case shall the Corporation undertake any activity for such agency unless the agency is authorized by law to undertake such activity and has funds available for such purpose.

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"SEC. 13. RECORDS; ANNUAL REPORT.-The Corporation shall at all times maintain complete and accurate books of account. [and shall file annually with the Secretary] The Board shall report upon the affairs and activities of the Corporation to the President of the United States through the Secretary of Agriculture and shall prepare annually for transmission to the President through the Secretary a complete report as to the business of the Corporation, a copy of which shall be forwarded [by the Secretary to the President for transmission] to the Congress.

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"SEC. 17. DISSOLUTION OF DELAWARE CORPORATION.-The Secretary of Agriculture, representing the United States as the sole owner of the capital stock of Commodity Credit Corporation, a Delaware corporation, is hereby authorized and directed to institute or cause to be instituted such proceedings as are required for the dissolution of said corporation under the laws of the State of Delaware. The costs of such dissolution of said corporation shall be borne by the Corporation. "SEC. 18. [CORPORATION ADMINISTRATIVE ACCOUNTS.-In the event that the personnel or facilities of any bureau, office, administration, or other agency of or within the Department of Agriculture, including the Corporation, are utilized in the performance of functions, including those of the Corporation, for which separate funds are available, the Secretary of the Treasury is authorized and directed, upon the request of the Secretary, to estalbish one or more separate accounts into which there may be transferred, by advance payment or reimbursement, all or any part, as determined by the Secretary, of the funds available for administrative expenses in the performance of such functions. The funds so transferred shall be expended only for the purpose for which appropriated or made available. EFFECTIVE DATE.-This Act shall become effective at 12:01 a. m., July 1, 1948.

Hon. ARTHUR CAPPER,

DEPARTMENT OF AGRICULTURE, Washington 25, D. C., March 12, 1948.

Chairman, Senate Agriculture and Forestry Committee,

United States Senate.

DEAR SENATOR CAPPER: There is enclosed a statement containing the views of the Department of Agriculture in regard to the suggestions submitted by the General Accounting Office proposing revisions of S. 1322, a bill to provide a Federal charter for the Commodity Credit Corporation. A copy of the proposed revisions was furnished to us by the General Accounting Office.

I cannot overemphasize to you the grave effects which the proposed amendments to the charter of Commodity Credit Corporation would have upon the operations of that agency as a vital instrument in carrying out a successful farm program. Among other harmful effects discussed in the enclosed statement, the amendments proposed by the General Accounting Office would (1) make virtually impossible the successful coordination and integration of a unified farm program by removing the Commodity Credit Corporation from the direction and supervision of the Secretary of Agriculture and creating, in effect, another Department of Agriculture; (2) seriously impair the ability of the Commodity Credit Corporation to fulfill its vital role in meeting the needs of agriculture by destroying its present flexibility in operations and financing its needs; and (3) limit the charter to a 2-year period, which would only give rise to needless doubt and confusion concerning the future status of this Corporation, which has proven so vital to farmers.

The removal of the Commodity Credit Corporation from the direction and supervision of the Secretary of Agriculture would be brought about by the amendments which provide for a board of directors to be composed largely of persons outside the Department of Agriculture, and which removes from the Secretary of Agriculture the authority to appoint directors and employees of the Corporation. The General Accounting Office proposal to divorce Commodity Credit Corporation from the other activities of the Department apparently has its origin in the misconception that because the Commodity Credit Corporation is a corporation it must be completely autonomous. The Corporation was not created with this in view,

and has never so operated. It was created to provide an instrument for the execution of agricultural policy which would provide the necessary flexibility of operation and the ability to adapt action to the rapidly changing needs of agriculture which are unpredictable because of the extremely variable factors of weather, acreages harvested, crop yields, consumer purchasing power, export markets, and extent of farmer participation. To assure the coordination and integration of its operations with the other activities of the Department, it was transferred to the Department of Agriculture and placed "under the general direction and supervision of the Secretary of Agriculture." As you know, the present organization of agencies within the Department of Agriculture is in accordance with a plan of organization worked out after a long and careful study by a committee of distinguished representatives of agriculture, industry, and finance having outstanding experience in the problems of administration. We believe that the present plan under which the activities of the Commodity Credit Corporation are fully coordinated and integrated with the activities of the other agencies of the Department affords sound and effective administration and avoids overlapping and duplication. Only by retaining the Commodity Credit Corporation as an integral part of the Department of Agriculture, as provided by S. 1322, can such effective and economical administration be assured.

