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represents farmers' investments in their own banks and associations, and about $220 million remaining is government capital. That will be coming down each year.

Mr. WHITTEN. You may proceed.

GENERAL STATEMENT OF THE GOVERNER

Mr. TOOTELL. Mr. Chairman, I have a prepared statement here which I would like to submit for the record in justification of our request.

Mr. WHITTEN. Without objection it will be inserted in the record at this point.

(The statement referred to is as follows:)

GENERAL STATEMENT OF THE GOVERNOR

We have for consideration the budget estimates of the Farm Credit Administration and the business-type budgets submitted under the Government Corporations Control Act for the Federal Farm Mortgage Corporation and the 12 Federal intermediate credit banks. The administrative expense requirements included in these budgets are summarized below, but before going into the estimates, I'd like to briefly review the organization and activities of Farm Credit Administration and the farm credit banks and associations, and to comment on the agricultural and economic conditions which have a bearing on the program provided for in the budgets.

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1 Represents first 6 months of 1959; the total estimate for the year is $3,375,000.

Farm Credit Administration.-The Administration, an independent agency under the direction of the Federal Farm Credit Board, provides supervision, examination, and facilities and services to a coordinated system of farm credit banks and associations which make loans to farmers and their cooperatives Administrative expenses are paid from funds provided by assessments collected from the banks and associations in the farm credit system.

The farm credit system is comprised of 38 banks and corporations and 1,446 local cooperative credit associations. The 12 Federal land banks make amortized real estate mortgage loans through national farm loan associations. The 13 banks for cooperatives make loans to farmer cooperatives. The 12 Federal intermediate credit banks provide agricultural loan and discount facilities for production credit associations and other eligible financial institutions. The Federal Farm Mortgage Corporation discontinued making Land Bank Commissioner (real estate) loans on July 1, 1947, and on June 30, 1955, disposed of its principal assets through bulk sale to the Federal land banks. The 949 national farm loan associations and 497 production credit associations are credit cooperatives located in farm communities to provide convenient service to members. All operating expenses, including interest on borrowings, and administrative expenses of the banks and corporations are paid entirely from their corporate funds. The primary source of loan funds of the farm credit system is from the sale in the open market of bonds and debentures which are not guaranteed by the Government either as to principal or interest.

Trends in agricultural credit.—The agricultural situation during 1957 resulted in farmers using more short-term credit for farm operations and less long-term real estate credit than during the preceding year. Farmers' cooperatives used

somewhat more credit during the fiscal year ending June 30, 1957, than a year earlier.

Prices received by farmers during 1957 showed some strength throughout the year. The general index of prices received was 238 at the beginning of the year. By August it had advanced to 248 and, following the usual seasonal decline in the fall, it was 242 in December. The average for the year was 242 and compared with 235 for the full year 1956.

Farm costs also continued to advance, especially those items which are not farm produced, such as machinery, fertilizer, and farm supplies. Wage rates and taxes also advanced. The index of prices paid, including taxes and wages, averaged 296 for 1957, compared with 285 for 1956.

Even though prices received for farm commodities averaged higher in 1957 than a year earlier, increasing costs have prevented any improvement in net farm income. The ratio between prices received and prices paid showed no change, averaging 82 for both 1957 and 1956.

Amount of credit extended to farmers.—The amount of loans made to agriculture by the farm credit system increased from $2,786 million in the calendar year ending December 31, 1956, to $2,847 million in the year ending December 31, 1957. This trend resulted entirely from the greater volume of loans made by production credit associations. These loans increased from $1,488 million in 1956 to $1,731 million last year, an increase of 16 percent.

Loans made by other parts of the system declined. Loans by the banks for cooperatives decreased from $609 million to $541 million, a decrease of 11 percent. This decline resulted principally from delayed or reduced marketings of cotton, corn, and other crops because of bad weather in the latter part of the year. Loans made by the Federal land banks also declined from $522 million in the calendar year ending December 31, 1956, to $399 million in 1957. This decline can be attributed to (1) a low level of farm transfers, (2) less pressure to refinance short-term debt because of improved moisture conditions and higher livestock prices, and (3) reluctance of farmers to make long-term commitments at high interest rates, especially in view of the fact that the wave of heavy capital investments in farms may have passed its peak.

Total debt owed by individual farmers to all lenders continued to increase. It is estimated that total farm-mortgage debt outstanding on January 1, 1958, amounted to about $10.6 billion, compared with $9.9 billion a year earlier. This is an increase of about 7 percent, compared with a 10-percent increase a year earlier. Non-real-estate debts owed by farmers are estimated at $8.1 billion on January 1, 1958, which is up only slightly from the $8 billion outstanding a year earlier.

