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SIMPLIFICATION OF FARM CREDIT ADMINISTRATION

LAWS

THURSDAY, FEBRUARY 24, 1966

U.S. SENATE,
SUBCOMMITTEE ON AGRICULTURAL CREDIT

AND RURAL ELECTRIFICATION,
COMMITTEE ON AGRICULTURE AND FORESTRY,

Washington, D.C.
The subcommittee met, pursuant to notice, at 10 a.m., in room 324,
Old Senate Office Building, Senator Herman E. Talmadge presiding.
Present: Senators Talmadge and Aiken.
Senator TALMADGE. The committee will come to order.
The purpose of this hearing is to take testimony on S. 2822, a bill
to amend various provisions of laws administered by the Farm Credit
Administration and to improve operations thereof and for other pur-
poses.

At this point without objection there will be inserted in the record a copy of the bill, a copy of the staff explanation of the bill, a letter from Governor Tootell, addressed to the President of the Senate, dated December 23, 1965, and also a copy of a letter from the Secretary of Agriculture dated February 23, addressed to Chairman Ellender of the committee. (The documents referred to are as follows:)

{8. 2822, 89th Cong., 2d sess.) A BILL To amend various provisions of the laws administered by the Farm Credit Administration to

improve operations thereunder, and for other purposes Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That the laws administered by the Farm Credit Administration relating to Federal land banks, Federal intermediate credit banks, banks for cooperatives, farm credit board elections and compensation of Federal Farm Credit Board, are amended as hereinafter provided.

FEDERAL LAND BANKS

SEC. 2. Title I of the Federal Farm Loan Act, as amended, is amended

(a) by adding the following subsection at the end of section 10 thereof (12 U.S.C. 751-757): "ch) To the extent authorized by the Farm Credit Administration, the Federal land bank of the district, and the board of directors of a Federal land bank association, a written report and approval by the manager or another employee of the association designated for the purpose shall be acceptable in lieu of the written report and approval otherwise required of the loan committee under this section; and in such cases the favorable report and approval by the manager or other employee shall constitute the applicant a member of the association.”

(b) by inserting immediately before the period at the end of paragraph First of section 12 thereof (12 U.S.C. 771 First) and immediately before the period at the end of the first sentence and immediately before the second comma in the second sentence of paragraph Second of section 13 thereof

(12 U.S.C. 781 Second) the following: "and which mortgages may include farm land within other farm credit districts to the extent authorized by the Farm Credit Administration”;

(c) by striking "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” from the fourth sentence of paragraph Sixth of section 12 thereof (12 U.S.C. 771 Sixth); and

(d) by substituting “an amount specified by the Farm Credit Administra. tion” for “$100,000” in paragraph Seventh of section 12 thereof (12 U.S.C. 771 Seventh).

FEDERAL INTERMEDIATE CREDIT BANKS

SEC. 3. Title II the Federal Farm Loan Act, as amended, is amended

(a) in section 202(a) thereof (12 U.S.C. 1031), by deleting "and" at the end of paragraph (2), by substituting "; and” for the period at the end of paragraph (3), and by adding the following new paragraph:

“(4) 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."; and

(b) by changing section 208(b) thereof (12 U.S.C. 1092) to read as follows: "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

Sec. 4. Sections 41 and 34 of the Farm Credit Act of 1933, as amended (12 U.S.C. 1134c and 1134j), are each amended-by striking from clause (a) in the first sentence thereof the following: “, for any of the purposes and subject to the conditions and limitations set forth in such Act, as amended”.

FARM CREDIT BOARD ELECTIONS

SEC, 5. The Farm Credit Act of 1937, as amended, is amended by substituting "sixty” for “thirty” in the last sentence of section 5(e) thereof (12 U.S.C. 640) and in the third last sentence of section 5(f) thereof (12 U.S.C. 640f) and by inserting the following immediately before the period at the end of each of such sentences: ", except that for elections to fill vacancies the Farm Credit Administration may specify a shorter period than sixty days but not less than thirty days”. This section shall be effective after the calendar year in which it is enacted.

