I think if this hearing runs true to form, sir, I believe you will have testimony before your committee by men and by a man who will rewrite this bill in one night, when they have never had too much experience with production credit and farm credit, when these men that are presenting this bill have lived with production credit and farm credit for the past 20 years.

I believe that completes my statement here.

Senator HOLLAND. Well, now; just a moment on that.

I have sat on this committee when we took action to get away from public ownership of land banks, and then later, the banks of the cooperatives. And now I am sitting here looking into this particular last group, you might say. I have not sensed any smaller group than the whole Congress.

Mr. LACY. I was not speaking about Congress, either House of Congress, I was speaking about men who would testify before this committee.

Senator HOLLAND. Well, undoubtedly we will hear all points of view. Some of them are quite contradictory of the position that you have taken, but that has been true with reference to each of the bills. And we have come out with a pretty sound handling of each of them. Mr. LACY. I appreciate that, sir.

Senator HOLLAND. I hope that we will do that well with this.

Mr. LACY. Those people, certainly, have a right to have their views; I understand that. But I was just trying to clarify my point, that this bill is not an overnight dream.

Senator HOLLAND. I know that full well. I know the people in our State have been working on it very diligently for a long while. I hope that we can work out something.

We are very glad to have had you here.

Mr. LACY. Thank you very much for the opportunity to appear. Senator HOLLAND. The next gentleman that we will hear from is Mr. Wayne Thomson.

STATEMENT OF WAYNE THOMSON, PRESIDENT, JENNINGS PRODUCTION CREDIT ASSOCIATION, JENNINGS, LA.

Mr. THOMSON. Mr. Chairman, my name is Wayne Thomson, and this is our secretary, Mr. Theriot.

I am one of the organizing stockholders and one of the organizing directors. I have been a director of the association for 23 years, during which time I have seen the system develop into a network of almost all completely farmer-owned credit agencies.

My association believes that the immediate consolidation of the production credit corporation and the Federal intermediate credit bank, in each district, will best serve the interest of our system for the following reasons:

PRODUCTION CREDIT CORPORATIONS HAVE SERVED THEIR PURPOSE

The production credit system was authorized by Congress in 1933, at which time, the production credit corporations 1 in each of 12 farm credit districts, were created for the purpose of organizing, capitalizing and supervising production credit associations.

We are grateful to this Congress for having created our system. We are equally grateful to the taxpayers and to the public who have absorbed the cost of maintaining these corporations.

We are pleased to report that a wonderful job was done in the organization of our associations. The capital that was loaned to us by the Government, through the production credit corporations, has almost all been returned. It is apparent then that two of the main objectives of the production credit corporations, namely, organization and capitalization, have been fulfilled, leaving only the task of supervision. It is reasonable to assume that the manpower requirements of the corporations with two-thirds of their functions removed, should be substantially reduced.

PCA'S ARE ORGANIZED IN DEPTH AND REQUIRE A MINIMUM OF SUPERVISION

Each production credit association is under the direction of a board of at least 5 members elected for staggered terms, thus insuring that the majority of the members on each board will at all times have served at least 1 term. Furthermore, each association has a manager, an assistant manager, and usually a treasurer. This assures trained personnel to assume managerial responsibility in event of necessity. With this type of organization and with 23 years of experience, we feel confident that only a minimum amount of supervision is required.

MANPOWER REQUIREMENTS DO NOT WARRANT A CORPORATE ENTITY

It is also a known fact, in our district, that the Federal intermediate credit bank and the production credit corporation are duplicating themselves in the supervision of the production credit associations, since approximately one-half of the manpower in the corporation is used to supervise the extension of credit, for which the final responsibility rests in the Federal intermediate credit bank.

Should this duplication be removed, the manpower requirements of the production credit corporation would be reduced to such an extent that the Production Credit Corporation of New Orleans could no longer justify its existence as a corporate entity and even less justify the continued investment of $21/4 million of Government capital.

Furthermore, the duplication in the supervision by our Federal intermediate credit bank and our production credit corporation has made it difficult for the association to satisfy both. Our association has therefore concluded that it would be to the best interest of our stockholders and the taxpayers for these two institutions to be merged.

