EMERGENCY CREDIT EXTENSION TO FARMERS IN DISASTER AREAS FRIDAY, MARCH 7, 1958 HOUSE OF REPRESENTATIVES, CONSERVATION AND CREDIT OF THE Washington, D. C. The subcommittee met pursuant to notice at 10 a. m., in room 1310, New House Office Building, Hon. W. R. Poage (chairman of the subcommittee) presiding. Present: Representatives Poage, Bass, McIntire, and Harrison. Also present: Representatives Johnson, Jones, Hagen, Smith of Mississippi, Fisher, O'Hara, Gathings, Rogers of Texas, Long, Morris, and Everett; Francis LeMay, staff consultant; John Heimburger, counsel. Mr. POAGE. The committee will please come to order. The committee is meeting this morning to consider certain bills relating to the extension of emergency credit to farmers and stockmen in disaster areas and, particularly, the legislation proposed by Mr. Jones, of Missouri, and Mr. Gathings, of Arkansas, and similar bills on that subject. (The bills, H. R. 10158, H. R. 10317, H. R. 10318, H. R. 10356, H. R. 10397, and H. R. 10954 are as follows:) [H. R. 10158, 85th Cong., 1st sess.] A BILL To extend the authority of the Secretary of Agriculture to make special livestock loans, and for other purposes Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That section 2 (c) of the Act of April 6, 1949, as amended (12 U. S. C. 1148a-2 (c)), is further amended to read as follows: "(c) In areas designated by the Secretary, where the production of livestock and livestock products constitutes a substantial part of the farm economy of the area and livestock operations in the area have been adversely affected by drought continuing over at least two years, or other natural disaster particularly affecting livestock production, loans may be made to established producers and feeders of cattle, sheep, and goats (not including the operators of commercial feed lots) who have good records of operations, but are unable temporarily to get the credit they need for continuing sound operations from recognized lenders, and who have a reasonable chance at working out their difficulties with supplementary financing. No such loans shall be made after June 30, 1960, except that supplementary advances to producers indebted for loans made under this subsection may be made as authorized by the Secretary. Loans hereunder may be made on such security as the borrower has available and for such period as the Secretary may prescribe. The creditors of the applicant will not be asked to subordinate their indebtedness but must be willing to work with the borrower 1 to the extent of executing agreements (including standby agreements) that are reasonably necessary to give the borrower a chance to improve his situation. Loans shall bear interest at the rate of 5 per centum per annum and shall be made upon such other terms and conditions as the Secretary shall prescribe. Loans exceeding $50,000 or which would cause the borrower's indebtedness hereunder to exceed $50,000 principal balance shall be approved by the Secretary." [H. R. 10317, 85th Cong., 2d sess.] A BILL To authorize emergency refinancing loans to farmers in disaster areas Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That the Secretary of Agriculture is authorized to make loans, in any area heretofore or hereafter covered by a major disaster determined by the President under Public Law 875, Eighty-first Congress, or any area covered by a production disaster determination by the Secretary of Agriculture under section 2 (a) of Public Law 38, Eighty-first Congress, to bona fide farmers and stockmen who have a reasonable chance of continuing their farming operations but who are unable to secure necessary extensions, renewals, or refinancing of their existing indebtedness from their present creditors or from commercial banks, cooperative lending agencies, the Farmers' Home Administration or other responsible sources, at rates and terms at which they could reasonably be expected to fulfill. Such loans shall be repayable in not to exceed five years and at such rate of interest as the Secretary shall determine, but not less than 1 per centum per annum above the rate determined by the Secretary of the Treasury at the beginning of the fiscal year in which the loan is made, equal to the current average yield of outstanding marketable obligations of the United States having maturities of five years. The loans shall be evidenced by the full liability of the maker and, in case of loans to corporations or other business organizations, by the personal obligation of each person holding as much as 10 per centum of the stock or interest in the corporation or organization. The Secretary shall provide by regulations for the taking of security for such loans only such available security as will permit the borrower when feasible to secure his current operating credit from his normal credit sources. SEC. 2. There is hereby created a revolving fund for the purposes of this Act which shall be established as a separate fund available only for the purposes of this Act. Said fund shall be composed of not more than $200,000,000, such additional amounts as Congress may from time to time approve, and collections from repayments and liquidations of loans made under section 1 of this Act. Such sums shall