by clause (2) of this sentence and which have not been repaid to the Government in full."

(6) Said Act is amended by adding the following new sections: "SEC. 204. Notwithstanding the provisions of any other law, the rate of interest payable by any corporation subject to this Act on loans hereafter made to the corporation by the Treasury shall be fixed by the Secretary of the Treasury, taking into consideration the current average market yields of outstanding marketable obligations of the United States having comparable maturities."

"SEC. 205. Any Government corporation as defined in section 101 of this Act, or any corporation or agency or activity thereof which is required by law to submit an annual budget pursuant to, or as provided by, section 102 of this Act

"(a) shall make payment in full, either by advance or reimbursement, to any agency of the United States, including any other corporation, in such amount as may be agreed upon between the agencies concerned, for the use of space in Government-owned or leased structures, guard services, communication services or facilities, and for any other service or facility which may be rendered upon request or which may be designated by the Bureau of the Budget: Provided, That such services or facilities may be rendered without charge only if the head of the rendering agency determines that the cost involved is nominal or cannot be determined accurately without incurring costs substantially equal to or in excess of the estimated cost of the services or facilities rendered;

"(b) shall contribute, from the respective appropriation or fund used for payment of salaries, pay, or compensation, to the civil service retirement and disability fund, a sum as provided by section 4 (a) of the Civil Service Retirement Act, as amended (5 U. S. C. 2254 (a)), except that such sum shall be determined by applying to the total basic salaries (as defined in that Act) paid to the employees of the corporation, agency, or activity, covered by that Act, the per centum rate determined annually by the Civil Service Commission to be the excess of the total normal cost per centum rate of the civil service retirement system over the employee deduction rate specified in said section 4 (a). The corporation, agency, or activity shall also contribute at least quarterly from such appropriation or fund, to the employees' compensation fund, the amount determined by the Secretary of Labor to be the full cost of benefits and other payments made from such fund on account of injuries and deaths of its employees which may hereafter 'occur. Such corporation, agency, or activity shall also pay into the Treasury as miscellaneous receipts that portion of the cost of administration of the respective funds attributable to its employees, as determined by the Civil Service Commission and the Secretary of Labor."

(7) Section 304 of said Act (31 U. S. C. 869) is renumbered as section 206, and subsection (b) of said section is amended by striking the words "wholly owned".

SEC. 3. The amendments made by this Act shall be effective July 1, 1957.

The principal effect of the proposed legislation is to abolish the distinction now made in the law between wholly owned and mixedownership Government corporations and thus bring certain corporations now classified as mixed ownership under the budget and auditing provisions of the law.

The Government Corporation Control Act originated in this committee and became law in the 79th Congress.

Our first witness will be Mr. Finan of the Bureau of the Budget; I believe that's it. Is that the correct pronunciation, Mr. Finan? Mr. FINAN. It is Finan.

The CHAIRMAN. I thought I was wrong about that. It's Mr. Finan of the Bureau of the Budget. We are happy, indeed, to have all of you with us and a number of Congressmen today, and we will call upon you immediately after the first witness.

Mr. Finan.

STATEMENT OF WILLIAM F. FINAN, ASSISTANT DIRECTOR FOR MANAGEMENT AND ORGANIZATION, BUREAU OF THE BUDGET; ACCOMPANIED BY HAROLD SEIDMAN, ASSISTANT CHIEF, OFFICE OF MANAGEMENT AND ORGANIZATION, BUREAU OF THE BUDGET

Mr. FINAN. Mr. Chairman, I am accompanied by Mr. Harold Seidman, who is the Assistant Chief of the Office of Management and Organization of the Bureau of the Budget; and, with your permission, from time to time, in connection with questions that come up, I may want to refer some to Mr. Seidman, who is our specialist on Government corporations, among other matters.

I am happy to appear before your committee in support of H. R. 8332, a bill to amend the Government Corporation Control Act, as amended.

H. R. 8332 is designed to carry out the President's recommendations in both his 1958 and 1959 budget messages that the Government Corporation Control Act be amended to provide for budget review and audit control over Government corporations which are authorized to obtain and utilize Federal funds. The General Accounting Office assisted in the development of this legislative proposal and concurs in its basic purposes.

