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Senator Pope. I think it might be interesting here to refer to the war risk insurance which the Government carried on during the war. That was started in 1914, and the total policies issued under that war risk insurance act were $2,250,000,000. The premiums received amounted to $46,000,000. The losses were $29,000,000, leaving a profit of $17,000,000 for that operation. The expenses of conducting the business for 4 years wee $165,000, a little over one-third of 1 percent on the premiums received.
That is one venture of the Government in the insurance field that has proven very successful.
And I believe you said that the actual expenses, the overhead expenses of operation, were paid by the Government?
Mr. BLACK. That is my understanding, that they were.
Senator SCHWELLENBACH. I would regret very much to see the farmers have as much trouble getting their indemnities on this crop insurance as veterans do in getting payments of losses to them.
Senator POPE. Well, this is not the veterans' insurance program. It is the war-risk-insurance program. It does not have any relation to veterans' insurance. That is a different story.
Are there any other questions on this point?
Senator SCHWELLENBACH. I would like to ask Mr. Green a question on a point that has rather confused me in your statement, that difficulties would arise because of the fact that a larger percentage of people might cooperate; farmers might cooperate from those States that have a bad record than those States that have a good record for the last 5 years.
My understanding is that in arriving at premiums you make an adjustment even as low as a county basis. If your premiums are based upon that situation why would the fact that 60 percent from one part of the country cooperated, as compared with 40 percent from a part of the country where there had not been crop losses in the last few years—why would that add to the difficulty?
Mr. GREEN. That will not hurt the insurance. The point I was making was with reference to the 70,000,000 bushels of accumulated grain. If more than 50 percent, say 60 percent or 70 percent participated in the high-risk areas where the premium will be larger-it will be one and a half and two bushels an acre instead of half a bushel—if they participate to a greater extent in the high-risk area, you would be receiving larger quantities of premiums, and therefore you would build up your grain reserve faster than you would if you had 50 percent of the acreage from every State.
In some of the States when the risks are small the premium would be half a bushel to the acre or less; where you get in the very high-risk areas it is two bushels to an acre, you see. That was the point, merely that you would accumulate grain reserves faster.
Senator ScHWELLENBACH. I got it just the opposite from what you meant, then. I got it that you would build up reserves, and I thought you were saying that we needed larger reserves because of that.
Senator POPE. Isn't the converse true, that in those high-risk areas in the period of poor yields you would be paying out a larger amount of indemnity?
Mr. GREEN. That is the point. You not only would be accumulating more than that 72,000,000 net grain reserves that shows there under table no. 1 of the report under the condition of having more of your acreage in the high-risk areas, but in a poor crop year when you went to pay actual losses and wheat was $1.25 a bushel, instead of paying losses of say 700,000,000 bushels times $1.25 it might be 90,000,000 bushels times the $1.25. Because you would have built up bigger reserves on rates that represent average losses, and when the loss year came you paid out on that year's actual loss, the accumulated deficit in a given year may be larger than estimated. That was the point I was getting at—that the 70,000,000 bushels deficit estimated is perhaps conservative if you get the bigger part of your acreage in that high-risk area.
Senator POPE. If there are no further questions on this point, we will ask Mr. Shields to proceed with the provisions of the bill.
Mr. SHIELDS. Referring back to the bill on page 2, subsection (b) and subsection (c) of section 3, provide for the authorization to appropriate money to subscribe to the capital stock and for the issuance of receipts evidencing payment for the stock.
Section 4, which was referred to earlier by the Secretary, provides for the management of the corporation by a board of directors, subject to the general supervision of the Secretary of Agriculture. The board consists of three persons employed in the Department, who shall be appointed by and hold office at the please of the Secretary.
Subsection (b) of section 4 provides that two members of the board shall constitute a quorum. .
Subsection (c) of section 4 provides that the directors of the corporation shall receive no additional compensation for their services as such directors, but may be allowed actual traveling and subsistence expenses when engaged in business of the corporation outside the District of Columbia.
Subsection (d) of section 4 provides that the board shall select, subject to the approval of the Secretary, a manager who shall be the executive officer of the corporation.
