to have the authority to make final and conclusive settlement and adjustment of any claims by or against the Corporation or the accounts of its fiscal officers: Provided further, That a report of such audit shall be made to the Congress, together with such recommendations as the Comptroller General may deem advisable, and that each such report shall cover a period of one fiscal year and shall not be made until the Corporation and the Secretary of Agriculture shall have had a reasonable opportunity, not to exceed ninety days, to examine the report, point out errors therein, explain or answer the same, and file a statement which shall be submitted by the Comptroller General with his report: Provided further, That a copy of each such report shall be furnished the Secretary of the Treasury and that the findings contained therein shall be considered by the Secretary in appraising the assets and liabilities and determining the net worth of the Corporation under sections 1 and 2 of the Act of March 8, 1938 (52 Stat. 107), as amended: Provided, however, That nothing in this section shall be construed as modifying legislation authorizing the use of funds of the Corporation for administrative expenses and requiring accountability therefor.

"(c) The expenses o the audit as provided in this section may be paid up to and including June 30, 1945, from moneys advanced therefor by the Corporation, or from any appropriation or appropriations for the General Accounting Office, and appropriations so used shall be reimbursed promptly by the Corporation as billed by the Comptroller General: Provided, That any such advances or reimbursements shall be considered as nonadministrative expenses of the Corporation. For the purposes of such audit the representatives of the General Accounting Office shall have access to all papers, books, files, accounts, financial records, warehouses, and all other things, property, and places belonging to or under the control of or used or employed by the Corporation and shall be afforded full facilities for verifying transactions with and balances in depositaries and with fiscal agents: Provided, That the certified financial reports and schedules of the fiscal agents of the Corporation based on commercial audits in the usual course of business may be accepted by the General Accounting Office in its audit of the financial transactions of the Corporation as final and not subject to further audit verification.

"(d) Any examination of the corporate records shall be made at the place or places where such records are normally kept in the transaction of the corporate business, and the Corporation shall retain custody of contracts, vouchers, schedules, or other financial or accounting documents, either original or duplicate, relating to its nonadministrative transactions."

SEC. 4. The Federal Reserve banks are hereby authorized to act as depositaries, custodians, and fiscal agents for the Commodity Credit Corporation.

STATEMENT OF CHESTER C. DAVIS

Mr. CRAWFORD. Mr. Chairman, may I ask a question before we proceed with the hearing?

The CHAIRMAN. Certainly.

Mr. CRAWFORD. I would like to know personally how long the hearings are likely to run. It seems to me we are tackling one of the most far-reaching measures that has ever been proposed to this Congress, that is, if I understand its objectives, and unless I have to leave the city in connection with some other committee work I think I am going to have quite a number of questions to ask in connection with this proposal. And I am just wondering if we could get a rough estimate of how long these hearings will run.

The CHAIRMAN. Of course, that matter rests entirely with the committee. I am glad to express myself about the matter. I introduced this bill for the consideration of the committee. I started to go over the bill with a view to making some changes before I introduced it but I thought it would be a better plan to introduce the bill as it has been submitted by the Commodity Credit Corporation's officials for the consideration of the committee because whether I happen to

approve of every provision of it I felt that the entire bill as proposed by them and favored by them should be submitted to the committee for its consideration so I abandoned the thought of changing the bill and introduced it with that thought in mind.

I talked with Mr. Hutson this morning but he is before a committee of the Senate and said that he could not get here before 11 o'clock. Frankly, I do not mean to try to hurry the meeting of the committee this morning, but Mr. Chester Davis is here to make a statement, after which Mr. Hutson will appear. I have also had a request to hear the representatives of some of the farm organizations in connection with the legislation. As you say, of course, it is very important, and if we give the matter the study that I feel that it deserves, I think we are going to have several days of hearings. That is my view of the matter. Of course, it is for the committee to decide. Mr. PATMAN. Does this bill include subsidies?

The CHAIRMAN. Well, yes. All that is involved in this legislation. Mr. PATMAN. It is not included in the bill, Mr. Chairman, but there are occasions of paying subsidies without reference to legislation, and it is included in the subject.

The CHAIRMAN. It may be said to include subsidies because this is a bill to appropriate an additional billion dollars to the Commodity Credit Corporation, and as the bill is written it contemplates a continuation of their present activities. It does cover the field of subsidies in various lines. Answering Mr. Crawford, frankly, I do not know any way that we can give consideration to this bill without some days of hearings so that people who are interested may have their say and the matter be fully understood by the members of the committee. Mr. SMITH. I wonder if it is possible, of course, to have the unrevised committee print promptly on the morning following the day of the hearing. Since this is an important piece of legislation, I think we should have those prints so we can study the testimony.

