Section 2(c). The major statutory eligibility requirements for Federal land bank loans are (12 U.S.C. 771, Sixth): ** "No such loan shall be made to any person who is not at the time, or shortly to become, engaged in farming operations or to any other person unless the principal part of his income is derived from farming operations. *** the term 'person' includes an individual or a corporation engaged in the farming operations; * but no such loan shall be made to a corporation unless the principal part of its income is derived from farming operations and unless owners of stock in the corporation assume personal liability for the loan to the extent required under rules and regulations prescribed by the Farm Credit Administration. ****" The italicized words would be stricken under the proposal now being made. This would eliminate the assumption of personal liability by a stockholder as an eligibility requirement for a Federal land bank loan to a corporation. The intention is that such assumption of personal liability may instead be required on the basis of credit factors. Such supervisory guidelines as are deemed necessary in this respect would be covered in rules and regulations issued by the Farm Credit Administration. Section 2(d).—Under existing law, "The amount of loans to any one borrower may not exceed $100,000 unless approved by the Farm Credit Administration ***" (12 U.S.C. 771, Seventh). The present proposal is to replace the "$100,000" with "an amount specified by it". This would leave it to the Farm Credit Administration to specify the amount in excess of which loans would require its prior approval. Under such an amendment, it would be possible, on a permissive basis, to accord the Federal land bank a wider latitude for individual loan action. This is deemed justified in view of the Federal land banks now having nearly 50 years of successful experience in making loans. Aside from the present proposal, the Farm Credit Administration will continue to review the quality of the loans that are made and used as collateral for bonds that are sold to the investing public. FEDERAL INTERMEDIATE CREDIT BANKS Section 3(a).-The 12 Federal intermediate credit banks, 1 in each farm credit district, are organized and operated under title II which was added to the Federal Farm Loan Act by the Agricultural Credits Act of 1923. Their function is to finance the 474 production credit associations and about 100 other financing institutions that make short- and intermediate-term loans to farmers and ranchers. The credit banks do this financing by discounting for the production credit associations and the other financing institutions, with their endorsement, the notes taken by them from the farmers and ranchers, and also by making loans to the associations and other financing institutions secured by such collateral as may be approved by the Governor of the Farm Credit Administration. The banks are also authorized to make loans to and discount paper for any other Federal intermediate credit bank, any Federal land bank, or any bank for cooperatives. Under existing law, there is no specific provision for the Federal intermediate credit banks to invest in interest-bearing securities any funds on hand that are not immediately needed for their discount and loan operations. However, since the banks are authorized to use U.S. Government bonds, in addition to the discounts and loans, as collateral for their debentures sold to the investing public, it has been considered to follow that the banks my invest in U.S. Government bonds. It now is proposed that the Federal intermediate credit banks also should be authorized "to purchase for investment obligations of the Federal land banks and the banks for cooperatives and, to the extent authorized by the Farm Credit Administration, obligations of any agencies of the United States." Aside from yielding income on otherwise idle funds, such obligations, along with the discounts and loans and U.S. Government bonds, would also be available to use as collateral for the debentures (12 U.S.C. 1041, 1031). Section 3(b). Under existing law (12 U.S.C. 1092), each Federal intermediate credit bank must make three reports a year to the Farm Credit Administration as to the resources and liabilities of the bank verified by an officer and signed by at least three directors. Such reports must be published in a newspaper. Special reports may also be required. In lieu of the existing requirements, it is now proposed that, "The Farm Credit Administration may require reports in such form as it may specify from any or all of the Federal intermediate credit banks whenever in its judgment the same are necessary for a full and complete knowledge of its or their financial condition or operations." BANKS FOR COOPERATIVES Section 4.