your point is that we have the grain and we have the credit and it is all on one side of the balance sheet. They have to offer something, either money or a promise to pay of some kind that could be cashed and deposited in the bank to establish a credit here to the holders of the grain.

Mr. BROOKHART. The people that sold them the 300,000,000 bushels of wheat got a satisfactory settlement with them all right, and at an advanced price, which demonstrates that it has been done within the year in a practical way.

The CHAIRMAN. Well, it does not follow, does it, that because you can sell 300,000,000 bushels of wheat over there you can sell 2,000,000 bales of cotton or 100,000,000 bushels of barley?

Mr. BROOKHART. No; but if that 33 cents that was put onto them had been cut down they would have had some more money to buy more of our stuff. I do not claim that could be done without difficulty, without careful financial management. There is no doubt but what it would require very great discretion and care to finance them, but the demand is there, and they would give us every kind of a preference in the way of promises, and we certainly had better havę that credit frozen up on a promise that is likely to be repaid some time than on a restriction of credit that is holding our stuff on this side and depreciating its value every day. That is a very vital proposition; it is a big proposition. Of course, I only use this $1,500,000,000 in the Federal Reserve Bank as an illustration.

I feel, as I said once before, that this farming business, being the greatest business, ought to be organized as any other business is organized. That would mean that it should have its credit department under its own control in every way. And since its funds arise right out of the farming business itself, that I believe you will find at all times more than sufficient to take care of the farming business and that are, in fact, being used now to conduct other enterprises— if we had this collective organization under a proper management, we could be looking out for our foreign markets and use that credit as it ought to be used to provide us that market.

Senator ROBINSON. I understand that the agency by which you propose to mobilize those credits is the cooperative bank that you referred to this morning?

Mr. BROOKHART. A general cooperative banking system. Of course, it would be a complete system.

Senator ROBINSON. I understand, of course, that it would be such a number of banks as the business justified. Have you given any personal consideration to the draft of the bill that you handed me this morning?

Mr. BROOKHART. Considerable; I have read it quite carefully. Senator ROBINSON. I would like to have incorporated in the record this tentative suggestion, Mr. Chairman.

The CHAIRMAN. Without objection, that will be done.

(The suggested draft of the bill referred to is here printed in full. as follows:)

COOPERATIVE BANKS.

A bill for the promotion of thrift and savings, to provide loans for farmers and workers, and to authorize the organization of cooperative banks.

Be it enacted by the Senate and House of Representatives of the State of
SECTION 1. This act may be cited as the "Cooperative Bank Act."

SEC. 2. Objects. The objects of this act are to authorize cooperative credit and savings agencies whose purposes shall be: (1) To promote thrift and savings; (2) to make industrial and service loans; (3) to finance the cost of farming operations and increase the production of farm products, such as the purchase of feed, seed, and other supplies; of cows, horses, sheep, pigs, and other animals; the payment of the cost of carrying on farming or dairying operations; of preparing land for cultivation, etc.; (4) to serve as agent for members in purchasing supplies and selling products and services; (5) to provide loans to members in case of sickness or emergency; (6) in general, to promote cooperation for the welfare of members, and to provide easy credit for farmers and workers.

APPLICATION FOR CHARTER.

SEC. 3. Any eight or more persons, residents of the State, may secure a charter for the organization of a cooperative bank by making application to the department of banking and by complying with the conditions of this act.

Persons making application shall sign and acknowledge articles of incorporation forms for which shall be provided by the department of banking.

The application for articles of incorporation shall contain the following:

(1) Name of proposed bank and place of doing business. The name selected shall contain the words "cooperative" or "people's bank." It may contain both words. (2) Purposes for which the association is formed.

(3) Par value of shares, which shall not be less than $10. The amount of capital stock that may be issued need not be fixed in the articles of incorporation or the application therefor.

(4) Number of directors (not less than five), all of whom must be residents of the State and shareholders of the corporation. Names and addresses of directors for the first year may be inserted in the application.

