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ECONOMIC DISASTER L

HEARING

BEFORE THE

SUBCOMMITTEE ON CONSERVATION AND CREDIT

KSU LIBRARIES 

OF THE

COMMITTEE ON AGRICULTURE

HOUSE OF REPRESENTATIVES

EIGHTY-EIGHTH CONGRESS

SECOND SESSION

ON

H.R. 9186

gfr JUNE 25, 1964

 rR

r9

Serial WW

0

Printed for the use of the Committee on Agriculture

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U.S. GOVERNMENT PRINTING OFFICE

36-438 WASHINGTON : 1964
COMMITTEE ON AGRICULTURE

HAROLD D. COOLEY, North Carolina, Chairman,

W. R. POAGE, Texas, Vice Chairman

GEORGE GRANT, Alabama

E. C. GATHINGS, Arkansas

JOHN L. MCMILLAN, South Carolina

THOMAS G. ABERNETHY Mississippi

WATKINS M. ABBITT, Virginia

PAUL C. JONES, Missouri

HARLAN HAGEN, California

LESTER R. JOHNSON, Wisconsin

D. R. (BILLY) MATTHEWS, Florida

FRANK A. STUBBLEFIELD, Kentucky

RALPH R. HARDING, Idaho

G. ELLIOTT HAGAN, Georgia

GRAHAM PURCELL, Texas

JAMES H. MORRISON, Louisiana

BENJAMIN S. ROSENTHAL, New York

ROBERT B. DUNCAN, Oregon

ALEC G. OLSON, Minnesota

ROBERT L. LEGGETT, California

SPARK M. MATSUNAGA, Hawaii

Mrs. CHRISTINE S. GALLAGHER, Clerk

HYDE H. MURRAY, Assistant Clerk

JOHN J. HEIMBURGER, General Counsel

ROBERT C. BRUCE, Assistant Counsel

FRANCIS M. LEMAY, Staff Consultant

CHARLES B. HOEVEN, Iowa

PAUL B. DAGUE, Pennsylvania

PAGE BELCHER, Oklahoma

CLIFFORD G. McINTIRE, Maine

CHARLES M. TEAGUE, California

ALBERT H. QUIE, Minnesota

DON L. SHORT, North Dakota

CATHERINE MAY, Washington

DELBERT L. LATTA, Ohio

RALPH HARVEY, Indiana

PAUL FINDLEY, Illinois

ROBERT DOLE, Kansas

RALPH F. BEERMANN, Nebraska

EDWARD HUTCHINSON, Michigan

RESIDENT COMMISSIONER

A. FERNOS-ISERN, Puerto Rico

SUBCOMMITTEE ON CONSERVATION AND CREDIT

W. R. POAGE, Texas, Chairman

E. C. GATHINGS, Arkansas

LESTER R. JOHNSON, Wisconsin

FRANK A. STUBBLEFIELD, Kentucky

JOHN L. McMILLAN, South Carolina

G. ELLIOTT HAGAN, Georgia

ROBERT L. LEGGETT', California

A. FERNOS-ISERN, Puerto Rico

II

CLIFFORD G. McINTIRE, Maine

DON L. SHORT, North Dakota

RALPH HARVEY, Indiana

ROBERT DOLE, Kansas

•t—;.01.1

4‘..1
CONTENTS

H.R. 9186, a bill to amend the Consolidated Farmers Home Administration Act of 1961 to authorize the Secretary of Agriculture to make economic Page disaster loans 1

Statement of:

Graham, Harry L., legislative assistant to the national master, Na- tional Grange 23 Higbee, Floyd G., Deputy Administrator, Farmers Home Admin- istration 

McIntire, 2

Hon. Clifford G., a Representative in Congress from the State of Maine 

Communications 11 submitted to the subcommittee:

Freeman, Hon. Orville L., Secretary of Agriculture, letter of May 6, 1964 

Higbee, Floyd 2

F., Deputy Administrator, Farmers Home Administra- tion, letter of June 26, 1964 10

hi

ECONOMIC DISASTER LOANS

THURSDAY, JUNE 25, 1964

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON CONSERVATION AND CREDIT

OF THE COMMITTEE ON AGRICULTURE,

Washington, D.C.

The subcommittee met, pursuant to notice, at 10:45 a.m., in room

1310, Longworth House Office Building, Washington, D.C., Hon.

W. R. Poage (chairman of the subcommittee) presiding.

Present: Representatives Poage, Gathings, Johnson of Wisconsin,

Stubblefield, Hagan of Georgia, McIntire, Harvey of Indiana, and

Dole.

Also present: Hyde H. Murray, assistant clerk Robert C. Bruce,

assistant counsel and Martha Hannah, staff.

Mr. POAGE (presiding) . The subcommittee will please come to order.

We are met this morning to consider H.R. 9186, by Mr. McIntire.

This is a bill to authorize the Secretary of Agriculture to make

economic disaster loans.

The Department witnesses are here to explain this bill. We will

be glad to hear from you, Mr. Higbee and Mr. Campbell.

(H.R. 9186, by Mr. McIntire, together with the Department report

dated May 6, 1964, follows:)

[H.R. 9186, 88th Cong., 1st sees.]

A BILL To amend the Consolidated Farmers Home Administration Act of 1561 to authorize the Secretary of Agriculture to make economic disaster loans

Be it enacted by the Senate and House of Representatives of the United States

of America in Congress assembled, That section 321 ( a ) of the Consolidated Act

of 1961, as amended (7 U.S.C. 1961), is amended by striking the period at the

end thereof and inserting the following: ", severe production losses, or critical

economic conditions encountered in the area by producers of specified agricultural commodities and products."

MAY 6, 1964.

Hon. HAROLD D. COOLEY,

Chairman, Committee on Agriculture,

House of Representatives, Washington, D.C.

DEAR MR. CHAIRMAN: This is in response to your request for a report on H.R.

9186, a bill to amend the Consolidated Farmers Home Administration Act of

1961 to authorize the Secretary of Agriculture to make economic disaster loans.

The Department of Agriculture recommends enactment of the proposed legislation provided H.R. 9186 is revised as follows:

1. The preamble is replaced by the following: "To amend the emergency loan

authority of the Secretary of Agriculture under subtitle C of the Consolidated

Farmers Home Administration Act of 1961 to authorize such loans in areas where

credit is not otherwise available because of serious economic conditions for

farmers and ranchers."

1
2 ECONOMIC DISASTER LOANS

2. In line 3, insert "Farmers Home Administration" after the word "Consolidated."

3. Delete the remainder of the bill after the colon in line 5 and substitute the

following: "or serious economic conditions for farmers or ranchers."

The suggested revisions are consistent with our recommendation concerning

S. 2307 now pending in the Senate.

Section 321 (a) of the Consolidated Farmers Home Administration Act of 1961

presently authorizes the Secretary of Agriculture to designate any area in the

United States and in Puerto Rico and the Virgin Islands as an emergency loan

area if he finds (1) that there exists in such area a general need for agricultural

credit which cannot be met for temporary periods of time by private, cooperative,

or other responsible sources, including the regular lending programs of the Farmers Home Administration, at reasonable rates and terms for loans for similar

purposes and periods of time, and ( 2) the need for such credit in such area is

the result of a natural disaster. H.R. 9186, if revised as suggested, would amend

section 321 (a) to also authorize the Secretary to designate such areas when the

need for credit is the result of serious economic conditions for farmers or

ranchers.

At intervals prior to the enactment of the Consolidated Farmers Home Administration Act of 1961 the Secretary was authorized to make loans out of the emergency credit revolving fund based on economic conditions. The fact that loans

were made on this basis to 71,299 farmers and ranchers in the total amount of

$224,348,099 is an indication of the extent to which economic conditions have

influenced the ability of farmers and ranchers to obtain credit. Also, the Department has received many requests since the enactment of the Consolidated Farmers Home Administration Act of 1961 to make emergency loans available because

of economic conditions.

The Bureau of the Budget advises that there is no objection to the presentation

of this report from the standpoint of the administration's program.

Sincerely yours,

ORVILLE L. FREEMAN, Secretary.

STATEMENT OF FLOYD G. HIGBEE, DEPUTY ADMINISTRATOR,

FARMERS HOME ADMINISTRATION; ACCOMPANIED BY HOWARD

D. CAMPBELL, OFFICE OF GENERAL COUNSEL, U.S. DEPARTMENT

OF AGRICULTURE

Mr. HIGBEE. Thank you, Mr. Chairman and members of the subcommittee.

I have soine notes that I would like to present which summarize the

past activities and the past history of making economic emergency

loans.

The Secretary of Agriculture is presently authorized by section 321

(a) of the Consolidated Farmers Home Administration Act of 1961 to

designate emergency loan areas upon his determination that (1) there

exists in the area a general need for agricultural credit which cannot

be met by local sources, including the regular lending programs of the

Farmers Home Administration, and (2) the need for such credit is the

result of a natural disaster.

The bill under consideration, as recommended by the Department

of Agriculture, would amend section 321 (a) to include authority for

the Secretary to designate an emergency loan area due to "serious

economic conditions" as well as a natural disaster, when there is a

general need for agricultural credit which cannot be met by other

established sources. This authority is needed to permit the emergency

loan program to serve those established farmers and ranchers whose

need for credit is comparable and just as critical as that of farmers

who are victims of a natural disaster. If credit is not available
ECONOMIC DISASTER LOANS 3

through some source these farmers or ranchers may not be able to continue in business.