Credit outlook.-It is expected that a continuation of recent trends will cause farmers' credit needs in 1958 to stay at a high level to pay operating expenses and to make capital investments for improvement of efficiency and for shifting to farm operations that are most profitable. On the other hand, it is anticipated that the demand for long-term farm-mortgage loans will be affected by the continued reluctance of farmers to make long-term commitments at the present relatively high level of interest rates. If mortgage rates decrease significantly, the proportion of long-term borrowing should increase. Loans from the banks for cooperatives probably will be maintained at a high level because of the high level of operating costs and to finance cooperatives which are undertaking more completely integrated operations.

BUDGET ESTIMATES

Sound administration and operation at a prudently economical cost is the policy of Farm Credit Administration and the agencies it supervises. The administrative-expense limitations represent authorization for the expenditure of assessments collected from farm credit banks and associations in the case of Farm Credit Administration, and authorization for the expenditure of corporate funds of the Federal Farm Mortgage Corporation and Federal intermediate credit banks.

Farm Credit Administration.-The Farm Credit Administration budget reflects a decrease of $75,000. This decrease is effected by a reduction in personal service costs, resulting primarily from merging of organizational groups. Federal Farm Mortgage Corporation.-The Corporation, which is inactive, has no budgeted administrative expense for 1959.

Federal intermediate credit banks.-The banks estimate no change for the 1959 fiscal year. Pursuant to section 202 (a) of the Farm Credit Act of 1956

(Public Law 809, 84th Cong.), an administrative-expense authorization is required only for the 6-month period ending December 31, 1958.

In developing the estimates, due consideration has been given to the agricultural economic and credit situation discussed above.

Mr. TOOTELL. I shall not read that statement, but I will simply call attention to a few of the items in it, and then I will be glad to try to answer any questions that you may have.

Our request this year involves an estimate of $2,125,000 for the needs of the Farm Credit Administration for the fiscal year 1959, compared with the $2,200,000 which is our authorization for 1958. This represents a decrease of $75,000 in our request, and is made possible by a decrease in the personnel of the Farm Credit Administration. Let me remind the committee again that the Farm Credit Administration is a small, independent agency of the Federal Government, the function of which is to supervise the banks and associations that actually do the lending business. The Farm Credit Administration makes no loans. It makes policy, issues regulations, and supervises and coordinates the activities of the district banks and associations.

In keeping with the decentralization program enunciated in the act of 1953, we have continued to decentralize our functions and to delegate to the banks and the associations more responsibilities than they ever had before. Through that and, also, through, we believe, more efficient procedures in a number of respects, it has been possible for us to rather substantially decrease personnel in a systematic way over a period of 3 or 4 years and to decrease our expenditures.

So this request for 1959, we believe, will take care of our needs so far as the Farm Credit Administration is concerned.

FEDERAL FARM MORTGAGE CORPORATION

The next item in the table has to do with the Federal Farm Mortgage Corporation, and you will notice that we have no request for an authorization for the Federal Farm Mortgage Corporation because it is inactive and it is not contemplated that there will be occasion to reactivate it.

Mr. WHITTEN. Several bills have been introduced in the Congress to reactivate that administration. Has the Farm Credit Administration been requested to report on such bills, or has it taken any position? Mr. TOOTELL. Yes; we have, Congressman Whitten. The Federal Board has taken a position on that, I believe, in each of the last 3 years. It has been the considered opinion of the Federal Board, after getting the views of the officers of the 12 Federal land banks and of the boards in each of the 12 districts, that there would not be justification for reactivating the Federal Farm Mortgage Corporation.

That Corporation, through the making of commissioner loans beginning back in the early thirties, did a tremendously constructive service for agriculture, but the circumstances in agriculture were considerably different at that time than thev are now, and it is the considered belief of the Farm Credit Administration that it would not be possible for the Federal Farm Mortgage Corporation to render a substantial service which would justify its reactivation at this time. Mr. WHITTEN. It is a fluid situation. Would the Board give consideration and recommend its reinstatement in the future, should Freumstances justify it, in your opinion?

