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FEDERAL FARM MORTGAGE CORPORATION

HOUSE OF REPRESENTATIVES,

COMMITTEE ON AGRICULTURE,

Washington, D.C., January 10, 1934. (The committee this day met, Hon. Marvin Jones, chairman, presiding.)

The CHAIRMAN. The committee will come to order, please.

We have met for the consideration of H.R. 6670 which has for its purpose in the main the guaranteeing of the principal of the Emergency Land Bank bonds.

I have asked the Farm Credit Administration to make an explanation of its purposes and requirements. Governor Myers is here this morning and we will be glad to hear from him.

(The bill is as follows:)

(H.R. 6670, 73d Cong., 2d sess.) (A BILL To provide for the establishment of a corporation to aid in the refinancing of farm debts, and for

other purposes

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That the Governor of the Farm Credit Administration, hereinafter in this Act referred to as the “Governor”, is authorized to organize and charter a corporation to be known as the "Federal Farm Mortgage Corporation”, hereinafter in this Act referred to as the “corporation". The board of directors of such corporation shall consist of the Secretary of the Treasury, or an officer of the Treasury designated by him, the Governor, the Land Bank Commissioner, and two officers of the Farm Credit Administration to be designated by the Governor. The terms of the directors designated by the Governor shall be for a period of twelve months commencing January 1 of each year, but the terms of the directors first designated shall be for the balance of the twelve months' period commencing January 1, 1934, but a director appointed to fill a vacancy shall hold his office for the unexpired term of the director whose place he is selected to fill. Any director designated by the Governor may at any time be removed by him for cause. The directors shall receive no additional compensation for their services as directors of the corporation, but may be allowed actual necessary traveling and subsistence expenses when engaged in the business of the corporation outside of the District of Columbia. The Governor shall be the chairman of the board of directors. The directors shall have power to adopt such bylaws and amendments to the charter of the corporation as they deem necessary for the conduct of the business of the corporation. The directors shall have power, without regard to the provisions of other laws applicable to the employment and compensation of officers and employees of the United States, to employ and fix the compensation of such agents, officers, and employees of the corporation as may be necessary to carry out the powers and duties conferred upon the corporation, and to prescribe the manner in which the obligations of the corporation shall be incurred and its expenses allowed and paid.

SEC. 2. The corporation shall have succession until dissolved by Act of Congress; shall have power to sue and be sued in any court, to adopt and use a corporate seal, to make contracts, and to acquire, hold, and dispose of real and personal property necessary and incident to the conduct of its business; and shall have such other powers necessary and incident to carrying out its powers and duties under this or any other Act of Congress as may be provided by law or in its charter and bylaws or in any amendments thereto. The corporation shall

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be entitled to the free use of the United States mails in the same manner as the executive departments of the Government. The corporation, with the consent of any board, commission, independent establishment, or executive department of the Government, may avail itself of the use of information, services, facilities, officers, agents, and employees thereof, in carrying out the provisions of this Act.

Sec. 3. The capital of the corporation shall be in the sum of $200,000,000, which shall be subscribed by the Governor on behalf of the United States in such amounts and at such times as he deems necessary for the purposes of the corporation. For the purpose of such capital subscription, the funds and proceeds thereof made available to the Land Bank Commissioner under section 32 of the Emergency Farm Mortgage Act of 1933 and the mortgages taken by the Commissioner and the credit instruments secured thereby are hereby transferred and made available to the Governor.

SEC. 4. (a) With the approval of the Secretary of the Treasury, the corporation is authorized to issue bonds in an amount not exceeding in the aggregate $2,000,000,000 at any one time outstanding. Such bonds shall be in such forms and denominations, shall have such maturities, shall bear such rates of interest, shall be subject to such terms and conditions, and shall be issued in such manner and sold at such prices, as may be prescribed by the corporation, with the approval of the Secretary of the Treasury. Such bonds shall be fully and unconditionally guaranteed both as to interest and principal by the United States, and such guaranty shall be expressed on the face thereof, and shall, on account of such guaranty, be lawful investments, and may be accepted as security for all fiduciary, trust, and public funds the investment or deposit of which shall be under the authority or control of the United States or any officer or officers thereof. In the event that the corporation shall be unable to pay upon demand, when due, the principal of, or interest on, such bonds, the Secretary of the Treasury shall pay to the holder the amount thereof which is hereby authorized to be appropriated, out of any moneys in the Treasury not otherwise appropriated, and thereupon to the extent of the amount so paid the Secretary of the Treasury shall succeed to all the rights of the holders of such bonds. The Secretary of the Treasury, in his discretion, is authorized to purchase any bonds of the corporation issued hereunder, and for such purpose the Secretary of the Treasury is authorized to use as a public debt transaction the proceeds from the sale of any securities hereafter issued under the Second Liberty Loan Act, as amended, and the purposes for which securities may be issued under such Act, as amended, are extended to include any purchases of the corporation's bonds hereunder. The Secretary of the Treasury may, at any time, sell any of the bonds of the corporation acquired by him under this section. All redemptions, purchases, and sales by the Secretary of the Treasury of the bonds of the corporation shall be treated as public debt transactions of the United States. Such bonds shall be fully and adequately secured by such assets of the corporation and in such manner as shall be prescribed by its board of directors. The corporation shall have power to purchase such bonds in the open market at any time and at any price. On such terms and conditions as may be agreed upon, the corporation may exchange such bonds, upon application of a Federal land bank issuing bonds after the enactment of this Act under the provisions of the Federal Farm Loan Act, as amended, for such farm loan bonds of equal face value; and may exchange farm loan bonds held by it for bonds of the corporation of equal face value.

(b) The corporation is further authorized to purchase from time to time, for cash, consolidated bonds of the twelve Federal land banks issued or to be issued under the provisions of the Federal Farm Loan Act, as amended, at such price and upon such terms as may be approved by the board of directors of the corporation, and to make loans to Federal land banks on the security of such consolidated bonds.

(c) In order to furnish bonds for delivery by the Federal Farm Mortgage Corporation, the Secretary of the Treasury is hereby authorized to prepare suitable bonds in such form, subject to the provisions of this Act, as the board of directors may approve, such bonds when prepared to be held in the Treasury subject to delivery upon order of the corporation. The engraved plates, dies, bed-pieces, and so forth, executed in connection therewith shall remain in the custody of the Secretary of the Treasury. The corporation shall reimburse the Secretary of the Treasury for any expenditures made in the preparation, custody, and delivery of such bonds.

Sec. 5. After ninety days after the enactment of this Act, no Federal land bank shall issue any bonds under the provisions of the last paragraph of section 32 of the Federal Farm Loan Act, as amended, subject to the guarantee of interest on such bonds by the United States, but this provision shall not apply to the issuance of any bond to refinance any bond which is or has been issued subject to such guarantee of interest.

SEC. 6. Direct loans made under section 7 of the Federal Farm Loan Act, as amended (U.S.C., Sup. VII, title 12, sec. 723), or under section 32 of the Emergency Farm Mortgage Act of 1933, may, at the option of the Federal land bank or the land bank commissioner, as the case may be, be made in bonds of the Federal Farm Mortgage Corporation.

Sec. 7. The twelfth paragraph of section 12 of the Federal Farm Loan Act, as amended (U.S.C., Sup. VII, title 12, sec. 772), is amended to read as follows:

Amounts transmitted to farm loan associations by Federal land banks to be loaned to its members shall, at the option of the bank, be in current funds or Federal Farm Mortgage Corporation bonds, or, at the option of the borrower, in farm loan bonds."

Sec. 8 (a). Section 13 of the Federal Farm Loan Act, as amended (U.S.C., Sup. VII, title 12, sec. 781), is amended by inserting at the end thereof the following new paragraphs:

“Fifteenth. To exchange farm loan bonds for Federal Farm Mortgage Corporation bonds of face value, and to purchase Federal Farm Mortgage Corporation bonds at or below par.

"Sixteenth. To exchange Federal Farm Mortgage Corporation bonds for farm loan bonds of equal face value.”

(b) The seventh paragraph of section 22 of the Federal Farm Loan Act, as amended (U.S.C., title 12, sec. 897), is amended by adding the following after the first subparagraph (d) thereof:

“(e). To purchase Federal Farm Mortgage Corporation bonds."

SEC. 9. Section 32 of the Emergency Farm Mortgage Act of 1933 (U.S.C., Sup. VII, title 12, sec. 1016) is amended by inserting at the end thereof the following: "Upon issuance of the charter of the Federal Farm Mortgage Corporation, the Land Bank Commissioner shall, in his name, make loans under this section on behalf of such corporation, and the mortgages and credit instruments secured thereby, together with the funds available to the Land Bank Commissioner under this section, are transferred to such corporation. The proceeds of bonds issued under section 4 of the Federal Farm Mortgage Corporation Act are hereby made available for the purposes of this section, but the face value of bonds which may be issued for such purposes shall not exceed $600,000,000.”

SEC. 10. Section 62 of the Farm Credit Act of 1933 (relating to fiscal agents of the United States) (U.S.C., Sup. VII, title 12, sec. 1138b) is amended by inserting after "

Associations, the following: "the Federal Farm Mortgage Corporation,".

SEC. 11. (a) The corporation, including its franchise, its capital, reserves, and surplus, and its income shall be exempt from all taxation now or hereafterimposed by the United States, by any Territory, dependency, or possession thereof, or by any State, county, municipality, or local taxing authority; except that any real property of the corporation shall be subject to State, Territorial, county, municipal, or local taxation to the same extent according to its value as other real property is taxed.

(b) Mortgages executed to the Land Bank Commissioner and mortgages held by the corporation, and the credit instruments secured thereby, and bonds issued by the corporation under the provisions of this Act, shall be deemed and held to be instrumentalities of the Government of the United States, and as such they and the income derived therefrom shall be exempt from Federal, State, municipal, and local taxation (except estate, inheritance, and gift taxes).

SEC. 12. Section 64 of the Farm Credit Act of 1933 (relating to unlawful acts and penalties) (U.S.C., Sup. VII, title 12, sec. 1138d) is amended by inserting after “Farm Credit Administration” wherever such phrase appears a comma and the following: “any Federal intermediate credit bank, or the Federal Farm Mortgage Corporation,”.

SEC. 13. Paragraph (2) of subsection (a) of section 5 of the Farm Credit Act of 1933 (U.S.C., Sup. VII, title 12, sec. 1131i) is amended by striking out the period at the end thereof and inserting a comma and the following: "and the notes or other obligations evidencing such advances and loans and the security therefor are hereby transferred to the Governor of the Farm Credit Administra

SEC. 14. (a) Section 5 of the Farm Credit Act of 1933 (U.S.C., Sup. VII, title 12, sec. 1131i) is amended by inserting at the end thereof the following new subsection:

tion."

“(e) The amount of all balances, collections, and appropriations allocated under subsection (a) to the revolving fund created thereunder, which is in excess of $120,000,000, is hereby made available to the Governor of the Farm Credit Administration for the establishment of a revolving fund of not to exceed $40,000,000. Out of such revolving fund, the Governor is authorized to allocate and expend such amounts as he deems necessary for subscriptions to the capital stock and/or paid-in surplus of Federal Intermediate Credit Banks."

(b) The first sentence of paragraph (a) of section 2 of the Agricultural Credits Act, approved March 4, 1923 (U.S.C., Sup. VII, title 12, sec. 1061), as amended, is amended by striking out the period at the end thereof and inserting in lieu thereof a comma and the following: “which amount may be increased from time to time with the approval of the Governor of the Farm Credit Administration":

(c) Section 2 of the Agricultural Credits Act, approved March 4, 1923 (U.S.C., title 12, sec. 1061), as amended, is amended by adding at the end thereof the following: “With the approval of the Secretary of the Treasury, the Governor of the Farm Credit Administration is hereby authorized to subscribe from time to time to the capital stock and/or paid-in surplus of any Federal Intermediate Credit Bank on behalf of the United States, in such amounts as he may determine are necessary for the purpose of meeting the credit needs of eligible borrowers from the bank, and the amount of the capital stock and paid-in surplus of such bank may be increased or decreased from time to time by the Governor, in accordance with such needs. Such stock shall be divided into shares of $100 each and subscriptions to such paid-in surplus shall be made in multiples of $100 out of the revolving fund created under subsection (e) of section 5 of the Farm Credit Act of 1933, as amended. The Governor on behalf of the United States shall make payment for stock and paid-in surplus of such bank and such payment shall be subject to call in whole or in part by the board of directors of the bank, with the approval of the Governor.”

Sec. 15. Šubparagraph (b) of section 14 of the Federal Reserve Act, as amended, is further amended by adding the following after the semicolon at the end of such paragraph: “To buy and sell bonds of the Federal Farm Mortgage Corporation having maturities from date of purchase of not exceeding six months, and to make loans on the security of bonds of the Federal Farm Mortgage Corporation subject to the limitations and restrictions respecting loans on the security of direct obligations of the United States issued under the Second Liberty Loan Act, as amended."

Sec. 16. (a) If any provision of this Act, or the application thereof to any person or circumstances, is held invalid, the remainder of the Act, and the application of such provision to other persons or circumstances, shall not be affected thereby.

(b) The right to alter, amend, or repeal this Act is hereby expressly reserved.

Sec. 17. This Act may be cited as the “Federal Farm Mortgage Corporation Act".

STATEMENT OF HON. W. I. MYERS, GOVERNOR FARM CREDIT

ADMINISTRATION, WASHINGTON, D.C.

Governor MYERS. Mr. Chairman, would it be appropriate to point out what has been happening in carrying out the terms of the Emergency Loan Act?

The CHAIRMAN. I think it would, and you may just proceed as

you wish.

Governor MYERS. I have passed out to each member of the committee a statement showing the number and the amount of loans closed, by States, May 1, 1933, to December 31.

The total number of loans closed during that period was 79,254, amounting to $210,565,454. The progress by months is shown by a graph. I have only a few copies available but I will pass them out as far as they go. I think you can see what has happened from the chart.

Mr. CHASE. That is money actually paid out?
Governor MYERS. Money actually paid out.

When the act was passed, from 3 to 4 million dollars a month in loans were being closed; but from August to December, inclusive, the amounts closed approximately doubled each month. For August the amount was more than $7,000,000; for September, about $13,000,000; for October, about $28,000,000; for November, nearly $53,000,000; and for December, $98,000,000.

This increase is in response to the efforts put forth by the Farm Credit Administration to give effective relief through the refinancing of debts, made possible under the Emergency Farm Mortgage Act.

Up to last night we had paid out approximately $250,000,000. The daily loan volume now is approximately $5,000,000.

The $250,000,000 paid out includes both the Land Bank Commissioner's loans from the $200,000,000 appropriation for that purpose and the Federal land-bank loans made under the $2,000,000,000 authorization of bonds, the interest of which was guaranteed by the Government.

A distribution of those loans for the same period, that is, up to January 1, is shown in this tabulation. Of the $210,000,000 of loans which had been closed and the money paid out up to that date, $140,000,000 was land-bank mortgage loans, and about $70,000,000 was the Land Bank Commissioner's loans. Since we had available only $200,000,000 in the Land Bank Commissioner's fund and since $70,000,000 had been paid out, about $130,000,000 only was left available on January 1.

But, Mr. Chairman, the approvals have run far beyond the amount of loans actually closed, because it takes time to carry through the formalities incident to the closing of loans. On January 1, loans aggregating more than $655,000,000 were approved but not paid out, in addition to the amounts paid out. That amount was divided into approximately $406,000,000 of land-bank loans, approved but not closed, and $249,000,000 of Land Bank Commissioner loans, approved but not closed.

For about 2 months we have made approvals of loans subject to available funds. You will remember that the $200,000,000 was made available under condition that this would be all that could be spent before January 1. This accounts for the loans being approved in advance of loans closed. On January 1, therefore, we had paid about $70,000,000 from the Land Bank Commissioner's fund and we had tentatively approved loans aggregating about $249,000,000. These approvals, however, were made subject to the availability of funds.

The $140,000,000 of land-bank loans which have been closed have been paid entirely in cash. When loans have been approved, we have not sold bonds on the market from the $2,000,000,000 authorization to get funds to pay the borrowers, for reasons you well understand. It has been impossible, because of conditions which were not foreseen, to sell the bonds at or near par. We have used the bonds as collateral for borrowing from the Reconstruction Finance Corporation, and have obtained commitments of $150,000,000. We have borrowed, therefore, on the security of those bonds in order to pay cash to the borrower. None of the bonds issued under the $2,000,000,000 authorization are in the hands of the public.

We have proceeded as well as we could. There were delays which we regret. But having got the machinery under way, we find it

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