When the Consolidated Farmers Home Administration Act of 1961

was enacted, the provision for making emergency loans due to economic conditions was considered in the Congress but was not included

in the final act. This committee approved that portion of the act, but

it was omitted over on the Senate side. However, the making of emergency loans to assist farmers due to economic conditions is not a new

authorization for the Department of Agriculture.

Public Law 38, 81st Congress, which was enacted on April 6, 1949,

authorized the Secretary of Agriculture—

to make loans to farmers and stockmen for any agricultural purpose in any area

or region where he finds that a production disaster has caused a need for agricultural credit not readily available from commercial banks, cooperative lending agencies, and other sources.

This was the beginning of the emergency loan program in the Department through which loans are made from a revolving fund based

on a determination by the Secretary of the need for this type of assistance.

Public Law 38 was amended by Public Law 115 on July 14, 1953,

to authorize the Secretary to make the following types of emergency

loans in addition to production emergency loans:

(1) Economic emergency loans in connection with any major disaster determined by the President to warrant assistance by the Federal

Government under Public Law 875 (81st Cong.), as amended, to

established farmers and stockmen for any agricultural purpose in the

area covered by the determination of the President, if the Secretary

finds that "an economic disaster has also caused a need for agricultural credit that cannot be met for a temporary period from commercial banks, cooperative lending agencies, or other responsible sources,

including the regular programs of the Farmers Home Administration.

There was no termination date with respect to the authority for making economic emergency loans.

(2) Special livestock loans to established producers and feeders of

cattle, sheep, and goats (not including operators of commercial feedlots) who have a good record of operations but are unable temporarily

to get the credit they need from other lenders and have a reasonable

chance of working out of their difficulties with supplementary financing. These loans were authorized initially to be made during a 2-year

period but the period was extended for an additional 2 years for initial

loans and for a longer period for indebted borrowers. The authority

to make special livestock loans stemmed from the need of livestock

producers throughout the Nation whose economic problems had been

aggravated by prolonged drought conditions combined with a sharp

decrease in livestock prices during the early 1950's. Public Law 38,

as amended, was repealed by the enactment of the Consolidated Farmers Home Administration Act of 1961.

Because of the need among farmers and stockmen in some areas for

credit which was not available to them for a temporary period from

other established sources to carry on their normal operations, Public

6-438-64 2
4 ECONOMIC DISASTER LOANS

Law 727, 83d Congress, was enacted on August 31, 1954, to authorize

the Secretary—

to make emergency loans for any agricultural purposes, except for refinancing of

existing indebtedness

to farmers and stockmen in any area or areas where the Secretary—

determines that there is a need for such credit which cannot be met for a temporary period from commercial banks, cooperative lending agencies, the Farmers Home Administration, under its regular programs, or under the act of

April 6, 1949, or other responsible sources.

This act authorized the use of $15 million from the emergency

credit revolving fund and was to continue until June 30, 1955. Subsequently, the period for making initial loans was extended through

June 30, 1959, and the aggregate amount of funds was increased to $65

million. Loans under this act could not exceed $15,000 and could not

be made to any one borrower so as to increase such borrower's indebtedness in excess of $20,000. These loans could be authorized in any

area where the Secretary found that credit was not available from any

other established source to serve the needs of farmers and stockmen.

Through June 30, 1962, a total of 71,801 economic emergency loans

had been made in 20 States in the amount of $102,022,333; 10,258

special livestock loans had been made in 45 States in the amount of

$91,229,691; and 26,308 special emergency loans had been made in 22

States in the amount of $30,935,950.

All of these economic-type emergency loans total 108,367 for

$224,187,974.

All types of ernergency loans made from the revolving fund through

June 19, 1964, total K94,586,533.

Mr. MCINTIRE. Could Task a question at that point?

Mr. HIGBEE. Yes.

Mr. MCINTIRE. The $224,187,974 is referring to the authorization

under Public Law 83-727?

Mr. HIGBEE. It includes special emergency loans made under Public

Law 83-727 and also economic emergency loans and special livestock

loans.

Mr. MCINTIRE. Thank you.

Mr. HIGBEE. As of December 31, 1963, repayments on these loans

amounted to approximately 95 percent of maturities.

Mr. MCINTIRE. The sum of 8794,586,533 is an overall figure including those loans which were made under the emergency declaration?

Mr. HIGBEE. That is correct.

Mr. MoINTIRE. SO that the sum of $794,586,533 includes the

$224,187,974?

Mr. HIGBEE. That is correct.

Mr. MCINTIRE. But the $224,187,974 specifically referred to loans

made under the authority of the economic aid and not the disaster aid

section?

Mr. HIGBEE. Yes, sir.

Mr. MCINTIRE. Thank you.
ECONOMIC DISASTER LOANS 5

Mr. HIGBEE. There is a definite need at this time among producers

and farm feeders of beef cattle throughout the Nation for credit assistance not available from other sources to enable them to hold on to

their livestock herds and continue their operations.

If this proposed legislation is enacted which will permit the making

of emergency loans due to serious economic conditions it would be

possible to serve these farmers and ranchers with emergency loans

for a temporary period.

When this discussion was underway 10 days ago it was estimated

that at least 4,500 such operators will be forced to liquidate during

the next 6 months unless they can obtain needed financing to hold onto

their livestock. If they sell, it will further depress the beef market

and adversely affect the whole industry.

Also, there is a definite need among the Maine potatogrowers for

assistance in order that they may continue their operations. Many

growers in this area have been faced with extreme economic problems

for a period of years which has forced them to utilize their equities

for operating expenses to the point that many of them no longer can

carry on without Government financing for a few years.

In making designations because of natural disasters, the Secretary is presently authorized to make loans available to eligible applicants engaged in any type of agriculture in the area or to restrict

loans to eligible applicants engaged in a particular type of agriculture

when only that type was affected by the natural disaster.

It is contemplated that this same procedure would be followed, if

the proposed legislation is enacted, in making designations because of

serious economic conditions. However, when a designation is restricted to eligible applicants engaged in a particular type of agriculture, the total operations of an applicant would be financed if the

particular type of agriculture for which the designation was made is

a substantial enterprise in his total operations and he is unable to

obtain needed credit for other sources.

What is meant by serious economic conditions for farmers and

ranchers? How severe would such conditions have to be in order to

justify the Secretary of Agriculture in making emergency loans available? The proposed legislation contemplates unfavorable economic

conditions would exist for a farmer or rancher when prices received

for his crops are less than production and marketing costs. When this

happens to farmers and ranchers, they are unable to pay loans obtained

for operating costs or to make payments on other obligations. Generally, such conditions make it necessary for them to dig deeper into

their property equities to obtain additional credit to continue in business. The situation becomes serious when these equities disappear

and there is no longer a basis for conventional credit. The proposed

legislation contemplates that under these circumstances the Secretary

would be justified in making an emergency loan designation.

Since the emergency loan program is administered by the Farmers

Home Administration, this bill contemplates that designation because

of serious economic conditions would be based on recommendations

3 6-4 3 8-6 4---O
6 ECONOMIC DISASTER LOANS

and supporting information submitted by the Farmers Home Administration.

The supporting information would include complete information

concerning conditions in the recommended area and the attitudes of

other lenders about the availability of agricultural credit.

This information will be gathered in surveys of affected areas2 incuding contacts with bankers, representatives of production credit associations, business institutions, farmers, and agricultural lenders. Severe economic conditions alone would not justify a designation. There

must also be a general inability of farmers or ranchers to obtain credit,

from other sources. Therefore, regardless of the severity of the economic conditions, a designation could not be made as long as farmers

and ranchers are able to obtain credit from other sources.

As is presently true in areas designated because of natural disasters,

this bill contemplates that in areas designated because of economic conditions loans would be made only to bona fide established farmers and

ranchers. Also, it is contemplated that loans would be made subject to

all the other basic policies governing emergency loanmaking in areas

designated because of natural disasters.

These policies, some of which are based on the authorizing statute,

some on legislative history, and some on good business judgment, prohibit making loans to enable an applicant to substantially expand his

normal farming or ranching operations or to make major adjustments or reorganizations. In addition, loans are not made to finance

commercial feedlot operations.

Let me emphasize that this authority, if granted, would not be

competitive with other established sources of credit. Emergency

loans are made only to established farmers and ranchers who are not

able to obtain needed credit from other sources to carry on their normal operations. Each application is considered individually and

on its own merits and the applicant must be certified as eligible by

the county FHA committee before a loan is approved. Each applicant

must have a good past record of operations, and must show good prospects for success with the loan.

The enactment of this bill to authorize emergency loans due to serious economic conditions will strengthen the position of the Department to assist farmers who need credit to help them through temporary

emergency periods.