MERGER WILL NOT DISTURB FARM CREDIT

There are some who hesitate to disturb our present arrangement for fear of its effect on farm credit. May I hasten to remind you, gentlemen, that the production credit corporation and the Federal intermediate credit bank in each district are now under the guidance of a common board of directors and this same board of directors will direct the merged institutions.

Isn't it reasonable to assume, therefore, that the welfare of the associations will be as equally well entrusted in this board when the two corporations have been merged? This proposed consolidation

does not entail a complete reorganization of our system. The only immediate change will be that both corporations now existing separately under the direction of a common board, will merge under one roof under the directorship of this common board.

MANPOWER DISPLACEMENT WILL BE GRADUAL

It has already been established that there will be a very gradual displacement of manpower and that the retrenchment and the economies that we have envisioned will not be fully attained until probably 4 or 5 years. This is as it should be, but a merger must be accomplished first in order to permit a study of the manpower requirements of the merged institution.

Frankly, the merger itself will eliminate the following positions, in each of 12 districts, namely, 1 presidency, 1 credit department, and 1 staff of accountants. It is evidence that further changes will be gradual; therefore, to delay the effective date of this act, as suggested by some, would only be procrastinating. We therefore believe that the merger should be accomplished January 1, 1957, so that manpower studies can be instituted to accomplish a reduction in the cost of agricultural credit.

MERGER WILL STRENGTHEN OUR SYSTEM AND INCREASE FARMER

PARTICIPATION

We are confident that there will emerge with the enactment of this legislation a much stronger and much more economical farm credit system. There will exist a national system of production credit associations owning 12 banks of discount, each of which will be directed by a district board, under an arrangement very much similar in every respect to the relationship that exists in the Federal Reserve System.

The 12 Federal intermediate credit banks, commonly known as banks of discount, will be strengthened by the acquisition of approximately $39 million in additional capital which is now lying dormant as capital and surplus in the 12 production credit corporations.

For example, there is approximately $3,423,721.08 of capital and surplus in the Production Credit Corporation of New Orleans, which will permit, after the merger, the extension of additional credit in our district in an amount approximately equal to 10 times this figure. The merger will enable associations and their bank of discount to solve their credit problems by direct negotiations with association officials, who are naturally more familiar with their own problems than are the officials of the production credit corporation who have handled it heretofore. This should result in a more flexible system, thus enabling each association to formulate lending policies that will meet the needs of its locality.

We are here to assist in the enactment of proper legislation for our system of production credit associations and to show our appreciation to this Congress and to the public by supporting legislation that will relieve them of this financial burden. We want to suggest that provisions be made whereby the extent of this burden can ultimately be reduced through streamlining, for the benefit of the farmer-owned associations who will buy the merged institutions.

We believe that the legislation introduced by the Federal Farm Credit Board embodies the suggestions that we have made and we are therefore pleased to support it without reservation.

We thank you for the privilege of having appeared before you.

Senator HOLLAND. Thank you very much, sir. I do not believe I have any questions. That seems to be an all-out endorsement of the program.

Mr. THOMSON. Thank you, sir.

Senator HOLLAND. The next gentleman that I see listed here is Mr. L. D. Campbell.

Mr. CAMPBELL. I represent nine of the OFI's of Texas. Mr. Sartwelle is here with me. We would like, if it could be arranged, to defer our hearing until tomorrow. Some of our group is not here. They will be here tomorrow. If it can be arranged, as I say, we certainly will appreciate that.

Senator HOLLAND. Very well.

How about you, Mr. Watkins Johnston?

Mr. JOHNSTON. Mr. Chairman, I was just talking with Governor Tootell. There are 2 or 3 matters that I would normally like to talk with your committee about. He has permitted me to talk with him. I might be able to save myself and the committee some time, if I might do that.

Senator HOLLAND. Very well.

That means that we have carried over until tomorrow Mr. Watkins Johnston, who may not wish to appear; Mr. Campbell, and Mr. Sartwelle will probably both want to appear; Mr. Davis, who is not here at present; and Mr. Crouch, who is not here at present.

