Mr. ToOTELL. Thank you very much.

Senator HOLLAND. Mr. Harris.

STATEMENT OF GLEN R. HARRIS, CHAIRMAN, NATIONAL ADVISORY COMMITTEE OF PRODUCTION CREDIT ASSOCIATIONS, RICHVALE, CALIF.

Mr. HARRIS. My name is Glen R. Harris, and I am a resident of Richvale, Calif. I am a member of the national advisory committee of production credit associations representing the 11th Farm Credit District, and am currently serving as chairman of that committee. The full membership of the committee, one member being selected by the production credit associations of each farm-credit district, is as follows:

District 1-William Wadsworth, Farmington, Conn.
District 2—H. G. Blalock, Baskerville, Va.
District 3-W. F. Woodruff, Nashville, N. C.
District 4-W. E. Lacy, Hopkinsville, Ky.
District 5-P. F. Williams, Clarksdale, Miss.
District 6-R. H. Lanterman, Chatham, Ill.
District 7-Walter H. Dunn, Ellendale, Minn.
District & William Yungelas, Webster City, Iowa.
District 9-King L. Banks, Delta, Colo.

District 10-Grover C. Impson, Beeville, Tex.
District 11-Glen R. Harris, Richvale, Calif.

District 12-Jack Arnold, Birney, Mont.

I would like to introduce them to you: Mr. W. E. Lacy, of Kentucky, the vice chairman of the committee; Mr. Yungelas, of Iowa, the secretary of the committee; Mr. Blalock, of Virginia, and Mr. Banks, of Colorado, the other two members of the executive group.

Senator HOLLAND. We are glad to have you.

Mr. HARRIS. I would like to add to my statement that all of these gentlemen are farmers or ranchers, all of them directors, and in most cases president of their own production credit associations in their home localities as well as serving on this national advisory committee.

Our testimony, Mr. Chairman, was prepared to present over in the House of Representatives and we have in some cases referred to H. R. 10285, and the identical bill which we understand is Senate bill 3564, is identical, and I have corrected the testimony in pen and ink here. I think I might have missed some, so if you will understand where it says H. R. 10285 we are intending to say S. 3564 in this testimony. Senator HOLLAND. Very well.

Mr. HARRIS. The committee met in Washington, D. C., on April 18, with all members present, and voted unanimous support of S. 3564 and the other identical bills introduced in the House and Senate.

We prefer the provisions of these bills over the slightly different version contained in S. 3549 because of the greater administrative control left with the district farm-credit boards, which we believe is very desirable.

We are opposed to S. 3550 to the extent that it differs from the other bills in treatment of the reserves, revolving funds, and continued Government control over the new combined corporations. We would prefer no legislation be enacted rather than have these provisions become law.

This committee is particularly pleased with the features of S. 3564 providing for user ownership and by making the bined

banks cooperative institutions, with provision for participation by the users, and with the flexibility provided in accomplishing the retirement of Government capital as agricultural conditions and progress of our production credit associations permit.

The committee last year supported the Farm Credit Act of 1955, including section 201, which was deleted by the Congress. However, at that time we recognized that section 201 was not a complete answer and now recognize the wisdom of the Congress in not adopting section 201, but rather waiting until a complete plan including both the production credit corporations and the intermediate credit banks could be developed.

We believe S. 3564 does provide such a plan, and that under its terms complete farmer ownership can be attained without any significant increase in costs to production credit associations or other financing institutions, through the opportunities it provides for economies resulting from consolidation and streamlining the organization, the flexibility provided in accomplishing retirement of the Government capital, and through the possibility of making better use of the capital now in the system.

We are gratified that the Congress last year enacted the balance of the act of 1955 which provided the plan by which our sister institutions in Farm Credit, the banks for cooperatives, can accomplish user ownership, and also the provisions improving the position of the land-bank part of the system.

We wish to particularly endorse the provision of the act of 1955 prohibiting secretary-treasurers of national farm-loan associations from simultaneously serving as members of district farm-credit boards. It has not been possible for secretary-treasurers of our production credit associations to do so and we do not believe it is good administration or should be permitted in either case.