( The tabulations entitled "Loans Made From the Emergency Credit

Revolving Fund or Disaster Loan Revolving Fund" and "Loans by

Fiscal Year and Type" follow:)
UNITED STATES DEPARTMENT OF AGRICULTURE, FARMERS HOME ADMINISTRATION

Loans made from the Emergency Credit Revolving Fund, or the Disaster Loan Revolving Fund under Public Laws 38 and 727, as amended, cumulative from inception of each program through June 30, 1962

State and territory

Production emergency loans Economic emergency loans Special emergency loans Special livestock loans Fur loans Total loans

Number

(1)

Amount

(2)

N umber

(3)

Amount

(4)

Number

(5)

Amount

(6)

Number

(7)

Amount

(8)

Number

(9)

Amount

(10)

Number

(11)

Amount

(12)

U.S. total 

Initial loans 

Subsequent loans Loan costs 1 

Alabama 

Alaska Arizona 

Arkansas 

California 

Colorado 

Connecticut 

Delaware 

Florida Georgia Hawaii 

Idaho 

Illinois 

Indiana 

Iowa 

Kansas 

Kentucky Louisiana 

Maine 

Maryland Massachusetts Michigan Minnesota 

Mississippi Missouri 

Montana Nebraska 

239,079 $452, 914,571 71, 801 $102, 022,333 26,308 $30,935, 950 10,258 $91, 229,691 653 $5, 471,362 348,099 $682, 573,907

176,613 62,466 328, 366, 910 124, 083, 865 463, 796 48, 588 23,213 74, 292, 684 27, 729,649 23, 567 2, 741 24,466, 783 6, 468, 405 762 4, 707 5,551 46, 727,828 44, 501, 863 324 329 2, 873, 727 2, 597,635 253, 799 94,300 476, 727, 932 205, 381, 417 464, 558

9, 582

0

55

18,588 1,201 4, 06158

51

816

10,41879

637

629

78

856

5,257 1,238 7,111 301

59

186

306

2,926 21, 756 17,298 865

73

7, 871,887

0

272,939 39, 992, 695 6, 903, 523 12, 746,453

- 347, 723 173, 955 7,812,946 13, 723, 950 205, 090 3, 414, 897 887, 106 129,022 1, 110, 360 16, 710, 710 696,169 13, 037, 108 836,565 220,529 985,070 998,992 4, 317, 113 33, 613, 262 30, 789, 394 3, 142,478 107.398

248

0

0

8,985

0

274

0

0

84

0

0

0

0

0

0

2,205 1,131 2,582 1,311

0

0

0

0

3,364 5,544

0

0

290, 265

0

0

12, 237, 110

0

408, 055

0

0

716,315

0

0

0

0

0

0

3, 860, 785 667,790 2, 669, 270 2, 895, 745

0

0

0

0

3, 364, 355 6, 909, 238

0

0

329

0

40

490

0

111

0

0

0

314

0

56

406

183

613

0

0

0

2,743

0

0

0

2,006 1, 162 1,648

0

1.114

212,996

0

197,335 440,412

0

351, 193

0

0

0

355,385

0

206,735 555, 085 284, 760 580,288

0

0

0

8, 786, 033

0

0

0

2, 113, 540 545,477 1, 580, 065

0

1. 257. 080

47

0

38

599

33

814

0

0

78

54

7

73

2

11

2

303

43

17

0

1

7

5

6

5

1,354 460

11

253,210

0

940,435 886,965 1, 032, 000 9, 894, 835

0

0

1, 074, 615 432,280 49,375 1, 831, 960 18,600 170,900 4,000 4,422,165 76, 120 150,475

0

1,200 13,000 42,500 25, 195 34,595 2, 035, 870 6,654, 213 227.240

0

0

0

0

3

142

0

0

0

0

0

21

21

14

0

0

0

0

0

0

1

96

15

0

0

1

0

0

0

0

0

16,600 1, 418, 427

0

0

0

0

0

88,240 443,260 112, 735

0

0

0

0

0

0

5,000 825, 187 87,883

0

0

3, 000

0

10, 206

0

133

28, 662 1,237 5,40258

51

978

10,786 86

787

1,0.58 286

1,471 7, 765 2,412 9,710 4,35560

194

407

4,953 26,287 26,244 1,326 1.198

8, 628, 358

0

1, 140, 709 53,557, 182 7,952, 123 24,818, 963 347,723 173,955 9, 603, 876 14, 511, 615 254,465 5, 541, 832 1, 903,051 697,417 1, 694, 648 24, 993, 660 1, 440, 079 15, 8,56, 853 12, 518, 343 221,729 1, 003, 070 1, 886, 679 6,543, 731 37, 557, 689 41, 314, 567 9, 799, 691 1, 591, 718

Footnote at end of table.

DINONODH naIsvsm sNvori 
UNITED:STATES DEPARTMENT OF AGRICULTURE, FARMERS:HOME7ADMINISTRATION-Continued

Loans made from the Emergency Credit Revolving Fund, or the Disaster Loan Revolving Fund under Public Laws 38 and 727, as amended, °Q cumulative from inception of each program through June 80, 1962-Continued

State and territory

Production emergency

loans

Economic emergency

loans

., Special emergency

loans

Special livestock

loans

Fur loans Total loans

Number

(1)

Amount

(2)

Number

(3)

Amount

(4)

Number

(5)

Amount

(6)

Number

(7)

Amount

(8)

Number

(9)

Amount

(10)

Number

(11)

Amount

(12)

Nevada 57 605,731 0 0 0 0 80 1,917,130 0 0 137 2, 522, 861

New Hampshire 28 179,835 0 0 0 0 7 5,910 0 0 35 185, 745

New Jersey 431 1, 436, 354 117 547,825 60 118,450 75 113,300 11 31,300 694 2, 247, 229

New Mexico 1,382 4,016, 114 1,072 2, 438, 670 0 0 893 8,927,420 1 2,260 3,348 15, 384, 464

New York 253 1, 884, 323 5 15,365 51 359,350 42 51,070 14 211,873 365 2,521 981

North Carolina 8, 749 8, 607, 976 6,076 5,826, 296 1,046 993,685 2 4,915 0 0 15,873 15, 432, 872

North Dakota 22,050 24,585, 156 0 0 10, 780 9, 438, 603 5 17,835 0 0 32, 435 34, 041, 594

Ohio 117 172,191 0 0 18 55.335 11 26,845 1 1,500 147 255, 871

Oklahoma 9,712 11, 960, 550 4,985 4, 350, 636 0 0 676 5, 596, 708 0 0 15,373 21, 907, 894

Oregon 271 1, 168, 839 0 0 0 0 58 1, 001, 090 15 116,020 344 2, 285, 949

Pennsylvania 153 530, 938 1 1,500 0 0 103 137, 760 5 17,000 262 687, 198

Rhode Island 28 85, 547 0 0 0 0 0 0 0 0 28 85,547

South Carolina 16,894 14,915, 504 0 0 1,335 792, 415 2 10, 870 0 0 18,231 15, 718, 789

South Dakota 7,926 7, 229, 833 0 0 1,782 1, 677, 298 171 1, 771, 460 3 15, 000 9,882 10. 693, 591

Tennessee 4,729 4, 056, 779 2, 146 1, 383, 595 0 0 58 75, 190 0 0 6,933 5, 515, 564

Texas 58, 174 152, 201,840 30,659 53, 051, 503 0 0 3,61)5 36, 088, 495 0 0 n2, 528 141, 341, 838

Utah 568 2. 491, 994 0 0 0 0 160 2, 632, 205 134 494, 048 862 5, 618, 244

Vermont 86 220,420 0 0 0 0 5 9,180 0 0 91 229,600

Virginia 687 4,858, 576 610 384„515 0 0 76 240, 640 0 0 1,373 5, 483, 731 Washington 809 5, 891, 168 0 0 0 0 4 131,195 80 485,975 893 6, 508, 338

West Virginia 25 354, 575 1 1, 000 0 0 47 27,465 0 0 73 383,040

Wisconsin 369 837, 117 0 0 0 0 0 0 73 1, 092, 957 442 1, 930, 074

Wyoming 660 2, 414, 801 1 2,500 21 34,430 117 2, 155, 260 2 3, 100 801 4, 610, 091

Puerto Rico 388 893,946 0 0 0 0 1 16,000 0 0 389 909,940

Virgin Islands 0 0 0 0 0 0 0 0 0 0 0 (

Average amount of loans

nitial $1,859 $1,529 $1,038 $9,927 $8,870 

lubsequent 1,986 1, 195 2,360 8,017 7,806 

Orchard loans

Vashington 48 $267, 130 

48 267. 13i

1 "Loan costs" represent the amounts advanced to borrowers for such purposes as the payment of taxes, insurance premiums, etc. Such advances related to economic emergency

special livestock, and fur loans are included in the amount for production emergency loans.

DINONODa IIHISVSICE SNVOrl 
ECONOMIC DISASTER LOANS

Loans by fiscal year and type-Number and amount

9

Year

Special livestock 1 Economic emergency 2 Special emergency 3

Number Amount Number Amount Number Amount

1954 3, 932 $35, 429, 723 19, 150 $26, 521, 130 

1955 2, 512 19, 413, 325 27, 569 39, 584, 651 1, 514 $1, 550,822

1956 1,601 13,431, 710 17, 362 23, 059, 006 12, 970 13,381, 813

1957 1, 158 10, 864,448 4,264 6, 417, 416 8, 739 9, 732, 750

1958 471 5,401, 715 2,039 3, 540, 515 2,494 3, 851, 055

1959 247 2, 689,815 745 1, 386, 920 591 2,419, 510

1960 151 1, 660, 870 398 846,905 

1961 104 1, 178,260 235 642, 680 

1962 82 1, 159, 825 39 23,110 

Total 10, 268 91, 229,691 71, 801 102, 022,333 26,308 30, 935, 950

1 Public Law 38 as amended by Public Law 115, approved July 14, 1953.

2 Public Law 78 as amended by Public Law 115, approved July 14, 1953.

3 Public Law 727, approved Aug. 31, 1954.

Mr. POAGE. I think it is quite apropos here to know just how much

money there is available. We have this bill trying to implement this.

