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or be her the tenanon came up forancy hear
contemplates that crop insurance would be administered by a corporation.
In connection with the tenancy hearings before the House committee-well, as an outgrowth of the tenancy hearings before the House committee—the question came up for discussion in the Department as to whether the tenancy matter should be handled by a corporation or be handled as an administrative function within the Department of Agriculture. There are arguments on both sides, and I do not have any conclusion on the matter. I asked that a little study be given to the points of difference between the two approaches, and here are four of the matters which have been brought out as a result of that study. I lay them before you for your consideration, because there are advantages and disadvantages to both approaches.
I understand that certain branches of the Government, outside of the Department, have raised questions as to whether or not there should be more corporations which to some extent have an independent entity, no matter how they are set up. Here are some of the points that are involved in this particular case as between the method of approach by a corporation and the method of approach by setting up an administration in the Department.
First, with respect to coordinating Department of Agriculture activities, the proposed corporation appears to be independent of the Department of Agriculture in its procedure, except as the Secretary of Agriculture exercises control through the appointment of the board of directors.
Senator POPE. And I believe there is a specific provision in S. 1397 that the Secretary has supervision, general supervision, over the activities of the board of directors and the corporation?
Secretary WALLACE. Yes; Sonnd, in section 6, subsection (a), page 5, of the bill, the proposed bill, the board will appoint officers and employees, whereas the present Departmental procedure is that the Secretary of Agriculture appoints.
Third, in section 6, subsection (d), page 6 of the proposed bill, the board may allot to the bureaus and offices of the Department of Agriculture, or transfer to such other agencies of the Federal Government and State governments, funds available for the purposes of this act. This requires board action, the submission of certain exhibits and approval by the Treasury Department. Under an administrative set-up within the Department of Agriculture, the allotments and transfers are made upon order of the Secretary-just a matter of procedure.
Fourth, separate personnel and finance divisions will be necessitated by the corporation set-up.
These matters are pointed out not as defects of the proposed bill, but as involving certain departures from established Department of Agriculture procedure. The same matter comes up with regard to the method of attack on the tenancy problem. It is a matter which is also brought to the fore as a result of certain suggestions by the President's Committee on Governmental Reorganization.
Senator Pope. Mr. Secretary, with reference to the organization of separate corporations for handling the tenancy problem and the crop-insurance problem, and perhaps other problems, aren't those very closely related subjects, and if they all are in the Department of Agriculture you could let them assume their proper relationships,
and the fact that you had separate corporations whose primary purpose was to administer the particular subject matter, would mean that you could coordinate those; whereas, if they were in different departments there might be some duplication of work which you could avoid in operating them in the Department of Agriculture?
Secretary WALLACE. Yes, if all of these things having to do with agriculture are in the Agricuture Department, the problem undoubtedly would be more simple than if they were in different departments; however, there is a somewhat different procedure-and I am not undertaking to judge as between the desirability of the different types of procedure there is a different procedure when you have, we will say, several corporations within the Department of Agriculture and when you have the same functions exercised by administrations within the Department.
Senator POPE. Can you see any disadvantage in the corporate method over the administration in the Department?
Secretary WALLACE. Yes; there are some disadvantages. In the case of the corporate set-up, the coordination comes through the person of the Secretary of Agriculture and not to the same degree through the staff of the Secretary of Agriculture as would be the case if it were an administration set-up. I mean to say the corporation would set up its own personnel office; it would be separate from the Department's personnel office. It would set up its finance office, which would be separate from the Department's finance office. It might make possible more rapid action; on the other hand, it might result in certain types of duplication as well.
Senator POPE. Wouldn't it be likely that you could handle more quickly, more expeditiously, the payment of indemnities and paying out of any money that might come in under a corporation than if it were under the Department of Agriculture?
Secretary WALLACE. That is quite possible. The matter, when you dig into it, becomes much more complicated than it appears on the surface.
Senator McGill. Why would you be able to handle the matter more rapidly, make payments more quickly, through a corporation than you could through the Department itself?
