The Governor is authorized to buy stock in these banks for coop-eratives using the remainder of the revolving fund of the Federal Farm Board as loans are liquidated.

Regional banks are empowered to make loans on a business basis to local cooperatives in the district served, according to the regulations of the Governor. The central bank is empowered to make loans to large regional and national cooperatives on a similar basis, also to these regional banks for cooperatives.

The board of directors of the Federal Land Bank are to be the ex officio board of the regional bank for cooperatives. The board of directors of the central bank are empowered only to determine general policies.

The first board of seven directors of the central bank are to be appointed by the Governor of the Farm Credit Administration. Ultimately the board is to be made up of the cooperative bank commissioner, three directors appointed by the Governor, and threedirectors nominated by borrowing cooperatives, and appointed by the Governor of the Farm Credit Administration.

Each cooperative borrowing from the central or regional bank is required to take $100 of stock in such bank for each $2,000 of the loan. That is 5 percent. Such stock, less the pro rata share of losses, if any, is to be repaid to the cooperative when the loan is paid.

The central bank would be empowered to issue and sell debentures to investors, if additional funds are required.

Loans made to cooperatives by the central and regional banks for cooperatives are to be in accordance with the provisions of the Agricultural Marketing Act, as amended.

Then I have listed some amendments to the Agricultural Marketing Act. We recommend, or provide for repealing the provisions relating to, first, advisory commodity committees; second, empowering the board to make miscellaneous investigations; third, assistance in forming and loans to clearing-house associations; fourth, loans to extend the membership of cooperatives; fifth, supplemental commodity loans; and, sixth, price insurance.

All those sections are to be repealed, and, as you know, the sec-tion providing for stabilization, section 9, has been repealed by the Executive order which becomes effective today. That is the reason it is not included; it has already been repealed.

We provide for amending section 7, to permit of loans to refinance facilities, as well as for initial financing. All facility loans are limited to not to exceed 60 percent of the value. The act now reads 80 percent.

We also provide for amending section 8 relating to interest rates, to provide an interest rate to be determined by the governor of the Farm Credit Administration, depending on the type of loan, but not to be less than 3, nor more than 6 percent.

We also provide for amending section 15, to include all bona fide cooperative associations of agricultural producers that meet the provisions of the Capper-Volstead Act, as to limited dividends, voting power of members, and business with nonmembers.

That, Mr. Chairman, covers the specific provisions for the reorganization of the Federal Farm Board, and recommendations for amend-ments to the Agricultural Marketing Act.

Mr. CUMMINGS. You might start and tell us why you want these amendments.

Dr. MYERS. Do you want to take up those points?

Mr. CUMMINGS. I am interested in what they are trying to undo of that we have already done.

Dr. MYERS. First, in regard to paragraph (a) regarding the appointment of advisory commodity committees. The act authorizes the Farm Board to obtain the election of advisory commodity committees to represent each of the important commodities. They have never functioned.

This spring they held an election of cooperatives for members of the wheat advisory committee, and there were something like 3,000 cooperatives. These figures are only approximate, but there were only about 15 or 17 votes cast out of 3,000 eligible cooperatives. The section has been inoperative; it is useless, and we recommend its repeal.

As to paragraph (b), empowering the board to make miscellaneous investigations: Under the act, the Farm Board now, and the Farm Credit Administration, are empowered to make miscellaneous investigations. Those investigations can better be handled by the Department of Agriculture, or by other agencies, and we recommend the repeal of that section.

As to paragraph (c), relating to assistance in forming and loans to clearing house associations: Those sections are repealed. Clearing house associations that is, a sort of organization that includes cooperatives, provide policies and attempt to get all of the commodity under control. They have not been successful. The few attempts that have been made have resulted unfortunately, and we recommend that that be repealed.

As to paragraph (d), relating to loans to extend the membership of cooperatives, we believe that the basis of loans should be secured; that is, that loans to cooperatives should be on a business basis.

Cooperatives that need to spend money, as they do, to extend their membership, should be able to meet that expense out of their ordinary income, and should not borrow in order to extend their membership.

In reference to paragraph (e), relating to supplemental commodity loans, the Board was authorized to make loans that were called supplemental commodity loans.

