I think, Mr. Chairman, that this type of transition would be the orderly process that such legislation should take, and I sincerely hope that this great Agriculture Committee will consider it in this light.

The CHAIRMAN. Thank you very much for giving us your viewpoints on this. We appreciate your statement. You have presented a good argument. We are glad to have it.

Mr. ANDREWS. Thank you, Mr. Chairman.

The CHAIRMAN. Our next witness will be Congressman Robert H. Michel of Illinois.

We will be glad to hear from you now.

STATEMENT OF HON. ROBERT H. MICHEL, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS

Mr. MICHEL. Mr. Chairman and members of the committee, I have asked for this opportunity to appear before your committee to express some very serious concerns over what in my judgment are defects in H.R. 1400, the bill to establish supplemental financing of REA's.

As a member of the Appropriations Committee, and more particularly the Agriculture Subcommittee, I am surprised that there is no provision in this proposal to assure adequate congressional supervision of a Federal loan program which will directly or indirectly provide a multibillion dollar source for plans for Federal institutions.

You, Mr. Chairman, and the more senior members of the committee, are well aware that our Appropriations Commitee has had the annual responsibility of examining closely the expanding program of the REA.

Your great committee certainly has the legislative authority in this area, but I do not recall in my tenure in the Congress that your committee has had before it more than two or possibly three times in open hearings a review of the operations of the REA. I do not mean to imply in any way that your committee had the responsibility for annual review, but our committee has had that responsibility and it has kept us in very close touch with all of its operations.

H.R. 1400, as I see it, is seriously defective in removing a large part of the REA program from congressional oversight while at the same time substantially increasing its Federal subsidies. It seems to me that each of us has a solemn responsibility to protect the interest and the financial position of the Federal Government by being effective stewards of all Government programs, and this legislation does not permit that kind of stewardship.

H.R. 1400, as presently proposed, provides several new forms of subsidy for electric cooperatives, including such things as the initial $750 million capitalization with no payment of interest required, a future Federal guarantee of $6 billion or more of debentures, freedom from taxation for the proposed bank, and the right to use employees and facilities of Government agencies without cost.

The sum total of these new subsidies is difficult to estimate offhand, but they, obviously, would be equivalent to a windfall of many hundreds of millions of dollars. I say "windfall," because the justifications for subsidies of this magnitude have not been proven in the light of the present condition and needs of most of the rural electric coopera

If my memory serves me correctly, in the past 30 years of the program there have been authorizations totaling something like $6 billion, and what wou are projecting is $8 billion to $15 billion over the next 15 years. There is no question that as the witnesses come before our subcommittee year after year in whatever field it is, that the requests always far exceed the money available. This is an old story, nothing unique about it whatever.

These subsidies would be provided and the program would be expanded far beyond the original intent of the REA Act, while at the same time virtually no congressional controls would be provided over the activities of the Federal electric bank. Even with the annual supervision of the Appropriations Committee over the past several years, it has been necessary on many occasions to question seriously some of the activities and administrative interpretations of the REA Administrator in the program. One may well imagine the future excesses and directions of this program if it has a multi-billion dollar source of funds and almost a carte blanche from the Congress to proceed willfully.

Notwithstanding Assistant Secretary Baker's views as expressed on page 10 of his testimony on the pending bill, H.R. 1400, that it provides for "very substantial controls," I can only say that I, for one, emphatically disagree. Mr. Baker cites certain reports that the Department would submit from time to time, but the members of this committee and I know that there is a vast difference between filing a report-which can be self-serving and can contain as slanted figures as you want to submit, and statistics-and having to submit a budget each year for congressional scrutiny and approval.

Any so-called bank should require that Congress should specify the amount of bank loans to be made each year.

I note, for example, the bills introduced by our distinguished colleagues, Mr. McMillan particularly and Mr. Teague, of California, and, possibly, others, do contain adequate provisions guaranteeing future supervision and control over REA financing through annual consideration by our Appropriations Committee. This, in my opinion, Mr. Chairman, is a necessary requirement for any legislation on this subject that might be approved by this committee.