Secretary WALLACE. Well, I think the only reason would be that the corporation would be sensitized to this particular activity, and this activity almost by itself, and the employees having to do with finance would address themselves to this one thing. If the finance division of the Department of Agriculture dealt with it, they would have many other things to deal with also. On the other hand, I would like to say this as well, that in my opinion the great overhead facilities of the Department oftentimes make things go more rapidly than would otherwise be the case.
Senator McGill. And if this were in the Department instead of handled by a corporation, the Department would have certain individuals, certain persons, to handle this particular work?
Senator POPE. But let me raise this question, Mr. Secretary: If premiums were paid in money, the money would belong to the Government of the United States, if the Department of Agriculture handled it and whatever is necessary is the way of handling money of the United States Government, whatever procedure was necessary, would have to come through you; whereas, if the premiums were paid to the
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corporation, which is independent in the sense that it is a corporation and can carry out these functions, you would not have to go through with all the procedure necessary to receive and pay out money by the United States Government?
Secretary WALLACE. I don't care to get into any extended consideration of this at this time. I merely wanted to raise the issue because I think it is an issue that is going to be raised, in all probability in a broader field than just crop insurance.
Senator McGILL. What control would the Department of Agriculture under this bill have over this corporation set up by the bill?
Secretary WALLACE. As set up by this bill, the Department of Agriculture, through the Secretary, would have very real control. There is no doubt about that.
Senator McGILL. It would have real control, you say?
Senator POPE. There is a specific provision in section 4, at the bottom of page 2, Senator, where it says:
The management of the corporation shall be vested in a board of directors (hereinafter called the board), subject to the general supervision of the Secretary of Agriculture.
Then, as the Secretary said, there is a provision that he is to appoint the members of the board, and I think the bill all the way through gives the Secretary the general supervision, and he has a very real and definite supervision over the acts of the corporation.
Senator McGILL. Are those appointments for any definite term?
Senator SCHWELLENBACH. I would like to inquire along a little different line. This is a voluntary plan?
Secretary WALLACE. Yes.
Senator SCHWELLENBACH. Do you think there would be any difference in the attitude of the farmers in cooperating if they were dealing with a corporation, as compared with the Department of Agriculture?
Secretary WALLACE. No; I don't think there would be any difference at all, so far as the farmers are concerned.
Senator POPE. Were there any other matters you wanted to take up?
Secretary WALLACE. No; there is nothing else that I have.
Senator Pops. Have you examined the bill itself as drawn, Mr. Secretary?
Secretary WALLACE. No; not in careful detail. I read it over some little time ago. I have not read it over recently.
Senator POPE. It follows the recommendations made by the committee of which you are chairman?
Secretary WALLACE. Yes; I was aware of that when I read it over. It seemed to be in line with the recommendations.
Senator POPE. Are there any other questions?
Senator SCHWELLENBACH. I have one that I would like to ask, Mr. Chairman.
In this bill there is a prohibition against using the premiums for any other purpose than the payment of indemnities.
Secretary WALLACE. Which section is that?
Senator ScHWELLENBACH. I do not find it right now, but I know it is in there.
Senator MCGILL. That is, storage fees?
Senator SCHWELLENBACH. Yes, storage fees. It is on page 8, line 20.
Secretary WALLACE. It provides “and shall sell wheat only to the extent necessary to cover payments of indemnities and to prevent deterioration."
Senator SchwELLENBACH. Yes; now, we had the experience with the old Farm Board of the effect of a large amount of wheat dragging down the market. This provision, as I construe it, is to prevent that sort of thing; however, Congress can always amend a law that it has passed, and I was wondering if, to further protect against that sort of a situation, it would not be well to provide in the law that the corporation in entering into contracts with farmers would include that provision in the contract, that the corporation must include that provision in the contract, making a contractual relationship which even Congress could not later change.
Secretary WALLACE. Is that contractual relationship with regard to that particular wheat that this particular farmer paid in?
Senator SCHWELLENBACH. No.
