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PRECEDENT ESTABLISHED

The committee gave careful consideration to the resolution and the amendments. In the course of this study the committee took cognizance of the fact that Congress approved, on December 22, 1925, a joint resolution declaring December 26 of that year a legal holiday in the District.

That resolution was designed to care for just such a condition as has arisen in the instance of the resolution now under consideration. Christmas Day in 1925 fell on a Friday. It was deemed necessary to take congressional action whereby to conserve all interests which might be imperiled by the establishment of a holiday not provided for by Congress.

The committee accordingly amended the resolution in conformity with the resolution approved by the Sixty-ninth Congress. The committee knows of no opposition to the resolution, and believes it to be fair, desirable, and necessary.

The favorable report by the District Commissioners on the resolution is appended hereto as part of this report.

COMMISSIONERS OF THE DISTRICT OF COLUMBIA,

Washington, June 3, 1930. Hon. ARTHUR CAPPER, Chairman Committee on the District of Columbia,

United States Senate, Washington, D. C. Sir: The Commissioners of the District of Columbia have the honor to submit the following on S. J. Resolution 184, Seventy-first Congress, second session, entitled “Joint resolution to declare July 5, 1930, a legal holiday for all banks and trust companies, the officials and employees thereof, in the District of Columbia,' which you referred to them for report as to the merits of the bill and the propriety of its passage. The commissioners know of no objections to the passage of the resolution. Very truly yours,

L. H. REICHELDERFER, President Board of Contmissioners, District of Columbia.

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SENATE

71ST CONGRESS

2d Session

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REPORT No. 817

AMENDMENT TO FEDERAL FARM LOAN ACT PERMITTING INTER

MEDIATE CREDIT BANKS TO MAKE LOANS TO ELIGIBLE AGRICULTURAL OR LIVESTOCK FINANCING INSTITUTIONS ON BILLS PAYABLE AND ELIMINATING SIX MONTHS' MINIMUM MATURITY REQUIREMENT

May 29 (calendar day, JUNE 4), 1930.-Ordered to be printed

Mr. Glass, from the Committee on Banking and Currency, submitted

the following

REPORT

[To accompany S. 4287)

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The Committee on Banking and Currency, to whom was referred the bill (S. 4287) to amend section 202 of Title II of the Federal farm loan act by providing for loans by Federal intermediate credit banks to financing institutions on bills payable and by eliminating the requirement that loans, advances, or discounts shall have a minimum maturity of six months, having considered the same, report favorably thereon with the recommendation that the bill do pass with the following amendments:

In line 6, page 1, after words “end of” strike out the words“ the first subsection" and insert in lieu thereof the words "paragraph (1)”; and in the same line, after the word "adding" insert the word "thereafter".

The purpose of this amendment is merely to identify more accurately the place in the act which is to be affected by the language found in lines 7 and 8 of page 1 of S. 4287.

Under sections 1031 and 1033, title 12, United States Code Federal intermediate credit banks have the power, with proper safeguards, to

1. Discount for, or purchase from any eligible bank, savings institution, trust company or agricultural and livestock financing institution, with its indorsement, any note, draft, bill of exchange, or other obligation, the proceeds of which was primarily used for agricultural or livestock raising purposes;

2. Buy or sell, with or without recourse, debentures issued by any other Federal intermediate credit bank; and

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3. Make loans direct to cooperative associations composed of persons producing or producing and marketing agricultural staples or livestock on the following security: (a) Warehouse receipts, (b) shipping documents covering agricultural products, or (c) mortgages on livestock-all such loans not to exceed 75 per cent of the market value of such products.

Under existing law the loans or discounts provided for under section 1031 have a range of maturity at the time they are made or discounted by the Federal intermediate credit bank from six months to three years.

The purpose of this bill is to broaden the scope of existing law by amending above sections of the Federal farm loan act (U.S. C., title 12, secs. 1031, 1033), in two respects:

1. Permitting the Federal intermediate credit banks, in addition to discounting certain classes of paper of above financing institutions, to make loans direct to such institutions on the security of the same classes of paper; and

2. Removing the six months' minimum maturity limitation on agricultural and livestock loans at the time they are made or discounted by the Federal intermediate credit bank and simply leaving the maximum maturity limitation at three years.

By permitting the intermediate credit banks to make loans direct to eligible banks and agricultural and livestock financing institutions and other institutions named in the act, it is believed that the business transactions of all such institutions will be simplified and facilitated without any departure from the fundamental purposes of the law, as it would permit intermediate credit banks to accept the same paper as security for the bills payable of such institutions as may now, under existing law, be discounted or purchased by them.

