Mr. HARRIS. I would like to make another comment, that I think that the Governor's point that the business of the production credit associations since 1933 has been a great percentage of the total business, and that that provided the credit banks with a better basis of operation than they would have had otherwise. I think there is real doubt whether this 20 percent can be accurately ascertained, because you have to go back and assume some things. And I think maybe without the production credit system the credit banks would not have that surplus now that they presently have. And consequently, the 20 percent figure would not have been true without the production credit system coming into being and being a part of the operations since they have been from 1933 to the present time. Senator HOLLAND. I think that is true. Neither would your reserves have accumulated to the amount that they have if you had not had others participating with you in the business. It works both ways. Mr. HARRIS. Yes. I say again that we in production credit have no quarrel with the OFI's and feel that they are a necessary part of the credit bank operation. Senator HOLLAND. You have accurately stated it in your presentation that the more business you have, the better it is to all concerned. I think that is sound. Mr. HARRIS. Thank you, sir. Senator HOLLAND. Are there any others here from out of town who want to be heard without fail this afternoon? Come up, sir. Maybe you will have a better suggestion to make about this troublesome question. STATEMENT OF ROBERT 0. JUSTICE, PRESIDENT OF THE BOARD, PERU PRODUCTION CREDIT ASSOCIATION, PERU, IND. Mr. JUSTICE. I am Robert O. Justice, president, and this is Joe Payne, of the same association, secretary-treasurer of our association. Senator HOLLAND. All right, gentlemen. You may proceed, Mr. Justice. Call upon your right arm there whenever you may need him. Mr. JUSTICE. We welcome questions and I bring him along to answer the questions. Senator HOLLAND. All right, sir. Mr. JUSTICE. Mr. Payne is a farm operator, lives on his farm and has a production loan. I, likewise, live on and operate my farm and have a production credit loan. And due to the fact that we are that close to the membership of the production credit, we would like to advance our reasons based on the desire of the large number of the members. You have heard the Governor, Mr. Briggs, the President, Federal Board, and Mr. Harris just recently from the National Advisory Committee. They have given you the reasons for this legislation, the various technical ramifications of it. We would like to present what we think is the opinion of the common member out here on the farm who is going to pay the costs and assume responsibility for the management. I will say just a little about our association. We represent 3,054 members of our association there in Peru, Ind. We loaned something like $10 million last year. We have an outstanding balance on March 31 of 1956 of $5,322,619. I have been a member of the board since organization in March 1934 and have seen our association grow from no reserves until December 31, 1955, when we had surplus and reserves of $533,416 and a net worth of $967,942. I give you those figures in that statement there to show that I think we are a pretty typical production credit association. It is not my purpose to discuss in detail the ramifications of this legislation nor the accomplishments we expect from its passage; these have been discussed previously. I believe the people vitally concerned are the members of production credit associations throughout the United States-honest-to-goodness dirt farmers. There has not been too much said about the farmers. When you get to the basic facts they are the ones concerned. I think they should have more consideration. That is why we proposed to advance their thinking. We are here for the purpose of urging the passage of Senator Holland's bill S. 3564. We have not been sent here by any group of associations or any committee, but are here on our own to represent the 3,054 members in our association and we think that our sentiments reflect the majority of the thinking of the membership in the Fourth District. It is because of my contacts and acquaintance with the association directors and secretary-treasury during the past 22 years that I feel I can express the majority sentiment of the more than 50,000 active members in the fourth district who had outstanding loans of $95,443,098 on March 31, 1956. I visited all of the associations in Indiana, most of the associations in Ohio and some in Kentucky, and I feel that I understand the thinking of the members in those areas. I dislike to bring out any repetition when time is so short. Proposed legislation has been presented to the directors and secretary-treasury of our district twice since the 1955 farm credit bill was considered by this committee and at the first of these meetings there were many different opinions, dissatisfaction, and discussion but no agreement was reached. When the revised draft of the bill was presented at a later date by Governor Tootell and Mr. Miles, a resolution approving legislation such as Senate bill 3564 provided was unanimously approved in the fourth district. I will say there were approximately 200 directors and secretarytreasurers in attendance at this meeting. I explained this bill to 600 of our members at our annual stockholders meeting on March 7, 1956, and their comments were to urge passage of the bill as it provides a means by which the Government capital can be retired from 2 more farm credit units with the least possible hardship to the members of the associations. Approximately 75 percent of our members are farm owners, and farmers by their very nature take a lot of pride in ownership. It was with great pride that the members of our association returned the class A stock held by the Government in our association, and we know from their expressions that they are looking forward to returning the Government capital from the other units as proposed in this legislation. The fact that our business has increased $2 million since the Government capital was retired in 1952 is evidence to me that it means a lot to our members to own their own credit association. We filed testimony with this committee a year ago on the farm credit bill of 1955. At that time our members favored a bill embodying the principles now contained in this bill, S. 3564, but were willing to support the bill presented last year rather than not have any plan for retiring the Government capital from the production credit corporation or the Federal intermediate credit bank. Now, gentlemen, we urge passage of this bill, because through my personal contacts with members of the Peru association and other members throughout the fourth district I am convinced that the great majority favor the legislation as set out in this bill. It also carries out the intent of the Farm Credit Act of 1933 and the declared policy of the Farm Credit Act of 1953. According to evidence submitted before the House committee, considerably more than 400 of the 498 production credit associations favor this bill. Since it is the purpose of this bill to facilitate complete farm ownership of the farm credit system and such a large percent of the members of the PCA's are in support of S. 3564, we respectfully urge your support and its final