(5) The application shall be subscribed by the organizers, whose addresses and respective number of shares for which they have subscribed shall be given.

(6) Statement of whether liability is limited to stock subscriptions or is unlimited in amount.

The application shall be acknowledged as provided by law and transmitted to the department of banking.

BY-LAWS.

SEC. 4. Such application shall be accompanied by duplicate copies of the proposed by-laws of the corporation. Such by-laws shall contain the following provisions for the management of the corporation, except as such provisions may be amended with the approval of the department of banking:

(1) Name and place of doing business.

(2) Purposes for which the corporation is formed, and whether liability of members is limited to the amount of stock subscribed by each, or is unlimited in amount. (3) Qualifications for membership and provisions for withdrawal and expulsion of members.

(4) Date of annual meeting, which shall be the second Tuesday in January of each year: the manner in which members shall be notified of meetings; the manner of conducting meetings; the number of members constituting a quorum, together with regulations as to voting.

(5) The number of directors: powers and duties, together with officers and compensation and duties of officers elected by the board of directors.

(6) The number of members of the credit committee of supervisory committee. and of audit committee, with powers and duties.

(7) The conditions upon which shares may be subscribed and paid for, transferred and with drawn and the par value of same.

(8) The charges, if any, which shall be made in connection with a loan and for failure to meet obligations punctually.

(9) The conditions upon which deposits may be received and withdrawn, and provisions as to the power of the corporation to make loans or to secure additional funds to carry on its business.

(10) The manner in which the funds of the corporation shall be invested.

(11) The conditions upon which loans may be made and repaid by members of the corporation.

(12) The method of receipting for money paid in on account of shares, deposits, or loans.

(13) The manner in which the reserve fund shall be accumulated.

(14) The rate of dividends to be paid on capital stock; manner in which dividends shall be determined and paid out.

(15) The maximum rate of dividends (which may not exceed the legal rate of interest provided by law) and interest that may be charged to borrowers, which shall not exceed 14 per cent a month on unpaid amount of loan.

(16) The manner in which voluntary dissolution of the corporation may be effected. The department of banking shall prepare suggested by-laws and regulations covering the provisions of this section, which shall be furnished to applicants upon request.

ISSUANCE OF INCORPORATION PAPER.

SEC. 5. The application for incorporation and the by-laws shall be approved by the department of banking if in conformity with this act and if such department is satisfied as to the character of the incorporators. Thereupon the department of banking shall issue to said association a certificate, together with copy of approved by-laws, shall be filed in the office of the clerk of the county or municipality in which such association is located. Upon such filing the said incorporators shall become and be a corporation and enjoy such powers as are enjoyed by corporations not inconsistent with the provisions of this act.

AMENDMENT.

SEC. 6. The by-laws so approved shall be the by-laws of the corporation; but such by-laws may be amended by the corporation upon the filing and approval of such amendments by the department of banking. Any amendments so approved shall be filed in the office of the clerk of such county or municipality wherein the said corporation is incorporated.

PENALTY FOR USING NAME.

SEC. 7. No banking partnership, association, or group, except such as are formed under the provisions of this act, shall use a name or designation containing the words "cooperative bank." The use of such name or designation by any other persons or associations shall be a misdemeanor subject to a fine of not to exceed $500.

OPENING OF BOOKS.

SEC. 8. When the certificate of incorporation has been issued, the corporation shall open its books for subscriptions and deposits; shares shall be issued for stock subscriptions, and evidences of deposits shall be given for deposits. The corporation shall make loans to its members at rates of interest and under the conditions provided in this act. It may undertake such other activities as are provided in sections 2 and 10 hereof.

MEMBERSHIP.

SEC. 9. Members of the corporation shall consist of persons who have been elected to membership; who have subscribed for one or more shares of stock; who have paid any entrance fee that may be required, and have complied with such other requirements as the by-laws may contain. Other cooperative societies and associations not for pecuniary profit may subscribe for stock and become a member of the corporation.

