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up the debt of 2 or 3 or 4 or 5 years ago, but only for those essential debts created last year which would have been paid if the fellow had had a normal operation, but which he could not pay because of this disaster which he suffered due to the unprecedented rains and floods.

Mr. HARRISON. This would be somewhat of a disaster loan, then?

Mr. Jones. Oh, yes; it would be of that type and would only be available in those areas where they had been declared disaster areas because of this flood.

Mr. HARRISON. Thank you.
Mr. Poage. Are there any further questions. If not, thank you.
Mr. Jones. Thank you, Mr. Chairman.
Mr. Poate. We will hear Mr. O'Hara of Minnesota right now.



Mr. O'Hara. Permit me to thank Mr. Gathings and you, Mr. Chairman. I shall be rather brief.

I want to say at the outset I introduced companion bills after Mr. Gathings and Mr. Jones had introduced their original bills. Mine is similar, identical with the bill which Mr. Gathings had previously introduced. I did so because they had been aware of the disaster area which I had in my own district, and because I think there is a need for legislation for those people who are affected.

Permit me to say that I am asked by my colleague Mr. H. Carl Andersen to ask the chairman for permission to insert a statement in the record in support of this type of legislation.

Mr. Poage. Without objection that will be granted. (The information referred to is as follows:)



Mr. Chairman, I again want to thank you and the members of your committee for this privilege of testifying on legislation before you for your consideration. I will be brief as I know the interest of every member of your committee in this subject, and I have confidence that you will do what is in the best interests of American agriculture. I also have great confidence in my colleagues who are the authors of the bills before you, and I know they put a lot of time and thought into the development of these proposals.

As you know, I came before you last year to testify in behalf of some kind of general legislation to provide more effective credit assistance in the agricultural areas hard hit by natural disasters. At that time, I suggested the establishment of a revolving fund in the hands of the Farmers' Home Administration with very broad authority for the making of loans in disaster areas. It has been my feeling that we need such authority on a permanent basis because every vear, at one place or another, some form of natural disaster strikes farms and farm people. If it is a disaster of major proportions affecting a great many people, the Congress is inclined to act on some emergency legislation for that particular

On the other hand, if it is a limited disaster affecting only a small area or only a few farm people, it is not always easy to get the Congress to act.

My thinking is that a farm, a township, a county, or even several States hurt by a disaster should all be treated alike. An individual whose farm is the only one devastated by rain, floods, hail, etc., is just as much in need of help as he would be if his loss was shared by thousands of other farmers in a widespread disaster. That is why I have wged general, permanent legislation with broad discretionary authority.

The bills before you deal with credit assistance in only those areas designated as disaster areas. This limitation has merit, as I feel that the regular credit


operations of the Farmers' Home Administration should be called upon to take care of the ordinary credit needs of farmers outside these disaster areas. However, some means should be developed to make the more liberal credit available in those individual or localized disasters not covered by the general disaster declarations.

Another point I would like to make, Mr. Chairman, is that any legislation you approve or develop should be liberal enough to meet the needs of these farm people. The people who will apply for this credit are in financial difficulties through no fault of their own. Their property has been destroyed and so has their income. In some cases, even their capacity to produce income will have been temporarily destroyed. Many of them will be bad credit risks and that is why they will be coming to the Farmers' Home Administration for these loans.

The repayment record of the Farmers' Home Administration has been outstanding. Through the years, their loss record has been very, very low and any banker could be proud of that record. However, I want to leave one word of caution with you today. No one is more anxious to see these farmers pay back every cent of their loan than I am, but at the same time I expect to see some losses. If we did not have some losses, considering the fact that all of these borrowers are very low or borderline credit risks who cannot borrow from any other regular lending agency, I would think that we had been too stringent in our loan operations. Now, when you come to this disaster type of loan, you should expect a little higher rate of loss. In other words, we do not want to be so liberal in these loans that we destroy the program, but we do want to be sufficiently liberal that we help all of those deserving of the assistance. If we do that, we will have some losses and we should be prepared for them.

To illustrate my thinking, let us assume that we have 100 farmers in financial distress as a result of a disaster. Perhaps 50 of them would go under without the credit proposed here today. Then let us assume that we make loans to 80 of them and all but 10 pay out. Instead of 50 farmers going under, only 10 have failed and I think that is a good investment of public funds to keep those farmers, solvent and in the business of farming. I do not think it is at all in the national interest to simply stand by and let these people go under if there is any chance at all of saving them by the judicious advancement of credit.

