popularity and to his tremendous ability. Certainly all of us in the Congress appreciate the great stature of the Resident Commissioner of Puerto Rico. I believe Dr. Fernós-Isern, one court, I think you told me, in Boston, in some proceeding had passed on the question of the legal meaning of "commonwealth"?

Mr. FERNÓS-ISERN. The Boston circuit court, in passing on a matter incidental to a lawsuit which hasn't been definitely decided, at least intimated or made reference to the fact that apparently Puerto Rico was to be considered as a State in a generic sense, although not a member State of the Union, but in compact with the Union. Words to that effect.

Mr. O'HARA. The distinguished gentleman from New York, Mr. Gamble, when we discussed this last, thought that because the Commonwealth is so recent that there may have been no judicial determinations. This is the only time that you are familiar with that the matter has reached any court?

Mr. FERNÓS-ISERN. There have been some decisions by the United States court in Puerto Rico, which have gone up to the Boston circuit court. It is a matter that is still under judicial consideration.

Mr. O'HARA. And you are fearful that unless "commonwealth" is included in the definitions in new laws, such as the Housing Act, that there will be some uncertainty because of later judicial determinations that may hold against the present theory?

Mr. FERNÓS-ISERN. That is correct, sir.

Mr. O'HARA. Thank you very much, Commissioner.

Mr. TALLE. Mr. Chairman.

The CHAIRMAN. Dr. Talle.

Mr. TALLE. Mr. Resident Commissioner, assuming that your bill is enacted into law by the Congress, what will be the political relationship between the United States Government and Puerto Rico?

Mr. FERNÓS-ISERN. The political relationship is already established. The bill I am contemplating wouldn't change at all that relationship. The bill I am contemplating is only to clarify the question of whether laws, which make reference to States, Territories, and possessions, but not to the Commonwealth of Puerto Rico, should or should not apply in Puerto Rico.

That is the only question the bill I have in mind now would take care of. But the relationship between Puerto Rico and the United States was established by the law that authorized the creation of the Commonwealth.

In general, if the Congressman wants me to briefly state the relationship, it is that emanating from a compact which was enacted—the terms of which were enacted into law by the Congress and accepted by the people of Puerto Rico in a plebiscite. So the present relationship between Puerto Rico and the United States is the result not only of the decision of the Congress, but of the acceptance by the people of Puerto Rico.

It is certainly government by consent, and under the terms of compact the people of Puerto Rico adopted their own constitution, which later was ratified by the Congress, within the framework of the compact, and the constitution creates a Puerto Rican Commonwealth, which to all intents and purposes acts exactly as a State government.

The difference between the Commonwealth of Puerto Rico and a State of the Union, fundamentally, from a constitutional standpoint, is that a State, of course, is a member of the Union within the Constitution of the United States. Puerto Rico is not incorporated constitutionally into the United States except through this compact. But in practice the laws of the United States, general laws, applicable generally in the States, apply in Puerto Rico. In other words, Congress has the power to legislate concerning Puerto Rico, exactly as it has the power to legislate for the whole Union.

Mr. MULTER. Except that you cannot vote?

Mr. FERNÓS-ISERN. That, of course, is not a matter of congressional law, but of Constitution and, of course, Puerto Rico does not vote for President or does not elect Senators or Members of the House, except a Resident Commissioner.

Mr. TALLE. It appears, then, that the question is, What is a commonwealth?

Mr. FERNÓS-ISERN. That is precisely it, although we adopted the constitution which we adopted under the name "Commonwealth," and this has been ratified by the Congress. There has been no definition of the general category of commonwealth, as yet, and that is what the bill I am thinking of would do. It would define what a commonwealth is. It would do actually for commonwealths what has previously been done concerning territories.

We know what a territory is. We know what a possession is. Those categories have existed for a long time and are well identified in law. The category "commonwealth" has never been created, Puerto Rico is the first one. I think now would be proper to make a definition of what is meant by "commonwealth" in the law, and how do laws of the United States apply in commonwealths. That would be, of course, always to have a relationship with what the compacts say. Mr. TALLE. Thank you.

Mr. MULTER. Mr. Chairman.

The CHAIRMAN. Mr. Multer.

Mr. MULTER. Commissioner, up to the present time the housing acts have been interpreted as applying to Puerto Rico, have they not? Mr. FERNÓS-ISERN. That is correct.

Mr. MULTER. All you are asking is to make sure they continue to apply?

