If it is foot-and-mouth disease, it usually spreads very rapidly, and if it is vesicular stomatitis, it spreads much more slowly. One of the things that we would study in this laboratory would be a more accurate and a more rapid method of diagnosis of foot-and-mouth disease. Mr. HORAN. Off the record. (Discussion off the record.) FARMERS' HOME ADMINISTRATION PRODUCTION AND SUBSISTENCE LOANS WITNESSES DILLARD B. LASSETER, ADMINISTRATOR, FARMERS' HOME ADMINISTRATION MARCUS B. BRASWELL, DIRECTOR, PRODUCTION LOAN DIVISION, FARMERS' HOME ADMINISTRATION CHARLES C. BARNARD, ASSISTANT CHIEF, BUDGET DIVISION, FARMERS' HOME ADMINISTRATION WILLIAM A. MINOR, ASSISTANT TO THE SECRETARY OF AGRICULTURE RALPH S. ROBERTS, DIRECTOR OF FINANCE AND BUDGET OFFICER, DEPARTMENT OF AGRICULTURE Mr. WHITTEN. Gentlemen, we are glad to have with us Mr. Lasseter, who is head of the Farmers' Home Administration, in connection with the budget request which has been sent down for the sum of $25,000,000 in loan funds and $1,500,000 for funds for increased operating expenses. Now having gone over the justifications that have been sent down, and having in my own mind some questions as to the correctness of the approach rather than the existence of the problem, I wonder, Mr. Lasseter, if this estimate isn't really needed in connection with your disaster program and if your shortage isn't there, rather than as it would appear in this justification. I wish you would tell us what the real facts are, and go into all the facts. Mr. LASSETER. This need has arisen from an unforeseen demand for loans growing out of natural disasters such as floods, drought, spring freezes of fruit crops, insect infestations, and so forth. However, it is obvious now that the disaster loan revolving fund will not be adequate to meet these needs. Mr. WHITTEN. That being the case, why was this item not submitted as a disaster loan estimate? Mr. LASSETER. There seemed to be some question as to whether the revolving fund could be increased without a change in present legislation. However, there is no question but what authority exists for making additional funds available to the Farmers' Home Administration to meet these needs. Accordingly, the Budget Bureau recommended that the matter be handled as proposed in House Document No. 640. Mr. WHITTEN. From what you have said, I think that the item should properly be discussed and justified here as a part of the disaster loan program, and request that you proceed on that basis. Mr. LASSETER. In accordance with your suggestion, Mr. Chairman, I will discuss first, and probably all the way through, the situation with respect to our disaster loan program. BASIC LEGISLATION FOR MAKING DISASTER LOANS I might point out first, so that there will be no confusion, that there are two programs, two disaster loan programs. The first was Public Law 71, which was the Columbia River disaster fund of $6,000,000. Mr. Horan, you recall that. Mr. WHITTEN. I would like for you in the record at this point to put the pertinent parts of the two acts in here. Mr. LASSETER. They are only a paragraph long. Both of them are very short. (The two acts above referred, to be submitted by Mr. Lasseter, are as follows:) PUBLIC LAW 785, EIGHTIETH CONGRESS, SECOND SESSION (SECOND DEFICIENCY APPROPRIATION ACT, 1948) LOANS TO FARMERS, 1948 FLOOD DAMAGE Loans to farmers, 1948 flood damage: To provide assistance to farmers whose property was destroyed or damaged by floods in 1948, $6,000,000 to remain available until June 30, 1949, which the Secretary of Agriculture is authorized to utilize through any existing agency or bureau for loans in such manner and upon such terms and conditions as he may prescribe for the purpose of aiding such farmers to continue farming operations, and for all necessary administrative expenses (not to exceed 4 per centum of the total amount of loans made) in connection with making and servicing such loans, including printing and binding, and personal services in the District of Columbia: Provided, That no such loan shall be made unless no other source of public or private credit is available. PUBLIC LAW 71, EIGHTY-FIRST CONGRESS, FIRST SESSION (FIRST DEFICIENCY APPROPRIATION ACT, 1949 LOANS TO FARMERS, PROPERTY DAMAGE The funds appropriated under the head "Loans to farmers, 1948 flood damage", in the Second Deficiency Appropriation Act, 1948, shall remain available until June 30, 1950, in accordance with the terms and conditions specified under said head, to provide assistance to farmers whose property is destroyed or damaged as a result of floods, storms, or other natural calamity during the calendar years 1948 and 1949. [PUBLIC LAW 38-81ST CONGRESS] AN ACT To abolish the Regional Agricultural Credit Corporation of Washington, District of Columbia, and transfer its functions to the Secretary of Agriculture, to authorize the Secretary of Agriculture to make disaster loans, and for other purposes Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That (a) there are hereby transferred to the Secretary of Agriculture (hereinafter referred to as the Secretary) all the functions of the Regional Agricultural Credit Corporation of Washington, District of Columbia, including but not limited to functions with respect to (1) loans to bona fide fur farmers as provided for in the last proviso in the paragraph