POWERS.

SEC. 10. In carrying out the objects and powers enumerated herein every cooperative bank shall have power:

1. To create and issue to members shares which shall be redeemable if so authorized by its certificate of incorporation or by-laws.

2. To receive deposits from members or other persons with or without interest thereon.

3. To deposit securities and funds with any bank of which it is a depositor. memhaor shareholder.

4. To borrow money.

5. To loan money on security, real, or personal to members.

6. To buy and sell promissory notes, mortgages, and other evidences of debt executed or indorsed by members.

7. To discount and negotiate promissory notes, drafts, bills of exchange, and other evidences of debt executed or indorsed by members.

8. To discount and negotiate promissory notes, drafts, bills of exchange, and other evidences of debt executed by other parties and actually owned by the member negotiating the same.

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9. To accept for payment at a future date drafts drawn upon it by members and to issue letters of credit authorizing the members holding the same to draw drafts upon it or its correspondents at sight or on time not exceeding one year.

10. To acquire and dispose of property, as follows:

(a) Such real and personal property as may be necessary or convenient for the transaction of its business, which however, may in part be leased to others for revenue purposes.

(b) Real estate and other property acquired in satisfaction of debts or purchased at sales under judgments, decrees, or mortgages held by it. But no cooperative bank shall hold title and possession of any real estate, purchased or acquired, to secure any debt due to it, for a longer period than five years, except with the special approval of the department of banking.

11. To act as the agent of members in purchasing real estate for use as their homes, farms, or business sites and in selling such real estate so used by them.

12. To act as the agent of members in purchasing goods and commodities required in their households, or in trades, arts, professions, pursuits, enterprises, or occupations in which the labor of members is used under their own management, or by incorporated cooperative bodies admitted to membership or of which it is a member.

13. To act as the agent of members in selling commodities produced on farms cultivated by members, or made by members with their own labor, or manufactured or distributed by incorporated cooperative bodies admitted to membership or of which it is a member.

14. To act, in soliciting and selling insurance to members and collecting from them premiums on policies, as the agent of any mutual or cooperative fire, life, or other insurance company or association.

15. To exercise all usual and incidental powers and privileges belonging to or pertaining to the foregoing business, and such incidental powers as shall be necessary to carry on the same. The word "commodities" shall for the purposes of this act be construed to include live stock and poultry and machinery.

16. To exercise such other banking powers as are not inconsistent with the provisions of this act or the laws of the State.

RESTRICTIONS.

SEC. 11. At least 20 per cent of all deposits received by any cooperative bank shall be held in quick assets, which may consist of cash in the bank's vaults, or of deposits in any bank, or of such obligations as are mentioned below in this section, or of wellsecured loans to members having no longer than three months to run before maturity. No cooperative bank shall make any loan or discount on the security of its own shares, nor be the purchaser of any such shares except for the purpose of redeeming or retiring the same, unless such security or purchase shall be necessary to prevent loss upon a debt previously contracted by it in good faith. No cooperative bank shall extend credit or loan any funds in its possession to persons not members: Provided, however, That any cooperative bank may invest such funds or any of them in direct obligations of the United States, of this State, or of any county, city, town, township, borough, or municipality of this State and dispose of such obligations: And provided further, That it may acquire and dispose of stock of any other cooperative bank or of any other incorporated cooperative body organized under the laws of this or any State or of the United States. Any cooperative bank may, out of surplus, make contributions toward the support of any system to which it may belong.

Not more than 10 per cent of the resources of the bank shall be loaned to any member and not more than 25 per cent in the aggregate to the officers and directors of the bank. Not more than 10 per cent of the capital stock and the reserve fund may be invested in the stock of other cooperative banks.

LIMITATION ON INDEBTEDNESS.

