TABLE I-Statement of estimated expenditures, fiscal year 1934

1 This item includes investments of the United States in the capital stock of banks and corporations, and loans, relief and sundry expenditures other than operating expenses, but does not include disbursements or investments of corporations, such as the Federal land banks.

Under the act of Jan. 31, 1934, farm-mortgage loans will be made by the Federal Farm Mortgage Corporation. 3 The sum of $40,000,000 was authorized for this purpose in the act of Jan. 31, 1934.

ESTIMATED EXPENDITURES, FISCAL YEAR 1935

During the fiscal year 1934, the Farm Credit Administration will have organized and capitalized the banks for cooperatives and the production credit corporations, so that our capital expenditures for 1935 will be substantially reduced.

The following table shows that for the fiscal year 1935, the investments, loans, advances, etc., are estimated to amount to $170,350,000 and the cost of adminis tration $7,161,346, of which $4,347,408 is for personal services and $2,813,938 for other expenses, both of which include also the supervision of the banks and corporations.

Our ultimate objective is to distribute the entire cost of administration against the several operating agencies, although it is not feasible under existing economic conditions to carry such a program entirely into effect so soon after the organizations have been created. The only part of the administrative expenses, however, which pertains to funds to be appropriated for the fiscal year 1935 is the item of $2,389,666, which is included in the Budget as the estimated "Salaries and Expenses, Farm Credit Administration, 1935." The remaining administrative costs aggregating $4,771,680, will be borne out of funds which have been made available for the respective activities.

TABLE II.-Statement of estimated expenditures, fiscal year 1935

1 This item includes investments in capital stock of banks and corporations, loans, relief, and sundry expenditures, other than operating expenses.

Under the act of Jan. 31, 1934, farm mortgage loans will be made by the Federal Farm Mortgage Corporation.

3 The sum of $40,000,000 was authorized for this purpose in the act of Jan. 31, 1934.

This item is made up of $5,600,000 from the 1934 appropriation and $75,000,000 which will be requested in a supplementary estimate to be submitted by the Treasury. This item will be requested in a supplementary estimate to be submitted by the Treasury Department.

(1) APPROPRIATED FUNDS TO FARM CREDIT ADMINISTRATION

SALARIES AND EXPENSES, FARM CREDIT ADMINISTRATION, 1935

The appropriation, salaries and expenses, Farm Credit Administration, is our only annual recurring appropriation. For the fiscal year 1933, the administrative appropriation of the several agencies merged in the Farm Credit Administration was $2,250,000 (exclusive of funds provided by the Reconstruction Finance Corporation for crop-production loans, farm-mortgage loans, and operating expenses of the regional agricultural credit corporations). With the increased demands placed upon the Farm Credit Administration by the Emergency Farm Mortgage Act and the Farm Credt Act of 1933, a small additional allowance, $50,000, was made for the fiscal year 1934, which brought our appropriation to $2,300,000.

The estimate submitted for 1935 is $2,389,666, the additional $89,666 being requested in anticipation of a restoration of 5 percent of the basic salaries of our employees, in accordance with the instructions of the Bureau of the Budget. The appropriation takes care of the activities of the Cooperative Division, which has charge of the agricultural marketing revolving fund and the banks for cooperatives; that part of the work of the Land Bank Division which relates to the supervision of Federal and joint-stock land banks and national farm-loan associations; the Intermediate Credit Division, which has supervision of the Federal intermediate credit banks; and the Farmers' Seed Loan Office, which handles

collections of farmers' seed loans granted between 1921 and 1931. The appropriation also covers indirect costs applicable to these operative divisions, such as administrative, accounting, legal, and statistical services.

ADMINISTRATIVE EXPENSES, PRODUCTION CREDIT CORPORATIONS

In order to carry into effect the provisions of the Farm Credit Act of 1933, relating to the organization of the production credit corporations and associations, Congress appropriated $2,000,000 in the Fourth Deficiency Act, 1933, to remain available until expended. No disbursements were made from this appropriation during the fiscal year 1933. The Production Credit Division estimates an expenditure of $800,800 for 1934, which will leave a balance of $1,199,200 to be carried forward into the fiscal year 1935.

This appropriation is used to establish throughout the United States a permanent cooperative production credit system for agriculture, which eventually will be owned and operated by farmers. The production credit associations, the local units of this production credit system, make loans for general agricultural purposes, including planting and harvesting of crops, breeding, raising and fattening of livestock, and raising poultry and handling livestock products. Each association, composed of farmer borrowers, will serve a local territory and will endorse farmers' notes and discount them with the Federal intermediate credit bank of the district. The 12 production credit corporations, the regional units of the system, have already been chartered. Each corporation has a capital of $7,500,000, paid from the Farm Credit Administration revolving fund, authorized under section 5 of the Farm Credit Act of 1933.