Section 5 gives regular corporate powers to the corporation, succession, the right to adopt a seal, right to make contracts, to adopt bylaws, to have free use of the mails, to avail itself of other facilities of the Government, and to conduct researches and surveys and investigations relating to crop insurance for wheat and for other agricultural commodities.
Senator POPE. Mr. Shields, under (d) you might specifically refer to the exemption from attachments and injunctions and execution, and so forth, and the reasons for that.
Mr. SHIELDS. Subsection (d) of section 5 provides that, subject to a provision which we will later consider in section 7, the corporation may sue and be sued in its corporate name in any court of competent jurisdiction, State or Federal, provided that no attachment, injunction, execution—and I believe we should insert "garnishment”-or other process, mesne or final, shall be issued against the corporation or its property.
The purpose of that provision is that if the corporation has stocks of grain it would not be hampered in carrying out the provisions of the act by having its stocks or other property tied up by legal process.
Senator MCGILL. Insert the word "garnishment” after "attachment.”
Mr. SHIELDS. Yes; line 6, after the comma, following the word "execution”, we believe it advisable to add the word "garnishment."
Senator SCHWELLENBACH. Of course, garnishment and attachment provisions are customary in any State law in reference to insurance, but you do not think we have here the right in Congress to say to a court that they cannot issue an injunction against some Federal agency, do you? That is an inherent, sacred right of the courts to do that.
Mr. SHIELDS. Well, this being a Federal instrumentality, there would be some doubt as to the extent to which the United States could be sued if it did not consent. It has given wide open consent to be sued. It seems that as a business corporation it should be open to suit, but at the same time, to the extent that we can, we would like to keep the assets of the corporation from being tied up.
Senator FRAZIER. An injunction might block the putting into operation of the program for a long time.
Mr. SHIELDS. That is right. It might interfere with it. If a private individual sues the corporation, for instance, for payment of a storage fee and in connection with that suit could attach the property of the corporation while the suit was pending, the purpose of the bill might be defeated.
Senator McGILL. This would limit all classes of injunctions for any cause. Mr. SHIELDS. That is true. That is the purpose.
Senator MCGILL. Suppose this corporation is doing something with reference to some citizens that it has no right to do at all?
Mr. SHIELDS. Well, the bill does not provide that the citizen should not have his rights respected. It merely provides that these--
Senator MCGILL (interposing). He cannot enjoin this corporation, cannot restrain it from doing an irreparable injury.
Mr. SHIELDS. That may be true, but it does provide that the corporation shall be liable for that injury, shall respond in damages for the injury.
Senator McGILL. If it could.
Senator SCHWELLENBACH. What injury could the corporation do to anybody that it could not respond in damages for? Suppose it took some person's wheat away from him, unlawfully withheld some of his wheat, it always could find the amount of damages.
Mr. SHIELDS. It does not occur to me offhand why a person could not be properly compensated for any loss, but people often allege that, they are irreparably damaged and that their compensation in cash will not pay for their damages. Offhand there doesn't occur to me any example of that.
Senator McGILL. That allegation would not be sufficient in itself alone. It would be subject to proof. It would have to be established by proper evidence, and if it could be proven, this statute would bar the court from issuing that sort of an injunction.
Mr. SHIELDS. The purpose merely is to keep the corporation in position to carry out the purposes of the statute.
Page 4: Subsection (i) provides that the corporation shall determine its necessary expenditures under this act and the manner in which they shall be incurred, allowed and paid, without regard to the provisions of any other laws governing the expenditure of public funds and that such determinations shall be final and conclusive upon all other officers of the Government.
In line 4, page 5, the word "other" should be stricken out. It is a typographical error.
Senator SCHWELLENBACH. What is the purpose of that?
Mr. SHIELDS. The purpose of that provision is to give the corporation power to determine what are its proper expenses under the provisions of this act, and to free it from control of other governmental agencies such as the General Accounting Office; the control of these agencies would be applicable to the corporation if this provision was not here.
Somewhat similar provisions are contained in the Agricultural Adjustment Act, in the Soil Conservation and Domestic Allotment Acts, and so forth. The basis of payments are determined by the Secretary of Agriculture and shall not be reviewable by any other officer of the Government.