Mr. HIGBEE. There is available, Mr. Chairman, approximately $95

million in the revolving fund. I believe at the close of business this

fiscal year we will have used approximately $50 million of the $95

million. We had anticipated that we might use a slightly additional

amount up to as much as $64 million, but I believe that the figure will

only be around $50 million.

There would be available in the revolving fund between $35 million

and $40 million to carry on this program.

Mr. POAGE. Just how large a program do you anticipate?

Mr. HIGBEE. The question as to how large the emergency loan program will become? We find in some instances that when we move in

with the emergency credit, the banks stay with the individuals longer

and will not liquidate out as many of their borrowers. The amount

of money required, of course, would depend upon the seriousness of

the economic situation.

Mr. POAGE. Since we have a rather serious economic situation for

the farmers all over the country, could we not rather suspect that with

this kind of a program that it would go to a tremendous size?

Mr. HIGBEE. I would estimate that it would be in excess of the

amount of money presently available in the revolving fund.

Mr. POAGE. What I am trying to say is that I think we ought to

recognize what we are doing.

Mr. JOHNSON of Wisconsin. Before a particular farmer would be

eligible for a loan on his farm, that would have to be gone into. It has

to be a natural disaster to cover that. In my area many people are in

trouble putting in their crops but I do not think that will help them

any this year.

Mr. MCINTIRE. I think that we ought to make it clear that we are

referring to natural disasters and not a national disaster, because this

is a bill that would provide an additional tool in the hands of the

Farmers Home Administration. It would use the criteria of economic

effect by virtue of a prolonged period of low prices, using this concept

as a supplemental tool to what is in the permanent legislation in the

Farmers Home Administration, I believe, which deals with assisting

in situations of natural disasters. In the administration of this pro-
10 ECONOMIC DISASTER LOANS

posal the area would be limited to that area where, by virtue of a prolonged adverse economic situation, we would have a tight credit situation. The availability of credit would have to be a determination

made by the Secretary and this would vary from one area to the

other. I introduced this bill, because of my interest in the situation.

Under the provisions of Public Law 83-727, there was an authorization for taking care of various economic ills.

Could you supply for the record, Mr. Higbee, a list of those States

concerned and the amount of money that was used under the previous

authorization for the economic disaster part? We used this in my

State, and it was very helpful at that time. Because of the developing

situation we now have a period of low prices, and there is a concern on

the part of some of us that other sources of credit are not going to

prove adequate; therefore, I introduced this bill in November. I do

not know what the experience has been in your State, Mr. Johnson, because you have late crops, but by virtue of a substantial improvement in

price from the end of May on, our situation has improved somewhat.

U.S. DEPARTMENT OF AGRICULTURE,

FARMERS HOME ADMINISTRATION,

Washington, D.C., June 26, 1964.

HOUSE AGRICULTURE COMMITTEE,

Room 1310, Longworth House Office Building,

Washington, D.C.

DEAR MR. CHAIRMAN: We were requested at the June 25 hearings on H.R. 9186

to furnish a list of the 21 States mentioned in the testimony where special emergency loans had been made under Public Law 727, as amended.

We are enclosing this list. As you will note, there are actually 22 States instead of 21.

Sincerely yours,

FLOYD F. HIGBEE,

Acting Administrator.

U.S. DEPARTMENT OF AGRICULTURE, FARMERS HOME ADMINISTRATION

Special emergency loans made from the revolving fund under Public Law 727,

as amended, cumulative from Aug. 31, 1954, through June 30, 1959

- Num- ber Amount Num- ber Amount

Alabama Arizona Arkansas Colorado Georgia Idaho Illinois Indiana _ 

Iowa Maine Minnesota Mississippi 

32940 490 111 31456 406 183 613

2,743 2,006 1, 162

$212,996 197,335 440,412 351, 193 355,385 206, 735

555, 085 284,760 580,288

8,786, 033 2, 113,580 545,477

Missouri Nebraska New Jersey 

New York North Carolina North Dakota Ohio South Carolina South Dakota Wyoming 

Total 

1,648 1,114

6051 1,046 10, 78018 1,335 1, 78221

$1, 580, 065

1, 257, 080

118,450 359,350 993,685

9, 438, 603 55,335 792,415

1, 677, 298 34,430

26,308 30, 935, 950

Mr. JOHNSON of Wisconsin. You would not allow those under the

new law—they got left out, is that not right?

Mr. MCINTIRE. This has been in the law two or three times in various

ways.

Mr. CAMPBELL. Yes, sir.

Mr. JOHNSON of Wisconsin. If we put this in, we are putting the law

back the way it was for how long a period of years?
ECONOMIC DISASTER LOANS 11

Mr. MCINTIRE. It was up to and including 1959, I believe, under

Public Law 83-727. This law was enacted in 1954.

Mr. CAMPBELL. That is correct. And it was for a temporary period,

and then was extended twice.

Mr. MCINTIRE. And then extended by the Congress, and then we got,

into the development of the Consolidated Farmers Home Administration. And it was not included in that legislation.

For the record, Mr. Chairman, I ask unanimous consent to file with

the reporter my statement that I have here.

Mr. POAGE. Without objection, that may be done.

(The prepared statement of the Hon. Clifford G. McIntire follows:)

STATEMENT OF HON. CLIFFORD G. MCINTIRE, A REPRESENTATIVE IN CONGRESS FROM

THE STATE OF MAINE

Mr. Chairman, there exists a real need for an authority that would permit the

Farmers Home Administration to make economic disaster loans. This is evidenced by the fact that the Department of Agriculture has—as indicated in its

May 6, 1964, report on H.R. 9186—"received many requests since the enactment

of the Consolidated Farmers Home Administration Act of 1961 to make emergency loans available because of economic conditions."

This points the finger at a real deficiency in our present credit system, for today there is no provision in law that authorizes the Farmers Home Administration to make emergency loans available where the need arises solely from

adverse economic conditions.

Section 312 (a) of the Consolidated Farmers Home Administration Act of 1961

presently authorizes the Secretary of Agriculture to designate any area in the

United States, Puerto Rico, and the Virgin Islands as emergency loan areas,

providing, of course, the credit needs arise from a natural disaster.

H.R. 9186 would fill this credit vacuum by giving the Secretary of Agriculture

the authority to designate for emergency loan purposes those areas that have a

credit need occuring from serious economic conditions.

There is nothing new nor unique about this aspect of economic disaster loans,

for these initially were put into effect through Public Law 81-38, which authorized economic loans by the Farmers Home Administration into areas declared to

be disaster areas by the President of the United States.

Then, Public Law 83-727 liberalized this loan authority by permitting emergency loans for "any agriculture purpose"—a broad definition which included

economic disaster. Public Law 83-727 was, of course, only temporary legislation;

however, it was periodically extended.

These types of economic disaster loans continued up until the enactment of the

Consolidated Farmers Home Administration Act of 1961, which embraced the

policy presently in effect of extending emergency loans only into natural disaster

areas.

At various intervals prior to the enactment of the Consolidated Farmers Home

Administration Act of 1961, the Secretary was authorized, as reported by the

Department of Agriculture "to make loans out of the emergency credit revolving

fund based on economic conditions. The fact that loans were made on this basis

to 71,299 farmers and ranchers in the total amount of $224,348,099 is an indication of the extent to which economic conditions have influenced the ability of

farmers and ranchers to obtain credit."

Too, under the combined authorities of Public Laws 38 and 727 (from the inception of these programs through June 30, 1962), loans valued at $682.573.907

were extended to 348,099 ranchers and farmers.

In 1939, Chairman Cooley introduced H.R. 7628, which was known in the

86th Congress as the Allott-Cooley bill. Section 21 (a ) of that bill—as well as

section 301 (a) of H.R. 11761 of the clean bill which Mr. Cooley later introduced

after the committee had considered H.R. 7628—contained permanent authority

for economic disaster loans. H.R. 11761 was passed by the House of Representatives on June 2, 1960. The Senate, however, failed to act on the bill and it died

in the 86th Congress.

The language of H.R. 7628 and the Allott-Cooley bill, H.R. 11761, provided as

follows: "* * * and (2) that the need for such credit in such area is the result

of a natural disaster or severe production loss."
12 ECONOMIC DISASTER LOANS

During the 87th Congress, the Allott-Cooley bill was revised by the new administration and included as title III of the omnibus Agricultural Act of 1961.

The Kennedy administration bill proposed permanent economic disaster authority. Section 321 of H.R. 6400 by Mr. Cooley carried this language: "* * *

and (2) that the need for such credit in such area is the result of a natural

disaster, severe production losses, or cultural economic conditions encountered

in the area by the producers of specified agricultural commodities and products."

This language was included in the bill (H.R. 8230), passed by the House of

Representatives on July 27, 1961. The Senate version (S. 1643) carried only

authority for natural disaster loans. For the conference, the House receded to

the Senate on this provision and section 321 (a) of Public Law 87-128, which is

the present law, limited these emergency loans to natural disasters only.

Section 321(a) of Public Law 87-128 provides as follows: "* * * and (2)

that the need for such credit in such area is the result of a natural disaster."

Here's what H.R. 9186 does: The language of this bill is identical to that

requested by the Kennedy administration in 1961. It is similar in purpose to that

of legislation requested by the Eisenhower administration in 1959 and 1960.

The provision which is the heart of my bill has passed the House of Representatives on two previous occasions—the Allott-Cooley bill in 1960 and as a part of

H.R. 8230 in 1961.

In each of the previous instances, the Senate has refused to accept the proposal of the House of Representatives, a version which would have permitted

the Secretary of Agriculture to make Farmers Home Administration economic

disaster loans.

