Mr. CLAPP. I am sure that this gets into some legal refinements I am not competent to discuss, Mr. Quie, but it is a way of designating two different stages of Government involvement here. And if Mr. Campbell would like to elaborate on that, perhaps, this would be helpful. Mr. QUIE. I would like to know what is really meant by "instrumentality" and "Federal ownership" and "agency."

Mr. CAMPBELL. I do not have the list of all of the differences. Basically, as an agency of the U.S. Government, any corporate entity would perform just the same as any of the departments or any independent agency, with the attendant Government immunities and with direction at the Cabinet level, from the executive department. There are, however, some organizations which perform an objective of the Federal Government but which do not function under the direct Federal control and may or may not be established by direct legislative provisions. The latter usually have a great deal more freedom of action to meet the public problems in a private or semiprivate way, but still are used to accomplish a national legislative objective. The courts have recognized this difference in status in the different types of organizations.

Section 403 of this draft recites a number of the differences which will obtain while the bank functions in its status as an agency and section 410 describes the changes in its powers when it reverts to a mixed ownership corporation with the status of a Federal instrumentality only. It then continues to carry out a national objective, but is not, so to speak, a corporate employee of the Federal Government.

Mr. TEAGUE of California. Will you yield there?

Mr. QUIE. Yes.

Mr. TEAGUE of California. This is a point that may be very important. An agency of the U.S. Government, I assume, has the right of eminent domain, the right of condemnation. Does an instrumentality have that, those rights, too?

Mr. CAMPBELL. The bank is a fiscal institution which is not going to have the function of using the electric properties constructed with its financing. An instrumentality of the United States would have to have its own specific condemnation powers.

This bill provides no condemnation powers for the bank. It will have only those it gets under a general condemnation statute of the United States.

Mr. TEAGUE of California. Does a general statute pertaining to this subject differentiate between "agencies" and "instrumentalities"? Mr. CAMPBELL. I believe it does, in effect.

Mr. TEAGUE of California. What I am getting at is: Under this bill, are we giving the bank any authority to go into these matters, to its board members, and have the right to condemn and take over privately owned power companies, against their will?

Mr. CAMPBELL. No. None of the recited corporate powers of the bank in sections 402, 403, and 410 inure to the benefit of the borrowers from the bank.

The CHAIRMAN. Pardon the interruption. If you change the nature of the entity and make it an agency of the Federal Government, would it not carry along with it all of the rights of eminent domain?

Mr. CAMPBELL. Insofar as the bank itself, Mr. Chairman, is concerned, but those powers would not go through the bank back to the individual borrowers.

Mr. POAGE. It would only be to own a bank building, or something of that sort.

Mr. CAMPBELL. That would be the limit of the possibilities.

The CHAIRMAN. You mean that the bank could only condemn in one instance, to acquire property for its immediate use?

Mr. CAMPBELL. That is my understanding of this bill.

The CHAIRMAN. You do not have the right of eminent domain in this, do you?

Mr. CAMPBELL. Borrowers get their right to condemn under the State statutes under which they are created.

The CHAIRMAN. That is, under State law but not from the Federal statute?

Mr. CAMPBELL. You are correct.

Mr. QUIE. Let me follow through on an understanding between instrumentality and agency. You mentioned section 403, in that it is an agency. Section 403 only pertains to the electric bank as an agency of the United States and would cease to exist when it becomes an instrumentality?

Mr. CAMPBELL. That is correct.

Mr. QUIE. In section 410 it converts to private ownership?

Mr. CAMPBELL. Yes.

Mr. QUIE. What other instrumentalities of the Federal Government are there that we have?

Mr. CAMPBELL. I can give you an illustrative list of those, Congressman Quie.

Mr. QUIE. I would like to have the full list, but could you recall some offhand?

Mr. CAMPBELL. This idea, of course, is patterned after the present character of some of the constituent entities of the farm credit system. They are now instrumentalities of the Federal Government. They are not agencies of the Federal Government. They are under the direction of their boards, and as instrumentalities carry out a national credit objective.