We have already scheduled for tomorrow 12 witnesses, so that apparently we have heard 12 witnesses today and will have 17 witnesses tomorrow, instead of having heard 17 witnesses today and having 12 witnesses for tomorrow.

Mr. CAMPBELL. Mr. Chairman, I will be glad to go ahead in the interest of saving time, if you desire.

Senator HOLLAND. That will be very well. on your part, and we will hear from you now.

That is very cooperative

STATEMENT OF L. D. CAMPBELL, SECRETARY, OTHER FINANCING INSTITUTIONS COMMITTEE OF TEXAS, HOUSTON, TEX.

Mr. CAMPBELL. Chairman Holland, my name is L. D. Campbell, of Houston, Tex. I represent the nine Other Financing Institutions of Texas. Also, for the record, I am an officer and director and one of the individual OFI's known as the Houston Agricultural Credit Corp. Without too much detail, I would like to mention in the beginning, and without boasting, that I have been in the credit field for the past 30 years, that is, the farm credit field, if you please.

I have a prepared statement here that I would present, but, if it is satisfactory, I will digress from that and add a few oral comments. Senator HOLLAND. First, I notice that you have attached to your statement a list of the nine OFI's in Texas.

Mr. CAMPBELL. Yes, sir.

Senator HOLLAND. Do I understand that you represent them all? Mr. CAMPBELL. Yes; I represent them all.

Senator HOLLAND. Without objection, then, I will have that list copied into the record at this point.

Mr. CAMPBELL. Fine.

(The list is as follows:)

Agricultural Livestock Finance Corp., 1102 Burk Burnett Building, Fort Worth 2, Tex.

Commercial Cattle Loan Co., 306 Travis Building, San Antonio 5, Tex.

Del Rio Wool & Mohair Co., Del Rio, Tex.

Houston Agricultural Credit Corp., 903 Milam Building, Houston, Tex.

National Finance Credit Corporation of Texas, 119 East Exchange Ave., Fort Worth 6, Tex.

Producers Loan Co., Childress, Tex.

Producers Wool & Mohair Co., Del Rio, Tex.

San Antonio Agricultural Credit Corp., National Bank of Commerce Building, San Antonio 5, Tex.

Wool Growers Central Storage Co., San Angelo, Tex.

Senator HOLLAND. You may proceed.

Mr. CAMPBELL. The nine OFI's of Texas are greatly interested in this pending legislation. In fact, they feel like they have a lot at stake. Eight of these nine OFI's have discounted loans with the Federal Intermediate Bank of Houston for the past 27 years; 2 of them have discounted their loans since 1923.

The company with which I am connected, the Houston Agricultural Credit Corp., was the first organization of this kind to use the facilities of the Intermediate Credit Bank of Houston. I believe the Intermediate Credit Bank of Houston was organized under the Farm Credit Act of 1923, in March of that year. Our company got the first loan in about the 1st of September. It has operated continuously for the past 33 years, right on through the depression.

Referring again to our individual company, we have about 1,000 stockholders who own all of the capital stock of our organization. They are farmers and ranchers up and down the gulf coast.

They vote and elect the directors of our company.

Mr. Sartwell, over here is one of the original directors and also a borrower.

They are substantial livestock men, substantial dairymen, substantial rice farmers. We even have a few cotton farmers that we finance. We finance men who borrow $1,000 and we finance men who borrow $200,000. We are there serving agriculture and not just to make a profit.

I will say the same thing goes with most of the old line companies that I know anything about. They are there to serve agriculture. Certainly they must make a profit, because without a profit they would not be sound. But, in turn, the profits usually stay in the company, or are declared in dividends that are owned by the farmers and the ranchers.

Our company has paid dividends on our stock to our borrowers continuously since 1937. We have paid a stock dividend, even during the few years of the depression, when there was no money. The remainder of our capital, the total capital of over $1 million is intact. It belongs to our farmers and ranchers, and that is true of a number of the OFI's in our State.

Senator HOLLAND. You do not mean that you are a cooperative?

Mr. CAMPBELL. We are cooperative in principle; yes, sir. Not all of the OFI's are cooperative, but our organization is, Senator Holland.