MISCELLANEOUS FISHERIES AND WILDLIFE LEGISLATION-1965 FISHERIES LOANS THURSDAY, MAY 27, 1965 HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON FISHERIES AND WILDLIFE CONSERVATION Washington, D.O. The subcommittee met at 10:50 a.m., pursuant to call, in room 1334, Longworth House Office Building, Hon. T. A. Thompson (chairman of the subcommittee) presiding. Mr. THOMPSON. This morning, the Subcommittee on Fisheries and Wildlife Conservation will consider several bills having to do with the making of loans to fishermen for the purpose of financing operations, maintenance, replacement, repair, and equipment of fishing vessels and gear. The Fisheries Loan Act, which was enacted in 1956 and expires next month, has been most helpful in upgrading and modernizing our fishing industry by providing financial assistance to an industry that until enactment of the 1956 act had not been able to obtain such assistance. The bills to be heard this morning are identical and they are: H.R. 4227, by Mr. Bonner; H.R. 5153, by Mr. Rivers; H.R. 6090, by Mr. O'Neill: H.R. 6101, by Mr. Tupper; H.R. 6362, by Mr. Keith; H.R. 6921, by Mr. Bates. (The bills and agency reports follow:) [H.R. 4227, H.R. 5153, H.R. 6090, H.R. 6101, H.R. 6362, H.R. 6921, 89th Cong., 1st sess.] BILLS To extend the term during which the Secretary of the Interior is authorized to make fisheries loans under the Fish and Wildlife Act of 1956, and for other purposes Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That section 4 (b) (1) of the Fish and Wildlife Act of 1956 (70 Stat. 1121), as amended (16 U.S.C. 742c (b) (1)), is amended to read as follows: "(1) Bear an interest rate of not less than (1) a rate determined by the Secretary of the Treasury, taking into consideration the average market yield on outstanding Treasury obligations of comparable maturity, plus (2) such additional charge, if any, toward covering other costs of the program as the Secretary may determine to be consistent with its purpose." SEC. 2. Section 4 (c) of the Fish and Wildlife Act of 1956 (70 Stat. 1121), as amended (16 U.S.C. 742c (c) ), is amended to read as follows: "(e) There is created a fisheries loan fund, which shall be used by the Secretary as a revolving funds to make loans for financing and refinancing under this section. Any funds received by the Secretary on or before June 30, 1975, in payment of principal or interest on any loans so made shall be deposited in the fund and be available for making additional loans under this section. The Secretary shall pay from the funds into miscellaneous receipts of the Treasury, at the close of each fiscal year, interest on the total loans outstanding at the close of such year at a rate determined by the Secretary of the Treasury, taking into consideration the average market yield on outstanding Treasury obligations of comparable maturity during the last month of the preceding fiscal year. Interest payments may be deferred with the approval of the Secretary of the Treasury, but any interest payments so deferred shall themselves bear interest. Any funds received in the fisheries loan fund after June 30, 1975, and any balance remaining therein at the close of June 30, 1975 (at which time the funds shall cease to exist), shall be covered into the Treasury as miscellaneous receipts. There is authorized to be appropriated to the fisheries loan fund the sum of $20,000,000 to provide initial capital." DEPARTMENT OF THE INTERIOR, OFFICE OF THE SECRETARY, Washington, D.C., January 25, 1965. Hon. JOHN W. MCCORMACK, Speaker of the House of Representatives, DEAR MR. SPEAKER: There is enclosed a draft of a proposed bill to extend the term during which the Secretary of the Interior is authorized to make fisheries loans under the Fish and Wildlife Act of 1956, and for other purposes. We request that this proposal be referred to the appropriate committee for consideration, and we recommend that it be enacted. Section 4 of the Fish and Wildlife Act of 1956, as amended (16 U.S.C. sec. 742c) authorizes the Secretary of the Interior to make loans for the purposes of financing and refinancing the operations of commercial fishing vessels and the maintenance, repair, and replacement of such vessels and their gear. It also is intended to be used for research into the basic problems of the fisheries. The authority to make these loans is limited to situations where there is evidence that the applicant was otherwise unable to obtain financial assistance on reasonable terms. The objective of the program is to provide financial assistance to the commercial fishing industry for the purposes of upgrading or modernizing our fishing vessels and gear and thereby contributing to more efficient and profitable commercial fishing operations. In order to carry out this program, a fisheries loan fund was established as a revolving fund. The fund initially had an authorization of $10 million, but this was increased in 1958 to $20 million. A total of $13 million has actually been appropriated to the fund. The fund, however, will expire on June 30, 1965, unless extended by this proposal. The program was initiated because long-term credit was generally not available to fishing vessel operators. The relative success of the program has encouraged a few banks to reenter the field of fishing vessel financing in the case of vessel owners having exceptionally good credit rating. Bank financing on reasonable terms, however, is still not available to many fishermen because of the hazardous nature of the fishery. These lending institutions are generally not familiar with the problems of the industry and are unwilling to take the risks involved in long-term financing of fishing vessels and equipment. This program has filled this credit gap. It has enabled our fishermen to obtain this needed financing