In its report dated May 6, 1964, the Department of Agriculture recommended

certain modifications in H.R. 9186. These changes are technical rather than

substantive, and I would have no objection to these revisions.

Furthermore, in that same report, the Department of Agriculture stated:

"The suggested revisions are consistent with our recommendation concerning

5.2307 now pending in the Senate."

Mr. MCINTIRE. My interest developed largely because of the situation which was developing in my own area and having had very favorable experience with the use of this authorization in previous years;

that is, Public Law 83-727, I introduced this bill. There was a limitation of $15,000 in the bill. My experience was that through the

basic authorization it was very helpful in that kind of a circumstance,

and that is why I considered the appropriateness of providing the

Farmers Home Administration with this tool. It had been a part of

the law before and had proved helpful to a number of States and I

thought it was a tool which would be helpful again and that could be

used in specific areas where it had developed that the source of credit,

including the normal services of the Farmers Home Administration,

were not adequate to serve the people for a temporary period. This is

the basis of my submission of this legislation.

Mr. POAGE. Let us analyze the question further.

Mr. CAMPBELL. The economic emergency authority that Congressman McIntire referred to is the only one of several which had a dollar

limitation in it. Public Law 499 first established in the Secretary of

Agriculture the authority to make emergency loans. Section 2(a) of

that act as originally enacted continued a practice developed by the Regional Agricultural Credit Corporations under their broad general

authority of making loans in certain areas where there was an economic

situation as distinguished from a natural catastrophe.

The 1949 act authorized that type of loan to be continued on a temporary basis.

Then came the drought of the early 1950's and the Congress amended

that law to provide, as a separate section on a temporary basis, special

livestock loans addressed more to the economics of the livestock indus-
ECONOMIC DISASTER LOANS 13

try although that may have been compounded by the drought situation.

It was not so much the drought as the threat of the drought which induced marketings that prompted the Congress to enact this special livestock law.

That particular section of the act was extended from time to time.

It had no monetary limitation on the size of the loan. Therefore, when we considered the consolidation of the existing authorities in con- nection with the Consolidated Farmers Home Administration Act of 1961 we attempted, and I think demonstrated to the satisfaction of this committee, the subcommittee, and the members present who examined those matters in detail to draft it in a manner which would utilize the broadest of the existing authorities. We did not put a monetary limitation, nor did we put in a time limitation.

For documentation the chairman may wish to refer to Union Calen- dal Report No. 293, 1st session of the 87th Congress, Report No. 754. The provisions of the bill as approved by this committee and passed by the House will be found on page 144 and the committee's comments and recommendations on this particular issue will be found on pages

74 and 75. You may wish to incorporate that in your record here.

Mr. POAGE. To get back to what I was talking about, I would ask the Farmers Home Administration the same as we asked the Soil Conservation Service, would it be wise to jeopardize programs that

are good and have public support, with programs that may jeopardize the whole program?

As to the livestock bill I am sure that we did not do that with that, did we?

Mr. HIGBEE. Livestock loans do run higher than other loans, although—

Mr. POAGE. I am deeply interested in seeing that we do give ade- quate protection to the livestock industry. You give livestock loans, disaster loans for livestock. You make big loans, do you not? Mr. HIGBEE. Yes, sir.

Mr. POAGE. And you make them, whether rightly or wrongly. I

do not want to call any names but you have had some very big loans, have you not?

Mr. HIGBEE. In the emergency loan program, Congressman Poage, the average loan was something less than $3,000.

Mr. POAGE. That is not what I am talking about. You have some loans for several hundred thousand dollars.

Mr. HIGBEE. The largest loan that I recall was up to one-half a

million, approximately one-half a million dollars.

Mr. POAGE. One-half million dollars. That is several hundred thousand dollars. And that sum would make loans to a whole lot of these small farmers, the loans that average $3,000—that would make a

great many of those smaller loans.

What I am getting at is this, that when we put no limit on these, do we not drain off our resources to such an extent that it becomes impossible for the program to serve all those who want in? Certainly such a program cannot get very widespread support.

I am not trying to say that these people are not entitled to help, but what I am trying to say is that nobody is going to continue to get any loans unless we have a limit where the program will retain public support. You cannot make many one-half million dollar loans
14 ECONOMIC DISASTER LOANS

under the Farmers Home Administration with the concept that we

now have of the Farmers Home Administration, because when you

go to making one-half million dollar loans or $100,000 loans—I do

not care what the stress is, you are in the commercial business—you

are not just saving somebody's home—you are in the commercial field

in a big way.

Mr. HIGBEE. Do not misunderstand me; we are not arguing for the

real large loans.

We will be glad to furnish you a list of the size of the loans.

Mr. GATHINGS. Most all of these loans have been repaid. And there

is no way to get away from that. That question was just brought up

by the chairman as to the size of the loans.

Mr. POAGE. We had limitations in the past as to the size of the loans.

Why do we not have it now?

Mr. GATHINGS. Originally, we had the regional agricultural credit

corporation, back a few years ago in the late 1940's. But why do you

bring up the issue here? An awful lot of people, farm people who

are in disaster areas require loans?

Mr. POAGE. We have to have it for the whole community.

Mr. GATHINGS. Whole communities are involved. You have a situation where lost of people are working in the operation. A large

farm is an aggregate of many small farms. We need large operators

as well as small operators in this business of farming. We do not

want to put them out of business. I think that in America we ought

to encourage initiative in the individual to get ahead. That is most

important to maintain the time-honored system that effort and energy

plus skill pays dividends. A person should not be discouraged from

Increasing the size of his farm.

Mr. JOHNSON of Wisconsin. In all of the years that the law has been

on the books have we had any trouble?

Mr. CAMPBELL. The only segment of the previous authority that

had the limitation—the only segment there consisted of three different

economid emergency authorities on the books at one time. Only one

of those three had a dollar limitation. That was Public Law 727

with respect to which Congressman McIntire spoke awhile ago.

Mr. POAGE. That was a limitation of $15,000 and you could not

loan a man enough to raise his existing indebtedness above $20,000.

Mr. CAMPBELL. I believe that is correct.

Mr. McINT1RE. If you will yield, Mr. Chairman, I might ask Mr.

Campbell a question. There was a period when that was true. Was

not that under 727 substantially used in the area of economic distress?

Mr. CAMPBELL. Of the three?

Mr. MCINTIRE. Yes. The amount of the money.

Mr. CAMPBELL. But as I tried to explain awhile ago, I considered

the special livestock loan as predominantly an economic situation, and

I would have to compare the amount of money used in the special livestock program with 727 usage before I could answer that question specifically.

Mr. MCINTIRE. But the limitation under 727 did not impair the effectiveness of that legislation materially, did it?

Mr. CAMPBELL. I have no survey of the statistics on which to say

how many applicants really needed more than the $15,000.
ECONOMIC DISASTER LOANS 15

Mr. POAGE. Those livestock loans should be referred to as economic

disaster loans. They were actually made on the theory that there was

a natural disaster. It was a widespread situation which in turn created

economic disaster. I think that any natural disaster creates an economic disaster.

Mr. CAMPBELL. If that had been absolutely true we would not have

needed to have amended the existing law, to enact special livestock authorization, because at that time we had authority to make emergency

loans for natural disasters.

Mr. POAGE. But you had to define the area of the natural disaster,

did you not?

Mr. CAMPBELL. Yes, sir.

Mr. POAGE. And the special livestock loan recognized the widespread

area. It did not go on and said that you could make it anywhere, to

any producer.

Mr. HIGBEE. No, we also designated an area after investigating the

needs of the credit in that area. There are two conditions. One is that

you have to have the economic emergency, and, secondly, that you have

to have an area where you cannot obtain credit. If they can obtain

credit from other sources they would not be eligible.

Mr. POAGE. Again I ask, do you think if you pass this kind of a

bill—do you think the widespread support of the Farmers Home Administration which you presently have and which we all want you to continue to have, would continue? That is the question. I would like

to have an answer from the gentleman on that.

Mr. HIGBEE. I believe that we can, because with the operations of

the emergency program without any limitations, we have been pretty

careful in making large loans. When we do make them they are

pretty well under circumstances where people are familiar with them,

know what the situation is and we do not believe that by passing this legislation it would adversely affect the overall Farmers Home Admin- istration program. We will continue to be very diligent in making

large loans. We would not go out promiscuously and just make large loans. Basically, the number of large operations still have some equity in their real estate holdings.

Mr. POAGE. I do not question that. If you loan the large ranch $10 million, it would have much better security than you would have if you loaned some shirttail farmer down in the Brazos bottom $300. The security from the banking standpoint—there is no question about it—is such that it would be more and you can make those larger loans.

Mr. HIGBEE. It is basically for the purpose of financing the familytype farmer.

Mr. POAGE. Not many family-type farmers need $100,000.

Mr. HIGBEE. A very limited number, sir.

Mr. POAGE. That is what I thought. That is all I am driving at.

I do not have any objection to making it broader, but I want to be very

sure that we don't destroy the program.

Off the record.

(Discussion off the record.)

Mr. POAGE. On the record.

Mr. MCINTIRE. I certainly would want the record to show that I

have a very keen interest in preserving the fine picture of relations that the Farmers Home Administration has in serving agriculture.
16 ECONOMIC DISASTER LOANS

It would not be my purpose at all in considering this legislation of

moving into an area which would jeopardize this fine record of

excellent relationship.