Moreover, the amendments proposed by the General Accounting Office would destroy the flexibility of the Corporation and impair its ability to adapt its operations to the rapidly changing conditions of agriculture (a) by prohibiting it, short of a cumbersome procedure involving costly delays, from undertaking any activity not set forth in minute detail in its budget estimates prepared as much as a year before crops are planted and (b) by taking away its present authority to borrow, its capitalization of $100,000,000, and the $500,000,000 reserve for the postwar price support of agriculture. The General Accounting Office proposals would make impossible the timely institution of many vital price-support operations which the Corporation is legally authorized, and in many cases legally required, to undertake. Furthermore, the proposed changes would require an immediate appropriation of approximately $5,000,000,000 to be added to the Government's budget for the fiscal year 1949 if Commodity Credit Corporation's present ability to finance farm programs is not to be impaired.

The need for flexibility in budgeting and financing was established and recognized in the Government Corporation Control Act. The General Accounting Office proposals would destroy the flexibility as provided for in that act.

The enclosed statement explains more fully the Department's position on the amendments proposed by the General Accounting Office.

A copy of this letter and the attached statement has been made available to the Honorable George D. Aiken, chairman of the special committee which you appointed to review S. 1322.

Sincerely yours,

CLINTON P. ANDERSON, Secretary.

STATEMENT OF THE UNITED STATES DEPARTMENT OF AGRICULTURE IN REGARD TO REVISED RECOMMENDATIONS OF THE GENERAL ACCOUNTING OFFICE FOR CHANGES IN CERTAIN PROVISIONS OF S. 1322

The changes recommended by the General Accounting Office in the proposed charter of the Commodity Credit Corporation1 are far-reaching and, in the opinion of the Department, would seriously impair the usefulness of the Corporation as an instrument for carrying out a major segment of the agricultural policies of the Congress. The proposals by the General Accounting Office, if adopted, would deprive the Corporation of flexibility which is essential to its successful operation. The corporate form of organization was adopted because of the need for such flexibility. The recommendations would not only make impossible the successful coordination and integration by the Secretary of Agriculture of all of the farm programs. but would have the effect of establishing another and independent Department of Agriculture.

In addition, the GAO recommends that the charter provide for continuation of the Corporation for only 2 years after July 1, 1948. The Department strongly

1 The GAO has made available to the Department a copy of recommendations concerning the proposed Federal charter for the Commodity Credit Corporation as embodied in S. 1322, which differ considerably from the recommendations concerning the matter presented to the Committee on Agriculture and Forestry of the United States Senate on January 20, 1948. The Department's comments on these earlier recommendations were presented to the committee on January 21.

urges the enactment now of a permanent charter for Commodity Credit Corporation. Doubt as to the status of the Corporation and its form of organization will cause confusion and needlessly hamper the effective discharge of the activities which have over the years proven so vital to the welfare of farmers and the many business interests concerned with the agricultural industry. In view of the statutes defining the Corporation's major activities and the provision for annual approval of its budget by the Congress, the enactment of a permanent charter would not deprive the Congress of complete control over the Corporation's activities.

Aside from the recommendation for delaying the enactment of a permanent charter, the more important recommendations fall into three major categories, as follows:

I. The organization of the Corporation and control of its affairs.

II. The borrowing power and capital structure of the Corporation.

III. Relationships with other Government agencies with particular reference to the supply program.

The comments of the Department regarding each of these major categories of recommendations are presented in the following statement, in the order named above. This discussion is followed by part IV, which contains comments regarding recommendations on each section of the bill (S. 1322) in the order in which they are presented in the GAO statement.

I. ORGANIZATION OF THE CORPORATION AND CONTROL OF ITS AFFAIRS

(Sections 2, 9, 10, 13, and 17)

A. Comparison of GAO recommendations with provision of S. 1322

The GAO has recommended that the charter include entirely different provisions relative to the appointment of directors and their relationship to the Secretary of Agriculture than those contained in S. 1322. These new provisions in effect would change the Corporation from an agency which is an integral part of the Department of Agriculture under the supervision of the Secretary of Agriculture to an independent agency which, even though technically located within the Department of Agriculture, would not be subject to the supervision of the Secretary.