The procedure was that the cooperatives would get a primary loan up to about 60 percent of the value of the commodity, from the intermediate credit bank, and then the Farm Board would loan the additional amount. They would get out on the end of the limb, so to speak, which encouraged the holding of the commodities, or part of the commodities, and that brought disaster both to the cooperatives and to the Farm Board.

The two features of the Agricultural Marketing Act that resulted in very heavy losses to the Farm Board were, of course, stabilization and supplementary commodity loans.

We feel that it is sound to borrow a legitimate part of the value of a commodity that is stored, to be marketed later. The Intermediate Credit Act already permits the loans up to 75 percent of the value of the commodity, covered by warehouse receipts. We think

it is unsound to make additional loans beyond that, and we recommend the repeal of that section.

As to paragraph (f), relating to price insurance, I do not know what that means. That section was never used.

It, however, is an experiment, and if it were used it seems to me it has no place in the organization of a financing agency. So it would seem the part of wisdom to keep that in an independent organization and not to jeopardize a sound financial institution by an experiment of that sort.

Mr. CUMMINGS. Where is that authority granted in the Agricultural Marketing Act?

Dr. MYERS. It is section 11 of that act.

Mr. CUMMINGS. Will you read it?

Dr. MYERS. Section 11 reads:

The Board is authorized, upon application of cooperative associations, to enter into agreements, subject to the conditions hereinafter specified, for the insurance of the cooperative associations against loss through price decline in the agricultural commodity handled by the associations and produced by the members thereof. Such agreements shall be entered into only if, in the judgment of the Board, (1) coverage is not available from private agencies at reasonable rates, (2) the insurance will be in furtherance of the policy declared in section 1, (3) the agricultural commodity is regularly bought and sold in the markets in sufficient volume to establish a recognized basic price · for the market grades of the commodity, and (4) there is available with respect to the commodity such market information as will afford an accurate record of prevailing prices for the commodity covering a period of years of sufficient length to serve as a basis to calculate the risk and fix the premium for the insurance. The agreements shall require payment of premiums so fixed and shall include such other terms as, in the judgment of the Board, are necessary. The Board may make advances from the revolving fund to meet obligations under any insurance agreement, but such advances together with the interest thereon shall, as soon as practicable, be repaid from the proceeds of insurance premiums.

It would be very difficult to work out price insurance.

Mr. CUMMINGS. Will you read the part affected by paragraph (c)? Dr. MYERS. Yes. Paragraph (c) relates to assistance in forming and loans to clearing house associations.

Loans to clearing house associations were covered in paragraph (3) of subsection (a) of section 7, and that authorizes the formation of and loans to clearing house associations.

Then there is section 10, which covers clearing house associations, and which reads as follows:

Upon application of any cooperative association handling an agricultural commodity or of producers of an agricultural commodity, the Board is authorized, if it deems such association or producers representative of the commodity, to assist in forming producer-controlled clearing house associations adapted to effecting the economic distribution of the agricultural commodity among the various markets and to minimizing waste and loss in the marketing of the commodity, if such assistance, in the judgment of the Board, will be in furtherance of the policy declared in section 1. The Board may provide for the registration, and for the termination of the registration, of any clearing house association in accordance with such regulations as the Board may prescribe.

Such clearing house associations are authorized to operate under rules adopted by the member cooperative associations and approved by the board. Independent dealers in, and handlers, distributors, and processors of, the commodity, as well as cooperative associations handling the commodity, shall be eligible for membership in the clearing house association: Provided, That the policy of such clearing house association shall be approved by a committee

of producers which, in the opinion of the board, is representative of the commodity. Clearing house associations shall utilize the market news service and other facilities of the Department of Agriculture as far as possible.

Mr. CUMMINGS. That is what I am especially interested in, for this reason. My district is especially interested in sugar.

I take it for granted you are familiar with the way in which sugar

is sold.

In my district we have 12 manufacturers. We ship sugar as far east as Pennsylvania. Refiners of cane sugar in the East refine their sugar and ship it into Illinois and Iowa. We formed a national beet growers association, with the view of being able to get by the Sherman Antitrust Act in forming such an organization as this so that the manufacturers of beet sugar and the refiners of cane sugar could divide the territory so that the people who manufacture beet sugar in Colorado and Nebraska could say to the fellows who manufacture cane sugar, "You sell yours here, and we will sell ours here." That saved a cross haul.

