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average market yield of outstanding marketable obligations of the United States having maturities comparable to such advances.

The Secretary of the Treasury is directed to purchase any notes issued by the Secretary pursuant to this section and any renewals thereof and for such purposes may use as a public transaction the proceeds of the sale from any securities issued under the Second Liberty Bond Act, as amended, and the purposes for which such securities may be issued under such Act, as amended, are hereby extended to include any such purchases. All redemptions, purchases, and sales by the Secretary of the Treasury of such notes shaīl be treated as public debt transac tions of the United States.

(H. R. 10397, 85th Cong., 2d sess.) A BILL To authorize emergency refinancing loans to farmers in disaster areas Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That the Secretary of Agriculture is authorized to make loans, in any area heretofore or hereafter covered by a major disaster determined by the President under Public Law 875, Eighty-first Congress, or any area covered by a production disaster determination by the Secretary of Agriculture under section 2 (a) of Public Law 38, Eighty-first Congress, to bona fide farmers and stockmen who have a reasonable chance of continuing their farming operations but who are unable to secure necessary extensions, renewals, or refinancing of their existing indebtedness from their present creditors or from commercial banks, cooperative lending agencies, the Farmers' Home Administration or other responsible sources, at rates and terms at which they could reasonably be expected to fulfill. Such loans shall be repayable in not to exceed five years and at such rate of interest as the Secretary shall determine but not less than 1 per centum per annum above the rate determined by the Secretary of the Treasury at the beginning of the fiscal year in which the loan is made, equal to the current average yield of outstanding marketable obligations of the United States having maturities of five years. The loans shall be evidenced by the full liability of the maker and, in case of loans to corporations or other business organizations, by the personal obligation of each person holding as much as 10 per centum of the stock or interest in the corporation or organization. The Secretary shall provide by regulations for the taking of security for such loans only such available security as will permit the borrower when feasible to secure his current operating credit from his normal credit sources.

SEC. 2. There is hereby created a revolving fund for the purposes of this Act which shall be established as a separate fund available only for the purposes of this Act. Said fund shall be composed of not more than $200,000,000, such additional amounts as Congress may from time to time approve, and collections from repayments and liquidations of loans made under section 1 of this Act. Such sums shall be borrowed by the Secretary from the Secretary of the Treasury for such terms as may be determined by the Secretary of Agriculture with interest at the rate as determined by the Secretary of the Treasury equal to the current average market yield of outstanding marketable obligations of the United States having maturities comparable to such advances.

The Secretary of the Treasury is directed to purchase any notes issued by the Secretary pursuant to this section and any renewals thereof and for such purposes may use as a public transaction, the proceeds of the sale from any securities issued under the Second Liberty Bond Act, as amended, and the purposes for which such securities may be issued under such Act, as amended, are hereby ex. tended to include any such purchases. All redemptions, purchases, and sales by the Secretary of the Treasury of such notes shall be treated as public debt transactions of the United States.

(H. R. 10934, 85th Cong., 2d sess.)

A BILL To provide for emergency credit to farmers and stockmen in certain disaster areas

to refinance certain indebtedness, and for other purposes

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That until December 31, 1958, in any area determined by the Secretary of Agriculture (hereinafter referred to as the "Secretary") under the provisions of section 2(a) of the Act of April 6, 1949, as amended (12 U. S. C. 1148a-2), to have suffered a production disaster in 1957, the Secretary is authorized to make and insure loans to farmers and stockmen (3) that, if such conditions are complied with and the loan is not fully repaid, then the Secretary will pay to the lending institution 90 per centum of any sums established as a loss on account of any such loan. Upon such payment by the Secretary, the obligation and any security therefor shall

and to make advances to approved lending institutions in accordance with this Act.

Sec. 2, Loans under this Act may be made only to farmers and stockmen who cannot secure credit for the purposes specified herein from private or cooperative credit sources or the regular and emergency programs of the Farmers' Home Administration on terms and conditions that could be reasonably expected to be fulfilled. Such loans shall

(1) be made only for the purpose of refinancing unsecured indebtedness of farmers or stockmen incurred in connection with making of 1957 crops or the production of livestock or livestock products, including poultry and poultry products, in the calendar year 1957, for the costs of feed, seed, fertilizer, machinery, repairs, oil, gas, gasoline, and other fuels for farm machinery and home consumption and for family subsistence in 1957, including food, clothing, and medical and hospital expenses;

(2) have maturities within the applicant's repayment ability but not to exceed five years;

(3) bear interest at rates determined by the Secretary, taking into account the rate of interest to be paid by the Secretary to the Secretary of the Treasury under section 4 and the total cost to the borrower of loans insured under section 3 hereof;

(4) provide that the borrower may prepay all or any part of the loan to maturity without penalty; and

(5) be secured by the personal obligation of the borrower, and in addition, if the borrower is a copropration or other association, by the personal liability of each member or stockholder thereof owning as much as 10 per centum interest in the corporation or association and by such other security as may be available without requiring subordinations or standby agreements from secured creditors or without interfering with the borrower's ability

to use available security to finance current and future farm operations. Sec. 3. (a) The Secretary is authorized to insure loans made by approved lending institutions located in the areas referred to in section 1 to farmers eligible for loans for purposes authorized and in accordance with the terms provided in section 2 hereof, and to make advance commitments for the insurance of such loans if made by such lending institutions. In addition to the requirement of section 2, loans eligible for insurance under this section shall provide