-The banks for cooperatives make loans to eligible farmer cooperative associations engaged in marketing farm products, purchasing farm supplies, or rendering farm business services. As it now reads (12 U.S.C. 1134c, 1134j), the Farm Credit Act of 1933 provides that "Subject to such terms and conditions as may be prescribed by the Farm Credit Administration," the 12 district banks for cooperatives and the Central Bank for Cooperatives are authorized "(a) to make loans to cooperative associations as defined in the Agricultural Marketing Act, as ameded, for any of the purposes and subject to the conditions and limitations set forth in such Act, as amended." The amendment now proposed is to strike the italicized words. The intended effect of this would be to leave the purposes and conditions and limitations of the loans to be prescribed by the Farm Credit Administration, although two provisions of the Agricultural Marketing Act would continue applicable as noted below. Among the purposes and conditions and limitations in the Agricultural Marketing Act that thus would be rendered inoperative are those contained in section 7 thereof (12 U.S.C. 1141e). More particularly, the purposes or kinds of loans specified in section 7 and the limitations therein as to the amount, security, plan, and period of repayment for facility loans no longer would be applicable as a matter of law although any of them could be prescribed by the Farm Credit Administration. The following interest rate provision in section 8(a) of the Agricultural Marketing Act, as amended in 1955 (12 U.S.C. 1141f (a)), would continue applicable since by its own terms it refers to a bank for cooperatives: "(a) Loans to cooperative associations made by any bank for cooperatives shall bear such rates of interest as the board of directors of the bank shall from time to time determine with the approval of the Farm Credit Administration, but in no case shall the rate of interest exceed 6 per centum per annum on the unpaid principal of a loan." The definition of a "cooperative association" in section 15(a) of the Agricultural Marketing Act, as amended (12 U.S.C. 1141j (a)), would continue to determine the cooperative associations to which loans may be made by the banks for cooperatives. This is because no change is being made in that part of the provision from the Farm Credit Act of 1933 quoted above which authorizes the banks for cooperatives "to make loans to cooperative associations as defined in the Agricultural Marketing Act, as amended." FARM CREDIT BOARD ELECTIONS Section 5.-The Farm Credit Administration conducts polls of the three voting groups in each farm credit district (i.e., Federal land bank associations, production credit associations, and cooperative associations eligible to vote as stockholders of the bank for cooperatives) to elect members to the district farm credit boards and to designate persons for consideration by the Presdient for appointment to the Federal Farm Credit Board. Under existing law (12 U.S.Č. 640e, 640f), a ballot may not be counted unless it is received by the Farm Credit Administration within 30 days after it was mailed out. The proposed amendment would increase the 30-day period to 60, except that for elections to fill vacancies, the Farm Credit Administration may specify a shorter period than 60 days but not less than 30 days. This would be effective starting with the next calendar year. FEDERAL FARM CREDIT BOARD Section 6.-The Federal Farm Credit Board consists of 13 members, one appointed by the President with the advice and consent of the Senate from each of the 12 farm credit districts, and a 13th member who is a representative of the Secretary of Agriculture. This is a part-time Board which has responsibility for the general direction and supervision of the Farm Credit Administration that otherwise consists of the Governor and other employed personnel. The amendment now being proposed would Increase from "$50" to "$100" the sum that each member of the Federal Farm Credit Board shall receive for each day spent in the performance of his official duties. As provided in the Farm Credit Act of 1953, such compensation may not be paid for more than 75 days in a calendar year (12 U.S.C. 636c(f)). The increased compensation would be more in line with that paid other personnel since the Government Employees Salary Reform Act of 1964. * 59-637-466- -2 In addition to the draft of proposed bill there is enclosed herewith a copy of those sections of the acts of Congress proposed to be amended on which is indicated the changes that would be made by the proposed bill. This submission is as directed by the Federal Farm Credit Board and early consideration and enactment of the proposed bill is recommended. The Bureau of the Budget has advised that there is no objection to the presentation of the proposed bill from the standpoint of the administration's program. Very truly yours, Hon. ALLEN J. ELLENDER, R. B. TOOTELL, Governor. DEPARTMENT OF AGRICULTURE, Chairman, Committee on Agriculture and Forestry, U.S. Senate, Washington, D.C. DEAR MR. CHAIRMAN: This is in reply to your request of January 28, 1966, for a report on S. 2822, a bill to amend various provisions