REA LEGISLATION TUESDAY, MAY 31, 1966 HOUSE OF REPRESENTATIVES, The committee met, pursuant to notice, at 10:20 a.m., in room 1301 Longworth House Office Building, Washington, D.C., the Honorable Harold D. Cooley (chairman) presiding. Present: Representatives Cooley (presiding), Poage, Gathings, Abernethy, Abbitt, Jones of Missouri, Hagen of California, Stubblefield, Purcell, Olson of Minnesota, Matsunaga, O'Neal of Georgia, Stalbaum, de la Garza, Vigorito, Redlin, Bandstra, Greigg, Callan, Belcher, Teague of California, Quie, Harvey of Indiana, Findley, Dole, and Burton of Utah. Also present: Representatives Reifel and Battin; Martha Hannah, staff: Hyde H. Murray, assistant clerk; Francis LeMay, consultant; and Fowler C. West, staff. The CHAIRMAN. The committee will be in order please. We are delighted to have the distinguished Secretary of Agriculture with us this morning, the first witness on these REA bills. I would like to explain to those present that following Memorial Day quite a few members are home. Some of them will be delayed in returning, so some of them are not in town but I am sure that others will be here later. I am sure that all of them will read your statement, Mr. Secretary. We will be glad to have you have anyone else sit with you at the table that you desire. I see that you have some distinguished colleagues with you. We will be glad to hear from you now. (H.R. 14837, introduced by Chairman Cooley, follows:) [H.R. 14837, 89th Cong., 2d sess.] A BILL To amend the Rural Electrification Act of 1936, as amended, to provide additional sources of financing for the rural electrification and rural telephone programs, and for other purposes Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That it is hereby declared to be the policy of the Congress that the growing capital needs of the rural electric and telephone systems require the establishment of a Federal Bank for Rural Electric Systems and a Federal Bank for Rural Telephone Systems which will furnish assured and viable sources of supplementary financing, with the objective that said banks will 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. The Rural Electrification Act of 1936, as amended, is amended by adding the following four new titles: 1 "TITLE III "SEC. 301. RURAL ELECTRIFICATION ACCOUNT.-There is hereby established in the Treasury of the United States an account, to be known as the rural electrification 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 rural electrification 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 rural electrification 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 rural electrification 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 rural electrification accounts; and "(5) shares of the capital stock of the Federal Bank for Rural Electric Systems acquired by investment of the rural electrification 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 rural electrification account. "SEC. 302. LIABILITIES AND USES OF 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 rural electrification account in connection with electrification loan operations shall be liabilities of the rural electrification account, and all other obligations against such appropriations or assets arising out of elec trification loan operations shall be obligations of the rural electrification account. "(b) The assets of the rural electrification account shall be available 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 Bank for Rural Electric Systems in accordance with section 405 (a) of this Act: Provided, That such investment shall be deemed paid in capital of the said bank notwithstanding that funds representing the proceeds from the purchase of such stock shall remain in the rural electrification account until required for actual disbursement in cash by the said bank; and "(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. "SEC. 303. DEPOSIT OF ACCOUNT MONEYS.-Moneys in the rural electrification account shall remain on deposit in the Treasury of the United States until disbursed. "TITLE IV "SEC. 401. ESTABLISHMENT AND GENERAL PURPOSES OF THE ELECTRIC BANK.There is hereby established a body corporate to be known as the Federal Bank for Rural Electric Systems (hereinafter called the electric bank), subject to the supervision and direction of the Secretary of Agriculture (hereinafter called the Secretary). The general purposes of the electric bank shall be to obtain an adequate supply of supplemental funds to the extent feasible from non-Federal sources, to utilize said funds in the making of loans under section 410 of this title, and to conduct its operations to the extent practicable on a self-sustaining basis. The electric bank shall be an agency of the United States, and shall, for purposes of jurisdiction and venue, be deemed a citizen and resident of the District of Columbia. "SEC. 402. GENERAL POWERS.-To carry out the specific powers herein authorized, the electric bank shall have power to: (a) adopt, alter, and use a corporate seal; (b) sue and be sued in its corporate name: Provided, however, That nothing herein shall be construed to exempt the electric bank from the application of sections 507(b) and 2679 of title 28, United States Code, or section 367 of the Revised Statutes (5 U.S.C. 316); (c) make contracts, leases, and cooperative agreements, or enter into other transactions as may be necessary in the conduct of its business, and on such terms as it may deem appropriate; (d) acquire, in any lawful manner, hold, maintain, use, and dispose of property; (e) accept gifts or donations of services, or of property in aid of any of the purposes herein authorized; (f) appoint such officers, attorneys, agents, and employees, vest them with such powers and duties, fix and pay such compensation to them for their services as the electric bank may determine, and obtain services as authorized by section 15 of the Act of August 2, 1946 (5 U.S.C. 55a); (g) determine the character of and the necessity for its obligations and expenditures, and the manner in which they shall be incurred, allowed, and paid, subject to provisions of law specifically applicable to Government corporations; (h) use the United States mails in the same manner and under the same conditions as the executive departments of the Federal Government; (i) execute, in accordance with its bylaws, all instruments necessary or appropriate in the exercise of any of its powers; (j) have, in the payment of debts out of bankrupt, insolvent, and decedents' estates, the priority of the United States, except where such priority is waived by the electric bank; (k) collect or compromise all obligations assigned to or held by it and all legal or equitable rights accruing to it in connection with the payment of such obligations until such time as such obligation may be referred to the Attorney General for suit or collection; and (1) exercise all such other powers as shall be necessary or incidental to carrying out its functions under this title: Provided, That the electric bank shall undertake no new types of activities not included in the annual budget program. "SEC. 403. BOARD OF DIRECTORS.