The CHAIRMAN. It is perfectly all right. There will be no trouble in having that done. I assume it is true with other members of the committee, it is true in my case, there are many things about this situation with which I am not familiar and that I think should be developed and understood by the committee. At the moment, I suggest that we permit Mr. Chester Davis to discuss the bill. Mr. Davis is here for that purpose. He needs no introduction to this committee. I am sure that all the members of the committee are familiar with your various governmental activities and we want to have you, Mr. Davis, proceed in your own way and discuss this bill. If you desire to make an uninterrupted statement, the committee will permit you to do so.

Mr. DAVIS. Thank you, Mr. Chairman.

Mr. SMITH. Does Mr. Davis have copy of his statement so that we can follow him here? Each one of the members of the committee would like to have a copy of the statement.

The CHAIRMAN. Do you have the statement in sufficient number to supply each member with a copy?

Mr. DAVIS. We could get them up to you this afternoon or tomorrow morning, Congressman Smith, but I do not have them with me. Mr. PATMAN. They will be printed.

The CHAIRMAN. If you want them during the day they can supply them for you.

Mr. SMITH. I meant merely to follow you as you read the statement. Mr. DAVIS. I am sorry. We have this statement which is largely historical, and I think sets the basis for Mr. Hutson's statement to the committee, and probably for questions which the committee may wish to ask me about policy. So far as the details of the policies of the Commodity Credit Corporation during recent years are concerned, as the chairman knows, I have not been in close touch with it. The Commodity Credit Corporation was transferred to the War Food Administration, of which I am now the head, in mid-April of this year, so my connection with it for the second time has been fairly recent. In connection with proposed legislation to continue Commodity Credit Corporation as an agency of the United States, increase its borrowing power, revise the basis for the annual appraisal of its assets, and provide for an audit by the General Accounting Office of its financial transactions, and for other purposes, I should like to discuss briefly, if I may, the history of Commodity Credit Corporation and bring to the committee's attention some of the major activities in which the Corporation has been engaged in recent years, as well as the more important activities which it is currently undertaking. The CHAIRMAN. Mr. Davis, may I interrupt you.

Mr. DAVIS. Yes, indeed, Mr. Chairman.

The CHAIRMAN. You speak of the history of the Corporation. You do not touch in that connection the history of the various acts of the Congress under which the Corporation has functioned?

Mr. DAVIS. I have some of that in my statement.

The CHAIRMAN. All right. I am glad you have.

Mr. DAVIS. It seems to me that that is fundamental in considering the history of the Corporation. I will also touch upon some of the more important activities that the Corporation has engaged in in recent years.

In the fall of 1933 the prices of agricultural commodities were at extremely low levels. Widespread distress and unemployment had greatly reduced the demand for agricultural products, and resulting surpluses further demoralized commodity markets. To assist in alleviating this situation and restore agricultural purchasing power, Commodity Credit Corporation was created, pursuant to the provisions of the National Industrial Recovery Act. Under the direction of Executive Order 6340, dated October 16, 1933, it was incorporated as an agency of the United States under the laws of the State of Delaware on October 17, 1933.

HISTORY

All of the Corporation's capital stock is owned by the United States Government. Under the Presidential reorganization order, effective July 1, 1939, the Corporation became a part of the United States Department of Agriculture, and the exclusive voting rights of the Corporation's stock were vested in the Secretary of Agriculture under an Executive order of the President dated August 7, 1939. Prior to that time, Commodity Credit Corporation was an independent agency of the Federal Government. It was managed and operated in close affiliation with the Reconstruction Finance Corporation. All of its loans, however, were made as required by law upon recommendation of the Secretary of Agriculture and with the approval of the President.

The original authorized capital stock of Commodity Credit Corporation was $3,000,000. Under an act of Congress of April 10, 1936, the Corporation was authorized to increase its capital stock to $100,000,000. Prior to March 8, 1938, funds, in addition to the capital stock required to finance loan programs were obtained by borrowing on the security of pledged collateral, principally from the Reconstruction Finance Corporation. Under an act of Congress approved March 8, 1938, the Corporation was authorized to issue and have outstanding at any one time obligations guaranteed by the United States. in an aggregate amount not exceeding $500,000,000. The Congress has increased the borrowing power of the Corporation from time to time; on March 4, 1939, to $900,000,000, on August 9, 1940 to $1,400,000,000, and on July 1, 1941, to the present authorization of $2,650,000,000.

The Congress has also provided for readjusting the net worth of Commodity Credit Corporation to the amount of $100,000,000 once each year after the Secretary of the Treasury has appraised the assets and liabilities of the Corporation as of each March 31.