We understand that there is some opposition from various of the other financing institutions to S. 3564. We therefore wish to comment that we believe that S. 3564 provides fair and equitable treatment of OFI's.

It provides that they shall continue to have the services of the credit banks available on the same terms and conditions as they will be available to production credit associations, that OFI's will participate to the same extent as production credit associations in any equities built up or distributed, according to their volume of business, and they are not being required to make the intial payments which are required of production credit associations.

We wish to make clear that no production credit association desires to deny the OFI's the services of the credit banks, but that on the other hand, it is in our interest that we encourage their use of these facilities, thereby building greater volume of business and greater efficiency of operation.

Of the 498 production credit associations which this committee represents, only 50 to 60 associations have expressed any opposition. In 6 of the 12 Farm Credit districts there has been no opposition voiced. In the other 6 districts there is scattered opposition.

Some of those opposing simply request delay because they feel they are not now ready to make the initial payment. Others have various objections, such as desiring a different name for the combined bank or a greater voice in management.

A number of those opposing, however, say if there is to be any change from their present status, they believe that the provision of S. 3564 provide an acceptable plan.

We, therefore, report that the great majority of the production credit associations are in favor of S. 3564 and urge your committee to approve the bill and the Congress to enact it into law, that we may move forward toward the objective of a completely cooperative and user-owned credit system for agriculture.

Now, Mr. Chairman, I should like to make a few additional comments with regard to the proposals of the Bureau of the Budget, in the maintenance of an interest in the reserves and the continued governmental control over the new corporations.

It is our feeling that the matter as the Governor has already said to you, who owns the reserves is possibly only of academic importance so long as the intermediate credit banks remain in existence. But we are immensely concerned that that expression of the continued governmental interest in them will be the reason for continued governmental control and, particularly, with regard to the budget provisions of the Government Corporation Control Act, which will subject the institutions, and consequently, our associations to greater costs and greater delays and greater administrative difficulties over the years, simply to comply with those rules, to get permission to spend our own funds, which is essentially what it would be.

And it is the matter of budget control features that we are particularly concerned about in the Bureau of the Budget's proposal.

However, we also feel that we have been responsible for the establishment of a great part of those reserves, and we have an equitable claim to them, so far as that is concerned.

We believe they should be left in there with full ownership to come to the associations and the OFI's at such time as the Government capital is repaid.

Another point in my testimony, I have mentioned that we think that farmer ownership can be attained without any significant increase in interest costs to our associations. I would want to make clear there that we are talking about any significant increases as a result of this legislation. We understand that there are some increases coming because of increased costs of money. And some have already come. Those are of some concern to our associations. We hope that that trend can be reversed for us before too long.

We do not believe that this legislation would have any significant part in any increases, and that actually we can go forward with it without it being a factor in any interest increases.

Thank you, Mr. Chairman.

Senator HOLLAND. Thank you for your statement.

To come back to the question of reserves, I quite well understand why you do not want the Government to have a continuing interest in there and I appreciate that point of view.

The thing that causes me concern is this: You are claiming the reserves up to the time of merger on the theory that by payment of greater interest rates than was necessary to carry the business, you have created those reserves, even though Government capital was what was employed.

I think that is a perfectly sound position to take as to that part of the reserves created out of the interest paid by the stockholders, but I think

that it so not so sound when you come to the other part of the reserve that was created out of interest paid by OFI's.

And particularly do I think that you weaken the strength of your position, both equitably and legally, when you turn right around and say, from the date of the merger it shall be otherwise. OFI's should be represented ratably with others, with the owners, in the apportionment of any surplus created from the date of merger.

It would occur to me that you are on sounder ground from every standpoint if you want to maintain your position of freedom, completely, from governmental claims against this reserve after your Government stock is retired, by adopting the other approach, namely, that that part of the reserves from the date of the merger which is created out of the activities of the owners, both present and past, shall belong to the corporation and shall be handled in the event of liquidation just like any other surplus would be; but as to the lesser part that was created by the interest paid by the OFI's, that that, in the event of liquidation, should belong to those who created it, and if we find later who can not claim it, it will be easy to pass legislation to dispose of any small undistributed part of the reserves.