Your committee feels there is a legitimate demand for the removal of the existing six months' minimum maturity limitation on loans and discounts by the intermediate credit banks. If this requirement in existing law is eliminated, the needs of agricultural and livestock marketing and production credit will be better served without in any way impairing the basic purposes of the farm-loan system.

Under date of May 17, 1930, the aggregate loans and discounts of the Federal intermediate credit system showed a total of $92,486,991.33. This act has been in effect since 1923.

It is a part of the Federal farm loan system and the loans permitted under the act lie in a very large field with enormous possibilities for expansion. Good progress has been made in handling paper of cooperative marketing associations, of agricultural credit corporations, and of livestock loan companies, but the discounts to banks have been and are but little more than nominal. The figure for the various classes on the date above named being as follows: Cooperative marketing associations.

$28, 408, 796. 00 Agriculture credit corporations..

34, 583, 788. 07 Livestock loan companies.

28, 322, 122. 81 Banks.and

1, 172, 284. 45 Total.--

92, 486, 991. 33 The debentures of the intermediate credit banks sell at very easy interest rates. The last debentures sold on May 15 bearing a rate

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of 3% per cent. It would be supposed, that with this demand for debentures of the intermediate credit banks, that a much greater loan volume would be obtained. The outstanding loans of the Federal land banks and the joint-stock land banks are approximately $1,774,000,000. It will be seen that in comparison the intermediate credit banks are not being actively operated. Many remedies have been offered for this condition, but the committee feels that the two helpful proposals which will do more to expand the loan volume and increase the usefulness of the intermediate credit banks without impairing the fundamental purpose of the law are those embraced in S. 4287. The amendments will permit loans direct to eligible banks on the security already defined by the act. This should stimulate and increase the direct loans of the intermediate credit banks. The latter part of S. 4287 will make possible loans for shorter periods than six months and will make available intermediate credit money to those cooperatives that may want to use the loans for a period of three or four months, or other periods less than six months. The 6-month limitation prevents the use of intermediate credit bank facilities by certain processors and also feeders of livestock, because they can not bind themselves to retain the money borrowed for a period longer than six months. The committee believes that these two amendments will make this system more elastic and will increase its service to agricultural producers.

The enactment of S. 4287 is recommended by the Secretary of the Treasury in his letter of approval to the chairman of this committee under date of May 10, 1930, which reads as follows, and is made a part of this report:

TREASURY DEPARTMENT,

Washington, May 10, 1930. DEAR MR. CHAIRMAN: Receipt is acknowledged of your letter of April 26, in which you ask for a report upon Senate bill 4287, introduced by Mr. Steiwer on April 21 (calendar day, April 25), 1930, entitled "A bill to amend section 202 of Title II of the Federal farm loan act by providing for loans by Federal intermediate credit banks to financing institutions on bills payable and by eliminating the requirement that loans, advances, or discounts shall have a minimum maturity of six months."

The first section of bill S. 4287 would amend section 202 (c) of Title II of the Federal farm loan act so as to permit Federal intermediate credit banks, in addition to discounting certain classes of paper of financing institutions mentioned in the act, to make loans or advances direct to such institutions on the security of the same classes of paper. It is the view of the Federal Farm Loan Board that such an amendment would simplify and facilitate the business transactions of the Federal intermediate credit banks with eligible financing institutions, without in any respect_departing from the fundamental purpose of the law, as it would permit the Federal intermediate credit banks to accept as security for the bills payable of such institutions the same paper that may now be discounted or purchased.

As to the second section of bill S. 4287, you will recall that in my letter to you of February 25, 1930, I made the following statement:

In the course of orderly marketing, cooperative marketing associations usually require commodity credit for shorter periods than six months, as well as for periods extending beyond six months, and many of them feel that they should be in a position to utilize the facilities of the intermediate credit banks for both their short time and long time requirements. Other agencies-country banks, agricultural credit corporations, and livestock loan companies—eligible to do business with the Federal intermediate credit banks also find it desirable at times to discount agricultural paper which has a maturity at the time of discount of less than six months. In the circumstances, the removal of the present limitation would, it is believed, make it possible for the banks to serve the needs of marketing and production credit more satisfactorily and adequately without departing from or impairing the fundamental purposes of the system.”

It is observed that the amendment proposed by section 2 of bill S. 4287 would accomplish the purpose thus recommended in my letter of February 25, 1930.

In the circumstances, it is the opinion of this department that the legislation proposed in bill S. 4287 would be desirable. Very truly yours,

A. W. MELLON,

Secretary of the Treasury.
Hon. PETER NORBECK,
Chairman Committee on Banking and Currency,

United States Senate.
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