In other words, if there has been an impairment of the capital of the Corporation as shown by the appraisal by the Secretary of the Treasury, then Congress authorizes the restoration of the capital to $100,000,000. If, on the other hand, there should be a surplus, it is cut back to $100,000,000.

The CHAIRMAN. That was in the act which transferred the Commodity Credit Corporation to the Treasury and severed its connection with the Reconstruction Finance Corporation; is that right?

Mr. DAVIS. As I remember it, that was done in 1938, Mr. Chairman. Originally there was no limitation on the life of Commodity Credit Corporation. On January 31, 1935, legislation was approved providing for the continuance of the Corporation as an agency of the United States until April 1, 1937, or such earlier date as might be fixed by the President of the United States. Since this legislation was approved the Congress has extended the life of the Corporation three times. First, by an act approved January 26, 1937, its life was extended until June 30, 1939. Second, on March 4, 1939, its life was extended until June 30, 1941, and third, on July 1, 1941, its life was extended until June 30, 1943.

I think it is significant to point out, however, that by joint resolution-Public, No. 74, Seventy-seventh Congress, as amended—approved May 26, 1941, Commodity Credit Corporation was directed to make loans upon the 1941, 1942, 1943, 1944, 1945, and 1946 crops of the commodities of cotton, corn, wheat, rice, tobacco, and peanuts for which producers had not disapproved marketing quotas for the marketing year beginning in the calendar year in which such crop is harvested. In addition, under the Steagall amendment-Public, No. 147, Seventy-seventh Congress, approved July 1, 1941-the Secretary of Agriculture was directed during the existing emergency to use the credit resources of Commodity Credit Corporation to support a price to farmers for any nonbasic agricultural commodity with respect to which expansion in production is necessary at a price not less than 85 percent of parity or comparable price. The Steagall amendment further provides where loan, purchase, or other price-support operations are undertaken, they shall be continued until public announcement has been given to producers in sufficient time for them to make readjustments in the production of the commodity.

More recently, under date of October 2, 1942, the Congress amended certain provisions of the Steagall amendment and provided that the provisions of this amendment should remain in force during the continuance of the present war and until the expiration of the 2-year period beginning with the first day of January immediately following the date upon which the President by proclamation or the Congress by concurrent resolution declares that hostilities in the present war have terminated. In addition, the language referring to 85 percent of parity was amended to 90 percent of parity.

Under Executive Order 9334 dated April 19, 1943, Commodity Credit Corporation was made a part of the War Food Administration.

ACTIVITIES OF THE CORPORATION UP TO JULY 1, 1941

Up to July 1, 1941, the activities of Commodity Credit Corporation were confined primarily to loans on butter, corn, cotton, dates, figs, hops, mohair, peanuts, pecans, prunes, raisins, rice, tobacco, turpentine, rosin, wheat, and wool.

These loan programs were undertaken in response to various legislative, Presidential, and administrative directives. Some of the Corporation's loans were mandatory and some were not; some loans were made with recourse on the borrowers and some were not; some loans were made to individual producers and some were made to associations of producers; some loans were made directly by the Corporation and some were made indirectly through local private banks under a contract whereby the Corporation agreed to take over the loans on the demand of the private lending agency. I do not wish to minimize the activities of the Corporation during this period for I feel that these loan programs were necessary in the interest of our national economy. Instances could be cited where these loans meant the difference between 5-cent and 9-cent cotton, 25-cent and 57-cent corn, 10cent and 20-cent tobacco, 35-cent and 65-cent wheat, 15-cent and 25cent butter, and similar differences on several other commodities.

The functions of the Corporation's loan programs in protecting farm prices become greatest, of course, under emergency conditions. For instance, the abnormal 1937 cotton crop of approximately 19,000,000 bales came about in part as an aftermath of the invalidation of the former Agricultural Adjustment Administration processing tax program. It would have meant untold suffering not only to the South but also to the entire Nation if it had not been possible for Commodity Credit Corporation to place a floor under what otherwise would have been a most drastic decline in cotton prices. Another great emergency arose during the year 1939 in the case of flue-cured tobacco. A large percentage of this crop is normally sold to Great Britain, which usually carried about a 2 year's stock on hand in the course of its curing process.

Upon the outbreak of hostilities in Europe, Great Britain apparently felt that it was desirable to discontinue using its dollar exchange for the purchase of additional supplies of American tobacco in order to be able to purchase more of other products of which it had smaller supplies. Consequently, the English tobacco companies were obliged to withdraw from buying in the American market, and our farmers who could not hold their tobacco faced ruinously low prices. In fact, the situation became so distressed that the flue-cured tobacco markets were closed. Fortunately, it