and to continue operating their vessels. We strongly believe it should be extended. U.S. fishermen are in constant competition with foreign fishermen for fish at fishing grounds where traditionally American vessels have, until recently, almost exclusively operated, and for markets in the United States. Imports constiiute an increasing percentage of the total supply of fish marketed in this country. This dual impact on our fisheries has increased the need for reasonable long-term financing for fishing vessels and gear. Under the circumstances, we believe that our domestic fishing fleet should be given this assistance where possible in meeting such competition. The extension of this worthwhile program, as provided in the enclosed proposal, will continue to help many fishing vessels stay in operation. As of July 31, 1964, the fisheries loan fund has provided needed financing for the replacement of 142 fishing vessels, the conversion of 25 vessels to purse seiners, the rebuilding and repairing of 202 vessels, the reequipping of 209 vessels, and the purchase of 152 new engines. In addition, 280 vessel mortgages and lienable debts on 255 vessels were refinanced. Many of these loans were multipurpose loans. During the period, beginning after the date of enactment of this act through July 31, 1964, a total of $15,774,000 had been loaned for these various purposes and $8.530,000 had been repaid. The interest collected during this period amounted to $1,766,000. While the principal purpose of this proposal is to extend the fisheries loan fund program to June 30, 1975, the proposal also contains other technical changes in section 4 of the 1956 act which are designed to make the program conform to the guidelines adopted by the President on Federal credit programs. The first of these changes removes the present minimum annual interest rate established by section 4 of the 1956 act and substitutes a formula for establishing the interest rate. This formula provides that the annual interest rate on each loan shall be a rate determined by the Secretary of the Treasury, taking into consideration the average cost of all outstanding interest-bearing public debt obligations of comparable maturity. The formula also provides that the rate may include an additional charge to cover administrative costs and prospective losses whenever the Secretary of the Interior determines that such an additional charge or portion thereof is consistent with the program objectives. The second technical change provides for the annual payment into miscellaneous receipts of the Treasury from the fisheries loan fund of the interest on total loans outstanding at the end of the fiscal year at a rate determined by the Secretary of the Treasury, taking into consideration the average cost of all outstanding interest-bearing Treasury obligations of comparable maturity. We believe that this would result in a rate of about 4 percent. Currently, the interest rate charged under the fisheries loan program is 5 percent. This rate has been sufficient for the past 3 fiscal years to cover all of the program's administrative costs of about 4 percent and annual losses incurred on individual loans. It is our intention to continue this charge. This will be sufficient to cover the payment into miscellaneous receipts of the Treasury and all future losses. It will not, however, cover administrative costs. Inasmuch as these administrative costs are now paid from the revolving fund, the principal of the fund will gradually be depleted and future appropriations to restore the principal may be needed. As required by the act of July 25, 1956 (5 U.S.C. 642a), the enclosed statement has been prepared concerning the estimated additional man-years of civilian employment and expenditures for the first 5 years of the program to which this proposal relates. The Bureau of the Budget has advised that there is no objection to the presentation of this draft bill from the standpoint of the administration's program. Sincerely yours, FRANK P. BRIGGS, Assistant Secretary of the Interior. A BILL To extend the term during which the Secretary of the Interior is authorized to make fisheries loans under the Fish and Wildlife Act of 1956, and for other purposes Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That section 4(b)(1) of the Fish and Wildlife Act of 1956 (70 Stat. 1121), as amended (16 U.S.C. sec. 742c (b) (1)) is amended to read as follows: "(1) Bear an interest rate of not less than (1) a rate determined by the Secretary of the Treasury, taking into consideration the average market yield on outstanding Treasury obligations of comparable maturity, plus (2) such additional charge, if any, toward covering other costs of the program as the Secretary may determine to be consistent with its purpose.” SEC. 2. Section 4(c) of the Fish and Wildlife Act of 1956 (70 Stat. 1121), as amended (16 U.S.C. sec. 742c (c)) is amended to read as follows: "(e) There is created a fisheries loan fund, which shall be used by the Secretary as a revolving fund to make loans for financing and refinancing under this section. Any funds received by the Secretary on or before June 30, 1975, in payment of principal or interest on any loans so made shall be deposited in the fund and be available for making additional loans under this section. The Secretary shall pay from the fund into miscellaneous receipts of the Treasury, at the close of each fiscal year, interest on the total loans outstanding at the close of such year at a rate determined by the Secretary of the Treasury, taking into consideration the average market yield on outstanding Treasury obligations of comparable maturity during the last month of the preceding fiscal year. Interest payments may be deferred with the approval of the Secretary of the Treasury, but any interest payments