(1) for the payment of interest by the borrower to the lender at a rate not to exceed 2 per centum above the rate of interest paid by the Secretary to the Secretary of the Treasury as provided in section 4 hereof; and

(2) for an insurance charge, payable to the Secretary through the lender, of one-half of 1 per centum of the initial principal amount of the loan and an annual charge thereafter at the rate of one-half of 1 per centum of the

principal balance remaining unpaid after each anniversary of the loan. (b) Any loan made by an approved lending institution or any application to such institution by an eligible applicant for a loan which meets the requirements of sections 2 and 3 may be submitted to the local representative of the Secretary for approval and the issuance of a certificate of insurance or a commitment to insure. The conditions of such insurance agreement shall be that

(1) the loan is made by the approved lending institution to an eligible applicant for an authorized purpose, and that the lending institution shall control the use of the loan proceeds to assure their use for authorized purposes;

(2) the lending institution will service and collect the loan in accordance with the terms and maturities provided in the note, will remit promptly to the Secretary, through his local representative out of the first collections made, any insurance charge due on said loans, and upon maturity will enforce collections with reasonable dispatch and to the same extent as the lending agency would enforce uninsured obligations it holds; and

be assigned to the Secretary for further liquidation. (c) The Secretary may provide by regulation for the purchase of any loans insured under this section prior to maturity and default, if the lending institution establishes satisfactorily to the Secretary that the volume of loans insured under this section held by the lending institution exceeds the volume of such class of obligation the lending institution is permitted by law or regulation to hold,

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or the volume is such as prevents the lending institution from servicing its usual farmer and stockman customers with necessary farm operating credit.

Sec. 4. (a) For the purposes of securing funds for carrying out this Act and administrative expenses in connection therewith, the Secretary is authorized and directed to make and issue notes to the Secretary of the Treasury aggregating not to exceed $ . Such notes shall be in such form and denominations and have such maturities and be subject to such terms and conditions as may be prescribed by the Secretary with the approval of the Secretary of the Treasury. Such notes shall bear interest at a rate fixed by the Secretary of the Treasury, taking into consideration the current average market yields of outstanding marketable obligations of the United States having maturities comparable to the loans made under this section. The Secretary of the Treasury is authorized and directed to purchase any notes of the Secretary issued hereunder, and for that purpose, the Secretary of the Treasury is authorized to use as a public debt transaction the proceeds from the sale of any securities issued under the Second Liberty Bond Act, as amended, and the purposes for which such securities may be issued under the Act, as amended, are extended to include the purchase of notes issued by the Secretary. All redemptions, purchases, and sales by the Secretary of the Treasury of such notes shall be treated as public debt transactions of the United States.

(b) The funds made available under section 4 (a) shall be used by the Secre tary to make direct loans under section 2, to fulfill the obligations of the Secretary under insurance agreements made pursuant to section 3, to purchase such insured loans prior to maturity and default, for advances pursuant to section 5, and for administrative expenses made in connection therewith. Receipts from insurance charges under section 3, liquidation of obligations and security purchased by or assigned to the Secretary, and repayments of advances under section 5 shall be used by the Secretary for repayments of notes made to the Secretary of the Treasury under section 4 (a).

(c) The Secretary shall report to the Congress fully on each activity under this Act at the beginning of each session of Congress.

(d) There is authorized to be appropriated, or otherwise made available, such additional sums for carrying out this Act as Congress may from time to time determine.

Sec. 5. (a) Upon the application of any approved lending institution and upon the showing by such institution that its cash available for loans is inadequate to take care of the production credit needs of its usual farmer and stockman cilstomers, the Secretary may enter into agreements with any such institutions for advance of cash to the lending institution out of which that institution will make loans to persons eligible, for the purposes authorized, and in accordance with the terms and conditions of section 2 of this Act. Any loans made out of such advances shall be collected and serviced by the institution in accordance with the terms of the notes evidencing such loans.

(b) The agreements with the lending institution shall provide that all sums advanced by the Secretary, all notes and security taken by the lender, and all collections thereon shall be held in trust for the benefit only of the Secretary in accordance with the terms of the agreement. The agreement shall further provide that out of the first collections made on any such loan there shall be repaid to the Secretary interest at the same rate per annum paid by the Secretary to the Secretary of the Treasury under section 4 of the unpaid balance of the advance to the lending institution. The balance of the interest on such loans shall be retained by the lending institution for its own account as a service fee.

(c) After collection and liquidation of loans made by the lending institution, in the manner provided in section 3, if the collections of principal on all loans made by said institutions out of said advances by the Secretary are insufficient to repay said advances in full, the remaining notes and security, if any, shall be assigned to the Secretary upon demand. The aggregate unpaid balances of the loans made out of such advances at the time of such assignment shall be the tentative losses, three-fourths of which shall be borne by the Secretary and onefourth by the lending institution in final settlement for the advance.