of the laws administered by the Farm Credit Administration to improve operations thereunder, and for other purposes. This Department has no objection to the bill. The Bureau of the Budget advises that there is no objection to the presentation of this report from the standpoint of the administration's program. Sincerely yours, ORVILLE L. FREEMAN, Secretary. Senator TALMADGE. Are there any statements which have been requested to be inserted in the record? The first witness is Mr. L. C. Carter, Chairman of the Federal Farm Credit Board. Governor ToOTELL. Mr. Chairman, Mr. Carter is not here, but I have a statement which I would like to file for Mr. Carter. Senator TALMADGE. Without objection it will be inserted in the record. (The statement referred to follows:) STATEMENT OF L. C. CARTER, CHAIRMAN, FEDERAL FARM CREDIT BOARD Mr. Chairman and gentlemen of the committee, the Farm Credit Administration is recommending enactment of S. 2822, which includes nine amendments to the laws administered by it to improve operations thereunder. As Chairman of the Federal Farm Credit Board, which has the general supervision of the Farm Credit Administration, I appreciate the opportunity to make a preliminarv statement at this hearing on the bill. Right after I finish, our chief executive officer, Gov. R. B. Tootell, and the Deputy Governors who also are service directors, will offer a more detailed explanation. Before having my own say on the bill, you may be interested in some personal information. I am just finishing a 6-year term on the Federal Farm Credit Board from the sixth or St. Louis Farm Credit District consisting of the States of Illinois, Missouri and Arkansas. Each of the 11 other farm credit districts also has a member on the Board, appointed by the President, and confirmed by the Senate, for a 6-year term, and there is a 13th member appointed by the Secretary of Agriculture to serve at his pleasure. I was born and raised on a farm, majored in agronomy in college, and once managed a large agricultural experiment station which included agricultural research on rice, soybeans, small grains, livestock, and miscellaneous crops. Today I own and operate a tree farm. Since 1944 I have been executive vice president and general manager of the Arkansas Rice Growers Cooperative association, and 18 affiliated grain drying cooperatives. Since its organization in 1958 I have also been executive vice president and general manager of the Arkansas Grain Corp. which processes and markets soybeans and small grains. A continuing function and duty of the Federal Farm Credit Board is to make recommendations to Congress for amendments to the laws administered by the Farm Credit Administration. I believe this is about the 11th time that we have done this since the Board was established in 1953. The present recommendations are not necessarily related to each other except that all are intended to be improve ments in the laws we administer. They have been reviewed with the district farm credit banks separately and also collectively at a national conference of the district board members. General approval has been indicated by the 12 district boards and by the central bank board. Any reservations they have will be mentioned when the provisions to which they relate are taken up in detail. The only provision in the bill that I would like to single out for comment is one that relates to the members of the Federal Farm Credit Board personally. This is section 6 which would increase their compensation from $50 to $100, for not more than 75 days in any calendar year. Any financial interest in this on my part is just about "nil" because, unless the Senate delays confirmation of my successor, I have attended my last Board meeting. All of the members, including past members to whom I have spoken, have considered it a privilege to serve on the Board. On the other hand, the compensation has not been increased since 1953. One of the district boards expressed the "view that the present rate is adequate and should not deter or discourage prospective members who have a sincere interest in serving farm credit." Otherwise there has been no objection made to this proposal by the boards of the farm credit banks that pay this and other costs of the Farm Credit Administration. As a retiring member, I would like to suggest on behalf of those who continue and follow that an increase at this time would appear to be appropriate. For other Federal personnel it is my understanding that the increases in the past 12 years have been quite substantial. As I mentioned earlier, Governor Tootell and other staff members are standing by to explain each of the proposed amendments in more detail. It is our hope that you may see fit to act favorably on all of the proposals. Senator TALMADGE. The next witness is Governor Tootell, we will be happy to hear from you, Governor. STATEMENT OF R. B. TOOTELL, GOVERNOR, FARM CREDIT ADMINISTRATION Governor TOOTELL. Mr. Chairman, I have a short statement that