Mr. FERNÓS-ISERN. That is right. But the acts heretofore applicable have been enacted before 1952, so the question never arose. Mr. MERRILL. Will you yield?

Mr. MULTER. I yield.

Mr. MERRILL. I think that isn't exactly right. The Commissioner is here not only for the purpose of making sure that the Housing Act applies; he is also here to try to get application of the Housing Act to Puerto Rico without having to have Puerto Rico be accepted in the general term of "territory" or "possessions." There is a psychological thing that he is fighting for here over and above merely getting the benefit of the Housing Act; isn't that right?

Mr. FERNÓS-ISERN. That is correct. I have both reasons in mind. Mr. MULTER. I understand that. But actually, so far as the law is concerned, there is no real change in the substantive law that you seek.

Mr. MERRILL. But he wants to get that without the status of territory or possession.

Mr. MULTER. I understand.

Mr. FERNÓS-ISERN. I understand the intention of the committee has been to have the law apply in Puerto Rico, anyhow. So all I am asking is that we may be sure that no judicial interpretation may later find that although the intent was to include Puerto Rico, that Puerto Rico was actually included, and, second, that in order to include Puerto Rico it may not be necessary to continue to apply to it as a possession, because of the reasons already given.

Mr. MULTER. The housing acts previously enacted have been of tremendous help in helping the housing conditions in Puerto Rico, have they not?

Mr. FERNÓS-ISERN. I know of many good things done by the United States in Puerto Rico, but I don't know of any one that I would dare say is better than what has been done by the Housing Act.

Mr. MULTER. Thank you.

The CHAIRMAN. Are there further questions of the Commissioner?
If not, thank you very much, Mr. Commissioner.
The CHAIRMAN. Mr. McLeaish.

STATEMENT OF HON. R. B. McLEAISH, ADMINISTRATOR, FARMERS HOME ADMINISTRATION, ACCOMPANIED BY HENRY C. SMITH, DEPUTY ADMINISTRATOR, FARMERS HOME ADMINISTRATION; CHARLES BERNARD, BUDGET PLANNING OFFICER; AND KENNETH SCOTT, DIRECTOR OF AGRICULTURAL CREDIT

Mr. McLEAISH. My name is R. B. McLeaish, Administrator, Farmers Home Administration, and I am accompanied by Mr. Henry C. Smith, Deputy Administrator of the Farmers Home Administration, and Mr. Charles Bernard, budget planning officer, and I would like to introduce to the committee Mr. Ken Scott, who has just been appointed a Director of Agricultural Credit.

With the consent of the chairman, I would like to read a statement. Mr. PATMAN. Mr. Chairman, may I ask if he has filed a statement showing the number of loans made last year? And I want a breakdown as to the first half and last half of last year.

Mr. McLEAISH. We will place that in the record, sir.

Mr. PATMAN. You don't have it available?

Mr. McLEAISH. I don't have it broken down between the first and last halves.

The CHAIRMAN. Mr. Patman, may we proceed in the regular order? Mr. PATMAN. Mr. Chairman, I can't stay.

The CHAIRMAN. It is unfortunate.

Mr. PATMAN. I know; it was unfortunate yesterday.

The CHAIRMAN. These other members have to stay here.

Mr. PATMAN. That is all I want. I want a breakdown put in the record for the first half and the last half, by months. That is all I want out of this witness.

(The information requested was not received in time for printing of this volume.)

The CHAIRMAN. All right, Mr. McLeaish, you may proceed.

Mr. McLEAISH. Mr. Chairman, title V of the Housing Act of 1949 authorizes the Secretary of Agriculture to extend financial assistance to owners of farms to enable them to construct, improve, alter, repair, or replace dwellings and other farm buildings on their farms, to provide them, their tenants, lessees, sharecroppers, and laborers with decent, safe, and sanitary living conditions and adequate farm buildings.

Since the approval of the act on July 15, 1949, a total of $99,074,000 has been made available for loans and $1,050,000 for grants. This total of $100,124,000 compares to $385,000,000 authorized in the act, as amended, through the fiscal year 1954. From inception of the program to December 31, 1953, a total of 18,401 loans for $93,992,181 had been made to eligible farm owners. In addition, grants totaling $363,674 had been made to 785 farm owners, 108 of whom also received loans within the total of 18,401, reported above.