be borrowed by the Secretary from the Secretary of the Treasury for such terms as may be determined by the Secretary of Agriculture with interest at the rate as determined by the Secretary of the Treasury equal to the current average market yield of outstanding marketable obligations of the United States having maturities comparable to such advances. The Secretary of the Treasury is directed to purchase any notes issued by the Secretary pursuant to this section and any renewals thereof and for such purposes may use as a public transaction, the proceeds of the sale from any securities issued under the Second Liberty Bond Act, as amended, and the purposes for which such securities may be issued under such Act, as amended, are hereby extended to include any such purchases. All redemptions, purchases, and sales by the Secretary of the Treasury of such notes shall be treated as public debt transactions of the United States. [H. R. 10318, 85th Cong., 2d sess.] A BILL To authorize emergency refinancing loans to farmers in disaster areas Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That the Secretary of Agriculture is authorized to make loans, in any area heretofore or hereafter covered by a major disaster determined by the President under Public Law 875, Eighty-first Congress, or any area covered by a production disaster determined by the Secretary of Agriculture under section 2 (a) of Public Law 38, Eighty-first Congress, to bona fide farmers and stockmen who have a reasonable chance of continuing their farming operations but who are unable to secure necessary extensions, renewals, or refinancing of their existing indebtedness from their present creditors or from commercial banks, cooperative lending agencies, the Farmers' Home Ad ministration or other responsible sources, at rates and terms which they could reasonably be expected to fulfill. Such loans shall be repayable in not to exceed five years and at such rate of interest as the Secretary shall determine but not less than 1 per centum per annum above the rate determined by the Secretary of the Treasury at the beginning of the fiscal year in which the loan is made, equal to the current average yield of outstanding marketable obligations of the United States having maturities of five years. The loans shall be evidenced by the full liability of the maker and, in case of loans to corporations or other business organizations, by the personal obligation of each person holding as much as 10 per centum of the stock or interest in the corporation or organization. The Secretary shall provide by regulations for the taking of security for such loans only such available security as will permit the borrower when feasible to secure his current operating credit from his normal credit sources. SEC. 2. There is hereby created a revolving fund for the purposes of this Act which shall be established as a separate fund available only for the purposes of this Act. Said fund shall be composed of not more than $200,000,000, such additional amounts as Congress may from time to time approve, and collections from repayments and liquidations of loans made under section 1 of this Act. Such sums shall be borrowed by the Secretary from the Secretary of the Treasury for such terms as may be determined by the Secretary of Agriculture with interest at the rate as determined by the Secretary of the Treasury equal to the current average market yield of outstanding marketable obligations of the United States having maturities comparable to such advances. The Secretary of the Treasury is directed to purchase any notes issued by the Secretary pursuant to this section and any renewals thereof and for such purposes may use as a public transaction, the proceeds of the sale from any securities issued under the Second Liberty Bond Act, as amended, and the purposes for which such securities may be issued under such Act, as amended, are hereby extended to include any such purchases. All redemptions, purchases and sales by the Secretary of the Treasury of such notes shall be treated as public debt transactions of the United States. [H. R. 10356, 85th Cong., 2d sess.] A BILL To authorize emergency refinancing loans to farmers in disaster areas Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That the Secretary of Agriculture is authorized to make loans, in any area heretofore or hereafter covered by a major disaster determined by the President under Public Law 875, Eighty-first Congress, or any area covered by a production disaster determination by the Secretary of Agriculture under section 2 (a) of Public Law 38, Eighty-first Congress, to bona fide farmers and stockmen who have a reasonable chance of continuing their farming operations but who are unable to secure necessary extensions, renewals, or refinancing of their existing indebtedness from their present creditors or from commercial banks, cooperative lending agencies, the Farmers' Home Administration or other responsible sources, at rates and terms at which they could reasonably be expected to fulfill. Such loans shall be repayable in not to exceed five years and at such rate of interest as the Secretary shall determine but not less than 1 per centum per annum above the rate determined by