-(a) The management of the electric bank, within the limitations prescribed by law, shall be vested in a board of directors (hereinafter called the 'Electric Bank Board') consisting of seven members. "(b) Four members of the Electric Bank Board shall be designated by the Secretary from among officers and employees of the Department of Agriculture, and shall serve as members of the Electric Bank Board without additional compensation. "(c) Three members of the Electric Bank Board, who are not regularly employed by the Federal Government, shall be initially appointed by the Secretary for a term of two years, with due regard to fair representation of the rural electric systems of the Nation. Thereafter, three members of the Electric Bank Board shall be elected for a term of two years by holders of class B and class C stock, in accordance with such rules and regulations as the Secretary may prescribe. An appointive or elective member may continue to serve as such after the expiration of the term for which he was appointed or elected until his successor has been elected and has qualified. Vacancies among appointive or elective members shall be filled for the unexpired term in the same manner in which the vacant office was filled. Appointive and elective members shall receive $100 for each day or part thereof spent in the performance of official duties, and shall be reimbursed for travel and other expenses as authorized by section 5 of the Administrative Expenses Act of 1946 (5 U.S.C. 73(b)-2) for persons employed intermittently in the Government service. 65-357-662 "(d) The Electric Bank Board shall prescribe bylaws, not inconsistent with law, regulating the manner in which the electric bank's business shall be conducted, its officers elected, its stock issued, held, and disposed of, its property transferred, its bylaws amended, and the powers and privileges granted to it by law exercised and enjoyed. "SEC. 404. GOVERNOR.-The Administrator of the Rural Electrification Administration shall serve as the chief executive officer of the electric bank (hereinafter called the Governor of the electric bank). Except as to matters specifically reserved to the Electric Bank Board in this title, the Governor of the electric bank shall exercise and perform all functions, powers, and duties of the electric bank. "SEC. 405. CAPITALIZATION.-(a) The electric bank's capital shall consist of capital subscribed by the United States, by borrowers from the electric bank, by corporations and public bodies eligible to become borrowers from the electric bank, and by electric consumers of said corporations and public bodies. Beginning on July 1, 1966, and ending fifteen years thereafter, the United States shall furnish capital to the electric bank, in the amount of $50,000,000 in any fiscal year, from net collection proceeds in the Rural Electrification Account created under title III of this Act, unless an appropriation Act shall specify another amount, and it shall be in order for appropriation Acts to contain such provisions but not in amounts exceeding $50,000,000 in any fiscal year: Provided, That on or before July 1, 1971, the Secretary shall make a report to the President for transmittal to the Congress on the status of capitalization of the electric bank by the United States with recommendations concerning the continuation thereafter of such capitalization. As used in this section, the term 'net collection proceeds' shall be deemed to mean payments from and after July 1, 1966, of principal and interest on loans heretofore or hereafter made under sections 4 and 5 of this Act, less an amount representing interest payable to the Secretary of the Treasury on loans to the Administrator for electrification purposes pursuant to section 3(a) of this Act. "(b) The capital stock of the electric bank shall consist of four classes, class A, class B, class C, and class D, the rights, powers, privileges and preferences of the separate classes to be as specified, not inconsistent with law, in the bylaws of the electric bank. Class B and and class C stock shall be voting stock, but no holder of said stock shall be entitled to more than one vote. "(c) Class A stock shall be issued only to the Administrator of the Rural Electrification Administration on behalf of the United States in exchange for capital furnished to the electric bank pursuant to subsection (a) of this section 405, and such class A stock shall be redeemed and retired by the electric banks as soon as practicable after June 30, 1981, but not to the extent that the Electric Bank Board determines that such retirement will impair the operations of the electric bank. "(d) Class B stock shall be held only by recipients of loans under section 410 of this Act. Borrowers receiving loan funds pursuant to section 410 shall be required to invest in class B stock five percent of the amount of loan funds so provided. No dividends shall be payable on class B stock. All borrowers shall be entitled to patronage refunds in class B stock under terms and conditions to be specified in the bylaws of the electric bank. "(e) Class C stock shall be available for purchase and shall be held only by borrowers, or by corporations and public bodies eligible to borrow, under section 410 of this Act, and shall be entitled to dividends in the manner specified in the bylaws of the electric bank. Such dividends shall be payable only from income and shall not exceed the current average rate payable on its electric debentures. "(f) Class D stock shall be available for purchase by electric consumers of borrowers, or of corporations and public bodies eligible to borrow, under section 410 of this Act, and shall be entitled to dividends in the manner specified in the bylaws of the electric bank. Such dividends shall be payable only from income and shall not exceed the current average rate payable on its electric debentures. "(g) If a firm, association, corporation, or public body is not authorized under the laws of the State in which it is organized to acquire stock of the electric bank, the electric bank shall, in lieu thereof, permit such organization to pay into a special fund of the electric bank a sum equivalent to the amount of stock to be purchased. Each reference in this title to capital stock, or to class B, class C, or class D stock, shall include also the special fund equivalents of such stock, and to the extent permitted under the laws of the State in which such organization is organized, a holder of special fund equivalents of class B, class C, or |