For the purpose of extending financial assistance under the act, section 501 defines a "farm" as

a parcel or parcels of land operated as a single unit which is used for the production of one or more agricultural commodities and which customarily produces or is capable of producing such commodities for sale and for home use of a gross annual value of not less than the equivalent of a gross annual value of $400 in 1944, as determined by the Secretary.

Under this definition, many city workers living in suburban areas or on part-time farms are eligible for asssitance and have applied for farm housing loans. Approval of loans to these individuals depletes the limited loan funds otherwise available for assistance to bona fide full-time farm owners whose housing needs generally are much more acute. It has been very difficult to administer the program under these conditions. The city workers living in suburban areas or on part-time farms are clearly eligible and usually have a source of income for repayment more stable than the full-time farm owner. ample loan funds were available for all applicants, this would not be a major administrative problem; but with only limited funds it has been difficult to direct the program toward assistance to bona fide full-time farmers.

If

Section 503 of the act provides for the making of loans to farm owners whose income from the farm is not then sufficient to make annual payments on a loan for the necessary improvements, provided that adjustments in the farming practices, enlargement of the farm, or other development would increase the repayment ability within a period of 5 years. Enlargement and development loans are authorized under these circumstances. This section further provides that contributions in the form of credits on the loan account may be made for a period of 5 years if the borrower is unable to make full payment of the annual installment. Section 504 provides for the making of a loan or a combination loan and grant to applicants not eligible under sections 502 and 503 for minor repairs and improvements to dwellings and other farm buildings in order to remove hazards and make the buildings safe and sanitary. This section also provides for enlargement and development loans "in order to encourage adequate familysize farms." Applicants seeking to enlarge or develop their farms into adequate family-size farms under either of sections 503 or 504 may secure assistance of this type through the provisions of title I of the

Bankhead-Jones Farm Tenant Act, as amended. Because of this conflict, and the large number of applications for assistance by farm owners with income sufficient to make full repayment of the loan, the Farmers Home Administration in the latter part of fiscal year 1953 discontinued making loans under sections 503 and 504.

The Bankhead-Jones Farm Tenant Act, under which direct loans are made and loans made by private lenders are insured, has as its specific objective the encouragement of family-size farms. A strengthening of title I of the Bankhead-Jones Farm Tenant Act through changes such as proposed in S. 1276, 83d Congress, would in many ways serve the need for better farm housing and other farm buildings of applicants now applying for assistance under title V of the Housing Act of 1949. One of the principal reasons for the lack of loan volume under title I of the Bankhead-Jones Farm Tenant Act has been the reluctance of private lenders to provide capital at the existing interest rate of 3 percent to the lender. S. 1276 would largely correct this situation by increasing the rate to not to exceed 4 percent. An additional 1-percent insurance charge would continue to be charged the borrower and would be available to the Government for insurance and administrative expenses. The Department has two additional revisions in the Bankhead-Jones Farm Tenant Act that it is recommending, which if enacted will assist in rendering better service to family-type farmers for building improvements. These revisions are: 1. Elimination of the requirement that title I loans must be secured by first mortgages. This will permit the making of direct loans and insuring loans by private lenders on the security of second mortgages. This will result in more farmers being assisted with the same appropriation for direct loans and will permit many private lenders an opportunity to retain their mortgage interest in the farms.

2. Provision that title I loans may be insured up to 100 percent of the fair and reasonable value of the farm. The act now provides that the insurance authority is limited to 90 percent. These revisions will place the insurance authority on the same basis as direct loans.

In discussions with the Bureau of the Budget and other interested Government agencies, questions have been raised concerning these recommendations that have not been finally resolved. These relate to the proposed insurance of second mortgages. As soon as these questions are resolved drafts of legislation covering these proposed revisions will be submitted.

The Department is in favor of legislation providing ample credit on a reasonable basis for better housing for bona fide farmers. On July 14, 1953, the Department transmitted proposed legislation to the Congress which would extend the present provisions of title V of the Housing Act of 1949 on an indefinite basis. However, after further consideration it now believes, and recommends, that S. 1276, with the proposed revisions discussed in this statement, would provide ample credit on family-size farms and would be preferable to continued utilization of the authority of title V of the Housing Act of 1949.

As indicated, the proposed revisions the Department of Agriculture is recommending have not been finally agreed upon by the Bureau of the Budget and other interested Government agencies. We are unable, therefore, to say that the proposal has the approval of the Bureau of the Budget.