The production credit corporation located in each district subscribes to class A stock in each chartered association in an amount equal to approximately 20 percent of the estimated loans to be made. The additional capital will be provided through the sale to borrowers of another class of stock, called class B stock. Each borrower is required to own class B stock equal to $5 for every $100 he borrows.

To date more than 500 production credit associations have been chartered. In the next 60 days the number will be increased to about 700. At that time, the entire United States will be covered by a system which will provide adequate credit for agricultural production. Thereafter, our representatives will assist the associations in perfecting their organizations; in adopting by-laws, regulations and amendments; in setting up sound business practices In general, they will supervise the associations.

FARM CREDIT ADMINISTRATION REVOLVING FUND

Section 5 of the Farm Credit Act of June 16, 1933, authorized the creation of a revolving fund of not to exceed $120,000,000, which is available for the purchase of capital stock of the production credit corporations. The sum of $40,000,000 was appropriated to this fund from the Treasury in the Fourth Deficiency Act of 1933. The other $80,000,000 will be derived from balances in appropriations and collections on farmers' seed and crop production loans. Up to the present time the transfers to the fund include the $40,000,000 appropriation, $16,660,824 of appropriation balances, and $43,339,176 of collections, making a total of $100,000,000. The sum of $90,000,000 has been used for the purchase of capital stock of the 12 production credit corporations.

AGRICULTURAL MARKETING REVOLVING FUND

Pursuant to the Farm Credit Act of 1933, efforts have been directed toward the establishment of a self-supporting system of credit for farmers' cooperative associations, under which the association using the credit will participate both in the ownership and the control of the lending institution. Under sections 33 and 40 of the act, the agricultural marketing revolving fund, created under the Agricultural Marketing Act of 1929, is made available for the purchase of stock of the banks for cooperatives. The central bank is located in the District of Columbia and has a capital stock of $50,000,000. Each of the 12 regional banks has a capital stock of $5,000,000. In addition to the payments for the bank stock, the Farm Credit Administration will make advances to the cooperative associations from the revolving fund during the fiscal year 1934, under the authority of the Agricultural Marketing Act of 1929. These advances will amount to approximately $5,000,000. Since the establishment of the banks for cooperatives, loans from the revolving fund have been made to cooperative

associations only to meet prior commitments, or for additional amounts necessary to protect the security behind the old loans, or to enable the corporations to continue in business and eventually pay their old obligations.

The total receipts on the loans made from this fund, including those outstanding on June 30, 1933, will amount to approximately $75,000,000 during the fiscal year 1934.

(2) RECONSTRUCTION FINANCE CORPORATION FUNDS

FARM MORTGAGE LOANS

The Emergency Farm Mortgage Act of May 12, 1933, section 32, directed the Reconstruction Finance Corporation to make available to the Farm Loan Commissioner (now Land Bank Commissioner) $200,000,000 for making direct mortgage loans to farmers to relieve distress and prevent foreclosures. The expenses of making these loans have been paid out of the fund. For the fiscal year 1934, the Land Bank Commissioner estimated the expense would amount to $2,720,000. Up to January 27, loans had been made amounting to $120,000,000 while approved applications on hand, on which no disbursement had been made, exceeded $275,000,000.

In view of the importance of this activity, Congress passed the Federal Farm Mortgage Corporation Act of January 31, 1934, establishing a corporation that will continue making loans on farm property. The act provides for the transfer to the Corporation of the unexpended balance in the fund, together with mortgages and other credit instruments taken by the Land Bank Commissioner.

Pursuant to this authorization, we will transfer to the Corporation first and second mortgages amounting to $120,000,000, cash with Reconstruction Finance Corporation subject to call, $65,000,000; cash with disbursing officers, $14,000,000; and sundry assets, including accruals of interest on mortgages, accounts receivable, furniture, fixtures, and so forth, aggregating $1,000,000.

LOANS TO JOINT-STOCK LAND BANKS

Under sections 30 and 31 of the Emergency Farm Mortgage Act of May 12, 1933, $100,000,000 was made available for a period not to exceed 2 years for the purpose of making loans to joint-stock land banks, organized under the Federal Farm Loan Act, with a view of securing their orderly liquidation, and of obtaining postponement of foreclosures on mortgages held by these banks.

In connection with the administration of this fund, we have reserved $100,000 for possible administrative expenses in 1934 and a similar amount in 1935, but to date the cost in connection therewith has been small, the total being less than $1,000.

CROP-PRODUCTION LOANS AND REGIONAL AGRICULTURAL CREDIT CORPORATION

FUNDS

The crop-production loans were authorized by the Acts of January 22, 1932, and February 4, 1933. The former act directed the allocation of $200,000,000 by the Reconstruction Finance Corporation to the Secretary of Agriculture to be expended in 1932 for loans to enable planting, fallowing, cultivating, harvesting, etc. The latter act permitted the continuation of the loans in the calendar year 1933, placing, however, a limitation thereon of $90,000,000.

