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to all. I know many drainage districts where the bonds and the bondholders had nothing because they had no value. The land owners were in a terrible fix because the debt had piled up to where it could not be handled, and through the Reconstruction Finance Corporation everybody gained, including the Government. So, if this cannot be practically done under the terms of the law, then perhaps consideration should be given to amending the law.
I did want to develop in the record what this program really is and what effort was being made to carry it out.
Mr. LASSETER. If we do not hold the line on that, the amount of money that I said would be adequate would certainly not be adequate.
LIMITATIONS ON SIZE OF DISASTER LOANS
Mr. WHITTEN. Is there any limitation on your loans, or should there be ?
Mr. LASSETER. According to the law, there is no limitation. We discussed that at length with the Agriculture Committee in the House, and I believe the record there of the hearing would show that the committee did not consider that it should place a limitation on the size of these loans.
As you know, this $45,000,000 was made available to us through action of the legislative committee, and it did not come before this committee, and I made my report to them during the hearing on another subject, and there was a good deal of discussion about it. But there was no indication that we should place a limitation, although I was asked specific questions as to whether I wanted a limitation and I said, I think you were there, Mr. Horan—that, from the standpoint of making my money go farther, yes. But if a man is a big operator, and if he has suffered a disaster, and there are seven or eight hundred people on his plantation that are dependent upon his running that establishment, and he gives us good security, the security on a large loan is generally better than the other—that we did not have the right to turn him down when we had adequate money. But the money is running out, and we are going to have to place some limitation somewhere.
Mr. WHITTEN. I can see what you would be faced with. But, on the other side, I think you should be allowed to exercise some discretion.
Mr. Lasseter, you have handled the disaster loan program with regular employees, have you not ?
Mr. LASSETER. Yes, sir; except we have had some additional personnel, what we call disaster-loan supervisors. We have stationed them around at strategic places; and, as I pointed out here, we have used since the beginning of that program $505,000 of administrative money on that.
Mr. WHITTEN. If the committee could figure out here, in line with your justification, whether we could appropriate this fund for production and subsistence loans, and then tie it down for the real emergency which faces you by writing restrictions into it providing that, while it is appropriated for production and subsistence, loan authorizations shall be limited to those areas designated as disaster loans,
and further restrictions where you would have to meet the same requirements, could you not get by with considerably less than this amount if need be in view of the showing you have made as to what the need is in those States?
Mr. LASSETER. You mean less than $25,000,000 ?
Mr. LASSETER. I hope so, Mr. Chairman, and I think so; but I am optimistic, and the people who are closer to it than I am probably do not believe so.
Mr. WHITTEN. Five million dollars is the maximum, less than $6,000,000 in any one State for a widespread area, and you have estimated here—someone has—two or three million would be the limit here, and as I understand it, this is 2,000,000 that has caused you to face this situation. I am not trying to get below what is adequate.
Mr. LASSETER. We left the wrong impression, Mr. Chairman. The wheat area extends up and down over many States.
NEED FOR ADDITIONAL FUNDS PRIOR TO RECEIPT OF COLLECTIONS
Mr. BRASWELL. The real problem that we have now and the most pressing problem is in the Great Plains area, the Wheat Belt.
Mr. WHITTEN. If we understand the revolving fund business, your collections should begin to come in not too long off and we are not having to meet this entirely separately, but those funds that come in will be available to meet these needs or some of them, and the law contemplated that they meet it entirely. You are just in a little tight position to tide you over into the period when those funds do come in.
Mr. BRASWELL. It will be the middle of October before we get enough funds to make a difference.
Mr. WHITTEN. You could not use a third of it by the middle of October ?
Mr. BRASWELL. The most pressing need we are going to have is going to be out in the Wheat Belt and the loans are needed in August and September for winter-wheat production.
Mr. LASSETER. How much do you estimate we are going to need out there?
Mr. BRASWELL. About $15,000,000, at least, in the wheat area.
Mr. LASSETER. In wheat alone; and two or three millions in the flooded areas.
When will the impact hit us?
Mr. WHITTEN. If you can get $15,000,000 now, you can get by because your collections from this other will be in sight.