(The information requested follows:)

It should be noted, at the outset, that an organization need not be a federal agency, nor need it be wholly owned by the federal government, nor even organized under federal law in order to be deemed a federal instrumentality. The determination of whether organizations are federal instrumentalities depends rather on whether they are chosen as instruments through which federal purposes are effectuated. Thus, in the U.S. Supreme Court decision of Westfall v. United States, 274 U.S. 256, 258, 259 (1927), it was held that "Congress may employ state corporations with their consent as instrumentalities of the United States." Spe also United States v. Doherty, 18 F. Supp. 793, 794-5; aff'd Doherty v. United States, 94 F. 2d 495; cert. den., 303 U.S. 658; Hiatt v. United States, 4 F. 2d 374. 377 (C.A. 7, 1925). Examples of organizations found by judicial decision to be instrumentalities of the United States include: local housing authorities [Toth v. United States, 107 F. Supp. 37, 38 (1952); Schetter v. Housing Authority of the City of Erie, 132 F. Supp. 149, 152 (1952)]; officers clubs on military bases [Maynard & Child v. Shearer, 290 S.W. 2d 790 (Ky. Sup. Ct. 1955)]; and military post exchanges [Standard Oil Co. of California v. Johnson, 316 U.S. 481 (1942)). The following Corporations are illustrative of federal instrumentalities which were created pursuant to federal statute but which are not agencies of, or wholly owned by, the United States; indication of the types of control exercised over these instrumentalities by federal agencies or officers is also set forth:

Federal Home Loan Banks.-These are "mixed-ownership government corporations" (31 U.S.C. 856); their board of directors consists of 12 directors, eight

of whom are elected by member institutions and four appointed by the Federal Home Loan Bank Board, a government agency which exercises general supervision and conducts examinations of these banks; after all government capital has been retired, the banks remain subject to GAO audits [12 U.S.C. 1422, et seq., 1431 (j) ].

Federal Reserve Banks.-These are owned by their members banks; three of their nine directors are designated by the Board of Governors of the Federal Reserve System, six are elected by member banks; they are under the general supervision of and subject to periodic examinations by the Board of Governors of the Federal Reserve System (12 U.S.C. 281 et seq.).

National Banking Associations.-These corporations are owned by private stockholders, who elect a board of at least five directors; approval of the Comptroller of the Currency is required for them to commence business; and they are subject to extensive controls of the Comptroller (12 U.S.C. 21 et seq.). Federal credit Unions.-These corporations are owned by their members who elect a board of at least five directors; they are under the supervision of the Director of the Bureau of Federal Credit Unions in HEW, are subject to his examinations, and are required to make financial reports to him (12 U.S.C. 1751 et seq.).

Mr. POAGE. Will you yield there?

Mr. QUIE. Yes, I will yield.

Mr. POAGE. Let us understand that. The land banks are instrumentalities, are they not?

Mr. CAMPBELL. Yes, sir.

Mr. POAGE. Are the intermediate credit banks and the production credit associations agencies?

Mr. CAMPBELL. They were agencies of the United States at one time. They are in the process of converting now.

Mr. POAGE. They are in the process of converting. However, only four of the banks for cooperatives are completely paid out, and the intermediate credit banks are only about 47 percent paid out, something of that kind.

Mr. CAMPBELL. I believe so.

Mr. POAGE. Are they agencies of the Federal Government at the present time?

Mr. CAMPBELL. I think that they are mixed-ownership Government corporations. I do not believe that the 1955 act retains them in the classification of agencies. There is, as you may recall, Congressman Poage, a provision for control shifting back and forth, depending upon the amount of the indebtedness to the Government.

Mr. POAGE. That is correct.

Mr. CAMPBELL. But they still have the characteristics of an agency to the extent that the Congress does have the opportunity if the occasion presents itself to further implement the capitalization under certain economic conditions.

Mr. POAGE. That is not true of the land banks which are wholly paid out?

Mr. CAMPBELL. That is correct.

Mr. QUIE. The FHA is a lending agency of the Federal Government which is a lending instrumentality or an agency?

Mr. CAMPBELL. The Farmers Home Administration is an agency. It is a bureau within the Department of Agriculture under congressional creation.

The Small Business Administration is an agency of the United States.

There are historical examples. The Reconstruction Finance Corporation was an agency, but it created some subsidiary corporations

which, I believe, were held to be in the category only of instrumentalities.

Mr. QUIE. They are no longer in existence.

Mr. CAMPBELL. They are liquidated. I am giving you historical examples.

Mr. QUIE. This will be an instrumentality in perpetuity?

Mr. CAMPBELL. You are correct.

Mr. QUIE. Thank you. Does the Federal Land Bank constitute an instrumentality-is that an instrumentality, and would it be an instrumentality of the Federal Government?