The total crop-production loans made during 1932 amounted to approximately $64,200,000 and during 1933 to $57,450,000. The administrative expenses in connection with these loans are paid out of the fund. Aside from the crop-production loans, the capital stock of the regional agricultural-credit corporations has been purchased out of this fund. Section 201 of the Emergency Relief and Construction Act of 1932 authorized the Reconstruction Finance Corporation to create in any of the Federal land-bank districts a regional agricultural-credit corporation with a paid-up capital of not less than $3,000,000. In all, the capital stock of the 12 regional agricultural-credit corporations subscribed and paid for amounts to $44,500,000. The expenses incurred in connection with operation of the regional corporations are paid by the Reconstruction Finance Corporation on our authorization.

The Farm Credit Administration has effected substantial savings in the administration of the crop-production loans and the regional agricultural credit corporations. The actual expenses for administering crop loans from February 1932 to June 30, 1933, amounted to $6,359,395, of which $4,893,007 was applicable to the fiscal year 1933.

While the volume of loans made during the fiscal year 1934 will not be nearly so heavy as during the preceding fiscal year, nevertheless, the estimated collections (reported as $53,170,000 in the Budget) in all probability will exceed $60,000,000, a sum greater than that loaned in 1933. The administration of both loans and collections during the fiscal year 1934 will require the sum of $3,601,899, a reduction of $1,291,108 from the preceding year.

The savings on operating expense of the regional agricultural credit corporations are even larger. Between December 1, 1932 (the approximate date of their organization), and June 30, 1933, the administrative expenses of the regional corporations amounted to $3,126,982, or an average of $446,712 per month, making an annual budget of $5,360,000. Actually at the time they were taken over, their monthly expenses were running somewhat in excess of this figure.

Beginning July 1, 1933, a substantial reduction was made in the allowances for the regional corporations. A maximum of $4,000,000 was set for their operating expenses for the fiscal year 1934, which reflects a reduction of $1,360,000.

The total deductions in these two items amount to more than $2,650,000. Accordingly, I can report that the Farm Credit Administration has more than complied with the promise of former Governor Morgenthau, made at the hearings on April 20, 1933, before the subcommittee of the House committee on the independent offices appropriation bill, that the Farm Credit Administration would effect savings of more than $2,000,000 in the operation of these activities in the fiscal year 1934.

The regional agricultural credit corporations are now on a liquidating basis and will ultimately be replaced by the production credit associations. Until these latter organizations are in a position to provide adequate credit facilities, however, the regional agricultural credit corporations will be continued and will be liquidated only when each district becomes adequately provided with credit facilities through the production credit associations.

At this time, the total expenses for the regional agricultural credit corporations are estimated for 1935 at $3,250,000, which is $750,000 less than the estimate for the fiscal year 1934.

APPROPRIATIONS TO TREASURY DEPARTMENT FOR PAYMENTS ON AUTHORIZATION OF THE FARM CREDIT ADMINISTRATION

SUBSCRIPTIONS TO PAID-IN SURPLUS OF FEDERAL LAND BANKS

The Fourth Deficiency Act, fiscal year 1933, appropriated $50,000,000 to the Treasury Department to enable the Secretary of the Treasury to pay for subscriptions to the paid-in surplus of Federal land banks in accordance with the provisions of section 23 of the Emergency Farm Mortgage Act of May 12, 1933, in return for extensions of installments on mortgages held by Federal land banks. Under the law, it is the duty of the Secretary of the Treasury, at the request of the Federal land bank making the extension, and the approval of the Land Bank Commissioner, to subscribe to the paid-in surplus of such bank an amount equal to the extensions or deferments made by the bank. The subscriptions to paid-in surplus of Federal land banks on January 31, 1933, amounted to $20,000,000. Recent estimates made by the Farm Credit Administration indicate that $75,000,000 will be needed for this purpose for the fiscal year 1935, which will be requested in a supplemental estimate to be submitted by the Treasury Department.

PAYMENTS TO FEDERAL LAND BANKS FOR REDUCTION OF INTEREST AND DEFERMENT

OF PRINCIPAL

Payments to the Federal land banks on account of reductions made in interest rates on mortgages held by them are authorized in section 24 of the Emergency Farm Mortgage Act of 1933. The Secretary of the Treasury pays each Federal land bank an amount which the Land Bank Commissioner certifies is equal to the reduction in the amount of interest payments occasioned by section 24. Furthermore, no payment of the principal portion of an installment of any loan is to be required within 5 years after the act, if the borrower is not in default with respect to any other condition or covenant in his mortgage.

For these purposes Congress appropriated $15,000,000 in the Fourth Deficiency Act, fiscal year 1933, which is available only during the fiscal year 1934. In order to continue these payments, the sum of $15,000,000 will be needed during the fiscal year 1935. This item will also be made the subject of a supplemental estimate to be submitted by the Treasury Department.