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Mr. ANDERSEN. I note on page 9 of your explanatory notes that you make this statement:

The average cost of land-bank bonds outstanding was 3.59 percent on December 31, 1957, as against 2.83 percent a year earlier.

Mr. Miles. That is right. I am discussing the Federal intermediate debentures.

Mr. ANDERSEN. But, generally speaking, it seems as though the cost of money has gone up, has it not, and it is still up!

Mr. Miles. It reached its peak for us in our October sale for November 1, when we paid 4.975 percent.

Mr. ANDERSEN. October of 1957 ?
Mr. MILES. Yes, sir.
Mr. ANDERSEN. That is when it reached its peak?
Mr. MILES. Yes, sir.

COST TO REA OF PRIVATE BORROWING

Mr. ANDERSEN. We have had considerable discussion in this subcommittee relative to a proposal to try to get private money for REA, and this subcommittee is very doubtful as to the prospect for REA securing funds at anywhere near what we consider to be their fortunate position today, and that, of course, means 2-percent loans from the Treasury.

Am I far off in saying this: If the REA were to go out into the private money markets of the land that it would probably cost them 5 percent for that money! Would you be prepared to say? Mr. MILES. I would not

Mr. ANDERSEN. Would you like to put an answer of some sort in the record at this point to that question?

Mr. TOOTELL. I would be glad to make a statement with regard to it.

Mr. ANDERSEN. I would like your opinion as to what the picture would be relative to REA were they to go out in the open market to get funds.

Mr. MILES. At the present time our production credit associations are charging as follows: We have 188 of the 497 charging 6 percent or less and 389 of the 497 are charging in excess of 6 percent.

Those rates are somewhat higher than they were before the cost of money started upward about 2 years ago, but if this trend and the cost of money moves down or stays where it is, these high rates can be reduced some after we have had some time to work out some of the high

Mr. ANDERSEN. If you wish to extend your remarks you may do so. Mr. MILES. I have covered the high points in my statement.

Mr. ANDERSEN. I want to joint with you in thanking these gentlemen for coming before us this morning, Mr. Chairman.

Mr. WHITTEN. You may complete your reply to Mr. Andersen at Mr. TOOTELL. A good deal would depend on the type of organization which was set up as a means by which the REA's would undertake to go into the market to get funds from the public, what type of security they were able to offer and for what length of term they would offer securities. Those things are very important.

cost money.

this point.

21494-458-pt. 4

I would cite the fact that the 12 Federal land banks have been selling their bonds to the investing public as a means of obtaining loan funds for 41 years. The market is well established for Federal land bank bonds, and they sell very favorably in comparison with bonds of similar term that are issued by large industrial corporations. They sell more favorably. They sell almost as favorably as bonds of similar term issued by the Federal Government, although the land bank bonds are not an obligation of the Federal Government.

By the same token our Federal intermediate bank debentures have been before the public for 35 years and they are well known, they are well received, they are well collateralized, and as a result we are able to sell intermediate credit debentures at an interest rate only slightly higher than the Federal Government has to pay at the time for debentures of similar term.

Usually intermediate credit bank debentures are for 9 months. Mr. Miles indicated that last October it was necessary to pay 4.975 percent interest rate.

He also indicated that the cost of money in the money market has dropped to a point where last month it was possible to sell our intermediate credit bank debentures for an overall cost of 2.55 percent.

We are going to be selling something more than $140 million of those debentures tomorrow, and we are guessing that we will be able to sell them at 2.10 or not over 2.15 total cost, including commission, because the money market is continuing to go down.

I remind you again that these are not an obligation of the Federal Government.

Now I will go back from this point to my original statement that it would make a tremendous difference as to what type of security the REA's offered in the market. Perhaps it would be a Government guaranteed security.

Mr. NATCHER. At that point, just assume that to be true.

Mr. TOOTELL. If the RÈA were to set up some sort of corporation, or however it might choose to do this, and issue a security which was guaranteed by the Federal Government, I would say that such a security would sell in the open market, even though it was a brandnew security, at perhaps even more favorable terms than our farm credit securities because it would be fully guaranteed as to principal and interest by the Federal Government. That would be our assumption.

If it did not have that Government guaranty, however, I would not hazard a guess as to what it would sell for because there would be no telling what kind of security there would be behind it and how the public would look upon it.

If it did not have a guaranty, I feel sure it would take it a number of years to become established in the market and get so that it would compete on terms anywhere near as favorable as those which we are able to command in the farm credit system.

INTEREST RATES

Mr. VURSELL. What are the interest rates in the farm bank?

Mr. TOOTELL. Our present cost of money for intermediate credit bank debentures which we will be selling tomorrow, Mr. Vursell, we believe we will be able to sell them with a coupon of not over 2.05 percent, and then there will be a one-tenth commission on top of that.