T. TOOTELL. I am sure that is true, Congressman Whitten. An ative to that, and one which perhaps the Board might lean

toward a little stronger, would be to actually discontinue the Federal Farm Mortgage Corporation, to do away with it and close the chapter on that program. Then, if circumstances should arise in the future which would justify a program of that type, to create another corporation which, drawing somewhat on the experience of the Federal Farm Mortgage Corporation, would develop a program which might be more adapted to the needs of 1958 or 1960 or whenever it might be. Mr. WHITTEN. You are referring to circumstances which would require the commissioner-type loans, for which, as I recall it, the requirements in the way of security and other things were different. In other words, you had less security and went further in making that type of loan than you did for the normal type. If that situation should arise again, your Board would give attention either to reinstating it or to adopting such other means as might meet that need? Mr. ToOTELL. I am sure that would be the attitude of the Federal Farm Credit Board.

ADDITIONAL FUNDS INVESTED IN PRODUCTION CREDIT ASSOCIATIONS FOR DISASTER LOANS

Mr. WHITTEN. Governor, many of us conferred with you and attended jointly, I believe, a meeting over in the Senate in connection with what the Farm Credit Administration could do and would do to meet these needs in disaster areas. In the farm credit system, as I understand it, you are limited in your loans to those folks who, in turn, borrow the actual money from the production credit associations in the local area. Is that correct?

Mr. TOOTELL. Yes; that is the type of loan which was needed in those particular disaster areas.

Mr. WHITTEN. What action, if any, have you taken during the year to enable the local production credit associations to expand their lending authority to meet those needs?

Mr. TOOTELL. Mr. Chairman, I would prefer that Mr. Miles, who is Deputy Governor in charge of short-term credit service and has the responsibility for supervising the production credit and intermediate credit setup, answer that question.

Mr. WHITTEN. We would be glad to have you do so, Mr. Miles. Mr. MILES. Congressman Whitten, since that meeting we obtained information from the delta associations-Mississippi, Arkansas, and the boot heel in Missouri-in regard to their needs for capital. As a result of the information which they submitted to us, it was determined that in order for them to serve properly the farmers of their respective territories, we would need to invest some additional capital in those associations. I have here the associations in the delta in which we have invested additional capital, and the amounts.

Mr. WHITTEN. We would be glad to have that included in the record.

(The information referred to follows:)

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Mr. WHITTEN. Has that met the need in those areas, insofar as the borrowers from the production credit associations are concerned?

Mr. MILES. Yes, sir; we have every reason to believe it has. The associations in the delta, in which we have placed this capital, report tous that this is meeting the need. We had one of our men visit these associations after these investments were made. He found that they were doing a very good job of servicing their members, and felt that they were in a position to provide adequate service to meet the needs of the territory, in other words.

Mr. TOOTELL. Two weeks ago I attended a meeting in your State, Mr. Congressman, and at that time talked with the president of the Intermediate Credit Bank of New Orleans, and also officers of 2 or 3 of the production credit associations in the delta area. They expressed to me great satisfaction with the assistance which had been given through this additional subscription of capital, and reported that their production credit associations were making a tremendous number of loans and getting quite a few new borrowers in addition to taking care of members who had been with them for a long time.

Mr. WHITTEN. Of course, the committee is aware of the fact that your efforts to meet this need are limited to the channels which we are discussing. The committee has been somewhat disappointed in the Farmers Home Administration not more fully utilizing its authority to meet these needs. I think the committee was largely responsible for getting some modification of that requirement, including a change in the program so a borrower could include in his loans a sufficient amount to pay taxes, interest on any secured debts, and about 15 percent of the appraised value of his machinery, which would enable him to hold his machinery. We were unable to get them to modify their regulations to include a payment toward unsecured debts or open accounts. However, if the lien holder were to sue and get judgment, I do not think the Farmers' Home Administration could do anything but pay out in full to protect what they put out on the other. This was pointed out to them.

By and large, I do think your own Administration, insofar as your authority goes, has met the needs of your borrowers.

REPAYMENT EXPERIENCE

How about repayment experience in the last year or two, insofar as the Farm Credit Administration is concerned?

Mr. TOOTELL. Speaking for the entire system, it is very satisfactory. The delinquency on Federal land bank loans has been at a nominal figure of 5 to 6 percent.

I should like to correct that. As of December 31, 1956, it was 6 percent even; as of December 31, 1957, it was 6.3 percent.

I call to the attention of the committee the fact that in each one of those years there was a substantial disaster area in the country, in which the land banks had a great deal of credit outstanding. At the end of 1956, of course, there was the Great Plains drought which still had not been broken. It has been to us almost a miracle the way the folks in the Great Plains country over a period when they had drought for 6 or 7 years in many of those areas did keep up their obligations in one way or another.

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