STATEMENT FILED BY CARLOS VAL. SMITH, SECRETARY-TREASURER, AND W. D. WALKER, PRESIDENT, WACO PRODUCTION CREDIT ASSOCIATION, WACO, TEX. We shall discuss here S. 4564, introduced by Senator Holland, of Florida; H. R. 10285 introduced by Representative Cooley; H. R. 10286 introduced by Representative Hope, of Kansas; H. R. 10315 introduced by Representative Poage, of Texas. These four bills are identical in text. Hence we shall refer to them in the singular. We have agreed with the majority of the production credit associations of our district that this bill, as far as it goes, is a good bill. We have no disposition to delay or impede its passage, if it is what the production credit associations of the entire system want and if the objections which we shall raise herein are inet. Our association however, is one of those who feel that some important things have been left out of the bill. The objections which we shall raise have been called to the attention of the Federal Farm Credit Board heretofore, with recommendations for their remendy, but without result. Therefore, we shall present our objections and recommendations to the Congress, hoping they may be received with more consideration. Objection No. 1: No provision for "increased control" This legislation, like the "Farm Credit Act of 1955." is designed to comply with the statement of policy contained in the Farm Credit Act of 1953 (Public Law 202), which says: "It is declared to be the policy of the Congress to encourage and facilitate increased borrower participation in the management, control, and ultimate ownership of the permanent system of agricultural credit made available through institutions operating under the supervision of the Farm Credit Administration, and the provisions of this act shall be construed in keeping with this policy." It has been, and is, our belief that "control should go with ownership." It was to be expected that the Federal Farm Credit Board, in preparing this bill, would have had due regard to the statement of policy of the Congress quoted above, which specifies "management, control and ultimate ownership" as its goals, not simply ownership. Yet this bill fails to make any provision for the purchasing associations to acquire increased control of the merged Federal intermediate credit bank as they acquire ownership. Our association, in common with many others, feels that the present arrangement, under which the PCA's of a district have 2 elected directors on a district board of 7 men, does not constitute control. This arrangement is fairly satisfactory so long as we do not own the credit bank, but when we have invested our money and have retired the Government capital from the merged bank and own it, we cannot agree that 2/7 representation on the board of directors will give us effective control. The proposed act does not provide for voluntary participation in the purchase of stock in the bank, but makes it compulsory for the PCA's to invest their capital. This is doubtless necessary to the success of the plan for retirement of the Government capital, but it would seem that simple justice would dictate that the same act should provide the means for giving the purchasing associations "increased control" along with their progressive assumption of ownership. And, we repeat, this clearly is the intent of the Congress as quoted above from the act of 1953. If it be thought that the omission of provision for controls from this bill is an oversight, let us look at the "Declaration of Policy" (sec. 2.), which reads as follows: "It is declared to be the policy of the Congress to continue to provide agriculture with a sound, dependable, and effective source of credit: to promote the efficiency of the farm credit system by merging production credit corporations in Federal intermediate credit banks and to facilitate farmer ownership of the merged banks and retirement of Government capital therein: to encourage and promote the continued growth and development of the production credit associations as self-supporting cooperative lending institutions operating on a sound credit basis with maximum local authority to determine credit needs and loan policies consistent with the maintenance of a national production credit system; and to continue to provide other financing institutions making loans to farmers and ranchers with the right to borrow from and rediscount with such merged banks on a basis comparable with the production credit associations regardless of the ownership of such banks. The provisions of this Act shall be construed In keeping with this declaration of policy." This declaration appears to have been very carefully written, and it makes it appear that the Congress has backed away from the policy contained in the Farm Credit Act of 1953, previously quoted. Notice that it omits any reference to "management and control" and bears