In other words, this provision would, among other things, facilitate prompt payment of the indemnities.
Senator SCHWELLENBACH. I concede that very clearly, but is it proper to adjust the ordinary expenses of this corporation, payment of salaries and expenses, subject to that exemption?
Mr. SHIELDS. In this connection you might consider section 12, page 10, which provides that the corporation shall at all times maintain complete and accurate books of account and shall file annually with the Secretary of Agriculture a complete report as to the business of the corporation.
It is also provided that the transactions of the corporation shall be audited by the General Accounting Office at such times and in such manner as the Comptroller General of the United States may prescribe for the sole purpose of making a report to Congress, together with such recommendations as he may deem advisable.
Senator SCHWELLENBACH. That is a post audit.
Senator SCHWELLENBACH. And the two of them together take from the General Accounting Office any right to control just the ordinary operating expenses of the corporation?
Mr. SHIELDS. That is correct. The General Accounting Office would audit the accounts of the corporation but would not control its accounts.
Senator McGILL. This gives the right to fix the salary of a manager at any figure they wish to fix it at.
Mr. SHIELDS. Section 6, dealing with appointments, provides that all employees shall be subject to the civil-service laws and the Classification Act, except attorneys and experts, and the further exception that anyone now employed in the Department may be employed.
Senator POPE. You spoke a minute ago of the Soil Conservation Act containing similar provisions. Are there other agencies that operate under similar provisions?
Mr. SHIELDS. That was true in the Agricultural Adjustment Act, and that is true to a large measure in all governmental corporate set-ups although the extent of exemptions vary. There are sets of laws applicable to the accounts of Government-owned corporations which are not applicable to Government agencies generally.
Senator SCHWELLENBACH. I would like to hear your argument on the general governmental policy of having a general accounting office and having control over the expenses of the Government by the Comptroller General. That may be a good policy or it may be a bad one, but so long as we have it, it seems to me that before we set up any agency which is exempt from it, we should have testimony at least as to the reason why it should be subject to that exemption.
Mr. SHIELDS. First, I might say this provision was thought to be in line with the report of the President's Committee on Reorganization, that the Comptroller General should audit accounts, and that the control of accounts should be established in the Treasury. It was assumed that any general law passed with respect to the control of accounts would be applicable to this corporation and that proper place to provide for any control of the accounts of this corporation would be in the congressional bill on reorganization and not in this bill.
Senator MCGILL. But that measure has not been passed. Mr. SHIELDS. That is true. The point is this: A question might come up as to whether or not an indemnity was properly payable under this act.
Senator SCHWELLENBACH. I am not talking about indemnities. I recognize that so far as that part of it is concerned, you have got-I think everybody will recognize that you have got to have your own control over that, but I am talking about just the ordinary expenses of operation.
Mr. SHIELDS. The point may be well taken, that there should be no exemption. I don't know any particular reason as to why ordinary routine expenses should not be subject to control. The purpose of the provision was to protect prompt payment of indemnities, and perhaps it should be limited in that way. We just didn't want complaints that we were not paying indemnities. That is all.
Senator SCHWELLENBACH. You can't run an insurance business and have a voucher lay in the Comptroller General's office for a year and a half until they decide whether it shall be paid or not.
Mr. SHIELDS. Yes. I think your point is very well taken as to other expenses.
Section (j) of section 5 provides that the corporation shall have the general powers incident to a corporation.
Section 6, which I have just referred to, provides that the board shall appoint employees, subject to the provisions of the civil service laws and Classification Act.
Senator McGILL. Now, Mr. Green was saying a little while ago it would be necessary to have certain regional headquarters in the country. I assume there will be quite a number who will deal directly with the farmers in the administration of this act.
Are we to understand that all those appointed under the provisions of section 6 must be taken from the civil-service register?
Mr. SHIELDS. Except it is proposed that in the carrying out of this program the county agricultural conservation associations which we are using in the present soil-conservation programs will be utilized. The employees of those associations, as I think you know, are not subject to civil-service laws or the Classification Act.
Senator McGill. I know they are not.
Senator MCGILL. This provides that all officers and employees, with the exception of attorneys and experts, must be under civil service.
Mr. SHIELDS. That is correct.