headed "Regional Agricultural Credit Corporation of Washington, District of Columbia", in title II of the Government Corporations Appropriation Act, 1949 (Public Law 860, Eightieth Congress); (2) loans under authorization by the Secretary for the Regional Agricultural Credit Corporation of Washington, District of Columbia, to reenter an area or region where a production disaster has occurred, as provided for in the proviso in section 2 of the Department of Agriculture Appropriation Act, 1949 (Public Law 712, Eightieth Congress); and (3) the liquidation of all other loans heretofore made by the Regional Agricultural Credit Corporation of Washington, District of Columbia, and of all assets, contracts, property, claims, rights, and liabilities relating thereto. (b) There are hereby transferred to the Secretary the functions of the Farm Credit Administration and the Governor thereof with respect to the Regional Agricultural Credit Corporation of Washington, District of Columbia. (c) The Regional Agricultural Credit Corporation of Washington, District of Columbia, is hereby dissolved. The Secretary of the Treasury shall cancel the outstanding certificates of stock of the Corporation. (d) All assets, funds, contracts, property, claims, and rights, all records, and all liabilities of the Corporation are hereby transferred to the Secretary. The revolving fund created by section 84 of the Farm Credit Act of 1933, as amended, (12 U. S. C. 1148a), shall be available to the Secretary for the performance of the functions specified in paragraphs (a) (1), (2), and (3) of the section, including administrative expenses in connection therewith: Provided, That for the fiscal year 1949 the limitations on the administrative expenses of the Corporation with respect to the said functions shall be applicable to the Secretary. (e) All personnel of the Corporation (excluding personnel of the Farm Credit Administration serving as directors or officers of the Corporation), and such of the personnel of the Farm Credit Administration as are engaged principally in the work of the Corporation, shall be transferred to the offices or agencies designated by the Secretary to carry out the functions herein transferred, to the extent that he determines that such personnel are qualified and necessary therefor. (f) The Secretary may carry out the functions herein transferred and the authority conferred upon him by this Act through such officers or agencies in or under the Department of Agriculture as he may designate. SEC. 2. (a) The Secretary is hereby authorized 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, or other responsible sources. Such loans shall be made at such rates of interest and on such general terms and conditions as the Secretary shall prescribe for such area or region. The Secretary may utilize the revolving fund created by section 84 of the Farm Credit Act of 1933, as amended (12 U. S. C. 1148a), for making such loans and for administrative expenses in connection with such loans. (b) The funds transferred to the Secretary under section 1 of this Act, and all sums received by the Secretary from the liquidation of the assets, contracts, property, claims, and rights transferred to him under section 1 of this Act, from the liquidation of loans made under section 2 of this Act, and from the liquidation of any other assets acquired with funds from the said revolving fund shall be added to and become a part of the said revolving fund; and the revolving fund as so constituted shall remain available to the Secretary only for the purposes specified in sections 1 (d) and 2 (a) of this Act. SEC. 3. (a) No suit or other judicial proceeding instituted by or against the Regional Agricultural Credit Corporation of Washington, District of Columbia, shall abate by reason of this Act, but the Secretary may be substituted as a party in place of the Corporation upon motion or petition filed within six months after the effective date of this Act. (b) This Act shall become effective ten days after its enactment. Approved April 6, 1949. Mr. LASSETER. Now, to get the $6,000,000 out of the way, I will say that we have now used about all of that. As of June 30, all of that expired. All of that but about $200,000 was used which was very close, considering everything, and that balance has reverted to the Treasury. That is not the revolving fund. It was first appropriated, I think, in 1948 and then was extended through June 30, 1950 for damage occurring in the calendar years 1948 and 1949. That fund now is out of the way. Collections from it, of course, will be returned to the Treasury. DISPOSITION OF REVOLVING FUNDS Now the other fund which is available is the old RACC revolving fund, in the amount of approximately $45,000,000, and it is that fund I would like to discuss, and also I could place in the record the disposition of those funds. The summary indicates the original amount was $45,494,334; collections on loans out of that fund until June 30, 1950, $1,600,000. So the total is $47,094,334. Now, obligations until June 30 for loans were $32,773,906, and for salaries and expenses, $505,000. So a total of $33,278,906 has been obliagted, and $13,815,428 is the unobligated balance as of June 30, 1950. I have here a statement-I don't think I should have to read thoseof estimated collections in fiscal year 