down on "farmer ownership" only. Without attempting to impugn motives, we are nevertheless faced with these questions: Why did the Federal Farm Credit Board feel it necessary to restate the policy of the Congress? Why did it not simply let the original (1953) declaration of policy stand and reaffirm it? Does this indicate that the Farm Credit Administration now looks askance at "borrower participation in management and control" and would limit borrower participation to ownership only? We can only raise these questions not answer them. But we can state positively that the production credit associations of the Nation have not changed their views and they are expecting the policy adopted in 1953 to be carried out. We do not believe that the Congress has changed its policy, and we submit that the proposed declaration of policy does not properly represent nor express the policy of the Congress. If this be considered an unimportant matter, let it be remembered that several attempts have been made in the past, by persons and interests opposed to the principle of farmer-borrower control of our system, to reverse our plan and to gather up the controls in Washington. Although these attempts were thwarted, we are not at all certain that further attempts will not be made. We hope there are no longer any persons in the Farm Credit Administration who disapprove of the principle of borrower management and control of our agricultural credit system, but if there are, the proposed restatement of congressional policy in the aforementioned declaration of policy, if enacted, would be a useful tool for their purposes. Recommendation.-We recommend: (1) That the declaration of policy in section 2 be rewritten or amended so as to reaffirm in all particulars the policy contained in the Farm Credit Act of 1953. (2) That the bill be amended to provide that the purchasing associations shall obtain control of the merged Federal intermediate credit banks progressively as they acquire ownership. (Our association favors the plan of separate, but interlocking boards of directors for the three units of the Farm credit system in each district.) Objection No. 2: No provision for hardship cases The attention of the Federal Farm Credit Board was called to the absence from this bill of any provision for allowing an extension of time for the initial investment of association capital in the merged bank where it would cause an association hardship. In our district, several associations have been and are experiencing a prolonged drought. In others, there are associations that, due to limited capital and smal lincome, may find it hard to meet the scheduled payments on time. Our association, being a more or less average PCA, would have to take about $26,766 out of our present working capital, in 3 installments over a period of 2 years. This is equivalent to 90 percent of our total profits for the past 5 years, and is equal to 6.7 percent of our present capital and surplus. We doubt if we can take this amount out of our working capital without some impairment of our operation. We feel certain that a comparable withdrawal from the capital of those associations that are undergoing more difficult conditions would cause even more embarrassment to them. We think that the bill should make provision for some flexibility in requiring the investment of association funds in the merged banks. If this is not done, and an association found itself unable to meet an installment, its only recourse would be to request the Governor of the FCA to invest some Government capital out of the revolving fund to take up the slack. It would be hard to imagine a more absurd situation than that of an association being obliged to get capital from the Government with which to retire Government capital from the bank. Recommendation.-That the bill be amended to permit the Federal intermediate credit bank of a district to grant an extension of time for the initial 15percent investment, or any installment thereof, to an association that would be unable to make such investment without serious hardship. We respectfully submit these recommendations to the consideration of all members of the Senate and the House of Representatives, and particularly to the members of the Committees on Agriculture of the two Houses. Senator HOLLAND, Senate Agriculture Committee, Senate Office Building, Washington, D. C.: FREEPORT, ILL., April 23, 1956. Board of directors representing 1,241 members of this association in favor of Senate bill S. 3564 and urge its passage. We would like this telegram included in the hearing now before your committee. H. E. MCCLEARY, President, Blackhawk Production Credit Association. BLOOMINGTON, ILL., April 23, 1956. Senator HOLLAND, Senate Agriculture Committee, Senate Office Building, Washington, D. C. Senator HOLLAND: The board of directors of this association representing 1,422 