Tallman, W. C., president, Public Service Co. of New Hampshire, Waterman, William B., vice president and general counsel, Iowa- Illinois Gas & Electric Co., Davenport, Iowa; also representing the Watson, A. J., Jr., president, Mississippi Power Co., Gulfport, Miss.. Williams, Arthur M., president, South Carolina Electric & Gas Co., Wilson, R. Baxter, president, Mississippi Power & Light Co., Wood, Ernest C., manager, Farmers' Electric Cooperative, Chillicothe, Yarborough, Hon. Ralph, a U.S. Senator from the State of Texas.......... Statement on taxation of cooperatives and lending institutions. .. Comparison of consumer density and revenues of REA borrowers and Number of farms with central station service.. Amendments proposed by American Farm Bureau Federation....... Letter to Harry Graham, National Grange, from C. E. Parks, vice Page Excerpts from legislative history of the unserved persons clause.. Resolution of the Northeast Public Power Association, Wakefield, Mass.. Charts, tables and information on REA borrowers with respect to: SUPPLEMENTAL FINANCING OF REA PROGRAMS MONDAY, AUGUST 15, 1966 U.S. SENATE, SUBCOMMITTEE ON AGRICULTURAL CREDIT AND RURAL ELECTRIFICATION OF THE COMMITTEE ON AGRICULTURE AND FORESTRY, Washington, D.C. The subcommittee met, pursuant to notice, at 10:05 a.m., in room 324, Old Senate Office Building, Senator Herman E. Talmadge (chairman of the subcommittee) presiding. Present: Senators Ellender, Holland, Talmadge (presiding), Cooper, and Miller. Senator TALMADGE. The subcommittee will come to order. This morning we are opening hearings on S. 3337 and S. 3720, proposals to amend the Rural Electrification Act. At this point, I desire to insert in the record S. 3337 and a letter to Chairman Ellender from the Department of Agriculture signed by John Schnittker, Acting Secretary, comparing S. 3337 with H.R. 14837, the administration's proposal; S. 3720, which is sponsored by Senator Cooper, a distinguished member of this subcommittee, and cosponsored by numerous other Senators; a letter dated April 13, 1966, from the Secretary of Agriculture to the President of the Senate and a document headed "A bill", together with a document entitled "Section-by-Section Analysis of Bill To Provide Additional Sources of Financing for Rural Electrification and Rural Telephone Programs" submitted by the U.S. Department of Agriculture, and a committee staff synopsis of various REA supplemental financing bills. (The documents referred to follow :) [S. 3337, 89th Cong., 2d sess.] A BILL To amend the Rural Electrification Act of 1936, as amended, to facilitate the extension and improvement of rural electric and telephone service, and to strengthen and stabilize rural electrification and telephone systems by supplementation of the existing sources of Federal financing as provided by titles I and II of the Rural Electrification Act, to furnish additional sources of capital funds, 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 Congress finds rural electric and telephone systems require ever-increasing amounts of capital to keep pace with the needs of their consumer members and users, therefore it is declared to be the policy of the Congres and the purpose of this Act that the supplemental capital requirements of the rural electric and telephone systems shall be met by the establishment of a Federal Electric Bank and a Federal Telephone Bank, which banks shall utilize both non-Federal and Federal funds, and, in time, shall become entirely privately owned, operated, and financed corporations. In order to effectuate this policy, the Rural Electrification Act of 1936, as amended (7 U.S.C. 901-924), is amended as hereinafter provided. SEC. 2. Subsection (f) of section 3 of the Rural Electrification Act of 1936, as amended, is repealed. SEC. 3. The Rural Electrification Act of 1936, as amended, is further amended by adding the following four new titles: 1 "TITLE III "SEC. 301. REA ELECTRIFICATION LOAN ACCOUNT.-There is hereby established in the Treasury of the United States an account, to be known as the REA electrification loan account, consisting of "(1) all notes, bonds, obligations, and property delivered or assigned to the Administrator pursuant to loans heretofore or hereafter made under sections 4 and 5 of this Act, including notes, bonds, obligations, and property held in trust by him on behalf of the Secretary of the Treasury, as of the effective date of this title, which shall be transferred to and be assets of the REA electrification loan account: “(2) undisbursed balances of electrification loans made under sections 4 and 5, which, as of the effective date of this title, shall be transferred to and be assets of the REA electrification loan account; "(3) all collections of principal and interest received on and after July 1, 1965, on notes, bonds, judgments, or other obligations made or held under title I of this Act, which shall be paid into and be assets of the REA electrification loan account; "(4) all appropriations for electrification loans made under the authority of section 3 of this Act and funds obtained in accordance therewith and the unexpended balances of any funds available on the effective date of this title for electrification loans under sections 4 and 5 of this Act, including any funds made available for electrification loans under the item 'Rural Electrification Administration', in the Department of Agriculture appropriation Acts current on the date of enactment of this title, and said appropriations and funds shall be assets of the REA electrification loan account; and "(5) shares of the capital stock of the Federal Electric Bank acquired by investment of the REA electrification loan account pursuant to section 302(b)(3) of this title, and moneys received from said Bank upon retirement of said shares of stock in accordance with the provisions of title IV of this Act, which said shares and moneys shall be assets of the REA electrification loan account. "SEC. 302. LIABILITIES AND USES OF LOAN ACCOUNT.-(a) The notes of the Administrator issued to the Secretary of the Treasury to obtain funds for loans under sections 4 and 5 of this Act, and all other liabilities against the appropriations or assets in the REA electrification loan account in conection with electrification loan operations shall be liabilities of the REA electrfication loan account, and all other obligations against such appropriations or assets arising out of electrification loan operations shall be obligations of the REA electrification loan account. "(b) The assets of the REA electrification loan account shall be available upon demand by the Administrator for the following purposes: "(1) loans under sections 4 and 5 of this Act and for advances in connection therewith, except that no such loans shall be made in any year in excess of the amounts previously authorized therefor in appropriation Acts for such year or available pursuant to section 3 of this Act; the amounts so authorized for loans and advances shall remain available until expended; "(2) payment of interest as it accrues on loans to the Administrator from the Secretary of the Treasury for electrification purposes pursuant to section 3 (a) of this Act; "(3) investment in the capital stock of the Federal Electric Bank in accordance with section 405 (a) of this Act: Provided, That funds representing the proceeds from the purchase of such stock shall remain in the REA electrification loan account until demanded for actual disbursement in cash by the said Bank; "(4) payment of principal when due on loans to the Administrator from the Secretary of the Treasury for electrification purposes pursuant to section 3 (a) of this Act; and "(5) payment of any difference in the cost of funds borrowed by the Bank through the public or private sale of its electric debentures, under section 406 (a), and the interest earned on the amount of 'intermediate' loans made under section 410(b) (2), from the proceeds of such sale. "SEC. 303. DEPOSIT ON LOAN ACCOUNT MONEYS.-Moneys in the REA electrification loan account shall remain on deposit in the Treasury of the United States until disbursed and shall earn interest while so deposited at the rate of 2 per |