passage. We do think, however, that when the members become the owners of all B stock in the credit bank, the law should provide that all such B stock cannot be retired so that the credit bank cannot become a public trust. It is a privilege to be here. I cannot say it is altogether a pleasure, but I will say it is a privilege. Senator HOLLAND. When I saw a gentleman down here from Peru, I thought it meant something contributed from our sister Republic down south, Peru. Mr. JUSTICE. No. Senator HOLLAND. You are just from the Corn Belt of Indiana, than which I understand there is nothing better. Mr. JUSTICE. North central Indiana, north of Indianapolis. Senator HOLLAND. If there are no questions, thank you very much. Mr. JUSTICE. Thank you. Senator HOLLAND. Next is Mr. King Banks, National Advisory Committee of PCA's. You may proceed. STATEMENT OF KING L. BANKS, REPRESENTING THE PRODUCTION CREDIT ASSOCIATIONS OF THE NINTH FARM CREDIT DISTRICT, DELTA, COLO. Mr. BANKS. My name is King L. Banks, of Delta, Colo. I represent the Ninth District of the Farm Credit Administration which is composed of the States of Kansas, Oklahoma, New Mexico, and Colorado. We have 41 production credit associations. My information from the State chairmen of Kansas and Oklahoma is that their production credit associations are unanimous in support of the bills presented by the National Board, H. R. 10285 and S. 3564, They are against the provisions of the bill as presented by the Bureau of the Budget with the possible exception of the reduction suggested in the revolving fund. Some associations in New Mexico favor the new bill; some are against it. I know that 1 is for it and 1 against it. The other three, I have no information definitely from them. Senator HOLLAND. You mean in New Mexico? Mr. BANKS. In New Mexico. In Colorado, at a recent meeting of our State Advisory committee, 4 associations favored the bill and 4 were against it. The reason for the unfavorable votes in Colorado was principally the possibility of a raise in interest rate to our members to cover the additional cost. The others felt that the new bill presented by the National Board was such a long step forward that we should accept it and then if there was any appreciable increase in cost we could take the necessary steps, political or otherwise, to remedy the situation. I might say that this increase in cost and the initial investment as suggested amount to 2.07 percent of the average month, and volume of loans is of great concern to all associations in our district. The Ninth district has consistently battled any change in the 1933 act other than amendments. But the 1953 act was passed and is now law. We realize the pressure on the new Board to propose legislation to retire, as soon as possible, the Government capital in the system. The National Board has worked hard and conscientiously to this end and the bill they have presented, with the exception of the 2.07 percent initial investment, as we mentioned before, is a long step in this direction. We feel that, if possible, we should get the National Board's bill with the elimination or reduction in the initial investment. For the record, I want to state that our district, while not unanimous, is overwhelmingly favorable to this legislation as proposed by the National Board. Senator HOLLAND. You recognize, I see, that the National Board is under a mandate because of the 1953 legislation? Mr. BANKS. That is right. Senator HOLLAND. To move toward elimination of the capital investment of the Federal Government in these units of the Farm Credit Administration. Mr. BANKS. We fully realize that; yes, sir. Senator HOLLAND. All right; thank you, sir. Mr. BANKS. Thank you. Senator HOLLAND. Mr. Kenneth L. Scott, Director, Agricultural Credit Services. STATEMENT OF KENNETH L. SCOTT, DIRECTOR, AGRICULTURAL CREDIT SERVICES, UNITED STATES DEPARTMENT OF AGRICULTURE Mr. SCOTT. The Department believes that this proposed merger of the Federal intermediate credit banks and the production credit corporations is an opportunity to further improve the facilities of the farm credit system to the benefit of farmers and ranchers throughout the country. I appreciate this opportunity to discuss with you briefly some of the more important phases of this legislative proposal, as we see them. Credit, of course, is an essential farm tool. Credit that is carefully geared to the particular requirements of agriculture, and especially to the sound needs of individual farmers, is especially helpful to the successful conduct of individual farm businesses. Farm people need credit in good times as well as during the less favorable years. The lack of such dependable credit brought into being the production credit system as the members of this committee well know. Here we have a system that was carefully designed to meet a real need; a system that is devoted solely to the extension of sound, helpful agricultural credit services. The record of the production credit system has been outstanding in several respects. In the early days there were skeptics who thought farmers could not safely be entrusted with the responsibility of making loans. Billions of dollars have been loaned with insignificant. losses. Of much greater significance is the pace-setting example which the Congress had in mind when the system was established. Notwithstanding the importance of the large volume of loans that have been made, I believe it is true that this pace-setting function has been of greatest benefit to our agricultural people generally. The principles of lending which this system put into widespread use have now been accepted by other agricultural lenders and adapted to their lending policies. Loan terms suits to the needs of farmers with particular emphasis on the repayment capacity of the business are now the common practice as a result of this fine example. The agricultural commission of the American Bankers Association has been actively sponsoring for several years the use of agriculturally trained men in country banks and the establishment of special agricultural loan departments. I think it is fair to say that the Production Credit gave this movement great impetus. The outlook for future agricultural developments is such that there will be further opportunities for the production credit system to perform additional pace-setting functions. It is important to remember why this special credit system has worked out so well. It didn't just happen, of course. The Federal intermediate credit banks were in existence long before the production credit days. Their basic authority and functions haven't changed much during the years. They are wholesalers of agricultural credit. They have developed a reputation for their debentures which cause them to be looked upon by the most prudent investors as blue-chip investments. It is essential that this fine reputation be carefully maintained to insure a continued supply of loanable funds. The Department believes that this bill would add further strength to this phase of the system. Private discount companies, the original outlets for the services of the credit banks, have continued to use the banks' facilities. Although production credit associations have for many years provided most of the volume of service, the Farm Credit Administration has very properly carefully safeguarded the rights of these private companies. |