members ask that this message be read into the record of the Senate agricultural hearing of Senate bill 3564. We sincerely request that the committee act favorable on this bill as it brings about economy of operation and provides the method for complete farmer ownership of the production credit system. ARTHUR W. NAFZIGER, President, Bloomington Production Credit Association. CHAMPAIGN, ILL., April 23, 1956. Senator HOLLAND, Senate Agriculture Committee, Senate Office Building, Washington D. C.: Board of directors of our association urges support of S. 3564 merging assets of production credit corporations and Federal intermediate credit banks, also favors amendment naming new merged institution production credit bank. J. FRED ROMINE, President, Champaign Production Credit Association. Senator HOLLAND, CHARLESTON, ILL., April 23, 1956. Senate Office Building, Washington D. C.: Favor Senate bill 3564 merging assets of Federal intermediate credit bank and production credit corporation. Your support of bill will be appreciated. CHARLES R. PINNELL, President, Charleston Production Credit Association. Hon. SPESSARD L. HOLLAND, GONZALES, TEX., April 23, 1956. Chairman, Subcommittee, United States Senate, Washington, D. C.: Reference Waco Production Credit Association's expose in regards change in declaration of policy in Farm Credit Act of 1956, believe that the definite change should be investigated and see no reason why declaration of Farm Credit Act of 1956 should not be substituted with reference to claims of other financing institutions which have done business with intermediate credit banks much longer than PCA's. We have no objection to treating them on parity with PCA's as to ownership and control. We feel that they are being discriminated against in impending legislation. GONZALES PRODUCTION CREDIT ASSOCIATION. JACKSONVILLE, ILL., April 23, 1956. Senator HOLLAND, Senate Office Building, Senate Agriculture Committee, Washington, D. C.: Jacksonville Production Credit Association urges passage Senate bill 3564. We represent 600 farmers. Senator HOLLAND of Florida, Washington, D. C.: LEROY O. CASTLE, President, JONESBORO, ARK., April 23, 1956. The Jonesboro Production Credit Association endorses Senate bill 3564. We believe your bill will make production credit associations fully farmer owned. We suggest the name be changed from Federal Intermediate Credit Bank to Production Credit Bank. Senator HOLLAND, Senate Office Building, Washington, D. C.: W. C. SLOAN, President. KEWANEE, ILL., April 23, 1956. Re Senate bill 3564: We wish to inform you that the Kewanee Production Credit Association with farmer membership of approximately 950 is in favor of this bill and urge you to vote favorable in your committee. GEORGE F. HAYES, President. C. E. HUMPHREY, Secretary-Treasurer. LAKELAND, FLA., April 11, 1956. Hon. SPESSARD L. HOLLAND, United States Senator, Washington, D. C.: As directors of the Lakeland Production Credit Association, representing 583 members, we very much appreciate Senate bill 3564, which you have introduced. We are thoroughly in favor of this bill. Senator HOLLAND, H. H. HOWELL, MACOMB, ILL., April 23, 1956. Senate Office Building, Washington, D. C.: The board of directors of the Macomb Production Credit Association have unanimously endorsed Senate farm credit bill Number 3564 we would like to have this endorsement included in the minutes of the Senate hearing on the bill. GLEN VANCE, President. PITTSFIELD, ILL., April 23, 1956. Senator HOLLAND, Member Senate Commission on Agriculture, Re Senate bill No. 3564 board of directors of Mississippi Valley Production MONMOUTH, ILL., April 23, 1956. Senator HOLLAND, Senate Office Building, Washington, D. C.: The board of directors of the Momouth Production Credit Association of Monmouth, Ill., wants you to know that they unanimously favor Senate bill 3564 now in Senate Agricultural Committee. Monmouth Production Credit Association, OTTO STEFFEY, President. MARKED TREE, ARK., April 21, 1956. Senator HOLLAND, Washington, D. C.: We, the board of directors, Poinsett Production Credit Association have gone over contents Senate bill 3564 introduced by you, and we favor the same and thank you for introducing it. Bill will provide ultimate ownership by farmers. Would like to see name changed to Production Credit Bank. H. P. MADDOX, Sr., J. G. STUCKEY, Sr., J. H. PRESTIDGE, Sr., C. O. WOFFORD, L. V. RITTER, Jr. DANVILLE, ILL., April 23, 1956. Senator HOLLAND, Senate Agriculture Committee, Senate Office Building, Washington, D.C.: Our association asks that you support Senate bill 3564 to merge assets of production Credit Corporations and Federal intermediate credit banks. We favor amending the bill to name the Northwest merged bank Production Credit Bank of (name of city). LESTER M. BURD, President, Vermillion County Production Credit Association, Danville, Ill. |