banks and securities dealers who buy these securities. These 10 firms are located in the large money centers throughout the country. Possible effect of change of ownership of Federal intermediate credit banks to production credit associations, on marketability of credit bank debentures. In response to this question, Mr. Newcomb reported to the Federal Board as follows on November 4, 1955: The opinion was unanimous that acquisition of the credit banks by the production credit associations on a basis acceptable to the Treasury would in no way affect the marketability of Federal intermediate credit bank debentures. This conclusion is supported by the experience of similar nature in the case of the land banks and also the Federal home loan banks. (The documents above referred to are as follows:) PRODUCERS MARKETING ASSOCIATION, INC., Hon. CECIL M. HARDEN, House of Representatives, Washington, D. C. DEAR CONGRESSMAN: House bill 10285 as prepared by the Farm Credit Board and introduced in the House by Congressman Cooley, we believe fulfills a need in agriculture. We believe it is sound, that the users of the Farm Credit System eventually own it. This has been accomplished in the Federal land banks and congressional legislation has set up a method to make this possible in the banks for cooperatives. H. R. 10285 makes it possible for the same to be accomplished with the Federal intermediate credit banks and the production credit corporations. We believe this bill treats all users of these two corporations fair and equitable and warrants your support. Identical bills have been introduced by both Congressman Hope and Congressman Poage. May we urge you to lend your support to this bill and work for its passage. Yours truly, WILLARD E. JONES, President. Mr. M. J. BRIGGS, PRODUCERS LIVE STOCK CREDIT ASSOCIATION, President, National Council of Farmer Cooperatives, Washington 6, D. C. DEAR MARVIN: During the annual meeting of the National Live Stock Producers Association in Chicago on March 28, you conferred with officers and management of the national association and of its affiliated credit associations regarding proposed credit bank legislation and policies thereunder. Reports and discussions of this conference were made on the following day to directors of the national association and to the managers' conference. Since the meetings in Chicago, I have given considerable thought to the reports and proposals made and vigorously advanced by P. O. Wilson. In fact, we have reviewed the reports, proposals, and recommendations with officers of our Producers Livestock Cooperative Association and Producers Live Stock Credit Association. Producers Livestock Cooperative Association and Producers Live Stock Credit Association have been users of and expect to continue to use the services of the bank for cooperatives and the Federal intermediate credit bank, respectively. We have, therefore, a stake in the organization, representation, and functioning of these divisions of the Farm Credit Administration. We have joined in the reorganization of the Louisville Bank for Cooperatives. Regarding the reorganization of the Federal intermediate credit bank, we should, of course, like to see the OFI's be accorded representation and considerations as nearly equal or comparable to those accorded PCA's as is possible. However, we think the plan finally agreed upon and proposed by you to the producers group in Chicago may be, as we understand it, as near the desired objectives we seek as is possible to attain at this time. It seems obvious that no proposals can now be unanimously agreed upon which will fully satisfy all parties and assure immunity from later political implications. Such situations must be met as they arise by the leadership of the Farm Credit Administration and the authorized participants. It seems to us wholly unwise to lose the good will of the farm credit leadership at this time by occasioning further delays by insisting upon provisions that are likely not now attainable. Furthermore, our producers association was one of the first and foremost in the advocacy of your election to the positions of responsibility which you now occupy. We then had full confidence in you and your good judgment. Neither has been impaired. It would now seem to be manifestly unfair for us to withhold from you the cooperation you have a right to expect from those who were a party to the placement of farm credit responsibilities upon you. We believe that our interests will be best served by supporting you in your present views and recommendations and asking that you keep the interests of the users and administrators of the OFI's in mind always so that their relationships in the farm credit system and the considerations afforded them through the Federal intermediate credit bank be in all regards as nearly equitable and comparable with PCA's as possible. Be assured of our appreciation for your thoughtful efforts and of our continuing cooperation. Sincerely and cordially, F. G. KETNER, Secretary-Treasurer and General Manager. Mr. BRIGGS. Mr. Senator, we appreciate the consideration you have given this bill. The Board has worked industriously and conscientiously and it has been handled democratically, and we will appreciate what you folks can do for us. (Whereupon, at 4:50 p. m., the committee adjourned.) (Additional statements filed for the record are as follows:) Senator ALLEN J. ELLENDER, Senate Office Building, Washington, D. C. ALEXANDRIA, La., April 11, 1956. DEAR SENATOR ELLENDER: A bill is pending that proposes to consolidate the Federal intermediate credit banks and the production credit corporations. This is a matter of great concern to us, an our board of directors at a meeting held April 3, 1956, voiced its opposition to this legislation—a copy of the resolution is herewith attached-and directed me as secretary-treasurer to solicit your help in defeating this proposed legislation. As you well know, the farmer is today suffering on account of high cost of operation and low income,. Interest rates continue to increase. The proposed legislation will add to the cost of the farmer. No greater service can be rendered to farming America than the refusal of Congress, at this time, to tinker with the Farm Credit Act of 1933. Yours very truly, S. F. TRAMMELL, Secretary-Treasurer, Alexandria Production Credit Association. RESOLUTION PERTAINING TO PROPOSED LEGISLATION TO CONSOLIDATE THE FICB's AND PCC's, ADOPTED BY THE BOARD OF DIRECTORS AT A MEETING HELD APRIL 3, 1956 We, the board of directors of the Alexandria Production