Mr. LASSETER. I will take a chance on it.
Mr. ANDERSEN. I would like to say that I do not see how North Dakota especially and my State of Minnesota can get by with anything less than $5,000,000 in view of the disaster, and that money should start to come in there shortly because those people do not have even a crop. There will be a larger area there which Farmers Home Administration must service extensively by loans.
Mr. WHITTEN. You understand, Mr. Andersen, the point of it is that under this revolving fund the collections come in in ample time to meet it.
Mr. ANDERSEN. I understand that, but I do not see how you can expect much in the way of collections from these disaster areas this year.
Mr. LASSETER. We are not.
Mr. BRASWELL. You will not get collections until another crop has been produced. Mr. ANDERSEN. A year from this next fall
. Mr. WHITTEN. Collections from other loans would be made available to that area.
(Discussion off the record.)
Mr. HORAN. I might say, Mr. Chairman, I think we all want to be fair to the Farmers Home Administration. They have a very difficult administrative job. This letter that I referred to came from the ranking minority member of the Appropriations Committee and the Farmers Home Administration and the Commodity Credit Corporation were two branches of the Government where the actual commitments would appear to be consistent with what the budget had requested.
Mr. Roberts is having Mr. Bartelt explain the figures that he has; the figures that he had were actual commitments by FHA, as I recall, of $182,000,000, and then the January 1950 budget was footnoted, $60,000,000, and that footnote says “Based upon net transactions.
On comparative basis with expenditures in daily Treasury statements, this figure would be $166,000,000.” Now, Mr. Roberts is having those figures analyzed. But I myself would like to understand them. Bear in mind that Mr. Taber's letter was rather eloquent and the figures sent to him by Mr. Bartelt to the Under Secretary of the Treasury indicated that this was almost contrary to the situation that exists in some other parts of the Government because actual expenditures, by and large, by most of the branches of the Government were far below their budget figure requests. I think we ought to know that. I think it will have a bearing on the actual situation of Farmers Home basis now.
Mr. ROBERTS. I am having a man analyze those figures and get the basis for them from Mr. Bartelt who I understand submitted them to Mr. Taber. I think the one thing that will be disclosed on this analysis is that this item is different from most other programs that are operated on direct appropriations in that these figures reflect estimated receipts; whereas ordinarily estimated expenditures against appropriated funds are shown as gross expenditures and do not reflect estimated receipts from operations. I believe that is the factor that has caused this item to look different from most of the other organizations. I will be glad to furnish a statement not only to you but to other members of the committee as soon as it is analyzed.
Mr. HORAN. It has a bearing on the questions the chairman has been asking. We are all trying to get an over-all view of this thing so we will know offhand where we are.
(The statement referred to is as follows:)
EXPLANATION OF DIFFERENCES BETWEEN ESTIMATED AND ACTUAL EXPENDITURES
OF THE FARMERS HOME ADMINISTRATION, FISCAL YEAR 1950
The information supplied by the Treasury Department, for which an explanation was requested, is as follows:
Millions Farmers Home Administration :
of dollars Actual expenditures, fiscal year 1950 (based on Daily Treasury Statement)
182 Estimated expenditures, fiscal year 1950, as shown in 1951 budget---- * 60 1 Based upon net transactions. On comparable basis with expenditures in Daily Treasury Statesments this figure would be $166,000,000.
The $60,000,000 estimate shown above was arrived at by deducting from the estimated expenditures of $166,000,000 a total of $106,000,000 in anticipated collections during the year of farm ownership, water facilities, and production and subsistence loans. The $60,000,000 therefore was an estimate of the net effect upon the Treasury of operations during the year. Since the $182,000,000 does not reflect the effect of collections of these .loans (inasmuch as such collections are included in the Daily Treasury Statements as receipts), the comparable figure to the $182,000,000 is the estimate of $166,000,000.