I have had some experience with producers. They felt that it

would be a good help, with an appropriate legislative record that

an amendment might be considered which would serve as a tool and

could be helpful in these areas where prolonged low prices have

developed very serious questions of economic distress. That is based

on past experience that was had in the use of this type of authorization.

And we felt that consecutive legislation might be considered, that it

would be a tool that might be helpful.

Mr. JOHNSON of Wisconsin. There is a question I want to ask.

You were asked the question as to what the biggest loan was. The

answer was one-half a million. Under what authority was that onehalf a million lent? You cannot do it under this authority.

Mr. HIGBEE. That is under our natural disaster authorization.

Mr. JOHNSON of Wisconsin. A natural disaster.

Mr. GATHINGS. How many of those were there?

Mr. HIGBEE. A very limited number. I do not have the exact

number.

Mr. GATHINGS. With respect to these emergency loans there were

very, very few that would be in that size figure.

Mr. HIGBEE. I think that in the last 2 years there has, probably, been

no more than five, but we will be glad to furnish that information.

Mr. GATHINGS. In the last how many years?

Mr. HIGBEE. In the last 3 years.

Mr. GATHINGS. Three years.

Mr. HIGBEE. We will be glad to furnish the exact number of those

loans.

(The information follows:)

Emergency loans $25,000 or more, fiscal year 1964

State

$25,000 to $49,999 $50,000 or more

Number Amount Number Amount

Arkansas 

California 

Florida 

Idaho 

Louisiana 

Maine 

Minnesota 

Mississippi 

Montana 

New Jersey 

New York 

Oregon 

Pennsylvania 

South Carolina 

Texas 

Utah 

Virginia 

Washington 

West Virginia 

Total 

24

4

5

1

3

$840, 000

147,630

164,210

25,000

119,000

10

1

1

318,670

25,000

25,000

1

1

4

48

3

1

31,000

142,600

1,597,130

118,220

34,670

46,920

2

2

3

1

4

3

1

1

4

9

$51,000

153,910

192,550

321,730

60,000

252, 520

268,640

54,830

60, 000

94, 000

316,280

758,670

50,950

104, 000

107 3, 635, 050 34 2, 739, 080

Through June 19 of the 1964 fiscal year 14,997 emergency loans had been made

in the total amount of $49,747,406. Out of this volume 14,586 were in amounts

less than $25,000 each, averaging approximately $2,920. There were seven loans

in amounts of $100,000 or more, as follows: $104,000, $105,000, $107,150, $116,060,

$136,330, $188,130, and $204,360.
ECONOMIC DISASTER LOANS

Emergency loans $25,000 or more, fiscal year 1963

17

State

$25,600 to $49,999 $50,000 or more

Number Amount Number Amount

Arkansas_ 27 $941, 456 2 $455, 000

California 5 168,650 3 741,840

Florida 2 74, 000 2 174,040

Georgia 1 43, 830 

Idaho 2 62, 960 1 123,250

Louisiana 5 162, 610 3 366,210

Maine 1 60, 000

Minnesota 5 174,110 2 145,920

Mississippi 17 625, 200 3 221, 600

Montana 3 131, 060 4 413, 180

Nebraska 1 30, 600 

New Jersey 1 25, 000 

North Carolina 1 48,160 1 52, 060

Oregon 1 110, 000

Pennsylvania 1 32, 000 

South Carolina 2 56, 550 4 345, 000

Texas 39 1, 304, 670 11 748,950

Utah 4 1M,370 

Virginia 2 64, 460 1 54,600

Washington 1 250, 000

West Virginia 1 44, 210 

Wyoming 1 30, 000 

Total 120 4, 173,290 40 4,261, 650

During the 1963 fiscal year 19,344 emergency loans were made in the total

amount of $62,479,239. Out of this volume 19,184 loans were in amounts less

than $25,000 each, averaging approximately $2,819. There were 11 loans in

amounts of $100,000 or more, as follows: $104,000, $110,000, $110,000, $113,000,

$123,250, $131,100, $136,400, $146,970, $250,000, $400,000, and $600,000.

Emergency loans $25,000 or more, fiscal year 1962

State

$25,000 to $49,999 $50,000 or more

Number Amount Number Amount

Alabama 1 $60, 000

Arkansas 26 $920, 250 7 795, 000

California 6 179,380 1 50,200

Florida 2 138,000

Idaho 2 86, 740 2 182, 850

Louisiana 6 204,360 5 437, 980

Minnesota 3 103,850 1 94, 200

Mississippi 7 267, 160 6 380,330

Montana 6 220,810 4 357, 970

Nevada 3 101, 970 

North Carolina 1 58, 540

North Dakota 1 27, 940 1 56,280

South Carolina 2 54, 000 4 369, 000

Texas 41 1, 460, 870 8 900, 940

Utah 8 304, 510 82,000

Virginia 5 155, 140 2 124, 850

Washington 2 82,890 2 627,400

West Virginia 1 44,630 

Total 119 4,214,500 47 4,715,540

During the 1962 fiscal year 20,743 emergency loans were made in th• , 'punt

of $61,966,231. Out of this volume 20,577 loans were in amounts les

000 or more, as follows: $101,500, $114,000, $126,000, $126,850, '. I II, $4 44.,2‘20,

each, averaging approximately $2,577. There were 12 loans in a VA

$173,390, $194,036, $283,200, $344,200, $363,860, and $400,000.

Mr. GATHINGS. How many of those, Mr. Higbee, paid bacIclaw loan '

to the Farmers Home Administration? 4

,d110
18 ECONOMIC DISASTER LOANS

Mr. HIGBEE. I can recall three of them that paid it in full and one

of them still has an outstanding indebtedness.

Mr. GATHINGS. Should they not be given the same consideration as

anyone else who is suffering from a natural disaster as the result of

excessive rainfall or hailstorms or whatever the situation might be?

Mr. HIGBEE. We were attempting to carry out the original intentions of the various programs that were given the Farmers Home Administration to administer. One of them was the funds available under the Regional Agricultural Credit Corporation and it had no limiations. So in our recommendation we have attempted to try not to

narrow the authorization as went into the Agricultural Act of 1961

and that is why we recommended it to be similar to those acts that we

were placing in it.

Mr. GATHINGS. This additional question. Do you not go over these

applications with a fine tooth comb? You usually find out all you can

about the party—all about his debts and his potential. You look into

it most carefully; is that not right?

Mr. HIGBEE. That is right.

Mr. GATHINGS. What type of loan had this $15,000 limitation in it?

Mr. CAMPBELL. That was a temporary act which authorized loans

in areas designated by the Secretary of an emergency character because of economic conditions only. It was an authorization for a 3-

year period. It had an aggregate amount—it had a limitation of $15,-

000 as the initial loan to any one applicant and a total indebtedness

limitation of $20,000, but that act, if I recall correctly, was presented

to the Congress arising out of a potato situation and some vegetable

situation in which the farmer's returns on those commodities were low,

not. because of a natural condition but because of the increased cost

and, perhaps, oversupply of the commodity for a temporary period,

to a point where the producers of those commodities had been forced

to carry over some of their production credit for several years.

The result of that was that private, commercial, and cooperative

credit sources were threatening liquidation of those borrowers who

are really good producers, and were merely caught in a temporary

economic squeeze. The limitations on private and cooperative credit.

were such that the producers were threatened with the termination of

their usual source of credit. They did respond to the stimulus of this

emergency credit, and for the most part did recover and are now back

in the usual credit sources.

Mr. GATHINGS. And they were largely small operators, because a

potato farmer, for example, does not have a great acreage.

Mr. CAMPBELL. Many were small, and some were larger.

Mr. GATHINos. There was no argument that the $15,000 was inadequate, was there?

Mr. CAMPBELL. I cannot speak to that, Congressman Gathings. I

just do not have the information which would permit an honest

answer.

Mr. GATHINGS. It was for a short period of some few years, was it

not.?

Mr. CAMPBELL. Yes, sir.

Mr. DOLE. What would be the terms of these loans, so far as relating

this to your agency?
ECONOMIC DISASTER LOANS 19

Mr. HIGBEE. The terms of our emergency loans usually are just

short-term loans, say 1 or 2 years for operating expenses and in. this

case those would be the great majority of them. In a few instances

under the special livestock loan program we made loans up to 5 years

where an individual lost all of his livestock and he had to replace it

and he could not pay it off the first 2 or 3 years.

Mr. DOLE. Under the present law that is 5 years?

Mr. HIGBEE. The present law does not have any limitations with

respect to repayment except that loans may not be scheduled for repayment over longer periods than are provided for loans for similar

purposes under subtitles A and B of title III of the act. In a few

instances in the emergency program, because of a natural disaster,

where we have to replace buildings, we presently have instructions to

let them have up to 20 years, but the term is based upon the individual's ability to repay. If he can repay it in a shorter period of

time, we set it up for a shorter period of time.

Mr. DOLE. And livestock it may be 2 or 3 years maximum?

Mr. HIGBEE. Only in those instances where an individual with an

economic emergency—where he did not lose his basic herd—he, probably, would just have a production loan of 1 or 2 years.

Mr. DOLE. And the rate of interest is at 3 percent, a flat 3 percent?

Mr. HIGBEE. Three percent.

Mr. DOLE. What about the livestock producer right now, say, in

Kansas or anywhere else, who has a banker on his neck, and the banker

is about ready to call his loan—does he get relief under this program

for his existing indebtedness—can you provide him with an emergency

loan to take care of the bank so he can keep his herd?

Mr. HIGBEE. We, basically, do not refinance the primary debtor.