SEC. 12. All debts past due to any cooperative bank, on which interest is past due and unpaid for a period of 12 months, shall, unless they are well secured or in process of collection, be considered bad debts and be debited to reserve account. Whenever said reserve shall have been impaired by losses or bad debts, it shall be restored to the full extent of such impairment before any dividends are paid. Whenever the liabilities of any cooperative bank not authorized to create shares shall, exclusive of reserve and surplus, exceed its assets, such bank shall be deemed insolvent. Whenever the liabilities of any cooperative bank authorized to create shares shall exceed its assets and one-fourth of the aggregate liabilities assumed by members on outstanding shares, such bank shall be deemed insolvent.

SUPERVISION.

SEC. 13. Corporations organized under this act shall be subject tɔ supervision by the department of banking. Such corporations shall make a report to such department of banking on blank forms supplied by it on the dates of the second and fifth calls made to national banks, notice of which calls shall be sent out by the department of banking. Such reports shall be verified by the oath of the president and treasurer or secretary, or by the oath of a majority of the supervisory committee. Such further reports shall be made under oath as the said department of banking shall at any time demand.

The corporation shall be examined once every year by the department of bankin?. Such department shall have access to all books, papers, securities, and other sources of information in making such examination. The department shall have power to subpoena and examine, in person or by deputies, witnesses under oath and documents, whether such witnesses are members of the corporation and whether such documents are documents of the corporation or not.

Should it appear to the department of banking that any such corporation has violated any of the provisions of this act, it may, by an order made over its official seal, after an opportunity for hearing has been given such corporation, direct any such corporation to discontinue the improper methods or practices mentioned in said order.

If any such corporation is found to be insolvent, or has violated any of the provisions of this act, or has failed within a reasonable time to comply with any such order mailed to the last address of such corporation, the department of banking may immediately, or within a reasonable time, take possession of the property and business of such corporation, and retain such possession until such time as said department permits it to resume business, or its affairs are finally liquidated as provided in this act.

MEETINGS.

SEC. 14. The fiscal year of such corporations shall end on the 31st day of December. Annual meetings shall be held on the second Tuesday in January, or within 10 days thereafter. Special meetings may be held by order of the directors or of the supervisory committee, and shall be held upon request in writing of 10 per cent of the members. Notice of all meetings shall be given in the manner prescribed in the by-laws. At all meetings each member shall have but one vote, irrespective of the number of shares held. At any meeting the members may decide upon any question of interest to the corporation, may overrule the board of directors, and, by a threefourths vote of those present and represented by proxy, provided the notice of the meeting shall have specified the question to be considered, may vote to amend the by-laws.

BOARD OF DIRECTORS.

SEC. 15. At the annual meeting the members shall elect a board of directors of not less than five members, a credit committee, and a supervisory committee, of not less than three members each. At the discretion of the members, the board of directors may also be the credit committee. Except as herein provided, no member of said board shall be a member of either of said committees, nor shall the same person be a member of more than one of said committees.

Directors and members of such committees, as well as all officers, shall be sworn to perform properly the duties of their offices, and shall hold their several offices for such term as shall be provided in the by-laws. Such oath shall require of such directors and officers that they shall diligently and honestly administer the affairs of such corporation; that they will not violate or knowingly permit to be violated any of the provisions of law applicable to such corporation; that they are the owners in good faith of at least one share each in the stock of such corporation. Such oath shall be subscribed by the individual making it and certified by the officer before whom it is taken and shall be immediately transmitted to the Department of Banking and preserved in its office.

DIRECTORS' POWERS.

SEC. 16. At the first annual meeting and at each annual meeting thereafter, the board of directors shall elect from their number a president, vice president, secretary, and treasurer. The offices of secretary and treasurer may, if the by-laws so provide, be held by one person. Other officers may be elected at the discretion of the directors. The board of directors shall have general management of the affairs, funds, and records of the corporation. They shall meet as often as may be necessary. Unless the by-laws make other reservations, it shall be the duty of the directors: