elect a director to the land bank board. Now, the board is in effect the board of all four institutions. This is primarily a change in name in recognition of the fact that it is imperative that the four banks in each district cooperate and work together in serving the farmers' interests; it is imperative that they be under the supervision of one board and this section changes the name to what it really is to the Farm Credit Board.

Mr. ANDRESEN. Governor, how are these men going to be elected under this change?

Mr. MYERS. May I come to that just a moment later, Congressman Andresen?

Mr. ANDRESEN. Yes.

Mr. MYERS. Any further questions about that section?

Section 6 authorizes each Farm Credit Board to employ joint officers and employees for the four district institutions, and to acquire and dispose of such property, real or personal, as may be necessary or convenient for the transaction of the business of these institutions.

There is very great advantage in having the four credit units together and enabling them to employ joint employees, when one employee will serve all four. For instance, one general counsel can serve all four units; one controller the accounting office; one statistician; and so forth. This section would authorize the Board to employ joint employees for the four institutions, the costs to be prorated amongst them in a fair manner. The officers and employees appointed under this section will be officers and employees of the four institutions. Any questions on that section?

Mr. BOILEAU. Would you have one appraiser to do the appraisal work for all four?

Mr. MYERS. Not the appraisal work. The land bank is the only one of these units where you would have an appraiser of land, for instance.

Mr. BOILEAU. But the others have appraisers of property.

Mr. MYERS. That is separate. The land bank has its appraisers; the production credit associations have inspectors to inspect the collateral for production loans. The banks for cooperatives have appraisers who do their appraisal work of elevators, and it is impractical to use the same appraisers in each unit.

Anything further?

Mr. BOILEAU. I would just like to make this suggestion: That if you could work out a program that would enable you to use one appraiser to do this work it would eliminate some of the criticism that has been offered where you send out, for instance, a land appraiser, for instance, from St. Paul out in Wisconsin and he appraises the land. And then in the next few days another appraiser comes out to inspect some property, and the criticism is offered that it is an expense that could be avoided by having one appraiser do the same work while he is out there.

Mr. MYERS. Yes.

Mr. BOILEAU. I am not making that as a criticism, of course, but as a suggestion to meet the criticism that is offered.

Mr. MYERS. I think we have made progress in meeting that condition in the Farm Credit Administration. One of our big advantages in making Commissioner loans is that we did not set up any new agency. We used the land-bank appraiser, or the same appraiser

that appraised the land on which the land bank and Land Bank Commissioner loans were made, and have also made their services available to other Government agencies that have wished to have their judgment on the value of the farms.

Mr. BOILEAU. I was not making that as a criticism, you understand, but just to indicate the criticisms that have come to me and which could be avoided.

Mr. MYERS. I understand.

Any further questions on that section?

Sections 7, 8, and 9 make changes in the Federal Farm Loan Act incidental to the creation of the farm credit boards.

Section 7 repeals provision for Federal land bank districts (12 U. S. C. 671) and other provisions of Federal Farm Loan Act superseded by section 5; makes members of farm credit board ex-officio directors of Federal land bank in district (new); reenacts provision of 12 United States Code, 683, making compensation of officers and employees of Federal land bank subject to the approval of the Farm Credit Administration; and repeals 12 United States Code, 682a; substantially reenacted by section 5 (i).

Section 8 preserves power of Farm Credit Administration to readjust territories of national farm loan associations now exercised by reference to 12 United States Code, 671.

Section 9 amends 12 United States Code, 831, conferring removal powers upon the Farm Credit Administration, so as to permit the director at large to be removed for cause. Under existing law (12 U. S. C. 681, repealed by sec. 7), such director may be removed by the Governor of the Farm Credit Administration at will.

Sections 10 and 11 provide that the members of each farm credit board shall be ex-officio the directors of the Federal intermediate credit bank, the production credit corporation, and the bank for cooperatives in the district.

Section 10 amends 12 United States Code, 1002, providing that the, directors of the Federal land bank shall be ex-officio the directors of the Federal intermediate credit bank in the same city.

Section 11 amends 12 United States Code, 1131 and 1134, making similar provisions for the production credit corporation and bank for cooperatives in the district.

I find that I have not answered Congressman Andresen's question about the method of electing the directors. There are seven directors in a district. Up until 1933 the directors that were elected, were chosen, of course, entirely by the land-bank borrowers. There were three directors elected, three appointed, and in the case of one, the land-bank borrowers voted for candidates and the Farm Loan Board appointed one of the top three. Therefore, recognizing the borrowers' interest and the Government's interest there were three elected, three appointed, and the seventh one was nominated by the borrowers and appointed by the Federal Farm Loan Board.

The Farm Credit Act of 1933, probably in view of the fact that increased Government aid was given, changed that situation so that since then three directors are elected and four are appointed, and of the three who are elected one is elected by the land-bank borrowers, one is elected by the production credit associations, and one is elected by the borrowers from the bank for cooperatives, and of the four who are appointed, a stipulation is that one of them must be a borrower from the land bank.

There has been some criticism of the fact that farmer members are not given adequate representation. These amendments contain this proposal: That when the direct Government interest subsidy ends, whenever that occurs, that we are to revert to certain features of the general plan existing before 1933, when three directors were elected, three appointed, and the seventh one, so to speak, nominated by the borrowers and then appointed by the Farm Credit Administration. And of the three who are elected one will be elected by the land-bank borrowers, who must be a borrower, one elected by the productioncredit borrowers, and one elected by the borrowers from the bank for cooperatives. Since the other director will be nominated by borrowers from the land bank

The CHAIRMAN. Do they nominate a number?

Mr. MYERS. They would vote for any number, and one of the top three would be appointed.

Mr. HOPE. I would like to ask a question, Governor?

Mr. MYERS. Yes.

Mr. HOPE. There has been some criticism, or at least inquiries, as to why all three of them should not be land-bank directors instead of one from the land bank, one from the production credit, and the other from bank for cooperatives.

Mr. MYERS. Congressman Hope, I had just made an explanation of that before you came in.

Mr. HOPE. I am sorry I missed it.

Mr. MYERS. We are changing the name to the Farm Credit Board under which, in effect, you will have a board from all four institutions in order to render greater service to the farmers in these districts, and in each district the members of those four institutions would be represented on one board.

Mr. HOPE. I agree with you.

Mr. MYERS. Now, then, this changes the name of the board, which has been misinterpreted. While it is a land-bank board, it is also a board for the other three units whose credit they are passing on. Mr. HOPE. Has that been true in the past?

Mr. MYERS. Yes; since 1933.

Mr. HOPE. I see.

Mr. MYERS. They have since then been called the land-bank board, and we propose to recognize the situation that actually exists by changing the name to the farm credit board, which will be ex officio the board of all four units. Therefore you have one group of men residing in the district who are familiar with conditions and who see to it that long-term mortgage credit, short-term credit, and other credit agencies are correlated and coordinated and that they render good service to the farmers in the district without the overlapping that has existed in the past.

Mr. COFFEE. Governor, has that had a tendency to increase or decrease the amount of Federal land bank expense?

Mr. MYERS. I think there has been a decrease. In other words, in the beginning of the loaning program of 1933, 1934, and 1935 it was necessary to greatly expand the staff to take care of the job of making over $2,000,000,000 in loans. The staff that has been jointly employed would have been necessary for the land bank if we had operated separately. Due to the fact that there are three other units

and the costs are divided up among the other three units, each obtains part of the benefit of the service of these men.

Mr. COFFEE. The cost has been prorated on the basis of the loans made?

Mr. MYERS. That has worked out differently in different districts. The proration is agreed upon by the board of directors so that each institution will bear a fair share of the cost.

Mr. ANDRESEN. Of course, the larger amount is done by the Federal land banks, but they only have one director?

Mr. MYERS. Under the present system the land-bank borrowers elect one, and one is appointed director who must be a land-bank borrower.

Mr. ANDRESEN. That really gives them another.

Mr. MYERS. That really gives them two. Each member of the board does not consider himself merely the representative of the unit that elects him. This job is to represent the farmers and the public of his district and see that the people get fair service, sympathetic service and efficient service at reasonable cost; so that while the method employed means that each unit elects a director, nevertheless, when they come on the board they do not fight for their particular institution but they represent the farmers and the agricultural interests in order to give them the best service possible.