We go in and furnish the operating funds for 1 or 2 years until he

gets back on his own feet and continues with the banks.

Mr. DOLE. So that it would be up to him to make the arrangements

with the bank as to his indebtedness?

Mr. HIGBEE. Yes.

Mr. Doi. With the bank, and you would not pay off the bank?

Mr. HIGBEE. NO.

Mr. DOLE. And this program would not make it possible to expand

his existing facilities?

Mr. HIGBEE. That is right—it would not do that.

Mr. DOLE. He would have to have a real emergency, until he can

stand on his own feet?

Mr. HIGBEE. Yes, sir.

Mr. GATHINGS. I want to say that you have done a great job. If it

had not been for the Farmers Home Administration untold numbers

of farmers in many areas would have suffered—they would not have

been able to operate.

Mr. HIGBEE. I might add this that we are not for the making of

large loans. As you know, our basic policy is not that. We know

that we are directed by this committee and the Members of the Congress to help the family farmer, but we do feel that by going to somewhat larger loans than the family farmer requires, the definition

applies to that, it keeps us out of criticism by someone saying, "You

would not help me—you waited until I got clear down before you

would help me." So in many instances we have helped individ-
20 ECONOMIC DISASTER LOANS

uals who were slightly larger than the family farmer size to stay in

business, which prevented him from collapsing and then coming back

into the program.

So if we continue to stay away from any large number of real large

loans I do not believe, Mr. Chairman, that it will have an adverse effect

upon our overall program in the Farmers Home Administration.

Mr. POAGE. I am interested in your saying that you can stay away

from any large number of real large loans. ''When you begin making

some of these larger loans it will have very significant economic advantages to the large operator to be able to get this loan?

Mr. GATIIINGS. It is to keep a man in the business of farming.

Mr. POAGE. I think it is a great deal more than that. I think that

when you are doing a commercial business, when you are making loans

of $100.000, you are in the commercial business, and you are not simply

maintaining the home—you are doing something to maintain commercial business.

Mr. GATIIINGS. There are many people and homes on those farms,

too.

Mr. POAGE. I know there are homes that are worth several hundred

thousand dollars, perhaps, but I do not think that our Government can

set itself up to provide special assistance to take care of that kind of a

loan. There are homes that are worth more than $100,000. I grant

you that. I certainly agree that these are the safest loans you are making—you will get your money back—the larger the loan is the safer it

is to you people—you can get this money back, but the man who is borrowing one-half million dollars is now paying 6 or 7 percent interest.

He will get it from you for 3 percent. That is a tremendous economic

advantage that he gets. If you open the door he will come in. I don't

blame him. I do not think that I, myself, could resist the pressure.

Maybe you can, but I doubt very much if you will, or that you can..

And if you do, you are going to have some of the most intensive pressure to make these loans. You say that you are going to make only a

few of:them, but when you make me one, Mr. Hagen will say, "You

have got to make me one," and I do not think that you can keep that

door just ajar. I think that you need to shut it or you will have to

keep it wide open. And I think that when you keep it open you are in

the commercial banking business, clearly.

Mr. GATIIINGS. And if you keep a man on the farm that is most important, too. The Farmers Home Administration has been keeping

the man and his operations going. He may be a one-gallus farmer

or a large operator. These folks take care of the farmers. And they

have kept them in business. What is wrong with keeping a man on the

farm, other than the fact that he might have a large operation, rather

than a small operation? What is wrong with the man because he

saved his money and has been prudent and has worked hard and has

• a large farm as a result, which he acquired by buying another little

piece of land to add to that which he had—what is wrong with that?

Mr. POAGE. I do not find anything wrong with that, but neither do

I find anything wrong with the proposition we were talking about a

few moments ago, on this other phase, the Soil Conservation Service.

We recognized that we have a program here of small watersheds that

is good. But I doubt that we can include the city of Los Angeles and

retain the program we have.
ECONOMIC DISASTER LOANS 21

Mr. GATHINGS. That program is quite different.

Mr. POAGE. That is right. I am not opposed to the big operator.

I just don't want him to get all the money so that there won't be any

money left for the little farmer.

Mr. GATHINGS. This committee ought to help people, to offer some

aid by this.

Mr. POAGE. I do not think that it is a wise thing to syphon off a very

sizable portion of the money of the Farmers Home Administration to

go into these big projects.

Mr. GATHINGS. Mr. Higbee just said that there were sizable balances

in the revolving fund. Adequate money has not been an issue. Whatever is needed has been made available.

Mr. POAGE. He has just told us that he thought they needed more

money.

Mr. HIGBEE. That is right.

Mr. POAGE. If you syphon a large part of the funds we have off into these larger loans, no matter how meritorious they may be, as I

see it you just are not going to be able to carry out the regular program. I am not saying that these things do not have any place here,

but I am saying that it is more important to keep the program we have

got going than to have that kind of a program.

Mr. McINTIRE. These are two areas which are quite different. One

is the natural disaster area. This is not under consideration. The

matter that is under consideration is whether there should be a limita- tion in relation to the economic loan. Does not this make a difference?

In other words, the disaster loans concern the situation where there is

a physical disaster on the physical property of these people.

Mr. POAGE. It is different, because when a man suffers a natural

disaster, it is perfectly obvious—he is seriously impaired in his operations. ikThen he suffers an economic disaster, he is still a businessman

who is still engaging in competition with his neighbor on exactly the

same basis his neighbors are on. Surely private credit will ride along

much longer with a large operator than it will with the small farmer.

Mr. McINTrRE. If you will yield. In the use of this provision in

previous authorizations it was applied to the disaster areas and did

not apply to commodities.

Mr. POAGE. That is correct. You are applying it to the commodity

now. I do not care whether it is in South Carolina or in Texas or in

California. For example, cotton sells at 78 percent of parity. And

under any kind of a definition that is a kind of disaster. You would

consider it that, would you not?

Mr. HIGBEE. Yes.

Mr. POAGE. You would consider that an economic disaster.

Mr. HIGBEE. We have not discussed the prices with relation to this.

We are using here as a criteria that when the prices get below the

cost of production.

Mr. POAGE. Do you consider that if we pass this bill that it would

authorize you to make loans to any cottongrower in the United States?

Mr. HIGBEE. Not at the present time.

Mr. POAGE. Why would it not?

Mr. HIGBEE. Basically, I think that you will find that they have

access to credit. And the price of cotton has not gotten to the point

where it becomes a serious financial situation here.
22 ECONOMIC DISASTER LOANS

Mr. POAGE. I think it is. Then let us ask you this, the price of livestock is down to a very low level. What do you think about cattle

prices? Would all cattlemen qualify under this bill at this time?

Mr. HIGBEE. We indicated that unless the prices would have some

improvement there would be some over 4,000 individuals in difficulty.

Mr. POAGE. Livestock is not any lower with respect to parity than

the price of cotton. As I see, both livestock and cotton men are in

economic trouble at least approaching the disaster level.

Mr. HIGBEE. I have not made a direct comparison on that. I do

know that cattle prices are down-14, 16 cents were the prices feeders

sent out to the ranchers recently. The records that we have show that

you cannot produce them for 14,16 cents.

Mr. POAGE. I agree with you. You cannot produce them for 14

cents. I sure do agree with you.

Mr. GATHINGS. Will you yield?

Mr. POAGE. Yes.

Mr. GATHINGS. The Secretary has set the price for cotton at 331/2

cents per pound for all that grow it under 15 acres, that is an allotment

of 15 acres, and that happens to be practically 85 percent of the total

cottongrowers in the whole belt. Thirty-three and one-half cents a

pound would be an appreciable increase over that which the farmer

got for his crop in 1963. In the drought disaster of 1930 we made

only about one-third of a crop and cotton sold for 7 cents a pound.

That is what the gentleman from Maine is talking about. He is talking about a situation based on 1930 when our crops were only onethird normal yield. Stalks in our part of the country were only about

14 or 15 inches high.

Mr. MCINTIRE. The point that I was initially trying to bring out

was that during economic disaster it is the smaller, the average sized

or smaller farmer, to whom credit generally will be less available than

to the big farmer. That is the economics of it. The big farmer has a

better type of credit, to a higher degree, than the smaller farmer in

a low priced situation. The point that I was trying to develop in

the case Of a natural disaster, where there is no limitation on the size

of the loan for the farmer, is quite a different circumstance. That is

in the economic phase of it. In the economic disaster situation the

larger operator has a line of credit which will sustain him much more

so than does the small operator.

Mr. GATHINGS. That is true. But, of course, there is a chalice that

he will be wiped out, too. There are other factors that enter into the

matter. When a larger operator collapses the impact is felt by many

segments within the community, whether the cause is economic or from

an act of God.

Mr. MCINTIRE. This proposal here makes clear the basis upon which

the authorization would stand.

Mr. POAGE. I thank you very much, gentlemen, for your presentation.

Mr. HIGBEE. Thank you.

Mr. POAGE. We will now hear from Mr. Graham.
ECONOMIC DISASTER LOANS 23

STATEMENT OF HARRY L. GRAHAM, LEGISLATIVE ASSISTANT TO

THE NATIONAL MASTER OF THE NATIONAL GRANGE

Mr. GRAHAM. Mr. Chairman and members of the subcommittee, I

will introduce myself for the record as Harry L. Graham, the legislative assistant to the master of the National Grange. And then if

I may, I should like to file my statement. It is a short statement anyway. And then I would simply like to make two or three comments

about it.

Mr. POAGE. Without objection that may be done.

