(b) If the county committee finds that the appeal has been taken in good faith, that the foreclosure of the mortgage was occasioned by causes beyond the control of the person so appealing, and that such person, by reason of his character, ability, and experience, is likely successfully to carry out the undertakings required of him, it shall so certify to the Governor; and no such person shall be entitled to the benefits herein provided unless such certification has been made by the committee. (c) Upon receiving any such certification, the Governor shall make such further investigation as he may deem necessary with respect to the matters covered by such certification. If, after such investigation, the Governor approves the findings of the committee the person so appealing shall be entitled to lease and purchase the foreclosed property, and if such property is held by a Federal land bank such bank shall convey such property to the Corporation, on the same terms and conditions as those provided in section 12 of this Act in the case of property covered by mortgages which are refinanced under such section.

VARIABLE PAYMENTS AND ADJUSTMENT OF FARM UNITS

SEC. 14. (a) The Governor may provide for the payment of any obligation or indebtedness under sections 10 to 13, inclusive, of this Act, or of any loan heretofore or hereafter made under the Federal Farm Loan Act, as amended, or the Emergency Farm Mortgage Act of 1933, as amended, by means of a system of variable payments under which amounts in addition to the require payments may be collected in periods of above-normal production or prices and employed to reduce the required payments in periods of subnormal production or prices.

(b) Whenever the Governor finds that any property otherwise eligible for refinancing or repurchase under the provisions of sections 10 to 13, inclusive, of this Act, is either too large or too small to constitute an efficient farm-management unit, or requires land or building improvements necessary to enable a diligent farm family to carry on successful farming of a type which the Governor deems can be successfully carried on in the locality in which the property is situaated, he is authorized, on behalf of the Corporation, to make the improvements so found to be necessary or to adjust the size of such property. For thejpurpose of making such adjustment, the Governor may either subdivide the property into smaller units or purchase such additional land as may be required to make the property an efficient farm-management unit.

REAMORTIZATION OF COMMISSIONER LOANS

SEC. 15. Notwithstanding the provisions of section 32 of the Emergency Farm Mortgage Act of 1933, as amended, the Governor is authorized to provide for the repayment of any loans heretofore or hereafter made pursuant to the provisions of such section, on the same amortization basis as that provided in the case of loans by Federal land banks under paragraph second of section 12 of the Federal Farm Loan Act, as amended. The Governor shall ascertain the extent to which any loan heretofore made pursuant to the provisions of such section 32, as amended, is being amortized over such a short period, as to cause hardship to the borrower, and shall provide for the reamortization of any such loan over a period, not to exceed 40 years, which he finds will be consistent with the protection of the security interest of the Government and the full repayment of such loan.

FORECLOSURES AND DEFICIENCY JUDGMENTS

SEC. 16. No foreclosure proceedings or suits for a deficiency judgment shall hereafter be instituted by any Federal land bank or by the Corporation on any mortgage executed pursuant to section 12 of this Act, or executed to secure any loan made pursuant to the Federal Farm Loan Act, as amended, or the Emergency Farm Mortgage Act of 1933, as amended, if the mortgagor conveys and delivers to such bank or to the Corporation, as the case may be, full title and possession to the mortgaged property free and clear of all liens and encumbrances: Provided, That the Governor may also require the mortgagor to pay, or agree to pay, upon terms and with security satisfactory to the Governor, an amount determined by the Governor to be equal to the amount of any damages to the mortgaged property resulting from the willful or negligent act or omission of such mortgagor. Upon such conveyance and delivery the Federal land bank or the Corporation, as the case may be, shall release the mortgagor from all liability on account of the mortgage. Upon the failure or refusal of the mortgagor to pay or agree to pay the amount so determined, the Federal land bank or the Corporation, as the case may be, may foreclose the mortgage and otherwise pursue the remedies available to it by law.

PENALTIES

SEC. 17. (a) Whoever makes any material representation, knowing it to be false, for the purpose of influencing in any way the action of any farm-debt adjustment committee, or any officer or employee of the Farm Credit Administration, upon any application, lease, contract, or appeal under this Act, or upon any change in or extension of any such application, lease, contract, or appeal shall be punished, upon conviction thereof, by a fine of not more than $1,000, or by imprisonment for not more than one year, or both.