Finally, I am very much interested in the feature of these bills which will enable farmers in the disaster areas to pay their bills at the local stores. I know that in my district a great many farm implement and other rural merchants are about at the end of their rope on credit. They have so much on their books that their credit is, in turn, being impaired and their suppliers are tightening up on them. As a result, they simply cannot extend any more credit and there is a great danger that the entire rural economy may be needlessly in jeopardy. I think it is good business all along the line to make this credit available so some of these farmers can pay their local bills and help not only themselves but also the small-business men who need these payments on account if they are to stay in business. Many of these small businesses in the rural areas have had to close their doors because of the slump in farm income, and I know that in disaster areas such as we have in most of my counties the problem is intensified.

I hope, Mr. Chairman, that your subcommittee will give every consideration to the problem and the proposed legislation before you. It will be a good thing for farmers and their businessmen neighbors if you can bring out a good bill.

Mr. O'Hara. In my particular district we have had 3 floods beginning in 1951, a record flood in 1952, and again last year almost a record flood which seriously affected and created disaster areas in about 6 or 7 of my 14 counties in my congressional district, due to the flooding of the Minnesota River.

Last year the flood came along about the middle of June, and subsequent to that. Some of the crops were in the ground. They were about ready to be put in corn, and some of them or most of them had planted their corn.

As the result of the flooding and the long time which elapsed before the ground dried out so it could be reseeded, the short growing season in that part of Minnesota left them almost hopelessly out of a crop except for what they might put in, in the way of grasses and things like that which some of them may have been able to produce.

Generally speaking, it was a lost production year for many of those farmers along the Minnesota River.

I was not fainiliar with the legislation which our colleague, Mr. Jones of Missouri, H. R. 10954, introduced until this morning. I appreciate there may be much to what he says as to the need of these small business loans because in the smaller communities, undoubtedly, there are small business people that are affected.

I consider this, as my colleagues do, as emergency legislation and short-term legislation. I think it would have to be on the basis of the character loan with some percentage of guaranty by the Government. I think that is imperative.

Mr. Jones. You did not understand me to say that I was suggesting to make the loan to the small-business man did you?

Mr. O'HARA. No.
Mr. Jones. It is to the farmer and he would in turn do that?

Mr. O'Hara. He would pay off. In other words, it is putting into that community which is a distress area, in a way in economically distressed area-it is pumping some money in there that is badly needed by the farmer, but which would, also, help the small-business man as well.

Whatever the language of the bill, Mr. Chairman, is, I think, that the principle is good at this time because I do not know how many have had repeated floods, as we have had in Minnesota, but I would assume that that has occurred. It does make a very deeply distressed situation.

I do think, Mr. Chairman, that it is highly imperative that we have consideration of this problem, and getting into the communities of these distressed areas this type of help and it would only apply, in my opinion, and should only apply to these distressed areas for a short period of time. If they have 2 or 3 good growing seasons, these loans could be 95 to 99 percent paid off, in my opinion. They are that type of aid, because many of these people, as Mr. Jones has indicated, have had these bad growing seasons. They probably owe money on real-estate mortgages, they owe on cattle mortgages, in other words, they are in a bad credit situation.

Most of them are honorable people who would want to pay those loans off, and any additional loans that would be granted to them under this legislation.

Permit me to say that I have the greatest confidence that the committee will report out, regardless of the language of my own bill and the other bills, some type of legislation which meets the problem.

Mr. Chairman, that concludes my brief statement. If there are any questions, I will be happy to answer them.

Mr. Poage. Thank you very much.

Mr. Jones. The original bills, which you and Mr. Gathings and myself and others introduced, did not provide that those loans could be made by any agency other than Farmers Home Administration?

Mr. O'HARA. That is correct.

Mr. Jones. Do you not think that it could be made by the bank or Production Credit Administration and try to preserve the normal credit channels?

Mr. O'HARA. I think the credit channels should be as broad as possible and as reasonable as possible. I think the more avenues there are possible the more good will be developed. I do not think

there is any question about it. Our original bills, I think, were rather restrictive in that regard. I thoroughly agree with the statement that you make.

Mr. Poage. Are there any further questions?

Mr. HARRISON. He is now getting his money from the bank-should he go back to the bank for further loans or through the Production Credit Association?

