Supplemental appropriation act, 1950, authorization to borrow from the Secretary of the Treasury_. Budget estimate, 1951, authorization to borrow from the Secretary of the Treasury_. $25,000,000 50, 000, 000 Mr. WHITTEN. Mr. Wickard, we are indeed sorry to miss Mr. Neal and his appearance here, and we regret exceedingly his untimely death. It was a pleasure to deal with him here. He was an asset to the REA program. In the many complicated problems that arose I know he was of great service to yourself, to the committee, and to the Congress. I want the record to show that we are exceedingly sorry to know of his untimely death. He will be missed. Mr. WICKARD. May I ask if it will be all right to send to his widow your remarks and the expression of this committee? Mr. WHITTEN. Yes, sir. Mr. HORAN. Include mine with them. Mr. STIGLER. I want to associate myself with the statement made by the chairman. When I learned of Mr. Neal's death during the adjournment it was a great shock, and I thought what a great loss it would be to REA. In my contacts with him I found him very sympathetic to our problems and at all times ready, willing, and able to solve those problems. I think the Nation has lost a great man. GENERAL STATEMENT Mr. WHITTEN. Mr. Wickard, we will be glad to have your general statement. Mr. WICKARD. Mr. Chairman and members of the committee, we are glad to have the opportunity to come before you at this time. We understand that we are here at this time because of the interest of the committee in the policy on making loans for generation and the transmission facilities, and if it is agreeable to the committee Mr. WHITTEN. Mr. Wickard, the committee is interested in your power generation loans. However, we expect to go into your general operations, as is always done. You are asked to project into the next year your request for funds and to justify them. The committee, at least I believe I am speaking for the committee, appreciating that certain matters which were now pending appeared to be highly controversial, believed it to be to the interest of the Rural Electrification Administration that these matters be discussed with the committee, all of us being interested in REA and its operation. At that time, you were advised that we would be glad to hear you earlier than was originally scheduled, if you so desired. You, as the head of REA, are expected to run it. The committee recognizes that. But the committee is also interested, and is charged with the responsibility of initiating appropriations, and for that reason we felt that these matters, all matters affecting the REA are pertinent to the present inquiry. LOANS FOR GENERATION AND TRANSMISSION FACILITIES Mr. WICKARD. We have the opportunity today to discuss all matters relating to the Rural Electrification Administration's needs for funds for the next fiscal year. They involve a lot of matters which have to do with funds which are now available to us, carry-over from those funds, and as I said, we had planned to start out to discuss with the committee our policy on making loans for generation and transmission facilities because the large amount of our money is going for that purpose, and I think it will have a direct bearing upon a consideration which the committee will want to give to our request for funds in 1951. Mr. WHITTEN. As to that, you may follow your own course. Mr. WICKARD. With reference to the authority which the Rural Electrification Administration has for making loans for the installation of generation and transmission facilities, I would first like to read from section 4 of the REA Act the following sentence: The Administrator is authorized and empowered * * to make loans for the purpose of financing the construction and operation of generating plants, electric transmission and distribution lines or systems for the furnishing of electricity to persons in rural areas who are not receiving central station service. Mr. WHITTEN. At that point, you might also state that this committee and the Congress had backed you to the limit always in trying to do everything that was needed to carry out that intent. Is that not correct? Mr. WICKARD. I agree with that statement, Mr. Whitten. REA has a definite policy which it pursues under this authority which I have just quoted, and that policy is in our administrative bulletin, a way we have of putting down in definite form what our policies are which we follow. Those policies are made known to everyone who is interested, to all employees and our borrowers, and we would be glad at any time to have them reviewed by the committees of Congress. I want to quote the policy which relates to the making of generation and transmission loans. The policy, which was adopted December 19, 1946, states: The Rural Electrification Administration will make loans to finance the initial construction of generation facilities and transmission facilities only under the following conditons: (a) where no adequate and dependable source of power is available in the area to meet the borrower's needs, or (b) where the rates offered by existing power sources would result in a higher cost of power to the borrowers than the cost from facilities financed by REA. Mr. WHITTEN. Has that been your policy all along? Mr. WICKARD. Yes, sir; that policy is in keeping with the policy which was established even before the Rural Electrification Act was passed. You see, REA operated for a little over a year under an Executive order. When the REA Act was passed, or was under consideration, there was debate in the Senate concerning this particular provision concerning generation which I just referred to a while ago. The question was raised: Would REA make loans, perhaps indiscriminately, under this authority? Senator Norris who was debating this question quoted at that time from a letter or a memorandum which he had received from the first administrator of REA, Mr. Cooke, and I will read that to you because I think it is important to the question which you have just raised: What was the intent of Congress, in other words, when it passed the REA Act giving REA this authority? How was it to be used, and I think it was on the basis of Senator Norris' expression that REA was given the authority which I have just quoted from the act. That memorandum read as follows: REA can make loans for generating plants but it must be shown conclusively (1) that energy is not available from any existing source; (2) that the proposed generating plant can produce energy at a lower cost than it could be obtained from any other sources; and (3) that the output of such plant will be used mainly for supplying energy for use in rural areas. That, it seems to me, is the basic reason for having the provision of the act which I have just quoted. Mr. ANDERSEN. The same one you are following? Mr. WICKARD. And is the one we are still following, and has been debated many many times in Congress and has been discussed before this committee and other committees. Mr. WHITTEN. Last year, in an effort to be sure that rural service be speeded up, we provided $350,000,000 and further provided that an additional $150,000,000 would be available. I mention this that you may have no misgiving as to the real interest of this committee, in providing electric service to rural people. Mr. WICKARD. I want to say to the committee that I think that the Congress has been very liberal with us, both as to the matter of funds, and has shown considerable confidence in us by the amount of discretion which we may use, as you have just indicated. And I also want to say that we are very glad to have an opportunity to discuss this matter very fully with the committee. And of course we try to carry out what we think is the understanding of Congress, and using our authority, we are sometimes criticized by people who say we do not carry out our policy. I say we are criticized by both the people who want to borrow money and the people who think that it would be unwise for us to loan money. And this sort of hearing gives an opportunity to fully review our policy. We think we are following it rather religiously and perhaps some people think we are following it too conservatively; but nevertherless, we are doing the best we can and we hope that everybody has an understanding as to how we are trying to carry out the policy as well as what the policy is. Now, there are three reasons, three general reasons why we think that it is wise to have this policy and three objectives which we have |