Mr. CAMPBELL. Under present law it is.

Mr. QUIE. And the bank of cooperatives, are they?

Mr. CAMPBELL. Under the present farm credit legislation, they will

continue to be instrumentalities.

Mr. QUIE. What other instrumentalities do we have outside of the banks for cooperatives and the Federal land banks?

Mr. CAMPBELL. I will be glad to make a survey for you and supply that for the record.1

Mr. QUIE. How is the board of the Federal land bank selected?

Mr. CAMPBELL. Each district farm credit board is selected under a formula for nominations by the borrower organizations. Each of the land banks has its own separate board. They are entirely free from any Federal selection. Twelve of the Farm Credit Board members, on the other hand, are appointed by the President with advice and consent of the Senate from nominations received from the districts. Each of the constituent agencies has a voice in those nominations. And the 13th member of the Farm Credit Board is appointed by the Secretary of Agriculture.

Mr. QUIE. And the Federal land bank is under the Farm Credit control; is that right?

Mr. CAMPBELL. Under the general supervision of the Farm Credit Administration. The land banks take some guidance from the Farm Credit Board. And, of course, they have a voice in the selection of that Board.

Mr. QUIE. Is this true of the bank for cooperatives?

Mr. CAMPBELL. Yes.

Mr. QUIE. Will this same kind of control be over this instrumentality on the part of the Federal Government?

Mr. CAMPBELL. After conversion, this draft bill provides that the Secretary of Agriculture will continue to appoint one member of the Board. The provision for conversion requires the termination of the terms of the remaining appointed members of the Board at the time of conversion. Since section 405 provides for a maximum of 13 members on the Board, the bank could then either have a board of 7 members or such additional members as the bylaws of the bank provide, up to the maximum of 13.

Mr. QUIE. Then, the difference between this and the Farm Credit Board is, in effect, that all of the members of the Farm Credit Board are Presidential appointees; is that it?

Mr. CAMPBELL. Yes; from a panel nominated by the constituent agencies, plus one member appointed by the Secretary.

1 See p. 766.

Mr. QUIE. Would that be true of all other instrumentalities of the Federal Government? Would this be different than any other instrumentality, in that not only one person would be selected by the administrative branch?

Mr. CAMPBELL. The character of the Board is not controlling as to whether it is an agency or an instrumentality.

Mr. QUIE. I wondered if the other instrumentalities of the Federal Government were subject to more authority on the part of the President and the Secretary of any department of the Government than in this.

Mr. CAMPBELL. I would suspect that there is a considerable variation. There are some Federal instrumentalities with much less control.

Mr. QUIE. I wish you would look into that and supply it for the record.

Mr. CAMPBELL. Yes.1

The CHAIRMAN. You said that an agency of the Government can create an instrumentality of the Government.

Mr. CAMPBELL. The Government Corporation Control Act has a limitation on that possibility, Mr. Chairman. There was a time when the agencies of the Government did create other agencies and instru, mentalities, but section 304 of the Government Corporations Control Act has a prohibition after 1945 against the creation of separate agencies or instrumentalities by officers or agencies of the Government.

The CHAIRMAN. Well, I asked a question and we are completely off the subject, Mr. Clapp. Will you now answer my question as to congressional controls?

My question was: What loans do you want to make that you cannot now make, which are not authorized to be made?

Mr. CLAPP. I was coming to that. The lending power of the bank, as stated in this compromise draft, is exactly the same as it appears in the administration's proposal, H.R. 14837, the Cooley bill. This states that the bank is authorized to make loans for two general purposes. The first purpose, of course, is simply the same purposes for which loans may be made under section 4 of this act, the Rural Electrification Act.

The second is a somewhat expanded authority for loans for the purposes of financing or refinancing, the construction, improvement, expansion, acquisition, and operation of electric generating plants and electric transmission and distribution lines or systems

The CHAIRMAN. What page are you reading from?

Mr. CLAPP. This is on page 20, Mr. Chairman.

Mr. ABERNETHY. Page 20 of this copy that you have handed us this morning, or is in H.R. 14837?

Mr. CLAPP. In the document handed to you this morning, Mr. Abernethy-this is section 408 of the revised draft-the second authority is to make loans "for the purposes of financing, or refinancing, the construction, improvement, expansion, acquisition, and operation of electric generating plants and electric transmission and distribution lines or systems, in order to improve the efficiency, effectiveness or

1 See p. 766.