Credit Association, Alexandria, La., have carefully reviewed the proposed legislation designed to consolidate the Federal intermediate credit banks and the production credit corporations. Although the district advisory committee has not met to take action on the proposed legislation, we herewith place upon record our preliminary protest to the legislation cognizant that it also affects the production credit associations. It is the unanimous consensus of this board that he production credit corporations have played a great part in building the farm credit system, and in view of the high cost of operation and low income of the farmer, it would be unwise to make such a change at this time in a system that has proven over a period of 22 years to be successful. It is the unanimous opinion of this board that the enactment of the proposed legislation at this time would be detrimental to the farmers; that more decentralization of power, rather than less, in the Washington office would be to the best interest of the farm credit system. The proposed consolidation would not prove to be an economy move, in our opinion, but would increase the cost of operation of the Federal intermediate credit banks which most likely would be passed on to the farmer users. It is our very sincere and strong belief that the proper method to improve the system, and to curtail expenses, is to "streamline" the operation of the production credit corporations and the Federal intermediate credit banks, and retain them as separate institutions. The only reason given for the proposed consolidation is to affect savings in operating cost. We think the saving will be insignificant. The production credit associations are service organizations and have played a great part in the economy of the farmers since organization in 1933. A slight saving accompanied by less service will work to the disadvantage of our system. In view of the present agricultural conditions, this board feels that it may become necessary for the Government to lend more support to short-term credit instead of less. The amount of Government capital in our system is insignificant compared to the service rendered to the Nation's economy. This board doubts that a bank of discount should ever be the supervisory agency of the associations, the lenders. This is based on our 22 years of experience with the Federal intermediate credit banks. Since organization this association has made 16,978 loans to farmers for a total of $31,732,909 and now have 1,847 members. According to their sentiment they are satisfied with the present system which is dependable and adjustable to farm needs, and do not support any change; furthermore, the proposed legislation was not begun by our farmers. The cost of the system is largely borne by its users. Most of the 498 PCA's are wholly farmer owned and the Government's investment in the system is small. This association has paid back to the Government every penny of tis peak investment of $385,000. Finally, the proposed legislation would revamp the system through consolidation of the FICB's and PCC's; and, in our opinion, would be an exchange of a satisfactory setup for a questionable experiment, which could easily result in a considerable higher cost to the farmer and a serious crippling of the service to him. Therefore, it is recommended that there be a delay in any new legislation until agriculture is on a sounder basis. This copy is being sent to you upon specific instructions of our board. Secretary-Treasurer, Alexandria Production Credit Association. ARCADIA, LA., April 16, 1956. Senator ALLEN J. ELLENDER, United State Senate, Washington, D. C. DEAR SENATOR ELLENDER: The board of directors, who represent approximately 1,500 farmers who are member-patrons of this association, has requested that I write you expressing their views regarding the proposed legislation designed to consolidate the Federal intermediate credit banks and production credit corporations. From the information given us, the main idea behind the proposed consolidation is to effect savings in the operation of the two institutions. After a very careful study, we can see that little, if any, economy would result. As our supervising agency, the Production Credit Corporation has always been most cooperative in permitting this association to retain sufficient capital enabling us to finance farmers in our area who have for economic reasons, converted from row crops to more diversified operations, such as livestock, dairying, poultry, etc. It is strongly felt that an independent agency such as the Production Credit Corporation would have a more sympathetic understanding of farmers' needs than an agency extending the credit and which has heavy responsibility to the purchasers of its debentures. In other words, we feel that the system is working to the entire satisfaction of all concerned and we earnestly solicit your cooperation and influence in trying to at least postpone this legislation until agricultural conditions are more favorable. Resepctfully yours, ROY BRICE, Secretary-Treasurer, Arcadia Production Credit Association. 76921-56 -14 OPELOUSAS, La., April 23, 1956. Hon. ALLEN J. ELLENDER, Chairman, Senate Agricultural Committee, Senate Building, Washington, D. C. DEAR SENATOR ELLENDER: The directors of our association asked that I write to give you their views on the proposed legislation for the purchase of the Federal intermediate credit banks and the production credit corporations by the production credit associations. It is the feeling of our directors that no legislation should be passed at this time. The cost of money has been rising steadily for the past year and it doesn't look like the peak has been reached. The interest rate charged our borrowers is high enough so it was necessary that this association absorb some of the increases. Any future increase will also have to be absorbed. Disturbing the present setup of the FICB's and PCC's may result in an increased cost to us of our money and that would make the situation worse. We are operating on a very narrow margin now. Should the Congress feel that legislation is necessary at this time, we recommend the bill offered by the Farm Credit Board introduced as H. R. 10285, or any identical bill. It would be to our advantage if the effective date of such legislation be deferred for about 5 years. Any help that you can give will be greatly appreciated. CLARENCE HARMON, Jr., Hon. GRACIE PFOST, TWIN FALLS IDAHO, April 21, 1956. House of Representatives, Washington, D. C. DEAR MRS. POST: We have had the