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Mr. WEITZEL. May I ask, Mr. Chairman, whether the Corporation would have any objection to provisions which would just require the Corporation to secure its general borrowing, as distinguished from borrowings or obligations incident to particular programs, such as the wool program or the commodity loan pogram, that it would require the Corporation to obtain those general borrowings from the Secretary of the Treasury.

Secondly, whether the Corporation would object to including obligations to the local banks in computing the amount of borrowings of the Corporation under the $4,750,000 debt limit.

Mr. BRASFIELD. I will take those questions in the order you gave them.

We feel that we are borrowing in accordance with Treasury policy. We are borrowing our general needs from the Treasury now, and as long as that is Treasury policy we would have no hesitation or no indication of doing anything other than to comply with it wholeheartedly and without any problem.

As long as the two acts mentioned, the one in 1938 and the Corporation Control Act, require us to obtain the approval of the Secretary of the Treasury on any borrowings that we make, we do feel that that is adequate control and it is not necessary to write in further restrictions in the charter.

We do not know what the problem may be somewhere down the road, and it might at some future point be tħe desire of the Treasury that we do borrow outside.

So, in that event, there would seem to be no particular advantage in making such a restriction in our charter where the complete control is in the hands of the Secretary of the Treasury.

That is your first point.

As to the second point, I would see no objection to considering our total lending agency obligations and loans against the total borrowing authorization.

It would require a change in the present law. The borrowings against that authorization, and I believe, and Mr. Shulman will check me on the statement, are now those guaranteed by the Treasury.

The others are obligations to purchase from the lending agencies in accordance with the lending agency contract, but they are not guaranteed by the Treasury.

It would have some administrative problems, perhaps, not being certain at all times as to what the figure was exactly.

If at some future time the margin was somewhat less, it might add administrative problems that could be avoided by the present arrangement.

I can assure you, however, that the board of directors in passing upon programs and dockets works against the $4,750,000,000 authorization on all programs, whether there is immediate borrowing or not.

That is the test of the success of the Corporation to be able to carry out its programs, the ability to obtain funds in accordance with that authorization.

Mr. BLAKEMORE. In connection with one form of the Corporation's operations, we found there was some confusion in the minds of some of the people at the other end between the obligation guaranteed by the United States and the obligations which are really guaranteed by just the Corporation itself.

loss on.

There is probably some merit in the suggestion that they be made uniform.

There is another type of transaction of the Corporation, the so-called cotton certificate arrangement, whereby these banks lend funds, and they can surrender the notes to the Corporation and are given in return certificates of interest in cotton, not bonds.

On June 30, 1945, those aggregated roughly $205,000,000.

We think it would make for uniformity in this matter if the suggestion might be followed.

There is one other observation I would like to make in connection with Senator Thye's comment awhile ago.

If it was your conclusion, based on the comments made, that the price-support activities of the Corporation can be determined by taking the over-all results of the Corporation's activities to date and subtracting the subsidy operation results as indicated by the records, indicating price-support results, it is not quite correct because it should be remembered that left in there are the wartime supply program activities also.

In that connection it should be considered that in carrying out these supply activities, the Corporation has very fortunately at times been able to dispose of commodities through those channels which otherwise they might have been forced to hang onto and suffer a

It is our position, as will be reported in our report when it is issued, that you cannot determine actually what the costs of the Corporation's price support activities have been.

They are so matched, of necessity, with supply activities, that really without a crystal ball you cannot look and say that this is what the Government has been forced to pay as a result of undertaking to support the prices of agricultural commodities, because the impact of the war on the price picture distorts that.

There are quite a few commodities, for instance cotton, where but for the advent of the war, it is probable that there would have been a substantial loss.

As it turned out, naturally they were able to dispose of vast quantities of cotton at prices which increased as a result of the war.

Senator THYE. I do not think anybody would dispute that statement.