so deferred shall themselves bear interest. Any funds received in the fisheries loan fund after June 30, 1975, and any balance remaining therein at the close of June 30, 1975 (at which time the fund shall cease to exist), shall be covered into the Treasury as miscellaneous receipts. There is authorized to be appropriated to the fisheries loan fund the sum of $20,000,000 to provide initial capital." U.S. DEPARTMENT OF THE INTERIOR Estimated additional man-years of civilian employment and expenditures for the 1st 5 years of proposed new or expanded programs 1 Current year refers to fiscal year 1966 as bill would take effect July 1, 1965, if passed. Hon. HERBERT C. BONNER, THE GENERAL COUNSEL OF THE TREASURY, Washington, D.C., May 11, 1965. Chairman, Committee on Merchant Marine and Fisheries, DEAR MR. CHAIRMAN: Reference is made to your request for the views of this Department on H.R. 4227, a bill to extend the term during which the Secretary of the Interior is authorized to make fisheries loans under the Fish and Wildlife Act of 1956, and for other purposes. The proposed legislation would amend section 4 of the Fish and Wildlife Act of 1956 to (1) extend the fisheries loan program for 10 years to June 30, 1975; (2) change the statutory interest rate provision on fishery loans from a flat 3-percent floor to "an interest rate of not less than (1) a rate determined by the Secretary of the Treasury, taking into consideration the average market yield on outstanding Treasury obligations of comparable maturity, plus (2) such additional charge, if any, toward covering other costs of the program as the Secretary [of the Interior] may determine to be consistent with its purpose"; and (3) provide for annual payment, from the fisheries loan revolving fund into miscellaneous receipts, of interest on the amount of loans outstanding at the end of each fiscal year, the interest rate to be determined on the basis of the market yield on Treasury obligations of comparable maturity during the last month of the preceding fiscal year. While the Department has no independent knowledge as to the need for the extension of the fisheries loan program, the changes in the interest rate provisions of the Fish and Wildlife Act that would be made by the bill would make the loan program conform to the recommendations of the President's Committee on Federal Credit Programs and the Department recommends their 2doption. The Department would like, however, to suggest a technical amendment to section 4(c) of the Fish and Wildlife Act as it would be amended by section 2 of the bill. Under the second sentence of section 4(c) as presently written, the fisheries loan fund would pay interest to the Treasury on loans outstanding at the close of the fiscal year. The Department recommends that the following language be substituted for that sentence: "The Secretary shall pay from the fund into miscellaneous receipts of the Treasury, at the close of each fiscal gear, interest on the cumulative amount of appropriations available as capital to the fund from and after July 1, 1965, less the average undisbursed cash balance in the fund during the year. The rate of such interest shall be determined by the Secretary of the Treasury, taking into consideration the average market yields during the month preceding each fiscal year on outstanding Treasury obligations of maturity comparable to the average maturity of loans made from the fund." This recommendation has the approval of the Department of the Interior. The Department has been advised by the Bureau of the Budget that there is no objection from the standpoint of the administration's program to the submission of this report to your committee. Sincerely yours, FRED B. SMITH, General Counsel. Mr. THOMPSON. The Chair might say at the outset that this program has been very successful. I think that some amount over $13 million has been utilized for these purposes. Even if the act does expire, we are faced with a situation where we are probably importing 68 percent of the fish utilized in this country, industrially or otherwise, and it is extremely urgent that we continue this authority. The Chair might suggest to any witnesses that this subject has been heard at great length before by the subcommittee and the full committee, so we need to take only a few minutes to hear testimony as to how this program is operating in order to give the subcommittee time prior to the House going into session to go into executive session because of the urgency of the situation. The first witness this morning is our friend and colleague on the subcommittee, the gentleman from Massachusetts, Hon. Hastings Keith. STATEMENT OF HON. HASTINGS KEITH, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MASSACHUSETTS Mr. KEITH. Thank you, Mr. Chairman. As a member of the subcommittee and a cosponsor of the legislation now under consideration, I don't feel that it is either necessary or appropriate for me to make a lengthy statement in behalf of H.R. 4227 and the several companion bills before us. I do have several comments, however, and I appreciate this opportunity to state my views for the record. The fisheries loan program had the purpose of upgrading and modernizing the commercial fishing fleet of the United States and to contribute, therefore, to more efficient and profitable fishing operations in this country. There are objectives not only in the interest of the domestic fishing industry but in the national interest as well. The facts will prove that the program has been successful, and that it has been well received by the fishing industry. Witnesses from the Bureau of Commercial Fisheries, I am sure, will be able to provide us with complete information as to the number of loans which have been made under the program and how many vessels have been, as a |