opportunity of going over the proposed bills to be presented to Congress by the Federal Farm Credit Board, and wish to again urge that Senate bill No. 3549 and House bill 10285 be approved as written, as they come nearer meeting with the approval of our board and with the plan that was discussed last summer in our district conference at Spokane. The three amendments to Senate bill No. 3549, and included in Senate bill No. 3550, do not meet with our board's approval. On page 5, line 19, also on page 16, line 20, they are substituting a much reduced revolving fund. The associations have never, since their inception, gone through a recession, and we are doubtful if these revolving fund reductions would be wise. On page 12, lines 23 to 25, where the Government is to hold its interest in the surplus and reserve account, this is particularly objectionable since we feel that these surplus and reserves were built up at the expense of the associations and their members through the interest rate charged, and that the Federal Government has no right to retain any interest in the same. The third change on page 23, subsections A and B of section 201, which would continue the budget provisions of the Government Corporation Control Act until the entire Government capital is retired, it seems to us that this should be eliminated even under the mixed ownership, since under the new law the PCA's contract to take the Government out in full. May we urge that you use your good influence to see that Senate bill No. 3549 and House bill No. 10285 be approved as presented by the Farm Credit Board, without the above-mentioned amendments? Yours very truly, C. C. HAYNIE, Secretary, Southern Idaho Production Credit Association. CASPER WYO., April 14, 1956. Hon. JOSEPH C. O'MAHONEY, Senate Office Building, United States Senate, Washington, D. C. DEAR SENATOR O'MAHONEY: We have been studying carefully the recently introduced farm credit legislation, which as you know, provides for the merger of the production credit corporation (the supervising agencies of the production credit associations) and the Federal intermediate credit banks (the discount agencies. The proposal also provides for the purchase by the production credit association of the capital of the merged institutions, through an intiial contribution, payable in 3 years, and the balance to be acquired over a period of years through the net earnings of the banks. The legislation also contains other provisions, among them features which would obviously result in increased cost of money to the production credit associations, and which would have to be passed on to the borrowers. While we subscribe to the theory of ultimate complete ownership of the System by the production credit associations and their members, we question the advisability of forcing the purchase of these agencies on the association at this time, due primarily to the reason stated above-namely, the probable cost. This cost to associations can only be estimated, and will depend to a large degree on the margin of profit on which the banks will operate. And this margin will also have a bearing on future earnings which will determine the amount of funds available each year for patronage refunds. These refunds of course, will be issued in Federal Intermediate Credit Bank stock and, as such association owned stock increases, Government owned capital will be retired. Our board of directors is unanimous in its opinion that the whole matter should be given another year or two of study before it is offered as legislation, in an effort to work out a more practical and equitable approach. Senate bill 3564 and House bill 10285 are the Farm Credit Board's final version and are, we are told, identical. Senate bill 3550 was offered by the Budget Bureau as an alternate measure and obviously does not have the support of any interested parties. It provides for a reduction in the revolving fund, retention of the surplus by the Treasury in event of liquidation and would keep the new institution under the control of the Bureau of the Budget. There will, of course, be some opposition in addition to ours, to the Farm Credit Board's bill but, from what we are able to learn, many associations over the country are supporting it. So it would appear that the bill possibly has a fair chance of passage. If such is the case we would like to have the Wyoming congressional delegation offer an amendment-copy of which is attached to this letter. By way of explanation of this suggested amendment we might state that under the section of the bill referred to, the Governor of the Farm Credit Administration has the authority to reallocate Government-owned capital among the various districts. Those districts relinquishing capital under this authority would sacrifice income that would otherwise be available to them to aid in offsetting some of the additional expense that would be incurred by reason of the merger of the two institutions. We have been informed, through reliable sources, that under this reallocation authority, this district (8) would lose about $3,500,000 in capital and would result in a loss of approximately $87,500 in income annually. Capital funds are normally invested in Government bonds that return about -22 percent. Consequently, it is felt by the members of our board, as well as others in this district, that if the authority to enhance capital to some districts as the expense of others were deferred for 5 years it would be more equitable for all concerned. It would permit those districts for which reduction is planned to enjoy the income for that period of time, thereby aiding in building reserves and offsetting expenses that would otherwise be directly or indirectly borne by the associations. At the end of the 5-year period, it might not be so unpractical or unfair to permit the reallocation, if the need then existed. Those district banks requiring additional capital structure now could obtain paid in surplus funds from the revolving fund. We are appreciative of the splendid cooperation you have always extended us and thank you for your help in this matter. Kind personal regards. Very truly yours, L. F. DAVIS, Insert after the word "banks", page 4, section 205 (A) (1), line 25, the following: "Provided, however, That no such reallocation shall be made by the Governor until this act has been in effect for a period of 5 years." We do not have a copy of S. 3564, which is reportedly identical with H. R. 10285. This amendment has been prepared as it refers to H. R. 10285-section, page and line number, etc. |