Mr. BLAKEMORE. I just want to make sure that you cannot just take the results of operations and subtract the reported results of programs classified as subsidies, and then call the remainder

Senator THYE. My only reason for raising some of these questions was, because you propose to amend this bill, whether your suggested change would in any manner jeopardise what has been the normal functioning of the Commodity Credit Corporation under the existing acts.

Mr. BLAKEMORE. No, sir.

Senator THYE. I would not want any amendments in the act that would tie the hands of Commodity Credit. In its normal function with local banks and with local county and State committees.

Mr. BLAKEMORE. On the contrary, we are particularly concerned that we do not do that.

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Mr. Weitzel opened his remarks today by saying we do not intend that any of these comments even relate to the underlying policies governing the Commodity Credit Corporation's programs.

Senator THYE. Well, that was the only reason I raised the question.

Senator Young. I think it was stated yesterday you wished to hold up the bill until the audit was made so that you could make your final recommendations.

Could you not make those recommendations now so that we could proceed with the bill?

Mr. WEITZEL. We could make them, Senator, within a matter of a few short weeks. I hesitate to say 1 week or 2 weeks because there are some rather weighty matters to be considered.

The report is several hundred pages.

No one in the Comptroller General's Office has had an opportunity to read it, but we do have some principal recommendations here today.

They are not our final recommendations, but we think they will be valuable as suggestions to the committee.

I would like to sum up on this one point by saying it is the position of the General Accounting Office that Government corporations should finance their general requirements through loans from the Secretary of the Treasury.

Mr. BRASFIELD. I wonder if I might add one point on the comment Mr. Blakemore made in connection with people not understanding whether these borrowings were directly guaranteed by the Treasury or not. It would perhaps open up a number of problems if the lending agency contracts which we now have with the country banks on corn, wheat, and so forth were to be guaranteed directly by the Treasury.

It would add a number of other facets to that operation which we do not have now. I am not fully certain of what might be all the ramifications of it. We would hesitate to see that present arrangement disturbed in relationship between the banks and the Commodity Credit Corporation. That has a considerable history and that is a very satisfactory one.

Senator THYE. That was the reason I asked the question. I did not want any disturbance in the functions that had proven themselves to be so successful in operations.

Mr. BRASFIELD. Even to require a new form of contract, because these are continuing contracts with the banks, would in itself result in a considerable administrative cost.

Senator THYE. That is correct. That is a matter of concern in this question.

Mr. BRASFIELD. We would certainly urge that that remain as it is and not become wrapped up with the question of guaranteed obligations of the Treasury.

Mr. WEITZEL. I think Mr. Blakemore's point had more to do with making definite whether certain obligations were guaranteed by the Government rather than suggesting any conversion from one type to another type, from the non-guaranteed to the guaranteed.

Mr. BLAKEMORE. Yes. The limitation set by Congress of the extent to which the Corporation can become indebted is in reality not a limitation. As it stands now it is not a legal limitation. As Mr. Brasfield says, it has been their policy to continue to do that. There has been no legal requirement that they do so.

Mr. BRASFIELD. That is our source of funds to meet our obligations. If we committed ourselves beyond our authority to borrow, we would be leading the farmers to believe we had the means to carry the program, which we would not have.

Mr. WEITZEL. In fact the Corporation is complying with that policy at the present time.

Mr. BRASFIELD. In our financial statements each month to the Board there is a statement which shows our commitments, borrowings from the Treasury, our lending agency obligations and lending agency contracts. We do watch that in connection with each program as presented to the Board.

Mr. WEITZEL. If that is correct, we feel that is a good policy and writing it into the charter would be a good thing at this time." One feeling we have about this charter bill is that it is a very important and basic bill and that the charter should stand for some time to come. It

may be difficult to amend it and these are some of the considerations the committee will want to give it before it passes on this basic charter bill.

If there is no further discussion on this point, I have one on page 4, line 23, in subsection (1) of the same section 4 which provides the Corporation "May make such loans and advances of its funds as it deems necessary or desirable in the conduct of its business.”