Sec. 6. The Secretary is authorized to make such rules and regulations and such delegations of authority as may be appropriate for carrying out this Act.

Sec. 7. If any provision of this Act is held invalid, the application of any provi. sion to other persons or under other circumstances shall be valid and remain in full force and effect.

Mr. Poage. At this time I want to give Congressman Smith an opportunity to say a few words because he has to go to a committee meeting of his own.

STATEMENT OF HON. FRANK E. SMITH, A REPRESENTATIVE IN

CONGRESS OF THE THIRD DISTRICT OF THE STATE OF MISSISSIPPI

Mr. Smith. You will recall earlier hearings we had on this problem about a month or a week ago; it was our hope then that we could get some administrative relief that would perhaps make it unnecessary to have any legislation in the field.

There has been quite a bit of action by the Farmers' Home Administration and by the Farm Credit Administration to improve this problem, but despite all they have done I think it is still essential that we are going to provide the necessary help for the farmers who were caught in this tragic credit squeeze that we should enact legislation along the line as proposed by Mr. Jones, or whatever proposal is or can be worked out that will provide some long-term credit for our farmers.

As you perhaps know, the Farmers' Home Administration has liberalized its loan provisions, to enable some minor payments on certain types of debts that farmers have, but their restrictions are still very rigid in certain fields.

The Farm Credit Administration has made additional capital available to the production credit organizations; at least, the 4 in my district have all been given $250,000 to $300,000 additional capital to make additional loans, but those loans would be made just for the members of that organization who have been participating and have been financed by them in the past.

I would like to call attention to the situation that exists with one of our largest farm financing organizations in my area and in the whole Cotton Belt, I am sure. It is in Greenwood, Miss. They have given notice to their borrowers that states in part:

We enclose check for the first disbursement of your 1958 loan, and in this check desire to call your attention that these funds are advanced to you for the sole purpose of producing a crop in 1958, and not to be used to pay bills or accounts or other past due obligations.

In other words, these past due obligations of the farmers involved are not going to be met, unless there is some arrangement for a longterm loan made available to them. If those obligations remain outstanding there is going to be, no matter what the future holds in the way of our current year's crop or how things develop in the future, there will be considerable trouble for our farmers and considerable turnover in farm ownership unless we get some action along this line.

So I hope that the committee will see fit to bring out Mr. Jones' bill or something similar that will provide some long-term loans for these farmers where they can meet the discretion and obligations that they incurred in 1957 due to the disastrous weather conditions.

Mr. Poage. We are very much obliged to you.
Are there any questions?
If there are no questions, we appreciate your coming before us.

Mr. SMITH. Thank you.

Mr. Poage. I am going to ask Mr. Jones, the author of one of the pending bills, if he cares to make a statement at this time.

STATEMENT OF HON. PAUL C. JONES, A REPRESENTATIVE IN CON

GRESS OF THE 10TH DISTRICT OF THE STATE OF MISSOURI

Mr. Jones. I would like to speak, Mr. Chairman, directly to H. R. 10954, which is a bill that sets out in specific detail how I think the funds which are needed to take care of emergency credit could be administered.

Recently the Farmers' Home Administration sent an investigator down into southeast Missouri. And prior to the time that he went down there, Senator Symington of Missouri sent telegrams to 31 different people in that area whose names had been given to the representative from the Farmers' Home Administration and whom they contacted on this problem of credit.

Here is the situation at the present time, at least, in southeast Missouri, and I think this might be typical of other sections of the country: We have a good agricultural area and, ordinarily, are not in trouble.

Last year we had approximately 100 inches of rain. The normal rainfall in that area is around 50 inches. That rain came in the spring and interfered with the planting of the crop. It, also, came in the fall and interfered with the harvesting of the crop, particularly cotton.

It is estimated in that immediate area that the agricultural income is approximately 45 percent of a normal year. The Farmers Home Administration has recognized the fact that we need credit there. They have been most cooperative in sending people to that area. I want to say that they have been responsive to our requests for more Jiberal credit terms.

We held some meetings in southeast Missouri last year that were attended by Mr. Henry Smith, from the Washington office, and by Mr. Schwabe, the State administrator of the Farmers Home Administration, and at this meeting which was attended by representatives of banks, gins, implement dealers, oil distributors, and other businessmen, it was pointed out that there was a need for more credit through Farmers Home Administration and a change in the regulations that had been used in the past.

The Farmers Home Administration has done this, for which we are very appreciative.

In setting up the budget for their clients this year they included money to take care of taxes, interest, a payment on the chattel notes, to the extent of up to 15 percent of the present valuation of the equipment on which mortgages were held. That item of depreciation was put in there to try to forestall the foreclosure of farm equipment. While the Farmers Home Administration was reluctant to take that step, they did take it, and it worked out even better than most of us anticipated, because in many instances the farm-equipment dealer and the bank, knowing that the money was available, did not exercise their right to foreclose and in many instances continued to carry those people.

There is another area of credit which is being partially taken care of through the Small Business Administration. The Congress, as you

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