between State and Federal authorities could thereby be secured in carrying out the purpose of the act. The Administration and the Office of the Administrator was to cease to exist at the expiration of 2 years from the date of the act; however, the Administration was continued until it was ordered liquidated by the act of June 22, 1936 (49 Stat. 1597). Direct Federal relief was thereafter continued under the Works Progress Administration, which was established on May 6, 1935, and ordered liquidated on December 4, 1942.

CREATION OF STATE CORPORATIONS

Funds granted by the Federal Emergency Relief Administration to the States for rural relief were earmarked for that purpose and administered by rural rehabilitation divisions in the State emergency relief administrations. Since these funds were used to make loans and in some instances to purchase land, it was thought desirable by the Federal Emergency Relief Administration to have created in each State a nonprofit corporation to handle rural relief. Accordingly, between July 1934 and April 1935, corporations for this purpose were organized and began functioning in 43 States. Most of the directors of the corporations were connected with the State or Federal emergency relief administrations. The stock of the corporations was pledged with the Federal Emergency Relief Administrator to insure compliance with conditions of the grants. Under the act of February 15, 1934, some grants were made directly to the corporations. Pursuant to a directive of the Federal Emergency Relief Administration, most of the functions of the rural rehabilitation divisions in the State administration were transferred to corporations.

The Emergency Relief Appropriation Act of 1935 (49 Stat. 115), approved April 8, 1935, appropriated $500,000,000 for rural rehabilitation and relief in stricken agricultural areas, and related purposes, and also made funds available for use at the discretion of the President for making loans to finance the purchase of farms and necessary equipment for farmers, farm tenants, sharecroppers, and farm laborers. Pursuant to that act, and primarily for the purpose of administering the rural program, the President created the Resettlement Administration by Executive order dated April 30, 1935.

Shortly thereafter, a ruling of the Comptroller General made it impossible to carry out the programs authorized by this act through grants to the States or agencies thereof, including the corporations, and the funds were administered thereafter as a direct Federal activity.

TRANSFER OF FUNDS

On June 19, 1935, the Federal Emergency Relief Administrator ordered all State emergency relief administrators to transfer all funds and property, of any nature whatsoever, acquired for or incident to, rural rehabilitation or drought relief purposes to the State corporations prior to the close of June 30, 1935.

When it became apparent that the corporations could not thereafter be financed by Federal funds, the corporations, on or about June 30, 1935, vested the management of their assets in the Resettlement Administration and agreed to transfer their assets to the United States for the purpose of carrying on a rural rehabilitation program in

the particular State involved. Pursuant to resolution of the corporations, practically all of the assets of the corporations were transferred either to the Administrator of the Resettlement Administration, or the Secretary of Agriculture, in accordance with transfer agreements which were entered into with the several State corporations between December 1935 and August 1941.

On January 1, 1937, the functions and duties of the Resettlement Administration were transferred by Executive order to the Department of Agriculture. Shortly thereafter the name of the Resettlement Administration was changed to the Farm Security Administration. In the Department of Agriculture Appropriation Act of 1944, provision was made that the Secretary could use these corporation funds only for the purposes for which he could use funds appropriated under the item "Loans, grants, and rural rehabilitation." The same restriction was carried in each appropriation act thereafter up to and including that of 1947. On August 14, 1946, the Farm Security Administration was abolished by the Farmers Home Administration Act of 1946 and these functions of the Farm Security Administration were taken over by the Farmers Home Administration.

TRUST AGREEMENTS

The agreements transferring the assets of the corporations to the Secretary of Agriculture recited that the corporation had been carrying on a rural rehabilitation program in the State from the proceeds of grants, loans, and other assistance received principally from the Federal Government; that the corporation was unable to secure any further funds from that source; and that, therefore, it was transferring its assets to the Federal Government for administration along with Federal funds as the best means of protecting the assets and preventing hardship to those being served by its activities.

The trust agreements authorized the Secretary of Agriculture toadminister and expend the property and assets transferred hereunder and the proceeds thereof, in such a manner as he shall deem necessary or appropriate for rural rehabilitation purposes in the State.

The agreements provide that in the event the Secretary of Agriculture shall cease to have the authority to use the funds as provided therein, the remaining assets shall be retransferred to the corporations or to such other agency as may be designated by the legislatures of the respective States.

These funds have been used by the Secretary, pursuant to the agreements, for the general purposes of rural improvement and assistance provided in titles I, II, and IV of the Bankhead-Jones Farm Tenant Act. Although used for this general purpose, they have constituted a special fund requiring separate accounting and administration. Most of the State corporations from whom the assets were transferred have gone out of existence. A few have continued their corporate existence and some degree of activity.

Some of the States demand a return of these assets to the State corporations. Other States are apparently willing that the assets should continue to be handled and administered by the Farmers Home Administration. Without this legislation the exact legal status of these funds which have been administered by the Federal Government pursuant to the transfer agreement will be somewhat

clouded and subject to disagreement between the States and the Federal Government. Under this bill the legal status of the funds. and the program involved, and the administration of the assets, will be clarified by bringing to an end the operation under the transfer agreements and either returning the funds to the State corporations or establishing them clearly in the Farmers Home Administration as a revolving fund for use in the particular States.

There can be no doubt that the trust agreements transferring these assets to the Secretary of Agriculture for administration are legally binding instruments, enforceable in the courts, and establishing an unconditional obligation on the part of the United States to return the trust assets to the States. Some of the trust agreements, particularly that of North Carolina which was ably presented to the committee by a representative of the North Carolina Rural Rehabilitation Corp., provide unconditionally for a return of the assets to the States at the expiration of a stated period. It also sets out specific conditions under which the funds are to be administered by the Secretary of Agriculture and provides for the immediate revesting of the assets in the State if any of the prescribed conditions are violated.

Ample evidence was presented to the committee during its hearing on this matter that both the Federal Emergency Relief Administrator and the Comptroller General, at that time Mr. McCarl, regarded the grants to States for rural rehabilitation and relief purposes as outright grants and the assets arising from those grants as the property of the States.

The agreements transferring these assets to the Secretary of Agriculture for administration were entered into at the suggestion of the United States and under terms proposed by the Federal agency involved. In the opinion of the committee, the United States is now estopped from questioning the title of the respective States to the trust assets and from making any disposition of said assets other than that directed by the States, if the State chooses to exercise its rights under the agreement. The committee believes, however that the Government is clearly within its legal rights in establishing the time and the manner in which these trusts are to be liquidated and the responsibility of the United States under them discharged. This bill establishes such time and conditions in a manner which the committee believes to be fair and equitable to all of the parties concerned.

ASSETS

The total amount of the assets involved is relatively small, amounting to only approximately $50,000,000. The following table shows the amount and type of these assets accredited to each State:

Grand total.

18, 693, 949. 80 27,626, 926. 51 1,881, 416. 46 264, 853. 11

176, 018. 52 48, 643, 164. 40 16, 066. 35 5,981, 187.90 42, 645, 910. 15 48, 643, 164. 40

8,881, 753. 50