Therefore, I respectfully urge that any legislation you recommend contain provisions guaranteeing continued congressional control over the program and its expenditures.

While I certainly could say much more on this whole subject matter, I prefer, Mr. Chairman, to limit my remarks and thereby hope to focus more attention on this one very vital point that I have tried to make. Thank you for the opportunity to present it to you this morning. The CHAIRMAN. We thank you very much.

Mr. ABERNETHY. I have a question.

The CHAIRMAN. I was going to call all of the witnesses back later for that purpose.

Mr. ABERNETHY. Very well. I just wanted to ask a question.

The CHAIRMAN. Do you want to do it now?

If so, go ahead.

Mr. ABERNETHY. How long have you served as a member of the Committee on Appropriations?

Mr. MICHEL. Ten years.

Mr. ABERNETHY. How long have you served on the Subcommittee on Agriculture?

Mr. MICHEL. Ten years.

Mr. ABERNETHY. How many REA appropriations has your committee considered in that time?

Mr. MICHEL. One for each year. That would be 10.

Mr. ABERNETHY. How many times has your committee cut that appropriation?

Mr. MICHEL. As a matter of fact, this last year we increased authorizations. I think that the original request was for something like $220 million, and we ended up with a figure of $375 million. That was an increase of $10 million over the year before.

Mr. ABERNETHY. It has been said that the committee has never cut the appropriations. Do you know whether that is actually correct or not?

Mr. MICHEL. Without referring to the record, I would say that in a general way this would certainly be true. It could not be more than 1 or 2 years, in my judgment, if at all, that the request has been cut.

Mr. ABERNETHY. It has been said as to this child of Congress that Congress created-it has been suggested by some of the witnesses that the Congress would not adequately take care of the needs of the rural electrification program if we do not pass this bill. Over your long years of experience in handling these appropriations, what would your opinion be as to whether or not the Congress would or would not do that? Mr. MICHEL. I would say that this would be completely without foundation. It is true that from time to time some of us have been critical of some of the things that have been going on. I think the very fact that several years ago we disclosed the REA cooperatives were borrowing at 2 percent and reinvesting back in Government securities bearing an interest rate of 3.5 or 4 percent indicates the wisdom of the need for oversight. No member of this committee, who has been an ardent supporter of the REA, conceived that would be the way in which we would find them going. Some of these practices have been corrected over a period of years. It is our responsibility to hold a check on it, but we have never been miserly, I do not think, in our deliberations and, ultimately, in what we have recommended for an appropriation.

Mr. ABERNETHY. Mr. Whitten is from my State. I think he is a very valuable Member of Congress, and he is very fair to REA. Mr. MICHEL. Yes, he is eminently fair.

Mr. ABERNETHY. I think that he has been very friendly toward getting electricity to the rural people. He serves as chairman of your subcommittee, does he not?

Mr. MICHEL. Yes.

Mr. ABERNETHY. Maybe this question should be put to him, but I think that the gentleman will know and tell us what his general attitude is toward financing the needs of rural electrification?

Mr. MICHEL. I would certainly have to say, from my long experience with Mr. Whitten, that in addition to being fair, he has been completely considerate of the REA cooperatives,

We sit, admittedly, in this position where, on the one hand, we have the extreme view of the cooperatives and, on the other hand, the extreme view of the power companies and the private utilities. We know that somewhere between these two extremes are the right answers. This is what we have tried to do in implementing the act. Mr. Whitten, as you very well know, has been a very ardent friend of the cooperatives.

Mr. ABERNETHY. I felt that your response would be along that line. It probably was not just exactly fair to ask you the question, but I knew that Mr. Whitten would not be embarrassed by your response. Mr. MICHEL. Mr. Whitten does not need anybody to speak for him, as the gentleman well knows.

Mr. ABERNETHY. Yes. Thank you very much.

The CHAIRMAN. Are there any other questions of the witness?