Mr. O'HARA. I think that is the way it should be. I think that would be generally the way it works out. It may be he has reached his limit at the bank. The bank may not be able to go any further with him. Even with his 90 percent guaranty. But then if he can go to one other avenue and get it, giving him immediate help that he needs, it may be necessary.

I would like to see it follow the previous standards so far as possible whatever the loan avenue or channel was.

Mr. Poage. Are there any further questions? If not, we are very much obliged to you.

Mr. O'Hara. Thank you, Mr. Chairman and gentlemen.
Mr. Poage. Mr. Gathings, we will hear from you next.



Mr. GATHINGS. Mr. Chairman, at the outset I would like to say that Mr. Mills of Arkansas communicated with me late' yesterday and stated he was vitally interested in legislation of the type that is before the committee this morning. He states that in his particular district his farmers are in need of loans that are provided by this proposed legislation, and that he wishes it would have been possible for him to have been present, but he is presiding this morning over his own committee and is unable to attend.

Also, Mr. Winstead, of Mississippi, has asked that I communicate to your committee that he, too, would like to have been present this morning in support of this legislation but was unable to attend due to another committee meeting.

As Mr. Jones has so ably stated, the Farmers' Home Administration moved in this year and liberalized its policy which has been most helpful to our people, by inaugurating a new plan which would advance interest payments, taxes, and up to 15 percent depreciation on chattels of the farmer. That was badly needed. And they did move into that area.

Before moving on into the discussion of the present bill, I just wanted to say to the committee that without the emergency Farmers' Home Administration loans that have been made in the past few years, I do not know what our people would have done. It is a great thing that they have taken care of the needs of the families that were unable to obtain loans from any other source.

Mr. Chairman, I want to give you a little information this morning with respect to the need for this legislation.

Is there an urgency! Is there a real disaster? Well now, in answer to that question that I propound, I would like to read from the United States Department of Commerce weekly weather and crop bulleright? Whereas, in the Farmers' Home Administration you screen the applicant and all of his relationships to determine whether he is the proper kind of a credit risk at all.

Mr. GATHINGS. May I answer that: We have just returned, several of the members of this committee, from the great State of California; we went close to the district of the gentleman who has just propounded that question. And the situation in California is quite different from some of the other sections that are so hard hit; the situation there in California was such that they can make it rain whenever it needs to rain out there in that irrigated West. And they have a situation where they can make money. If they fail on one crop, why they will make money on something else. If they fail on vegetables, they will make money on alfalfa. If they fail on that, they will make money on citrus.

If they fail on citrus they will make it on cotton and on rice.

I do hope that the gentleman from California will bear in mind we do have problems that you do not have. We have a situation that this bill will correct. And we have this recession due largely to the fact that the farmer has lost the income which he has heretofore been enjoying. And if we could pump this new money into these communities it would be a shot in the arm.

There will be some losses, of course, but the American people pay their debts.

Mr. Hagen. That particular category of farmer that you are talking about is a very poor risk. He does not deal at arm's length in the boginning

Mr. GATHINGS. Any type of grower that is hard hit, whether he has been renting or owns land, if he is a farmer, he will come under the provisions of this bill. He is part of the community. We want to keep him there.

Mr. Hagen. To really help him would be to provide him with a loan to make a crop in 1958 ?

Mr. GATHINGS. That has been done. These gentlemen here are doing that, and doing a good job in that respect.

Mr. Hagen. His landlord should be willing to enter into some agreement, or standby agreement. His only possibility of getting any money out of that fellow on the average, I would assume, is to be kept in the farming business.

Mr. GATHINGS. He is in the farming business.
Mr. HAGEN. This is a creditor's bill rather than a debtor's bill.

Mr. GATHINGS. The gentleman cannot appreciate the fact what that situation is. You do not have that in your part of the country. You do not get great stacks of mail, saying, "Why don't we get some help?" That is what we are trying to do. We would like for you to join with us and help us, like we are trying to help your folks in bringing this badly needed credit to these people. I hope you will join with us.

I would like to talk with you after this committee meeting is over about it.

Mr. Jones. I would like to reply to Mr. Hagen. One thing we are trying to do here is that we know it is an economic problem, but frankly, we realize that it is a hazardous loan. There is no question about it.

As was pointed out here by several of the witnesses, we think that if the Government will come in here and make this loan which they

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