(b) No officer, attorney, or employee of the Government shall be the beneficiary of or receive any fee, commission, gift, or other consideration directly or indirectly, for or in connection with any transaction or business under this Act other than such salary, fee, or other compensation as he may receive as such officer, attorney, or employee. Any person violating any provision of this section or section 9 (d) shall, upon conviction thereof, be punished by a fine of not more than $1,000, or by imprisonment for not more than one year, or both.

RIGHT TO AMEND

SEC. 18. (a) The right to alter, amend, or repeal this Act, or any part thereof, is expressly reserved.

(b) Any provision of the Federal Farm Loan Act, as amended, the Emergency Farm Mortgage Act of 1933, as amended, or other law, inconsistent with the provisions of this Act, is hereby repealed.

It has been found necessary to go into the legal phases of the socalled certificate plan, and in the meantime there has been so much. interest in the farm credit program and in the method of handling and the method of financing that it was thought wise to have some hearings on that particular subject. Several of us have been working along the line of suggestions, some of which have been discussed before the committee and have been discussed by members individually, and H. R. 8748 is the result. Similar bills have been introduced in the Senate by two or three Senators, and I have asked Dr. Black and his department to explain the bill, and also to answer any questions which the committee may desire to ask in reference to the way it will function, or the way other matters are handled in connection with farm credit administration.

Now, Dr. Black, if you would like, we will permit you to go first through the bill and explain how it is to operate, in order to get the complete picture before the committee and then submit to questions, or, if you prefer, submit to questions as you go along. Would you like to make an explanation of the bill first, a brief explanation?

STATEMENT OF A. G. BLACK, ACTING GOVERNOR, FARM CREDIT ADMINISTRATION

Mr. BLACK. I think perhaps that might be the best way to proceed, Mr. Chairman.

The CHAIRMAN. You do not have copies of an outline or anything of that kind to submit to the members of the committee?

Mr. BLACK. No; I have not.

The CHAIRMAN. All right, Dr. Black, will you kindly make an explanation of the bill so that the picture may be before the committee? Mr. BLACK. The bill proposes that interest rates be permanently reduced to 3 percent per annum on all loans now outstanding from either the land banks or the Farm Mortgage Corporation; that until June 30, 1946, new loans would be made at a contract rate of 3 percent and that after June 30, 1946 the rate on new loans would be related to the cost of money for making such loans, but at no time would

the rate be more than 1 percent above the cost of the loan funds. I suppose the 1946 date is included in the bill because it would permit the refunding of outstanding farm-loan bonds by that time. If the rate were related to the interest rate on outstanding obligations before then there would be a rather heavy deficit piled up because of the fact that bonds are already outstanding for which the loan income would not be sufficient to pay the interest.

Mr. HOPE. At this point I think there should be placed in the record a statement showing the outstanding bonds and the amount of interest carried by those bonds.

Mr. BLACK. The rate of interest? Do you mean the rate of interest or the amount?

Mr. HOPE. The amount of each issue.

The CHAIRMAN. I think it would be well for you to place in the record here or a little later the rate of interest on the various bonds and when they are callable, and in what amount, so that we may have the entire picture.

Mr. BLACK. I have such a statement and it can be placed in the record.

(The statement follows:)

Holders of all consolidated Federal farm-loan bonds outstanding callable in 1943, 1944, 1945, and 1946, as of Dec. 31, 1939

Mr. HOPE. Right at this point also, I would like to ask if there is any estimate as to what this provision would cost the Federal Government per annum in the way of subsidy?

Mr. BLACK. We have made a very hasty calculation of that. The interest subsidies, under present legislation, amounted last year to about $36,000,000. The interest subsidy under this provision would have amounted to $29,700,000. There would have been a saving to the Treasury of $6,300,000 over the present subsidy.

Mr. HOPE. How do you figure that? You are giving a lower interest rate than the present law provides, yet you say the subsidy would be less. What is the basis for that estimate?

Mr. BLACK. That is due to a later provision in this bill, which requires that certain 4-percent bonds now outstanding in the hands of the Farm Mortgage Corporation be retired and replaced by lowerinterest-rate obligations; also under present law the subsidy is the difference between the loan contract rate and the statutory reduced loan rate; under this legislation the subsidy is the amount of the annual interest on bonds in excess of 2 percent per annum.

Mr. HOPE. Which section is that?

The CHAIRMAN. I wonder if it would not be wise to let the witness go on through the bill with his explanations? I think we will dodge all around if we do not. I think it would be better to have a brief explanation right on through without interruption, and the members make notes and save their questions till he concludes. All this will have to be gone into in detail, and I think some of the questions might be answered by the later provisions of the bill.