Mr. ANDRESEN. Now, prior to 1933 the borrowers on the Federal land bank had four directors?

Mr MYERS. They elected three.

Mr. ANDRESEN. They elected three?

Mr. MYERS. And nominated a fourth one.

Mr. ANDRESEN. Yes; but since you say that after the Government gets its money out of the proposition it is going to return to the system that existed prior to 1933. That is not exactly correct, is it; the farm credit and the other agencies will each have one director

Mr. MYERS (interposing). We cannot go back to 1933 unless you eliminate the other credit units and leave only the land bank. The intermediate credit banks the production credit corporations and the banks for cooperatives were established to help do the job. The land bank is the biggest unit, but the others were organized to increase and improve the service to agriculture.

I said I believe that they would go back to the method of having three persons elected by borrowers, three appointed and the third one nominated by the borrowers and appointed; and further, we do not want to wait until the Government gets its money out of it. This is to take effect when direct interest rate subsidy ends. Government capital in the operation will probably not be repaid until long after that time; the Governments interest in these institutions will undoubtedly continue for a long time after this change takes place.

Mr. HOPE. You refer to the subsidy that is granted through the reduction in interest rate?

Mr. MYERS. The reduced interest granted by the appropriation to pay interest on the individual land bank loans.

Mr. HOPE. That is the only thing you had in mind?

Mr. MYERS. That is the only thing I referred to.

Mr. HOPE. Yes.

Mr. MYERS. Then as soon as that ends we will go back to the former method?

Mr. BOILEAU. That will end with the present administration?
Mr. MYERS. I am not a prophet.

Mr. BOILEAU. That is the legislation that you have reference to, I mean?

Mr. MYERS. Yes.

Mr. BOILEAU. But this does not refer to it as a subsidy, does it? Mr. MYERS. It does not refer to it as a direct subsidy in the bill; we refer to that in the farm credit

Mr. BOILEAU. I mean, does this bill recognize that as a subsidy; does it speak of it as a subsidy?

Mr. MYERS. I think it refers to it as a reduced rate of interest provided by the Government.

Mr. BOILEAU. I think there may be some difference of opinion whether it is a subsidy or not. And I can readily understand from your viewpoint that it is considered a subsidy, but this committee, when it undertakes to have this legislation passed, must determine whether or not we are willing to call it a subsidy.

Mr. MYERS. It is called interest reduction.

Mr. HOPE. That I assume will be a means of reducing the rate on commissioner loans as well as

Mr. MYERS. The interest on the land bank loans only; these directors have nothing to do with the mortgage corporation.

Mr. HOPE. I see. All right.

Mr. BOILEAU. The interest reduction is made by

Mr. MYERS (interposing). On the land-bank loans.

Mr. HOPE. Just on the land bank?

Mr. MYERS. Yes.

Mr. BOILEAU. On the land-bank loans. And this legislation provides that the rate shall not exceed what?

Mr. MYERS. Six percent.

Mr. BOILEAU. Shall not exceed 6 percent?

Mr. MYERS. Yes.

Mr. BOILEAU. Now, if Congress legislates a reduction in the interest rate it is called a subsidy, but if you can do it as the farm credit administration, it is efficiency?

Mr. MYERS. We can only do what you authorize us to do.
Mr. ANDRESEN. May I ask you a question?

Mr. MYERS. Yes.

Mr. ANDRESEN. I see by the morning papers that the President wrote a letter to Chairman Jones calling attention to the fact that it will cost the Farm Credit Administration $40,000,000 if this bill that was passed should become a law. I think you have told the committee that it would be around 12 to 17 million.

Mr. MYERS. My testimony stated, as I remember it, that the cost of reducing the interest on the land loans to 3 percent would be about 31 to 32 million. And then, because I was not asked about the reduction in the rate of commissioner loans, that was not given. But the cost to the Government of that would be between eight and nine million dollars a year.

Mr. ANDRESEN. How much was it for last year; how much was the Government subsidy?

Mr. MYERS. About $33,000,000.

Mr. EVANS. This year about $30,000,000.