The distinction now made by the Government Corporation Control Act between wholly owned and mixed-ownership Government corporations has not provided a satisfactory criterion for determining the need for and nature of Presidential and congressional supervision. Private ownership of a percentage, often nominal, of the capital stock of a Government corporation does not in itself alter the responsibilities of the President and the Congress or serve to reduce the actual or potential burden on the Federal Treasury. The Government can well be charged with being pennywise and pound foolish when it reviews annually the budget programs of such agencies as the Virgin Islands Corporation, Federal Crop Insurance Corporation, and the Federal Prison Industries Corporation, but waives review of the banks for cooperatives merely because a small fraction of their capital stock is privately owned. The Federal investment in the banks for cooperatives is more than 5 times that in the other 3 corporations put together. The bill provides, therefore, that the test for maintaining budget review, the annual audit by the General Accounting Office and the controls exercised by the Secretary of the Treasury, shall be based not on private ownership of a portion of the capital stock, but on the use of Federal funds and the assumption of financial responsibilities by the United States Government.

Under the provisions of H. R. 8332, annual budget review by the President and the Congress would be established and maintained over Government corporations which possess authority (1) to issue or have outstanding obligations guaranteed in whole or in part by the United States; or (2) to obtain Government funds by appropriations, borrowings, subscriptions to capital stock or otherwise; or (3) to utilize Government funds obtained by any of the above methods. Application of this formula would bring under annual budget review a number of so-called mixed-ownership Government corporations, namely, the Central Bank for Cooperatives and the 12 regional banks for cooperatives and the Federal Deposit Insurance Corporation. It would also retain budget review over the 12 Federal intermediate credit banks.

The Government owns almost 90 percent of the capital stock in the banks for cooperatives and Federal intermediate credit banks, and its stock investment in these banks amounts to approximately $236 million. Two Federal revolving funds, one currently of $40 million and the other of about $39 million, are maintained which can be utilized to purchase additional Government stock in the banks. Proceeds derived from retirement of Government capital are paid into the revolving funds, not the Treasury. The Federal Deposit Insurance Corporation has a $3 billion call on the Treasury, and the full amount of insured deposits totaling more than $119 billion is included by the Treasury in its compilation of the long-range commitments and contingencies of the United States Government.

The General Accounting Office agrees that these corporations should be made subject to budget review, but proposes further that budget review be applied also to the Federal home-loan banks and the Federal land banks. While GAO's arguments have considerable merit, we believe that a valid distinction can be drawn between the land banks and the home-loan banks, which are now entirely privately owned, and the banks for cooperatives and intermediate credit banks which are substantially Government owned. Private capital investment in the Federal home-loan banks and Federal land banks amounts to approximately $700 million and $113 million, respectively. Neither the home-loan banks nor the land banks can borrow from the Treasury upon demand, and neither has access to Government funds earmarked for its use. The Federal Home Loan Bank Act makes clear that the Secretary of the Treasury "in his discretion" is authorized to purchase obligations of the Federal home-loan banks. The authority of the Federal Farm Mortgage Corporation to make loans to the land banks as also discretionary and cannot be employed without congressional authorization.

As early as 1947, the House Committee on Appropriations cited the failure to provide for budgetary review over mixed-ownership Government corporations as a major weakness of the Government Corporation Control Act. The following quotation from the report of that committee (H. Rept. No. 544, 80th Cong., 1st sess.) presents better than I could the case for bringing these corporations under the scrutiny of the President and the Congress. The report states:

There are certain of the mixed-ownership Government corporations * ** which, in the judgment of the committee, should be subjected to the same degree of control as the wholly owned Government corporations. The Government's financial stake in them is such that to leave them free of this control is to leave a segment of the Government's business interests (which could result in heavy drains on the public purse) without the close supervision by the Congress which can only be obtained through annual budget review.

Enactment of H. R. 8332 would also eliminate the confusion and contradictions arising from the term "mixed-ownership Government corporation." Section 201 of the Government Corporation Control Act now defines as mixed-ownership Government corporations such dissimilar types of corporations as the Federal land banks, which are entirely privately owned, and the Federal Deposit Insurance Corporation, which is wholly Government owned. On the other hand, the act applies the term "wholly owned" to the Federal National Mortgage Association, although part of the Association's stock is privately owned, and to the Federal Savings and Loan Insurance Corporation, whose status is in major respects identical to that of the Federal Deposit Insurance Corporation. Under the proposed amendments, all agencies and instrumentalities subject to the act would be classified uniformly as "Government corporations."

The bill also contains a number of technical provisions relating to cost reimbursement, accounting terminology, and other procedural and administrative matters. These provisions revise accounting terminology to make it consistent with current usage; clarify the authority of the GAO and the Secretary of the Treasury; and apply uniform standards to Government corporations with respect to payment for services furnished by other Government agencies.