Senator SCHWELLENBACH. No, but make the contract with each farmer that all the wheat is going to be used only for the purpose of paying indemnities and preventing deterioration. Under that they would know certainly that the wheat was not going to be dumped on the market and drag down the price of wheat.
Secretary WALLACE. That is a point well worth considering. I had not given it any thought previously, but it would seem to me there might possibly be a legal difficulty unless the contract had to do with the particular wheat. I don't know that there would be any legal difficulty.
Senator ScHWELLENBACH. I don't see that there would be. We just contract with each man and say: “You give us your wheat in premiums and we will agree that that and all the rest of the wheat shall only be used for the payment of indemnities or sold to prevent deterioration."
Secretary WALLACE. I presume that could be handled if it were deemed desirable, as part of the regulations of the corporation. It would not necessarily have to be in the act, would it?
Senator SCHWELLENBACH. Well, I don't know whether it is a good idea or not. I am just presuming it.
Secretary WALLACE. It impresses me—I would not care to express an opinion offhand.
Senator SCHWELLENBACH. It seems to me it ought to go into the act.
Senator POPE. In the preparation of the bill that point was discussed at considerable length, and it was thought very desirable that such a provision be in the law, and I can see no objection to it being safeguarded in any other way, either through a contract, through the regulations that the corporation might make, or in any other way, because that is a vital point, an essential point in the bill, as we all agreed in the preparation of the bill.
Senator McGill. I take it Senator Schwellenbach is fearful of this situation: That they might acquire and have in storage a large quantity of wheat, and some Congress would come along and strike out this provision of the bill, of the law, and wheat then would be available and would be dumped on the market.
Secretary WALLACE. It sounds like a very interesting suggestion.
Senator McGILL. That would create the same situation we had at one time, which drove commodity prices down.
Senator POPE. Are there any other questions?
Senator FRAZIER. Mr. Chairman, I think it would be advisable if the Secretary would make some statement for the record of his general opinion as to the advisability and the need of crop insurance.
Secretary WALLACE. Well, the report does it very fully.
Secretary WALLACE. But I am quite happy to give you an offhand personal view of it if you care to have that view for purposes of the record.
Senator FRAZIER. I think it would be well.
Secretary WALLACE. I have a feeling, not a well-rounded view necessarily, being given offhand, but I can give you my feeling on the question.
In the first place, I have increasingly had since 1930 a feeling that while you might say the mean of our weather has not changed or is likely to change, yet the variability of our weather around that mean gives evidence of having changed very considerably. There is a considerable possibility, therefore, of the crops over a certain period of years being much further above the mean than formerly, and the possibility that the crops over other periods of years might be much below, further below the mean than formerly. It may be that I have been rendered unusually sensitive to that situation as the result of the unusually bad crop year of 1930, the unusually good crop year of 1932, the extraordinarily bad crop years of 1934 and 1936. It may be that I have also been made more sensitive to the situation as a result of the sudden decline in European demand for our surplus products, and by the efforts we have put forward under the Agricultural Adjustment Administration to adjust ourselves to that decline in the demand on the part of foreign countries for our surplus wheat and other farm products.
Therefore, I feel that I have been rendered sensitive by the fact that while the wheat crops of 1933, 1934, 1935, and 1936 were all exceedingly short, yet we planted in the fall of 1936 by far the largest wheat acreage we ever had planted. All of these forces have seemed to me to expose us to exceedingly wide fluctuations in the total output which, if certain forces happened to combine at the same time, might result in wheat prices going down as low as 40 cents a bushel, or if a certain other set of forces happened to combine, might result in prices going as high as $1.60 a bushel. Therefore, a situation might result on the one hand in extraordinary injustice to the farmer, and on the other hand in considerable injustice to the consumer. It has seemed to me, with the array of facts as we have observed them since 1930, anyone in the position of governmental responsibility to the consumer and the farmer could arrive at only one conclusion, namely, that it is necessary for the Government to engage in activities that would promote greater stability, both for the farmer and consumer. I have visioned