FEDERAL FARM CREDIT BOARD

* SEC. 6. Section 4(f) of the Farm Credit Act of 1953 (12 U.S.C. 636c(f)) is amended by substituting “$100" for "$50” therein.

SENATE COMMITTEE ON AGRICULTURE AND FORESTRY (SUBCOMMITTEE No. 2)—

SHORT EXPLANATION OF S. 2822
This bill provides for the following:
I. With respect to Federal land banks,

(1) Permitting reports on loan applications and applicants to be made by the manager or other employee of the Federal land bank association (instead of a loan committee of three or more);

(2) Permitting mortgages to include land in other farm credit districts;

(3) Repealing the statutory requirement that stockholders assume personal liability to the extent required by FCA regulations on loans to corporate borrowers;

(4) Permitting the FCA to specify the maximum amount which may be loaned to any one borrower without obtaining FCA approval (in lieu of the present statutory specification of $100,000). II. With respect to Federal intermediate credit banks

(1) Permitting FICB's to invest in obligations of the land banks, banks for cooperatives, and any agencies of the United States.

istrict applicant a member of the association. ieu of les operation land in more than one farm credit district. In order to enable a single

(2) FICB financial reports when and in the form deemed necessary by FCA (instead of a minimum of three annually prepared and published as specified by statute). III. With respect to the banks for cooperatives—

(1) Repealing the general requirement that loans be restricted to the purposes and subject to the conditions and limitations set forth in the Agricultural Marketing Act. (This would leave such loans subject to any provisions of the Agricultural Marketing Act specifically applicable to such loans, such as the definition of eligible borrowers and maximum interest rate, but would remove such general restrictions as those contained in section 7 of the Agricultural Marketing Act relating to purpose, kind, amount, security, plan, and period of repayment.) IV. With respect to the FCA generally

(1) Providing for 60 (instead of 30) days for the return of ballots in elections of district board members and nominations of Federal Board members, but permitting the FCA to specify a period from 30 to 60 days for elections to fill vacancies.

(2) Increasing the compensation of Federal Board members to $100 (from $50) per day engaged in official duties, not exceeding 75 days per year.

FARM CREDIT ADMINISTRATION,

Washington, D.C., December 23, 1965. The Honorable the PRESIDENT OF THE SENATE, U.S. Senate.

DEAR MR. PRESIDENT: There is transmitted herewith a proposed bill to amend various provisions of the laws administered by the Farm Credit Administration to improve operations thereunder, and for other purposes. The laws that would be amended relate to Federal land banks, Federal intermediate credit banks, banks for cooperatives, farm credit board elections, and compensation of Federal Farm Credit Board. In this presentation, the amendments are taken up under the headings and numbering used in the proposed bill.

Section 2(a).- Under the Federal Farm Loan Act, there are 12 Federal land banks which make long-term land mortgage loans to farmers and ranchers. One such bank is located in each of the 12 farm credit districts into which the 50 States and Puerto Rico are divided. The loans are made through local Federal land bank associations and each borrower from a land bank becomes a member of the association through which the loan was made. There are from 28 to 90 such associations in the different farm credit districts.

Under existing law (12 U.S.C. 751-7), an association loan committee of three of more members, for which the association manager also is eligible (12 U.S.C. 712), is required to make a written report on each applicant and the security offered and no loan may be made unless the report of the loan committee is favorable. In certain circumstances, and on a permissive basis, it now is intended that the manager or another employee of the association may be authorized to render the kind of written report and approval that otherwise is required of the loan committee. This would be only to the extent authorized by the Farm Credit Administration, the Federal land bank of the district, and the board of directors of the particular association. Further, in lieu of the association directors or loan committee electing an applicant to membership in the association as is now required (12 U.S.C. 712, 745), it is intended that the favorable report and approval by the manager or other employee in such cases shall constitute the Section 2(b).-As to loans made, invested in, or purchased by a Federal land

a basic requirement is that they shall be secured by first mortgages on farm land within the farm credit district in which the bank is situated (12 U.S.C. 771, First, 781, Second). On occasion an applicant owns and is farming as a single Federal land bank to adequately finance such an applicant, it is proposed to provide that the mortgages taken by a Federal land bank may include farmland within other farm credit districts to the extent authorized by the Farm Credit

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