THURSDAY, MARCH 19, 1981.

FARMERS HOME ADMINISTRATION

WITNESSES

DWIGHT O. CALHOUN, ACTING ADMINISTRATOR

L. D. ELWELL, ASSISTANT ADMINISTRATOR, MULTIPLE FAMILY HOUSING

GEORGE T. MOORE, ACTING ASSISTANT ADMINISTRATOR, FARMER PROGRAMS

JAMES C. ANDERSON, ACTING DIRECTOR, BUDGET DIVISION

JAMES V. LOUGHRAN, DIRECTOR, COMMUNITY DEVELOPMENT DIVISION, OFFICE OF THE GENERAL COUNSEL

WILLIAM KRAUSE, DIRECTOR, EMERGENCY LOAN DIVISION

STEPHEN B. DEWHURST, BUDGET OFFICER, DEPARTMENT OF AGRICULTURE

AGENCY HISTORY

Mr. WHITTEN. The Committee will come to order.

We have with us today the Farmers Home Administration. I understand your new Director has not yet been confirmed. Mr. Calhoun, the Acting Administrator, will appear and present the request of the Farmers Home Administration.

We have reached a point where we find it helpful, I think, to go back and pay tribute to what the agencies have done back through the years, because we are living under changed conditions.

The Resettlement Administration, as you recall, created by Presidential directive, was what became the Farm Security Administration. From there the Agency came on up to where in the last 12 or 15 years most any new program or new assignment in rural areas has been placed under the Farmers Home Administration. I think, looking over the agencies to which these new programs might have been directed, the Farmers Home Administration perhaps was in better shape to handle them than any other agency. As a result you have a tremendous job. Frequently, however, the Office of Management and Budget put a limit on your personnel and a limit on mileage, or travel funds, which made it difficult for you to do your job. So there are many reasons that contribute to what many people think has been rather lax handling of certain programs within your agency.

Further, my understanding is that in my area we have had about four short crops. As you know, production loans, for instance, are available only when you can show you cannot get a loan from another source. That has created quite a large workload. We are familiar with that. However, in connection with some of your activities, it is hard to understand how you could have ever gotten into the situation you did. Loans were made to wealthy people, most but not all of them in California, as I recall. People who happened to lose

on a particular activity received low interest loans to cover not only their loss but all their credit needs regardless of their ability to get credit elsewhere.

At the time the problems were reported by the news media we looked into it. Many people wanted this Committee to set some limits because the law did not provide any limits or any restrictions on the size of the loans which would have kept this from happening, or so they advised us.

I mention these things that are on your side, but I would like for you to discuss as part of your justification of your budget, many of these activities which have been the subject of discussion, news stories, and television stories.

So you may proceed, but in the process before you get through, I hope you will touch on these activities with which you are familiar and then we will ask our questions.

What is your position in the Department, Mr. Calhoun?

Mr. CALHOUN. Mr. Chairman, my official position is Assistant Administrator for Community Programs.

Mr. WHITTEN. That means you do the work while somebody else runs around.

Mr. CALHOUN. No, sir. I wouldn't say that. That is my official position. At the moment, I am the Acting Administrator.

Mr. WHITTEN. We know of your work in the Department-I dofrom some of those who were with the Department who are now retired. I have a high regard for your work there, and we are glad to have you here to present this matter. You have been with them quite a while and are familiar with the operations of the Department. So we will be glad to hear from you at this time.

INTRODUCTION OF ASSOCIATES

First you might introduce the associates who might be new to the Committee and also place in the record a biographical sketch. In fact, I think yours has appeared in times past, has it not?

Mr. CALHOUN. Yes, it has.

Mr. WHITTEN. You might proceed then to introduce those who are new and proceed in your own way.

Mr. CALHOUN. Thank you, sir.

The first gentleman on my right is Mr. L. D. Elwell, the Assistant Administrator for Multiple Family Housing.

At the end of the table on my right is Mr. George Moore, who is the Acting Assistant Administrator for Farmer Programs. Both of these gentlemen have been with the agency for a number of years and have worked here at the National Office level and also have extensive experience working in the field in Farmers Home Administration.

On my immediate left is Jim Anderson, who is the Acting Director of our Budget Division.

And on down near the end of the table is Steve Dewhurst, Budget Officer for the Department of Agriculture.

We also have with us Jim Loughran, who is with the Department's Office of the General Counsel.

Mr. WHITTEN. You think you are going to have to call on your lawyer before you get through?

Mr. CALHOUN. We may need to do that, Mr. Chairman, with your permission.

We also have with us the individual who will be proposed for the position of Under Secretary of Agriculture for Small Community and Rural Development, Frank Naylor.

Mr. NAYLOR. Mr. Chairman, good to be with you, sir.

[The biographical sketch follows:]

GEORGE T. Moore, Farmers HOME ADMINISTRATION, NATIONAL OFFICE

Native of Tennessee; grew up on a cotton-livestock farm.

Graduate University of Tennessee; B.S. degree in agriculture.

Veteran of World War II; taught agriculture in veterans training programSenath, Mo.

Served as FmHA county supervisor in Tennessee for many years; worked as real estate loan officer on Tennessee State office staff.

Served for many years as farm real estate loan officer on national office staff; holds professional designation of "certified review appraiser” in national association of review appraisers.

Director, Farm Real Estate Loan Division; has served for several months as acting assistant administrator, farmer programs.

Mr. CALHOUN. We have prepared a statement that we would be happy to submit for the record.

SUMMARY OF STATEMENT

Mr. WHITTEN. You might proceed in your own way.