And if you folks are as sound in your belief that there won't be any liquidation, that these organizations will be held for centuries, which I believe will be the case, no result will come from such disposition. There might very easily come practical trouble, both on the floor and in the matter of getting presidential approval and the matter of court litigation in the event that you claim for your own stockholders something beyond what they themselves have put up.

I just suggest that. I do not think it is any serious question because I think you can handle it, along the lines that I have suggested there; and there may be other ways, too, without coming to grips with the Budget Bureau on its contention, that you paid the excess of interest or the OFI's did, that it was paid on Government capital and should belong eventually to the Government.

That is the position that you do not want to acceed to.

Mr. HARRIS. That is correct. That is one point that we would be concerned about, that if in the attempt to segregate the amount of the present surplus that has been built by the OFI's from that built by us, and then in the course of that segregation it was determined that it would remain in the Government ownership because of the inability to find the proper OFI to credit that amount to, in as much as a great many of them are no longer in existence, then that did continue to carry forward this Government ownership of a portion of it; and consequently, continued to subject us to the budget provisions and that sort of thing, we would be very much concerned about that.

Senator HOLLAND. No; I did not suggest that there would be any Government ownership continued in the matter at all but that on the date of the payment out of the Government stock, the retirement of the Government stock, that the equity in the reserves belonged to those who created it, and not that there would be any forced liquidation at that time or any forced apportionment of the interest-the Government did not create it.

You can word it very easily where it would be distributed to those who created it by way of paying higher interest rates than they would have had to pay to carry the business, simply on a level keel.

Mr. HARRIS. I would like to make another comment, that I think that the Governor's point that the business of the production credit associations since 1933 has been a great percentage of the total business, and that that provided the credit banks with a better basis of operation than they would have had otherwise.

I think there is real doubt whether this 20 percent can be accurately ascertained, because you have to go back and assume some things. And I think maybe without the production credit system the credit banks would not have that surplus now that they presently have. And consequently, the 20 percent figure would not have been true without the production credit system coming into being and being a part of the operations since they have been from 1933 to the present time.

Senator HOLLAND. I think that is true. Neither would your reserves have accumulated to the amount that they have if you had not had others participating with you in the business. It works both

ways.

Mr. HARRIS. Yes. I say again that we in production credit have no quarrel with the OFI's and feel that they are a necessary part of the credit bank operation.

Senator HOLLAND. You have accurately stated it in your presentation that the more business you have, the better it is to all concerned. I think that is sound.

Mr. HARRIS. Thank you, sir.

Senator HOLLAND. Are there any others here from out of town who want to be heard without fail this afternoon?

Come up, sir. Maybe you will have a better suggestion to make about this troublesome question.

STATEMENT OF ROBERT 0. JUSTICE, PRESIDENT OF THE BOARD, PERU PRODUCTION CREDIT ASSOCIATION, PERU, IND.

Mr. JUSTICE. I am Robert O. Justice, president, and this is Joe Payne, of the same association, secretary-treasurer of our association. Senator HOLLAND. All right, gentlemen. You may proceed, Mr. Justice.

Call upon your right arm there whenever you may need him.

Mr. JUSTICE. We welcome questions and I bring him along to answer the questions.

Senator HOLLAND. All right, sir.

Mr. JUSTICE. Mr. Payne is a farm operator, lives on his farm and has a production loan.

I, likewise, live on and operate my farm and have a production. credit loan.

And due to the fact that we are that close to the membership of the production credit, we would like to advance our reasons based on the desire of the large number of the members.

You have heard the Governor, Mr. Briggs, the President, Federal Board, and Mr. Harris just recently from the National Advisory Committee. They have given you the reasons for this legislation, the various technical ramifications of it.

We would like to present what we think is the opinion of the common member out here on the farm who is going to pay the costs and assume responsibility for the management.