83D CONGRESS 2d Session "} SENATE REPORT No. 1498 AUTHORIZING THE BANKS FOR COOPERATIVES TO ISSUE CONSOLIDATED DEBENTURES JUNE 3 (legislative day, MAY 13), 1954.-Ordered to be printed Mr. AIKEN, from the Committee on Agriculture and Forestry, submitted the following REPORT [To accompany S. 3487] The Committee on Agriculture and Forestry, to whom was referred the bill (S. 3487) to authorize the Central Bank for Cooperatives and the regional banks for cooperatives to issue consolidated debentures, and for other purposes, having considered same, report thereon with a recommendation that it do pass without amendment. This bill would permit the Central Bank for Cooperatives and the regional banks for cooperatives to join together in the issuance of debentures in the same way that the Federal land banks and the Federal intermediate credit banks are now permitted to join. At present the Central Bank for Cooperatives is the only bank for cooperatives authorized to issue debentures. The total amount of consolidated debentures, plus individual debentures of the Central Bank, which might be outstanding at any time is limited to 8 times the combined capital and surplus of the 13 banks. The bill is proposed by the Farm Credit Administration as a step toward the retirement of Government capital by providing the banks with authority to issue more marketable securities. A fuller explanation of the bill is contained in the letter of the Governor of the Farm Credit Administration attached hereto as exhibit A. EXHIBIT A FARM CREDIT ADMINISTRATION, The honorable the PRESIDENT OF THE SENATE, United States Senate. DEAR MR. PRESIDENT: There is enclosed a proposed bill entitled "A bill to authorize the Central Bank for Cooperatives and the regional banks for cooperatives to issue consolidated debentures, and for other purposes.' " The objective of this bill is to improve the procedure under which the banks for cooperatives may obtain lending funds from commercial banks and the invest ing public, by giving the banks for cooperatives substantially the same authorities with respect to debentures as apply to debentures of the Federal intermediate credit banks and bonds of the Federal land banks. This would be accomplished by giving the Central Bank for Cooperatives and the 12 regional banks for cooperatives the power to issue consolidated debentures that are the joint and several obligations of the Central and regional banks. These debentures would not be obligations of the United States and would not be guaranteed by the United States Government either as to principal or interest. The Central Bank for Cooperatives under the present law now has power to issue debentures up to five times its paid-in capital and surplus. The 12 regional banks for cooperatives do not have power either to issue debentures on their own behalf or to assume any liability for the debentures issued by the Central Bank. For this reason, it is not possible to utilize the assets of the 13 banks in the system in an effective manner in order to realize the maximum efficiency in obtaining necessary lending funds from commercial sources and the investing public. The authority to issue consolidated debentures would make possible this objective and greatly facilitate the financing operations of the 13 banks, just as it has in the case of the Federal land banks and the Federal intermediate credit banks. It is thought also that the establishment of a stable market for consolidated debentures of the banks for cooperatives would enable these banks to operate successfully with less capital funds than they now require and that accordingly the investment by the Government in their capital stock might be retired more expeditiously than would be the case under the present debenture-issuing authority of the Central Bank alone. Under the wording of the proposed authority, each bank for cooperatives would be liable for all consolidated debentures, even though it might not share in the proceeds of a particular issue. However, in practice as between the banks, the banks sharing in the proceeds would be primarily liable. These debentures would be secured. The procedures for collateralizing the consolidated debentures would be similar to those applicable to the individual debentures of the Central Bank. The total amount of such debentures and individual debentures of the Central Bank which may be outstanding at any one time could not exceed 8 times the capital and surplus of the 13 banks for cooperatives. A debenture committee, composed of the chief executive officers of the 13 banks, would be authorized to determine the terms and conditions of such debentures and the manner and form in which they are issued, subject to approval by the Governor of the Farm Credit Administration. The Governor would be authorized, also, to set up such safeguarding procedures and machinery for their issuance as he might deem advisable for the protection of the public and the cooperattive banks. The bill would also enable national banks and State member banks of the Federal Reserve System to receive compensation in the distribution of the consolidated debentures as is now the case as regards the individual debentures of the Central Bank for Cooperatives. Debentures of the banks for cooperatives also would be accorded the same status with respect to investment of fiduciary and trust funds under the jurisdiction of the United States and as security for public deposits as is presently accorded the farm loan bonds of Federal land banks under section 27 of the Federal Farm Loan Act. Section 303 of the Government Corporation Control Act, relating to securities issued by banks for cooperatives, would be applicable to the consolidated debentures of the banks which the bill would authorize. The Farm Credit Administration recommends early consideration and enactment of the provisions included in the enclosed draft. The Bureau of the Budget advises that there is no objection to the presentation of this proposal for the consideration of the Congress. Sincerely yours, Hon. GEORGE D. AIKEN, R. B. TOOTELL, Governor EXHIBIT B FARM CREDIT ADMINISTRATION, Chairman, Committee on Agriculture and Forestry, United States Senate. DEAR SENATOR AIKEN: Please refer to our letter of May 13, 1954, addressed to the President of the Senate, in which the Farm Credit Administration recommended early consideration and enactment of a draft of bill subsequently intro duced by you and designated S. 3487, entitled "A bill to authorize the Central Bank for Cooperatives and the regional banks for cooperatives to issue consolidated debentures, and for other purposes." Inquiry has been made as to whether the statement in our letter of May 13 to the effect that the Farm Credit Administration recommends the proposed legislation includes the specific recommendation of the Federal Farm Credit Board. The purpose of this letter is to assure you that the Board has in fact approved