If history is to repeat itself, we may anticipate opposition to H. R. 8332 from those corporations who are being made subject to budget review. With a few notable exceptions, Government corporations strongly opposed enactment of the Control Act. Practically all of them claimed a vested and irrevocable right to the four freedomsfreedom from financial control by the Congress, freedom from budget review by the President, freedom from independent audit by the Comptroller General, and freedom to use Federal funds. The record was filled with predictions of the dire consequences which would flow inevitably from enactment of the control bill. Not one of those predictions has come to pass in the almost 13 years the Control Act has been on the statute books. On the contrary, budget supervision and audit control have been directly responsible for major, and often long overdue, improvements in the management and financial practices of Federal corporations. As Senator Byrd said in his testimony on the Government Corporation Control Act

the bill is intended simply to give the owner a look once each year on what the corporation has done and intends to do. The requirements of the bill impose less burden on Government corporations than those under which the average private corporation operates.

We may also anticipate that once again irrelevant issues will be raised as arguments against the bill. I assure this committee that there is nothing whatever in H. R. 8332 which would adversely affect farmer ownership and participation in the management of the farm credit banks; change the method of financing the FDIC; or alter the FDIC's present organizational status. The farmer-owned institutions, the production credit associations, national farm loan associations and other cooperatives which make loans to farmers, are not subject to the bill at all. If annual budget review by the President and the Congress, who represent the majority stockholders, the United States taxpayers, conflicts with the policy of farmer ownership and participation in the management of the banks for cooperatives and the intermediate credit banks, then the detailed supervision exercised by the Farm Credit Administration over these institutions must also be considered inconsistent with that policy. Since Government capital in the farm credit banks is being retired primarily from income, not private stock subscriptions, budget review may well accelerate, not retard, ultimate farmer ownership. So far as the FDIC is concerned, the flexible budget provisions provided by the act will in no way impair the Corporation's ability to examine insured institutions and promptly to meet its insurance obligations.

The Government Corporation Control Act properly deserves a place with the Budget and Accounting Act of 1921 as one of the great landmarks of Federal administration. The act represented the culmination of the selfless and untiring efforts of men like Senators Byrd and Butler, the cosponsors of the legislation, Senator Taft, Senator Fulbright, Congressman Whittington, Comptroller General Lindsay Warren, Budget Director Harold Smith, and President Truman.

President Truman addressed a letter to the chairman of the House Committee on Expenditures in Executive Departments in which he stated that he heartily favored the proposal and described it as "a longdelayed forward step applying the sound doctrine of an executive budget" to Government corporations. Experience under the Government Corporation Control Act has clearly demonstrated that it is possible to maintain essential congressional and Presidential supervision over Government corporations without impairing the financial and operating flexibility required for the successful conduct of governmental programs of a business nature. Enactment of H. R. 8332 will assure that the declared policy of the Congress, as stated in section 2 of the Control Act

to bring Government corporations and their transactions and operations under annual scrutiny by the Congress and provide financial control thereof

will be carried out fully now and in the future. The Bureau of the Budget urges favorable consideration of the bill.

That completes my prepared statement, Mr. Chairman.
The CHAIRMAN. Thank you; Mr. Brown?

Mr. BROWN. Yes, Mr. Chairman, I'm acting up

The CHAIRMAN. Congressman Matthews, how about if you are interested in this subject, won't you have a seat over here? And congressman McIntire, too.

Mr. BROWN. I came here somewhat in the dark on this bill. I didn't have an opportunity today to study it until I received a copy and the statement from the committee this morning.

However, I had some communications on this measure just this past week. I hope, Mr. McCormack, you can give some thought to just what I'm saying; so I followed the usual procedure and I looked up H. R. 8332 in the Public General Bills Digest that is furnished us by the Legislative Reference Bureau, as I remember, over in the Library of Congress; and this states that H. R. 8332, Mr. Dawson of Illinois, by request, June 24, 1957, and referred to Government operations, makes certain technical amendments in the Government Corporation Control Act, authorizes the Secretary of the Treasury to fix the rate of interest payable by any corporation on the loans made to the corporation treasury.

Now, I haven't been able to find that in there. Is that in the bill? The CHAIRMAN. Yes; I think so.

Mr. BROWN. Whereabouts is it in the bill? I glanced through it hurriedly.

The CHAIRMAN. Mr. Finan, the Bureau of the Budget witness, ought to be able to answer that.

Mr. SEIDMAN. That is section 204, Mr. Brown, on page 6.
Mr. BROWN. Oh, yes:

Notwithstanding the provisions of any other law, the rate of interest payable by any corporation subject to this act on loans hereafter made to the corporation by the Treasury shall be fixed by the Secretary of the Treasury * * *