1951. I will be glad to place all of this in the record. Mr. WHITTEN. We will be glad to have it. Mr. LASSETER. Estimated collections are July through September, $2,700,000; October through December, $10,600,000; January through March, $2,700,000; April through June, $1,150,000; a total of $17,150,000 this fiscal year. I might point out that a good many of those loans will not come due by June 30, 1951. The citrus belt, for instance, and in what would be the soft-fruit belt, where they have to build up the orchards, they will not be able to pay us back out of a 1 year annual crop. So the problem is there now, and just speaking from memory, and the representatives of our organization can give you more details, the problem now is whether we are going to be able to ride out this demand before collections begin to come in in any appreciable amount. In other words, we will have $13,000,000 to meet all of the demands from the wheat area. Declarations of disaster areas have not been made out in the wheat country, and they have not yet come in for loans. I understand August and September is when that demand will hit its peak. I don't anticipate any more heavy demands in the boll weevil areas yet, but we do have the soft-fruit demand, that is, the peaches in the South, the soft fruit area in the West, that have not yet hit us with their full impact. So, as I have just said, it is a question of whether we are going to be able to hold on until the collections start in appreciable amounts. Mr. WHITTEN. Mr. Lasseter, there are a number of problems I know you have in this program, with which this committee is sympathetic. There has been some adequate provision for credits in areas that are stricken by disaster where other credits are not available at reasonable rates. On the other hand, I know that you had some problems due to a misunderstanding on the part of many people. In the first place, it wasn't commonly known as a credit program. Lots of folks didn't think they had to pay it back, which of cource, creates a big demand for the fund. Other folks took it who already had money, took it as an opportunity to bail themselves out and let the Government have the paper which they had, and with those two things operating, it created a demand far beyond that which the Congress intended to meet or, you might say, are financially able to meet, and I wonder what precautions you have taken to tie this down to really those cases where credit is needed and not available from other sources and to weed out where it is just a case of unloading that that is on you. Mr. LASSETER. I took some action-I don't remember the exact date, but from the very beginning, we resisted the efforts of creditors to get us to bail them out. I discussed it with a good many of you informally, and I also discussed this in detail with the legislative committee, the agricultural legislative committee, and at the very beginning, in some rare cases, we made the mistake of loaning some money to farmers to refinance their mortgaged chattels for their appraised market value. Now, Mr. Braswell, how much of this money was used before we did close the door? I will get to the door closing later, but how much did we actually lend that could be called refinancing? Mr. BRASWELL. Out of the more than $33,000,000, probably $2,000,000 or less was involved in the refinancing. Mr. WHITTEN. I got lots of complaints from our section about your changing the policy and no longer bailing then existing creditors out, and I told them the only thing that surprised me was that you changed it, because I was led to believe earlier that you weren't going to do that to start with. Mr. LASSETER. That was my own understanding, too. We did let them refinance some chattels when it seemed to be the only possible way of keeping them in business instead of their being foreclosed and shoved out, but what date was that now? Mr. BRASWELL. In February. Mr. LASSETER. In February of this year, we closed the door on any kind of refinancing, and I will say this, that for about a month or 6 weeks, I had a very tough time of it, but we did succeed in doing that, and the present regulations are that there could be none of that under any circumstances. At one time, I think, our mistake was natural. We didn't anticipate this terrific demand. Our experience with the Columbia River flood-first we estimated at a $20,000,000 need out there. The Congress gave us $6,000,000. Mr. Horan sponsored that, and out of that $6,000,000, we used $2,000,000. I never did anticipate there was going to be such a demand on this revolving fund. RATE OF INTEREST ON DISASTER LOANS Mr. WHITTEN. What is your loan rate under this? Mr. WHITTEN. And you do require repayment and such security as is available? Mr. LASSETER. All possible security we can get. We have been criticized for requiring too much security. If I may have this off the record (Off the record.) Mr. WHITTEN. I am trying to get the record complete as to what this is, just what we are trying to meet here in this request, and what your program is trying to meet. You also have another thing that caused you lots of trouble-3 percent interest, you know, for a man in the farming business, where he is paying his own production credit association as much as 412, now I believe it is 5 percent, when banks charge probably 6 percent. There |