the Secretary of the Treasury at the beginning of the fiscal year in which the loan is made, equal to the current average yield of outstanding marketable obligations of the United States having maturities of five years. The loans shall be evidenced by the full liability of the maker and, in case of loans to corporations or other business organizations, by the personal obligation of each person holding as much as 10 per centum of the stock or interest in the corporation or organization. The Secretary shall provide by regulations for the taking of security for such loans only such available security as will permit the borrower when feasible to secure his current operating credit from his normal credit sources. SEC. 2. There is hereby created a revolving fund for the purposes of this Act which shall be established as a separate fund available only for the purposes of this Act. Said fund shall be composed of not more than $200,000,000, such additional amounts as Congress may from time to time approve, and collections from repayments and liquidations of loans made under section 1 of this Act. Such sums shall be borrowed by the Secretary from the Secretary of the Treasury for such terms as may be determined by the Secretary of Agriculture with interest at the rate as determined by the Secretary of the Treasury equal to the current average market yield of outstanding marketable obligations of the United States having maturities comparable to such advances. The Secretary of the Treasury is directed to purchase any notes issued by the Secretary pursuant to this section and any renewals thereof and for such purposes may use as a public transaction the proceeds of the sale from any securities issued under the Second Liberty Bond Act, as amended, and the purposes for which such securities may be issued under such Act, as amended, are hereby extended to include any such purchases. All redemptions, purchases, and sales by the Secretary of the Treasury of such notes shall be treated as public debt transactions of the United States. [H. R. 10397, 85th Cong., 2d sess.] A BILL To authorize emergency refinancing loans to farmers in disaster areas Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That the Secretary of Agriculture is authorized to make loans, in any area heretofore or hereafter covered by a major disaster determined by the President under Public Law 875, Eighty-first Congress, or any area covered by a production disaster determination by the Secretary of Agriculture under section 2 (a) of Public Law 38, Eighty-first Congress, to bona fide farmers and stockmen who have a reasonable chance of continuing their farming operations but who are unable to secure necessary extensions, renewals, or refinancing of their existing indebtedness from their present creditors or from commercial banks, cooperative lending agencies, the Farmers' Home Administration or other responsible sources, at rates and terms at which they could reasonably be expected to fulfill. Such loans shall be repayable in not to exceed five years and at such rate of interest as the Secretary shall determine but not less than 1 per centum per annum above the rate determined by the Secretary of the Treasury at the beginning of the fiscal year in which the loan is made, equal to the current average yield of outstanding marketable obligations of the United States having maturities of five years. The loans shall be evidenced by the full liability of the maker and, in case of loans to corporations or other business organizations, by the personal obligation of each person holding as much as 10 per centum of the stock or interest in the corporation or organization. The Secretary shall provide by regulations for the taking of security for such loans only such available security as will permit the borrower when feasible to secure his current operating credit from his normal credit sources. SEC. 2. There is hereby created a revolving fund for the purposes of this Act which shall be established as a separate fund available only for the purposes of this Act. Said fund shall be composed of not more than $200,000,000, such additional amounts as Congress may from time to time approve, and collections from repayments and liquidations of loans made under section 1 of this Act. Such sums shall be borrowed by the Secretary from the Secretary of the Treasury for such terms as may be determined by the Secretary of Agriculture with interest at the rate as determined by the Secretary of the Treasury equal to the current average market yield of outstanding marketable obligations of the United States having maturities comparable to such advances. The Secretary of the Treasury is directed to purchase any notes issued by the Secretary pursuant to this section and any renewals thereof and for such purposes may use as a public transaction, the proceeds of the sale from any securities issued under the Second Liberty Bond Act, as amended, and the purposes for which such securities may be issued under such Act, as amended, are hereby extended to include any such purchases. All redemptions, purchases, and sales by the Secretary of the Treasury of such notes shall be treated as public debt transactions of the United States. [H. R. 10954, 