I would like to insert for the record and if it meets with your pleasure I would like to read it. Senator TALMADGE. Do you wish to read it in its entirety or do you have any objection to being interrupted? Governor TOOTELL. I have no objection. S. 2822 is a bill recommended by the Farm Credit Administration for consideration and enactment. It contains nine provisions to amend the laws administered by the Farm Credit Administration. These amendments are unrelated except that they are generally intended to improve operations. There are four provisions relating to the Federal land banks; two concern the Federal intermediate credit banks; and one is for the banks for cooperatives. If agreeable to the committee, I will leave the proposals concerning the banks to be explained by the three Deputy Governors who are also service directors for the different banks, directors of the different credit services. Before getting into the bank proposals, though, I would like to undertake to explain two other amendments in the bill: Section 5 which would provide more time for farm credit board elections; and section 6 to increase the compensation payable to members of the Federal Farm Credit Board. The 50 States and Puerto Rico are divided into 12 farm credit districts, each consisting of from 1 to 8 States. In each district there is a farm credit board consisting of seven members who also serve as directors of the Federal land bank, Federal intermediate credit bank, and bank for cooperatives serving the district. These board members serve for 3-year terms. One of them is always appointed by the Governor of the Farm Credit Administration by and with the advice and consent of the Federal Farm Credit Board. The other six members are now elected, two by each of the three separate voting groups in the district. These voting groups are composed as follows: (1) The Federal land bank associations-from 28 to 90 in each district-through which the Federal land bank makes long-term land mortgage loans to farmers and ranchers; (2) The production credit associations-from 26 to 71 in each district-which makes short- and intermediate-term loans to farmers and ranchers that are rediscounted with or used as collateral for loans from the Federal intermediate credit bank; and (3) The farmer cooperative associations that borrow from the banks for cooperatives. For each election to a district farm. credit board by one of such voting groups, the Farm Credit Administration conducts two polls by mail, one for nominations and another for the final election. Besides electing members to the district boards, these same voting groups also designate a nominee, to be considered by the President of the United States before making appointments to the Federal Farm Credit Board from their district. For this purpose the Farm Credit Administration conducts two polls of the three voting groups in the district, a nomination poll and a final designation poll, and the name of the final designee of each of the three voting groups is then presented to the President for consideration. The members thus appointed by the President and confirmed by the Senate from each of the 12 farm credit districts serve for a 6-year term and there is a 13th member who serves at the pleasure of the Secretary of Agriculture. I will have more to say about the status of this board later. Under existing law, a vote may not be counted in such polls unless it is received by the Farm Credit Administration within 30 days after the ballot is mailed out by it. Section 5 of the bill would increase this 30-day period to 60 days, except that for elections to fill vacancies the Farm Credit Administration may specify a shorter period than 60 days but not less than 30 days. This amendment would become effective starting with the next calendar year. Many of the Federal land bank associations and production credit associations have asked for the longer period so that they may have more flexibility in scheduling the meetings of their boards of directors at which their vote in these polls is decided upon. Section 6 of the bill would increase from $50 to $100 the compensation which each member of the Federal Farm Credit Board receives for each day or part thereof spent in the performance of his official duties. As provided in the Farm Credit Act of 1953, such compensation may not be paid for more than 75 days (or parts of days) in any calendar year. Since 1953, there have been several increases in the compensation paid to Federal personnel generally and the increase now proposed is deemed comparable with that paid other personnel since the Government Employees Salary Reform Act of 1964 and the Federal Employees Salary Act of 1965. For example, the top salary now payable under the general schedule of the Classification Act of 1949, as recently amended, is $25,382 for grade GS-18, which figures as $97.60 per day. As is the case with all administrative expenses of the Farm Credit Administration, the compensation of the members of |