The Congress has vested in the Secretary of Agriculture ultimate responsibility for carrying out a unified farm program. The GAO apparently believes that because the CCC is a corporation it should be autonomous in the sense of being completely divorced from other activities of the Department. It was not created with this aim in view and has never so operated. It was created to provide a mechanism for use in the execution of agricultural policy which would provide the necessary flexibility of operation and the resultant, ability to adapt action to the rapidly changing circumstances facing agriculture. In addition, the corporate form of organization is one which is easily understood and facilitates operations involving relationships with private business organizations. Most of the Corporation's operations involve consideration of established trade relationships, and it is important that it be in position to operate in the same manner as do the business organizations with which it deals.

S. 1322 provides that the management of CCC shall continue to be vested in a board of directors, subject to the general direction and control of the Secretary, who shall be a director and serve as Chairman of the Board, and that the directors be employees of the Department of Agriculture who shall be appointed by and hold office at the pleasure of the Secretary. In contrast, the GAO recommends that management be transferred to a board independent of the supervision of the Secretary of Agriculture. With the exception of the Secretary of Agriculture or his nominee, the members of the new Board would be appointed by the President, with the advice and consent of the Senate, for 5-year terms, and full-time executive officers of the Corporation, if also directors, would not comprise, in the aggregate, more than one-half the members of the Board.

The GAO recommendation clearly contemplates that members of the Board shall not be employees of the Department, that the Board shall not be subject to the general direction and control of the Secretary of Agriculture, and that the Chairman of the Board could be a member other than the Secretary. While it is stated that the Corporation shall operate "within the Department of Agriculture" and that the Board is to report to the President of the United States through the Secretary, these provisions have little significance in the light of the other provisions proposed.

B. Relationship of the CCC to the Department of Agriculture

The GAO recommendations must be viewed in the light of the function of the Commodity Credit Corporation in carrying out the objectives of the Nation's agricultural program. The importance of an abundant supply of agricultural commodities to the whole domestic economy has been generally conceded. Similarly, there can be little doubt as to the importance of price support to the American farmer if he is to produce in abundance. Abundant production is certain to lead to temporary surpluses of particular commodities from time to time as yields and other factors vary. In some instances more serious problems of this character are certain to develop if prompt and appropriate action is not taken. Because of the vital part which the Commodity Credit Corporation plays in dealing with these matters, it obviously must be integrated with the Department's other activities. The Congress has vested in the Secretary of Agriculture responsibility for administration of agricultural programs within the framework established by Congress. In order to eliminate duplication of operations and to provide for an effective coordinated administration of the agricultural programs, the Commodity Credit Corporation was made an integral part of the Department. The proposal to set up the Commodity Credit Corporation as an independent agency not under the supervision of the Secretary of Agriculture would constitute a complete reversal of the policy of the Congress in transferring the Corporation to the Department, and would require a piecemeal approach to solving the problems of agriculture. It would remove from the supervision of the Secretary one of the most important agencies within the Department used for effectuating agricultural policy, and the Secretary could no longer discharge the responsibility for the over-all agricultural programs. Instead, the Congress would have to look to both the board of directors of the Commodity Credit Corporation and the Secretary of Agriculture for carrying out agricultural policies prescribed by Congress.

Even during the period prior to 1939, before the Corporation was transferred to the Department of Agriculture from the Reconstruction Finance Corporation, its policy was to make only those loans and initiate only those programs recommended by the Secretary of Agriculture, and it used the facilities of the Department in carrying out such programs. When the Commodity Credit Corporation was transferred to the Department of Agriculture in 1939 under Reorganization Plan No. 1, April 1939, the President stated: "Since 1916 the Congress has established from time to time agencies for providing loans directly or indirectly for the stimulation and stabilization of agriculture and such agencies should in my opinion be grouped with the other agricultural activities of the Government." He further stated that the Commodity Credit Corporation is "hereby transferred to the Department of Agriculture and shall be administered in such Department under the general direction and supervision of the Secretary of Agriculture, who shall be responsible for the coordination of their functions and activities."

Two specific points in the GAO recommendations regarding the Board of Directors of the Corporation warrant more detailed discussion. These points are (1) that members of the Board of Directors not be drawn from within the Department and (2) that the Board of Directors and the Corporation be in no way subject to supervision or direction by the Secretary of Agriculture. C. Members of Board of Directors not to be drawn entirely from Department of Agriculture

There can be no difference of opinion on the point that the problems confronting the Secretary of Agriculture and the Commodity Credit Corporation are of such magnitude that the best minds and the most mature experience obtainable should be utilized. S. 1322 recognizes this fact, and at the same time gives cognizance to some very real and practical problems which must be considered in the selection and appointment of members of the Board of Directors of the Corporation.

