$2,600,783,902.70 for the fiscal year 1919.
The larger collections of income and profits taxes is due, in part,,
to the, fact that the provisions contained in the revenue act pf 1918
1 The figures concerning Internal-revenue receipts as given in this chapter differ fromsuch figures carried in* other Treasury statements showing the financial condition of the
Government, because the former represent collections by internal-revenue oflacers throughout the country, including deposits by postoaasters of amounts received from sale of
internal-revenue documentary stamps, while the latter represent the deposits of these
collections in the Treasury or depositaries during the flscal year concerned, the differences,
being due to the fact that some of the collections in the latter part of the flscal year
can not be deposited or are not reported to the Treasury as deposited until after June 30,.
thus carrying them into the following flscal year as recorded in the statements showing:
the condition of the Treasury.
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