(The prepared statement of the National Grange follows:)

STATEMENT OF THE NATIONAL GRANGE BY HARRY L. GRAHAM, LEGISLATIVE

ASSISTANT TO THE NATIONAL MASTER

Mr. Chairman, members of the committee, my name is Harry L. Graham. I

am legislative assistant to the master of the National Grange.

The National Grange appreciates the opportunity of appearing before this

committee in support of the amendment to the Consolidated Act of 1961 which

has been introduced by the Honorable Clifford McIntire of Maine and referred

to this committee.

This amendment provides that lending authority previously possessed by the

Farmers Home Administration and adopted by the House in 1961 and stricken

by the Senate be restored to the Farmers Home Administration. The National

Grange has always supported the granting to this lending agency of the widest

possible authority for making not only the regular purchasing and operating

loans, but the emergency loans which are the difference between survival and

bankruptcy for farmers in various areas at various times.

We are all familiar with the operation of the disaster area loans when the

disaster is one of nature such as drought, flood, etc. These loans have stood

farmers in good stead when these natural disasters have struck and have been

a source of retaining solvency for many farmers.

Some of the disasters which beset producers, however, are not the work of

nature, nor are they the result of the activities of any one farmer, but rather

the collective impact of some of their activities on the economy as it is related

to the commodities which are the prime sources of income in their areas.

This is partly the problem which the producers of potatoes in Maine have faced

for several years when a major problem which has created the low prices for

their product has not been an act of nature nor an act of the farmers, but rather

the kind of futures trading which has been permitted under existing legislation.

We congratulate this committee and commend it for having the wisdom to report

out the bill introduced by Congressman McIntire to eliminate this problem

and express to you at this time the earnest hope that this legislation will be

brought before the House for a vote during this session of Congress.

Even where there is an overproduction on the part of the producers of any

one commodity, there are times when in some areas the situation is such that

normal credit is not available to these farmers to continue in operation while

they await the market adjustment that can come from their own actions. This

has been true in potatoes, it is true in the dairy industry in some areas today,

and it is most dramatically true in the beef producing areas whose problems

have created so much comment in the past few months.

Loans such as this authorizes were made by the Farmers Home Administration at the last low point of the beef cycle and were means of keeping many producers from going bankrupt. We do not know the extent of the need for these

loans this year but there seems to be considerable indication of the possibility of

substantial credit needs because of the combination of beef imports and extremely

high cattle production in the United States.

In a situation such as this, commercial banking firms are most apt to stay

with the extremely large producer, partly because there are instances in which

they have so much invested that they have no alternative except to try to stay

with him long enough to rescue their investment. This is not necessarily true

when a smaller farmer is involved and especially where he has not over capitalized to the point that he is insolvent.
24 ECONOMIC DISASTER LOANS

If Government farm policy and farm credit policies are to be continued on

the basis of a necessity for helping these farmers who are efficiently sized and

owned and operated by family units, then some standby authority for the Farmers Home Administration such as is contained in this amendment seems to us

to be highly desirable and in some instances critically necessary. This legislation which has been proposed properly recognizes that there are disasters that

are economic in character and that these need to be given the same credit considerations as are the natural disasters.

We, therefore, urge favorable and prompt action by this committee on this

legislation and promise you our support in attempting to get it passed by the

Congress.

Mr. GRAHAM. The National Grange supports this legislation which

has been introduced by Congressman McIntire, because we believe

that the economic disasters—and we believe that history proves this—

are just as far reaching and just as damaging to our agricultural

economy as our natural disasters, although they are not quite so

dramatic. You can see a flood or a tornado or a drought. It is a little

harder to see a continual reduction in prices of commodities that leaves

people with a restricted purchasing power and with much difficulty

with the problem of obtaining credit, than if they had their house

washed away or their barn destroyed by fire.

There has been reference made to 1930, which is a classic example

of an economic situation. We have had some in more recent years,

not quite so classic but just as damaging to particular areas. One

in the area that Congressman McIntire represents in terms of potatoes and I will tell you that we have had a lot of correspondence and

visitors in our office from the potato people of Maine this year. And

may I comment just quickly on one factor of this which concerns me,

and that is that some of these economic disasters are partially the result of Government action or the failure to take remedial action in

changing existing legislation.

In the legislation which Congressman McIntire introduced—and

which this committee has already approved and which is still hanging

fire—to eliminate futures trading in potatoes in Maine, I think had

a great deal to do with the economic disaster that came in Maine, and

those farmers up there had nothing to do with it, and they had no

way of solving their problem within the existing law.

In the case of dairy

'

I think that we have got the same kind of a

situation in the Federal milk market orders.

I will send to the committee and the members of the committee tomorrow a short study which I have just completed on the New YorkNew Jersey market in which I will show to you that as a result of

the inability of the farmers in those areas to cut off their production

of surplus milk that they lost 13 cents per hundredweight on all of the

milk they sold last month; that their total loss was over $2 million;

they lost 78 cents per hundredweight for 59 percent of their milk.

And the cost to the Federal Government was $29 million for handling

that surplus.

This is economic disaster any way you want to put it. This is a

one-way road to bankruptcy for the dairy farmers. And I think that

these gentlemen, I know, are needing at the present time a great deal

of the kind of help which is available in this kind of legislation. And

unless we change the legislation we have on the books they will need

a great deal more.
ECONOMIC DISASTER LOANS 25

In the case of beef—and here is a particular example—we had a

combination of circumstances over which no individual beef producer

had any control whatsoever. We had at one and the same time the

contraction of the European market and finally, as the result of that,

the increase in the imports from Australia and New Zealand.

We had at the same time cheap feed and we had an unusual expansion of the beef herds in America. And all of these came at one

time. And they created an economic disaster for many of these

people.

I personally think that the feeder is going to come out of this in a

little better shape than the fellow who raises calves and raises lambs.

They are the people that this whole economic process is going to revert

back to and these gentlemen are going to have real trouble in this

next year or so in my judgment, in trying just to stay alive and to

survive in the midst of this situation we have today, even with the improvement in the beef market.

And these are the kinds of situations which the present legislation

does not cover. It is the authority that the Farmers Home Administration does not have at the present time. And we believe that it is

necessary for the survival of these farmers, and in the final analysis

for the good of the country.

And for this reason we are very hopeful that this legislation will be

passed and that this authority will be granted to the Farmers Home

Administration.

Mr. POAGE. Thank you, Mr. Graham.

Mr. GATHINGS. You have heard the colloquy this morning—you were

back there in the room?

Mr. GRAHAM. Yes.

Mr. GATHINGS. What do you think about the matter of following

the recommendations of the Farmers Home Administration leaving

off any question that has to do with the limitation—what does your

organization feel about that—what is its views with respect to that?

Mr. GRAHAM. That is just a little fuzzy.

Mr. GATHINGS. It is a little what?

Mr. GRAHAM. That is a little bit fuzzy. We generally have thought

of this organization, the Farmers Home Administration, as being one

concerned with the family-type farm. And definitions of the familytype farm are getting difficult to come by now. I do believe that this

should not 

Mr. GATHINGS. Are you opposed to emergency loans—is that what

you are saying?

Mr. GRAHAM. No.

Mr. GATHINGS. Are you for making loans available to farmers regardless of size?

Mr. GRAHAM. No no.

Mr. GATHINGS. Well, we are for the family-size farm operation here.

We are for that.

Mr. GRAHAM. What I am trying to say here is that because this is

a little hard to say what you want to say without being misunderstood

one way or the other, I do not believe that we would look with favor on

the granting of this kind of lending to the syndicate type of operation

that has grown up as a profit takinc,institution where, for instance,

in the beef industry they have pulled together a hundred thousand
26 ECONOMIC DISASTER LOANS

cows or feeders, in that type of syndicate, and we have some of that

and did have some of that back in the 1950's—these fellows who have

done this on the basis of a gamble, some of them have gambled

and lost. Now this is different from the operator who has stayed in

this business all of the time and has gradually accumulated more and

more productive capacity and this is the definition that I would think

would be more desirable than size alone.

Mr. GATHINGS. I can see your point.

Mr. GRAHAM. You see why I had to outline my position before I

could say what my conclusion was.

Mr. GATHINGS. Thank you.

Mr. POAGE. Mr. Hagan.

Mr. HAGAN of Georgia. No questions.

Mr. POAGE. Mr. Harvey?

Mr. HARVEY of Indiana. I have one comment to make, and this goes

back a good many years when I was acting on behalf of the Production Credit, before the Farmers Home Administration became fully

operative, at least in my area, and I found this one thing that in

times of great stress, that the mere fact that a lending agent of the

Government is present in a community where disaster has struck has a

very wonderful effect. It restores confidence on the part of the regular

lending agencies. I found instances in my own experience when a

banker who was unwilling or very timid about making a loan to a

farmer who, because of no fault of his own was in difficulty—that

the agency of Federal Government being there and willing to make

the loan, that the banker would say, "Well, if they are going to do it,

I will do it."

I think particularly there is a tendency for the local lending agency

to have their morale lowered in times of disaster and I believe that

the mere authority in itself has a very salutary effect.

Mr. POAGE. If there are no further questions, we are very much

obliged fo you.

Mr. GRAHAM. Thank you.

Mr. POAGE. Is there anyone else who wants to be heard on this

legislation?

If there is no one else to be heard we will close the hearings and we

will consider the legislation at a later date in executive session.

I think that is all that we have this morning.

The commitee will, therefore, stand in recess subject to call.

(Whereupon, at 12:05 p.m., the committee adjourned subject to

call.)