1. Qualifications of Board members.-The present composition of the Board of Directors under which all members are responsible officials within the Department results in the use of persons who have much experience in the field in which the Board of Directors takes action-namely, the development of operational policy. The Corporation does not have the autonomy of most business corporations in deciding which programs it will undertake, because the general framework of its programs would be prescribed by law. The GAO proposal in effect would mean that the services of employees of the Department qualified to hold membership on the Board of Directors would not be utilized, in an effort to obtain for the Corporation the benefit of other types of experience now secured by the Corporation through advisory committees and other means.

2. Relationship of Board of Directors to development of specific operations.— A brief outline of the manner in which specific operations are developed will indicate the function of the Board of Directors in translating congressional policies into actual operations. The responsibility for the initiation of proposed operations involving a particular commodity, within the framework laid down by the Congress, rests upon the commodity specialists in that field. In addition to drawing fully upon such facilities of the Department as the Bureau of Agricultural Economics, the Extension Service, the Office of Foreign Agricultural Relations, and others, those responsible fully utilize the community, county, and State farmer committees to obtain the broadest possible viewpoint and experience of farmers. The Department has also established advisory committees in many of the major commodity fields which are made up of representatives of each segment of the industry such as producers, warehousemen, wholesalers, retailers, cooperative associations, and other interested groups. Although obviously representatives of private industry do not participate in making final determinations, the knowledge, experience, and viewpoint of each of these several groups is utilized to the fullest possible extent in developing proposed program operations for consideration of the Board of Directors. By using such means, the approval of a program by the Board of Directors represents a result that is not the product of a handful of individuals employed by the Corporation or the Department, but, rather, it represents the combined judgment of all interested groups.

3. Willingness of outside individuals to serve.-Even if the GAO proposal were considered desirable, it is not apparent how individuals of the type described in the GAO recommendations could be induced to serve because of the compensation involved, if it meant that they must divest themselves of all private interests and associations (the substitute language proposed by the GAO includes no limitation in regard to compensation, but it is presumed that neither the general levels set by the Congress in other comparable situations nor the criticism which the Board would face in setting its own compensation at a high level could be ignored). If members did not divest themselves of all private interests and associations which might be conflicting, including investments, they as individuals and the Board as a group would be subject to possibility of the most severe criticism in spite of the utmost scruples in endeavoring to guard confidential information. This would adversely affect the Corporation's programs. Further, experience has indicated the need for frequent emergency meetings called at a few hours' notice which would likely preclude anyone elsewhere employed from being available when needed. On the other hand, experience indicates that employment of a board of directors on a full-time basis would not be justified, since the policy-making function alone would not require daily or continuous meetings of the Board.

D. Board of Directors and Commodity Credit Corporation to be in no way subject to supervision or direction of Secretary of Agriculture

The framework within which the Corporation operates is determined by the Congress. Thus the Congress, and more particularly its committees, perform in many respects the functions of a board of directors of a private corporation. Guidance and control is exercised by the Congress in the approval of the annual budgets submitted pursuant to the Government Corporation Control Act. Also, from time to time, Congress enacts statutes designed to deal with specific problems that arise. For example, when the unavailability of normal export markets for certain commodities acquired by the CCC under its price-support program and surplus to the needs of the United States caused problems to arise, the Congress made specific provision for the disposition of such surpluses for foreign relief (sec. 11 (e) of the Foreign Aid Act of 1947). Numerous other statutes directing or dealing with the activities afford additional illustrations.

1. Responsibility of the Secretary of Agriculture. It is evident that the Secretary of Agriculture could not be held accountable for the over-all administration of the farm program if this very vital activity is excluded from his general direction and control. It is apparent that operations of the sort carried out by the Commodity Credit Corporation must be carried out in a manner consistent with the over-all policy determined by the Secretary of Agriculture, if all farm programs are to be integrated and coordinated. Under present policies, no operation is begun without consideration and approval by the Board of Directors and approved by the Secretary. Moreover, in formulating proposals for presentation to the Board, consideration is given to the over-all policy of the Department, as determined by the Secretary.

2. CCC would be separated from the Department of Agriculture.-The GAO recommendation that the CCC be set up as an independent agency which would