Land bank bonds which will be of longer term, 5 years to 12 years, get into a market area which is not as easy at the present time and it would probably take in the neighborhood of a 212 percent interest rate to make them attractive in the market.

The cost of money has been going down so rapidly in the last 3 months that it is very difficult to be definite on this thing.

The thing I have tried to do is to point out, in answer to Congressman Andersen's question, that so much depends on the type of security and a very important thing is whether it would be guaranteed by the Federal Government.

Mr. NATCHER. I want to thank you for the fine statement you have made to the committee, and especially that part of your explanation which you made in answer to Mr. Andersen's question concerning REA.

Speaking only as one member of the committee, I personally hope that no legislation is passed this session or at any time in the near future which would tend to destroy REA.

I am very much interested in that portion of your statement, Governor, in which you point out that farm mortgage indebtedness as of January 1, 1958, amounted to $10,600 million. This compares with the sum of $9,900 million the year before.

Further I am very much impressed with your statement in which you point out that non-real-estate debts owed by farmers are estimated at $8,100 million as of January 1, 1958.

Your credit outlook for the future has been explained to the committee and that certainly is not good so far as agriculture is concerned. You cite the true picture as it exists today, and, Governor, I want you to know that I agree with you. I think you are right. Neither you, nor I, nor any other member of this committee hopes that this condition will continue into the future. We hope that conditions will certainly improve.

Mr. ANDERSEN. Will you yield, Mr. Natcher?
Mr. NATCHER. Certainly.

Mr. ANDERSEN. I want to join in the statement you just made relative to REA and also to the fact that the continued increase in debt incurred by agriculture should be sort of a red flag to the Congress and serve notice that something is wrong:

Mr. NATCHER. I certainly agree with my colleague.

Governor, I hope that the credit outlook so far as agriculture is concerned will improve, but I do want you to know that I appreciate your fine statement and I

agree
with
you

that those conditions are with us today and every effort should be made to correct this situation if it is possible.

Mr. WHITTEN. Thank you again, Governor. I am personally glad to see you here.

We could discuss this farm question many more hours if we didn't have so many others waiting to appear.

Mr. TOOTELL. We enjoyed being with you on this occasion as we have in the past.

Thank you for your support of farm credit.

TUESDAY, MARCH 18, 1958.

SOIL BANK PROGRAMS

WITNESSES MARVIN L. McLAIN, ASSISTANT SECRETARY OF AGRICULTURE WALTER C. BERGER, ADMINISTRATOR, COMMODITY STABILIZA

TION SERVICE ROBERT P. BEACH, ASSISTANT DEPUTY ADMINISTRATOR, OPERA

TIONS, COMMODITY STABILIZATION SERVICE DWIGHT W. MEYER, DEPUTY DIRECTOR, ACREAGE RESERVE, SOIL

BANK DIVISION, COMMODITY STABILIZATION SERVICE THOMAS E. HAMILTON, DEPUTY DIRECTOR, CONSERVATION RE

SERVE, SOIL BANK DIVISION, COMMODITY STABILIZATION

SERVICE PAUL M. KOGER, ADMINISTRATOR, AGRICULTURAL CONSERVATION

PROGRAM SERVICE W. S. SWINGLER, ASSISTANT CHIEF, FOREST SERVICE RAYMOND W. HEINEN, ASSISTANT TO ADMINISTRATOR, SOIL CON

SERVATION SERVICE CARL H. DORNY, DIRECTOR, BUDGET AND FINANCE DIVISION, SOIL

CONSERVATION SERVICE CLAUDE T. COFFMAN, OFFICE OF GENERAL COUNSEL CHARLES L. GRANT, DIRECTOR OF FINANCE AND BUDGET OFFICER,

DEPARTMENT OF AGRICULTURE

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Total number of permanent positions..
A Ferage number of all employees..
Number of employees at end of year..
Average GS grade and salary.
01 Personal services:

Permanent positions..
Positions other than permanent.
Other personal services.

Total personal services..
02 Travel..
03 Transportation of things.
04 Communication services..
05 Rents and utility services.
06 Printing and reproduction.
07 Other contractual services.

Services performed by other agencies. 08 Supplies and materials... 09 Equipment.. 11 Grants, subsidies, and contributions. 13 Refunds, awards, and indemnities.. 15 Taxes and assessments...

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Subtotal..
Deduct quarters and subsistence charges..

Total, allotment accounts..

Total obligations.-----
Obligations are distributed as follows:

Commodity Stabilization Service..
Agricultural Conservation Program Service.
Forest Service..
Soil Conservation Service.
Office of the General Counsel.
Office of Information...

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