Mr. CALHOUN. Let me just highlight a few of the points and then present the total statement, if that is all right with you, sir, for the record.

It is certainly my pleasure to be here and visit with you concerning the needs of the Farmers Home Administration and rural people in this country.

The amended budget for the 1982 fiscal year is estimated at $8.6 billion. The agency now administers some 31 loan and grant programs for farming, housing, community facilities and businessindustrial development in rural areas.

FmHA carries its services to the rural public directly through more than 2,300 local offices at the county and State level.

You recognized earlier, Mr. Chairman, that Farmers Home has a delivery system that has no equal. We have people located near the service areas and can be of service to the rural folks through those many offices. We feel that this is a real advantage in being able to know the local problems and work very closely with the rural people in trying to solve those problems.

You mentioned the Resettlement Administration. Since this program was started in 1935, the objectives have grown and as we moved on into the Farmers Home Administration in 1946, this agency also strengthened its primary role as a provider of supervised credit for farmers and other rural people, our program has been geared to those individuals and organizations that cannot get credit from other sources. In addition, we have pioneered the development of central water systems and other programs that provide that sort of service.

RURAL DEVELOPMENT RESPONSIBILITIES

The agency has also undertaken the responsibility under title 5 of the Housing Act of 1949, as amended, to improve housing for rural people and, of course, additional programs under the Rural Development Act of 1972, to help modernize rural communities with various community facilities and programs of that type.

During the past four years and continuing into the current year, the Farmers Home Administration has borne an unprecedented load of responsibility of helping to meet the general farm credit emergencies that were fundamentally due to the weather and inflation. You have already commented on that need.

Disaster emergency loans and the special economic emergency loan program enacted in 1978 have far exceeded the traditional farm ownership and farm operating loans that are intended to help families enter farming and develop successful family farms from meager or modest beginnings.

STAFFING BELOW PROGRAM REQUIREMENTS

Eligibility for emergency credit is not confined to this class of family farmers. The sheer volume of lending in farm programs, housing, community and rural business programs administered through FmHA has taxed our work force almost to the breaking point. It has weakened services and farm loan supervision and counselling that have helped so many people to succeed over the years.

We find in some cases that loan servicing and collection has not received the proper emphasis that we think needs to be placed on this priority item. During the past 12 years, the agency's portfolio of loans and guarantees outstanding has risen from $52 billion in 424,000 accounts to $55 billion in 1,200,000 accounts.

The ratio of staff years of work to every million dollars loaned and serviced has dropped from one staff year to less than one-fifth of a staff year.

The fiscal year 1981 program level is estimated at almost $14 billion for all programs combined. Farm loans will account for more than half of that amount and three-quarters of the farm credit will emanate from emergency programs.

Last year, the agency obligated almost $13 billion, including $62 billion of farm loans.

1982 AMENDED BUDGET

In the present outlook for fiscal year 1982, economic emergency lending will subside with the expiration of the program next September 30. Administrative and legislative actions taken the past year are also bringing back to earth the volume of disaster emergency loans for purposes other than restoring what was actually lost.

The budget proposed for 1982 concentrates a greater proportion of our effort in the basic programs reserved for the family farmers. We are asking for $2.2 billion loan authority for farm ownership and farm operating programs. This includes some offset to the expiration of the economic emergency loan program as an alterna

tive source of operating credit to meet some of the economic problems faced by family farmers.

Many farmers of limited equity continue to have difficulty securing conventional credit. There are farmers for whom the Nation has maintained an alternative credit source in FmHA, where they must turn to until earnings improve and they can obtain credit through normal channels. Thousands of today's best established family farmers came up the ladder by that route.

We consider that the least replaceable and therefore most critical mission conferred upon the Farmers Home Administration is that of furnishing not only the supplementary source of credit to family farm agriculture, but the counselling and assistance embodied in the concept of supervised credit.

Efficiency and good management were never more vital to the success of the family farmer. We recognize that ways must be found to insure the quality of our help to young farmers and other low equity farmers who carry out adequate financial and management practices to survive the tight inflationary years so they can consolidate their positions when better times emerge.

Mr. Chairman, in another area served by the Farmers Home Administration, the budget proposes for fiscal year 1982 a level of 78,540 single family units for people of low and moderate income.

In addition, the rural rental housing program is a major source of relief for the shortage of suitable, low-cost housing for elderly people or for families unable to afford single family homes.

The budget incorporates prospective adjustment by legislation in the financing of rural water and waste disposal systems to reduce subsidy cost. We have also proposed that the rate of interest charged in the community facilities loan program be increased to more accurately reflect the rates of the municipal bond market. The budget also proposes to eliminate the loan guarantee program for rural business and industry. This program has been slowed by commercial interest rates so costly as to make infeasible the financing of all but the most sound ventures, the very enterprises for which the private sector can and should provide credit without government involvement.

Also, since the acceleration of energy price deregulation and with the substantial tax incentives available, the B&I loan program guarantee is no longer looked upon as a potential avenue for financing for biomass fuel and energy development.

Mr. Chairman, that concludes the introductory remarks that I would like to make.

Subject to your permission, of course, we would like to ask that the prepared statement be inserted in the record.

Mr. WHITTEN. Be glad to have it in the record at this point. [CLERKS' NOTE.-The statement of Mr. Calhoun appears in pages 922 through 926, a History of the Farmers Home Administration appears on pages 927 through 977, and the Explanatory Notes appear on pages 978 through 1119.

MEETING RURAL AMERICAN NEEDS

Mr. WHITTEN. A lot of the questions that we may ask here have not been reconciled and have not been studied insofar as the Department answering all of the details. So we would like to have