In explaining the difference between the estimate of $166,000,000 and the actual expenditures of $182,000,000, it might be helpful at the outset to indicate the basis upon which the estimate of $166,000,000 was made. This estimate was developed last fall as a part of the regular submission to the Budget Bureau for inclusion in the 1951 budget, and therefore is based on judgment fairly early in the fiscal year 1950 as to what the expenditures would be. Also, there were some difficulties in making estimates in view of the nature of certain of the programs. For example, farm housing was a new program and there was no previous experience to use as a basis for estimating the actual cash expenditures during the year. Similarly, because the volume of disaster loans is determined by the need for such loans as it develops through the year which is not forseeable, it is difficult to estimate in advance the expenditures from the disaster loan revolving fund. As indicated by the following figures, the principal difference exists with respect to this fund.
Following is an analysis of the two figures mentioned above together with explanatory statements of significant differences:
Disaster loans (Public Laws 38 and 71, 81st Cong.).
tenancy loans returned to miscellaneous receipts of the Treasury..
It will be observed from this statement that there are three principal items accounting for the net differences in the totals:
1. Disaster loans. This difference of $20.7 million is due to inability to foresee the great increase in the demand for these loans which occurred during the fiscal year. As explained at the hearing, the expenditures from the Public Law 38 revolving fund were about three times the original expectations.
2. Farm Housing. Due to the delay in getting this program under way, the original estimate of $24.4 million proved to be too high. The obligations during the year approximated $20.6 million, although cash expenditures were only $14.4 million.
3. Balance of unused borrowing authorizations returned to Treasury. The total of $182 million includes, as expenditures during the year, an unused balance of $6.8 million which was returned to miscellaneous receipts of the Treasury.
This does not represent a cash expenditure but merely a book transaction whereby unused borrowing authorizations so returned were shown as expenditures in the accounts concerned but offset by similar amounts reflected as receipts on the books of the Treasury. The estimate of $166 million did not contemplate that the return of balances would be handled in Treasury accounts in this manner, and therefore did not include the $6.8 million.
From this analysis it is clear that the only activity for which actual expenditures exceeded the previous estimates was disaster loans. It should be emphasized that this did not involve any violation of the authority to use funds, inasmuch as the total available in the Disaster Loan Revolving Fund was $45.5 million, and even though the expenditures greatly exceeded estimates they were still well within the funds authorized to meet disaster needs under Public Law 38.
NEED FOR ADDITIONAL OPERATING EXPENSES
Mr. WHITTEN. Mr. Lasseter, you are handling this with the same personnel. What would the increase on the administrative fund for this amount to by comparison with what the Senate suggested?
Mr. LASSETER. $27,700,000 was the House figure. The Senate raised it to $29,000,000.
Mr. BARNARD. Originally, we asked for $30,000,000. The Senate increase is $1,300,000 over the House.
Mr. LASSETER. Off the record. (Discussion off the record.)
Mr. HORAN. Might I inquire, Mr. Chairman, how close to meeting the administrative costs do the interest payments come?
Mr. LASSETER. This last year about $11,000,000.
Mr. BARNARD. About $11,000,000 short. A couple of years ago when we got cut so much, we had interest payments about equal to the administrative expenses.
Mr. LASSETER. What happened, a lot of this outstanding money was a big interest-bearing reserve, a bigger one than we had before. We have been collecting so much money that the total principal balance has been declining. So the interest collections went down for that reason. The farm housing and farm ownership insured programs will increase the principal balance to be serviced.
Mr. WHITTEN. Mr. Lasseter, I want you to know that many of us in the Congress think you folks have done an excellent job. My questioning along the lines of some of your problems and some of the beliefs in the minds of the people as to what this program means were not directed in criticism to your efforts to hold them down, but I do realize it has caused an unusual demand in some cases, not from a real disaster, perhaps, with regard to certain individuals, but with the belief that, because of these other things, this was a good source of credit.
Now there is one other thing. You mentioned that in the cotton areas—that is where they make one crop—that you make a loan for this one crop. It is declared a disaster area this year and this year only, and, as I understand, it is true that when a man pays up all he owes, he feels he has established his credit for next year; but does it have to be a disaster in the next year? If this year is not exactly a disaster, but those people down there just happen to make enough to barely pay out, are you authorized then to declare it a disaster area again in view of that fact?
Mr. LASSETER. There is some doubt about that, Mr. Chairman.