85th Cong., 2d sess.] A BILL To provide for emergency credit to farmers and stockmen in certain disaster areas to refinance certain indebtedness, and for other purposes Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That until December 31, 1958, in any area determined by the Secretary of Agriculture (hereinafter referred to as the "Secretary") under the provisions of section 2(a) of the Act of April 6, 1949, as amended (12 U. S. C. 1148a-2), to have suffered a production disaster in 1957, the Secretary is authorized to make and insure loans to farmers and stockmen and to make advances to approved lending institutions in accordance with this Act. SEC. 2. Loans under this Act may be made only to farmers and stockmen who cannot secure credit for the purposes specified herein from private or cooperative credit sources or the regular and emergency programs of the Farmers' Home Administration on terms and conditions that could be reasonably expected to be fulfilled. Such loans shall— (1) be made only for the purpose of refinancing unsecured indebtedness of farmers or stockmen incurred in connection with making of 1957 crops or the production of livestock or livestock products, including poultry and poultry products, in the calendar year 1957, for the costs of feed, seed, fertilizer, machinery, repairs, oil, gas, gasoline, and other fuels for farm machinery and home consumption and for family subsistence in 1957, including food, clothing, and medical and hospital expenses; (2) have maturities within the applicant's repayment ability but not to exceed five years; (3) bear interest at rates determined by the Secretary, taking into account the rate of interest to be paid by the Secretary to the Secretary of the Treasury under section 4 and the total cost to the borrower of loans insured under section 3 hereof; (4) provide that the borrower may prepay all or any part of the loan to maturity without penalty; and (5) be secured by the personal obligation of the borrower, and in addition, if the borrower is a copropration or other association, by the personal liability of each member or stockholder thereof owning as much as 10 per centum interest in the corporation or association and by such other security as may be available without requiring subordinations or standby agreements from secured creditors or without interfering with the borrower's ability to use available security to finance current and future farm operations. SEC. 3. (a) The Secretary is authorized to insure loans made by approved lending institutions located in the areas referred to in section 1 to farmers eligible for loans for purposes authorized and in accordance with the terms provided in section 2 hereof, and to make advance commitments for the insurance of such loans if made by such lending institutions. In addition to the requirement of section 2, loans eligible for insurance under this section shall provide (1) for the payment of interest by the borrower to the lender at a rate not to exceed 2 per centum above the rate of interest paid by the Secretary to the Secretary of the Treasury as provided in section 4 hereof; and (2) for an insurance charge, payable to the Secretary through the lender, of one-half of 1 per centum of the initial principal amount of the loan and an annual charge thereafter at the rate of one-half of 1 per centum of the principal balance remaining unpaid after each anniversary of the loan. (b) Any loan made by an approved lending institution or any application to such institution by an eligible applicant for a loan which meets the requirements of sections 2 and 3 may be submitted to the local representative of the Secretary for approval and the issuance of a certificate of insurance or a commitment to insure. The conditions of such insurance agreement shall be that— (1) the loan is made by the approved lending institution to an eligible applicant for an authorized purpose, and that the lending institution shall control the use of the loan proceeds to assure their use for authorized purposes; (2) the lending institution will service and collect the loan in accordance with the terms and maturities provided in the note, will remit promptly to the Secretary, through his local representative out of the first collections made, any insurance charge due on said loans, and upon maturity will enforce collections with reasonable dispatch and to the same extent as the lending agency would enforce uninsured obligations it holds; and (3) that, if such conditions are complied with and the loan is not fully repaid, then the Secretary will pay to the lending institution 90 per centum of any sums established as a loss on account of any such loan. Upon such payment by the Secretary, the obligation and any security therefor shall be assigned to the Secretary for further liquidation. (c) The Secretary may provide by regulation for the purchase of any loans insured under this section prior to maturity and default, if the lending institution establishes satisfactorily to the Secretary that the volume of loans insured under this section held by the lending institution exceeds the volume of such class of obligation the lending institution is permitted by law or regulation to hold, 23201-58—2 |