If sugar is worth $4 in New York, it would be worth about $5 in Denver, because the rate is about $1 per hundred from New York to Denver.

If a fellow who manufactured beet sugar in Colorado should ship that sugar half way to New York, it would be worth $4.50. It would be worth $5 at Denver, or in Colorado.

If it would be worth $4.50, he would have paid 50 cents per hundred freight, so it would be worth $1 less than at home. There are 270 pounds of sugar in a ton of beets, so it means that a ton of beets is worth $2.70 less.

If they could organize a clearing house, such as they had during the war, and then divide the territory, that would be of some assistance. But the Farm Board told us we could not get by with that. The Colorado organization of beet growers is the largest beet growers' organization, and we spent 10 to 15 thousand dollars try

ing to get organized into a national association, trying to get this through. But we did not get the organization. We think we can do that under this provision which it is proposed to repeal.

Unless there is something else that will allow us to do that, I am quite sure that the sugar-beet people would very much object to repealing that particular part of the act unless there is some other provision in the act under which we can do that.

Dr. MYERS. I wonder if that is the policy of Congress. It is up to Congress to determine the policy, and we attempt to administer it. Could it not be handled more effectively under the Farm Relief Act, providing for trade agreements?

Perhaps our point of view would be clarified if I point out that we believe that these banks for cooperatives can function most effectively as financial institutions, with reasonable business loans, and that that type of what you might call an experiment

Mr. CUMMINGS (interposing). No; it is not an experiment. It was done during the war.

Dr. MYERS. Let us say that type of operation, can be better handled through some other agency.

Mr. CUMMINGS. Is there any law that would allow that?

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Mr. O'BRIEN. The Agricultural Adjustment Act authorized the Secretary of Agriculture to enter into agreements with handlers of agricultural commodities relating to production and marketing, which agreements, if approved by the Secretary, are not in violation of the antitrust law.

Mr. CUMMINGS. Will that apply to agricultural products that are imported, because cane sugar is largely imported, and then refined at New Orleans and New York?

Mr. O'BRIEN. The agreement is made with the handler of the agricultural commodity in the United States, so the agreement would be made with sugar refiners in New York, and with sugar refiners in Denver, or at any other place.

Mr. Buck. The provision you want repealed is the one that authorizes these organizations?

Dr. MYERS. Yes.

Mr. CUMMINGS. We do not care about any assistance, or anything in reference to the loan provision. We just want to be able to be let alone so we can do that.

Dr. MYERS. I will be glad to find out from the Department of Agriculture about the possibility of doing that under the farm relief bill.

Mr. FULMER. It is my understanding that in the farm relief bill the trade agreement section was placed in the bill so you could bring about the very thing you are talking about.

Mr. CUMMINGS. That is all that is on my mind.

Mr. GLOVER. I want to get one matter clear in my mind.

Say, for instance, I want to borrow $2,000. Five percent of that would be retained, and I would get 95 percent?

Dr. MYERS. Yes, sir.

Mr. GLOVER. When I pay that loan off in the fall, where does the $100 go?

Dr. MYERS. That would be deducted from your final payment, if there had been no loss.

Mr. GLOVER. In other words, I would pay $1,900, but I would not get any interest, or anything of that kind.

Dr. MYERS. Yes. The reason for the decentralization of the loan functions of the Farm Board is that since we have been operating, since early in March, my estimate would be that at least 90 percent of the applications for loans come from local associations in Idaho, in Colorado, in Oklahoma, and in every other State, and those loans cannot be handled efficiently from Washington.

We believe that the business needs of the cooperatives could be better handled with an agency to make those business loans to the cooperatives in each farm land bank district, and with one central agency that could make loans to the regional banks, or that could make loans to large national cooperatives that cover several districts. Mr. HOPE. Heretofore loans made to local grain cooperatives have been made through the Farmers' National Grain Corporation, as I understand it?

Dr. MYERS. In most cases.

Mr. HOPE. Is it contemplated, under this new set-up, that you will make all those loans to the local associations direct through the regional bank, or do you still intend to have that type of loans go through the Farmers' National Grain Corporation?