We recommend that more specific language be inserted with respect to the purposes for which the Corporation can make loans and advances of its funds. We believe it to be desirable for the Congress to specify in the charter the general character and extent of the loans to be made by the Corporation. We believe it to be desirable for the Congress to indicate in the charter the circumstances under which the loans should be made.

In this connection, the use of the Corporation's borrowing power to finance temporarily, through loans to the Secretary of Agriculture, the conduct of soil conservation activities, as provided by section 391 (c) of the Agricultural Adjustment Act of 1938, is inconsistent with the apparent purposes of the Corporation. Moreover, it does not appear that the need in this case is one which cannot be solved by the orthodox methods of appropriation. We recommend that consideration be given by the Congress to the repeal of section 391 (c) of the Agricultural Adjustment Act of 1938. This would be consistent with the policy adopted in the Department of Agriculture Appropriation Act, 1948, with respect to financing farm tenant and REA loans.

The committee will recall that in the Agricultural Appropriation Act the Congress provided that the Reconstruction Finance Corporation should cease to make advances to the Secretary of Agriculture for these two purposes, that any existing loans should be turned over to the Secretary of the Treasury and any further advances made by the Secretary of the Treasury.

This particular provision of the Agricultural Adjustment Act of 1938 is shown by the Corporation in its justification of this bill as one of the statutes which would remain in effect under section 6 of the present bill.

We feel that the Congress could as well handle this matter by the normal appropriation procedures or at least if loans are to be made to

the Secretary, they could be made just as easily directly by the Secretary of the Treasury without the intermediation of the Corporation.

Senator AIKEN. Do you have any comment on that, Mr. Dodd?




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Mr. Dopp. Yes; I have some comment on that.

The Congress has in effect a law that says we shall have an agricultural conservation program. It provides, among other things, the county officers; and advances to farmers can be made for the period between January 1 and June 30 by borrowing from Commodity Credit Corporation to the extent of $50,000,000.

As you folks all know, your appropriations are made on a fiscal-year basis, so that the amount which is appropriated for 1948 agricultural conservation program is appropriated sometimes late in the year—last year as late as August. But the county officers have to have money to run on, and you have to advance money for fertilizer, seeds, and so forth to the farmers in that 6 months' period between January 1 and July 1 if you are going to have the program operate.

Last year there was a proviso to eliminate the agricultural conservation program and drop it from the laws, in which case there was no need to continue over into this other year this proviso to advance money for the operation of the program until the appropriation was made. If our appropriation was made on the calendar-year basis, there would be no need for the following arrangement. The appropriations are made on the fiscal-year basis, and the farmers start carrying out the 1948 practices in January 1948. In the South it is earlier; the fertilizers, cover crops, and all those things, and even much of your terracing and dam building is carried out earlier, a long time before the Appropriation Subcommittee ever meets. The appropriation language authorizes the Secretary to carry out the program of certain practices.

You know that has been in the bill for certain years. It authorizes a Secretary to carry out a $300,000,000 program, $325,000,000 program. Last year it said for 1948 he is to have $150,000,000 for the program.

We take that program out to the farmers in December and early January for the coming calendar year, and the farmers get busy. We would have no way to carry those expenses because the appropriation is cut off at the end of the fiscal year. If we have a $150,000,000 program, you can see we have no money to run on into the calendar year 1949.

Mr. WEITZEL. Mr. Chairman, I know of no insuperable difficulties in having appropriations provided that would cover the calendar year rather than the fiscal year. Now, if a way cannot be found within the framework of ordinary appropriations, would the Department have any objection to obtaining these advances directly from the Secretary of the Treasury rather than from the Commodity Credit Corporation ?

Mr. Dopp. It is a law of—it is a change in the law. The law reads now that the Commodity Credit Corporation is authorized to loan to the Secretary expense money for making advances to farmers for that 6 months' period for which there is no money available.


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