Yes, that lever controls rear remote hydraulic outlets. Should be 3 positions, down, neutral,up. Make sure it is in neutral position.
Was there a front end loader (FEL) or backhoe or some other hydraulic attachment on the tractor before you bought it? Sometime ago on this board someone had bought a tractor like yours that previous owner had a FEL on it with a power beyond adapter on the hydraulics. Well previous owner just removed FEL and plugged the power beyond port so hydraulic pump was always under load and pressure relief valve squealing. This tractor has an open center hydraulic system so the oil flows in a continuous loop unless PS, PB, 3pt or remote hydraulics are activated. It sounds like somewhere on your tractor the loop is broken.
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Today's Featured Article - Tractor Profile: Farmall M - by Staff. H so that mountable implements were interchaneable. The Farmall M was most popular with large-acreage row-crop farmers. It was powered by either a high-compression gas engine or a distillate version with lower compression. Options included the Lift-All hydraulic system, a belt pulley, PTO, rubber tires, starter, lights and a swinging drawbar. It could be ordered in the high-crop, wide-front or tricycle configurations. The high-crop version was called a Model MV.
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