Mr. BLACK. Section 3 provides for the guaranty of farm-loan bonds, both as to principal and interest, by the Federal Government. There is one question that should be raised in connection with that section, and that is whether it is desired to have joint-stock land bank bonds still outstanding so guaranteed. I would infer, from the general wording of the bill, that that was not the intention, but if it is not the intention, probably a statement to that effect should be included in that section. The CHAIRMAN. All right. Just go on through the bill and let us get a general picture first and then we will go back to the various items. Mr. BLACK. Section 4 deals with the refinancing of farm-loan bonds. That is the matter that you have raised, Congressman Hope, the withdrawal of the 4-percent bonds from the Farm Mortgage Corporation. Section 5 abolishes the stock liability of the national farm-loan associations on stock held in the Federal land bank.

Section 6 provides for the retirement of such capital stock held by national farm-loan associations or by direct borrowers from the bank, and provides likewise for cancelation of the stock held by farmer borrowers in the farm-loan associations themselves.

Section 8 has to do with the duties and future organization of the national farm-loan associations.

The next section has to do with the setting up of certain farm-debtadjustment committees. These committees can be appointed separately or the board of directors of the national farm-loan associations may serve in that capacity.

The latter part of that section has to do with the adjustment of debts incurred for the emergency crop, feed and seed loans that have been made to farmers over a period of some twenty-odd years, some of which have not been paid; they are still obligations of the farmers who may have borrowed the money some 20 years ago and have not been able to repay it.

Mr. DOXEY. Could I interrupt you right there? And the reason I do that is I want to mention the bill introduced by Senator Wheeler and now before our subcommittee We have not had a chance to go into it thoroughly. Does that bill make any recommendations with reference to that type of obligation? I do not know whether you are familiar with the Wheeler bill or not, but that is a bill dealing with that problem.

Mr. BLACK. The Wheeler bill as it was introduced last summer is incorporated in all its essential aspects in this bill. The question that you asked was also included in the Wheeler bill of last summer. Mr. DoXEY. And you have the same provisions in this bill that are in the Wheeler bill?

Mr. BLACK. Yes, sir.

Mr. DOXEY. All right.

Mr. BLACK. His whole bill has been incorporated in this one, practically as it was written last summer.

Mr. DOXEY. Well, you understand the Wheeler bill I am talking about is the one that provides for the cancelation of those loans that the Farm Credit has made out through the drought-stricken area. The CHAIRMAN. That is a different proposition.

Mr. BLACK. Yes; that is the one that is referred to here in paragraph (c) of section 9.

Mr. DOXEY. The reason I interrupted you is I have not read this bill, and I just wanted to get it clear in my mind whether this bill specifically referred to was incorporated in the Wheeler bill.

Mr. BLACK. For those dates; yes; and particular bills; that is

correct.

Section 10 has to do with the refinancing of mortgages of any farmer who may be indebted to the land bank or Farm Mortgage Corporation and provides machinery whereby farmers who have excessive debts may get that debt adjusted.

Section 11 has to do with a part of the mechanism for doing that. Section 12 has to do with certain leasing arrangements. A summary of this section, as I visualize the operations, would be something like this: A farmer who has an excessive debt, who has been unable to pay the debt, or possibly could not pay it, would apply to his local debtadjustment committee, which might be the farm-loan association. If the farm-loan association, after examining him, his character, and capacity to carry a debt, would recommend that the debt actually was too high and that no farmer under ordinary circumstances and under average conditions could be expected to succeed with that debt load, the farmer would deed his farm to the Farm Mortgage Corporation, relinquishing all ownership in it, and the farm then would be leased back to him with an option for purchase at the close of any particular period of time up to 5 years. At the end of 5 years, presumably the productive value of the farm would be established. If the farmer had demonstrated during the leasing period that he had the capacity to carry on and regain ownership of the farm, a repurchase price would be agreed upon, he would again become the owner of the farm.

That, very briefly, is the provision of the last section of this bill. One of the later sections also provides that the payment of any obligation or indebtedness described in the preceding section may be made upon a so-called "variable payment plan," in which the actual payments made each year would represent a share of the crop, rather than a fixed amortization payment.

Section 15 provides for the reamortization of Commissioner loans up to 40 years.

Section 16 provides that deficiency judgments will not be taken except in cases of willful or negligent action on the part of the mortgagor. The final sections of the bill are the customary penalty provisions.