Mr. Teague?

Mr. TEAGUE of California. I want to offer a word of commendation to the witness. He has been a very valuable member of the Appropriations Committee and his testimony today is impressive and very helpful.

Mr. MICHEL. Thank you.

The CHAIRMAN. Are there any further questions?

Mr. Gathings?

Mr. GATHINGS. You brought up a point that was not presented to us last year and has not been touched upon this year, and that is the probing into the activities of the rural electrification system. I just want to commend you for your overall statement this morning. Mr. MICHEL. Thank you, sir.

The CHAIRMAN. Are there any further questions?

Mr. Hansen?

Mr. HANSEN. I certainly think the gentleman from Illinois has done an excellent job and clearly stated his position as an able and informed member of the Appropriations Committee.

Mr. MICHEL. Thank you.

The CHAIRMAN. Are there any further questions?

Mr. Zwach?

Mr. ZWACH. Mr. Chairman and Congressman Michel, you perhaps are aware of the anticipated needs of the REA cooperatives. Do you think that the Congress, the Committee on Appropriations would perhaps be willing to adequately finance this, or do you think that we need additional financing legislation?

Mr. MICHEL. I will tell the gentleman this: I think we are all aware of the power requirements doubling every 10 years. That is a common rule of thumb. Let us not kid ourselves. There are problems, but I think that the Congress has always shown itself to be flexible enough to meet the growing and the expanding needs and requirements of the country.

If I may sum this up in capsule. I just do not like to see REA financing get completely out of hand, where everyone, each individual on this committee will find your control of your voice or your influence completely written off the book by a carte blanche authority that is proposed in H.R. 1400.

Mr. ZWACH. I would like to say to the Congressman that I have read the hearings for the several previous years, and I would like to commend the Congressman for the detailed way in which the Subcommittee on Agricultural Appropriations has conducted their hearings. I was very much impressed with the work that it has done. Mr. MICHEL. Thank you.

The CHAIRMAN. Mr. McMillan ?

Mr. MCMILLAN. I would like to congratulate the gentleman on his fine statement. I certainly agree with his point, that the Congress should have some control over the expenditures of any Government agency. I just want to express that point.

Mr. MICHEL. Thank you.

The CHAIRMAN. Are there any other questions?

If not, we are very much obliged to you, Mr. Michel. We appreciate your coming before us.

Mr. MICHEL. Thank you again, Mr. Chairman and members of the committee, for your consideration.

The CHAIRMAN. Our next witness will be Congressman Ancher Nelsen, Minnesota.

We will be glad to hear from you now.

STATEMENT OF HON. ANCHER NELSEN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MINNESOTA

Mr. NELSEN. Mr. Chairman and members of the committee. This is a pleasant experience for me, to walk into this room and see faces of REA managers and directors that I previously have visited with in all parts of the United States. In my experience as Administrator, I also dealt with your chairman, Mr. Poage, on many occasions dealing with the problems confronting us.

I have no prepared statement. I do not come here in support of any particular measure, but I do want to testify as to the objectives sought in the supplemental financing proposal.

Back in 1954, I met with Mr. Maurice Stans, of the Bureau of the Budget, and Mr. Burgess of the Treasury Department, to work out some kind of a plan for supplemental financing for the REA co-ops. At that time, I found no support for the principle among those who professed to be leaders in the program. I am glad to see that it is now accepted by many that there is a need for some such type of plan. And I hope that a workable plan can be developed that has proper safeguards to protect against abuses in the event that the Government sets up a financing plan.

I would like to refer to what has happened in the State of Minnesota. This was many years ago, when the REA tax bill for our State was enacted into law. I was the author of that bill in our State legislature.

At that time, we decided that we needed some kind of tax relief for rural development, and the bill that was passed in the State of Minnesota applied not only to REA distribution cooperatives, but it also revised the tax structure for the private power companies under the premise that whatever we did should be done fairly This was the beginning of an atmosphere of working together between the cooperatives and the utility companies in our State.