this legislative proposal and that the statement in our letter of May 13 was intended to convey that information. Sincerely yours, R. B. TOOTELL, Governor. CHANGES IN EXISTING LAW In compliance with subsection (4) of rule XXIX of the Standing Rules of the Senate, changes in existing law made by the bill, as reported, are shown as follows (existing law proposed to be omitted is enclosed in black brackets, new matter is printed in italic, existing law in which no change is proposed is shown in roman): SECTION 37 OF THE FARM CREDIT ACT OF 1933 SEC. 37. The Central Bank is authorized to issue debentures, but the amount of debentures which may be outstanding may not exceed at any one time five times the paid-in capital and surplus of the bank. Such debentures shall be issued at such times and subject to such terms and conditions as the board of directors shall determine but shall bear such interest rates as may be fixed by the chairman of the board. Such debentures shall be secured by collateral which shall be at least equal in value to the amount of debentures outstanding and which shall consist of cash, direct obligations of the United States, or notes or other obligations discounted or purchased or representing loans made under section 34. The provisions of law applicable to the preparation and issue of Federal intermediate credit bank debentures shall, so far as applicable, govern the preparation and issue of debentures issued under this [section] paragraph. The governor shall appoint a custodian of such collateral who shall have power subject to such rules and regulations as the governor may prescribe to approve and accept substitutions of collateral. When the Central Bank for Cooperatives and the regional banks for cooperatives shall by resolutions consent thereto, consolidated debentures of the thirteen banks for cooperatives may be issued in the manner and form and on terms and conditions approved by the Farm Credit Administration. There shall be a debenture committee comprised of the presidents of the twelve regional banks for cooperatives and the chief executive officer of the Central Bank for Cooperatives which shall exercise with respect to such consolidated debentures powers and functions equivalent to the powers and functions of the Bond Committee of the Federal Land Banks as authorized by the Federal Farm Loan Act, as amended, and shall operate in accordance with the provisions of law applicable to such Bond Committee (title 12, U. S. C., 883–886). Such debentures shall be made payable at any of the banks for cooperatives and may be made payable at any Federal Reserve bank or banks designated on the face of the debentures. Such debentures shall be the joint and several obligations of the Central Bank for Cooperatives and of the regional banks for cooperatives, and each of such banks is hereby authorized and directed to take such action as is necessary to become obligated for such debentures. The debentures shall be secured by collateral which shall be at least equal in value to the amount of debentures outstanding and which shall consist of cash, direct obligations of the United States, or notes or other obligations discounted or purchased or representing loans made under sections 34 and 41, as amended (title 12, U. S. C., 1134j, 1134c). The Farm Credit Administration shall appoint a custodian or custodians of such collateral who shall have power subject to such rules and regulations as the Administration may prescribe to approve and accept substitutions of collateral. The total amount of such consolidated debentures plus any outstanding individual debentures of the Central Bank which may be issued and outstanding at any time shall not exceed eight times the capital and surplus of the Central and regional banks for cooperatives. The provisions of law made applicable by the preceding paragraph to the preparation and issue of debentures by the Central Bank for Cooperatives shall govern the preparation and issue of debentures under this paragraph and they shall be signed by the Governor of the Farm Credit Administration and attested by any deputy governor. Insofar as applicable, the pro visions of the Federal Farm Loan Act, as amended, relative to the call for additional security and failure of any bank to pay its proportion of interest or principal shall apply to the consolidated debentures of the banks for cooperatives. Debentures issued under the provisions of this Act by banks for cooperatives shall be a lawful investment for all fiduciary and trust funds, and may be accepted as security for all public deposits. LAST SENTENCE OF PARAGRAPH 7 OF SECTION 5136 OF THE REVISED STAtutes, AS AMENDED (12 U. S. C. 24) The limitations and restrictions herein contained as to dealing in and underwriting investment securities shall not apply to obligations issued by the International Bank for Reconstruction and Development or the [Central Bank for Cooperatives] thirteen banks for cooperatives organized under the Farm Credit Act of 1933, or any of them which are at the time eligible for purchase by a national bank for its own account: Provided, That no association shall at any one time hold obligations issued by either of said banks as a result of underwriting, dealing, or purchasing for its own account (and for this purpose obligations as to which it is under commitment shall be deemed to be held by it) in a total amount, with respect to each issuer, exceeding 10 per centum of its capital stock actually paid in and unimpaired and 10 per centum of its unimpaired surplus fund. JUNE 3 (legislative day, MAY 13), 1954.-Ordered to be printed Mr. AIKEN, from the Committee on Agriculture and Forestry, submitted the following REPORT [To accompany H. R. 3097] The Committee on Agriculture and Forestry, to whom was referred the bill (H. R. 3097) to authorize the transfer to the regents of the University of California, for agricultural purposes, of certain real property in Napa County, Calif., having considered the same, report thereon with a recommendation that it do pass without amendment. The report submitted to the House of Representatives by the Committee on Agriculture (H. Rept. No. 873) is attached hereto and made a part of this report. [H. Rept. No. 873, 83d Cong., 1st sess.] The Committee on Agriculture, to whom was referred the bill (H. R. 3097) to authorize the transfer to the regents of the University of California, for agricultural purposes, of certain real property in Napa County, Calif., having considered the same, report favorably thereon without amendment and recommend that the bill do pass. STATEMENT The purpose of H. R. 3097 is to transfer to the University of California a 20acre tract of land, together with buildings and improvements thereon, which has been used as an experimental vineyard. The transfer will enable the experimental program to continue and expand with a minimum cost to the Federal Govern ment. This tract, located near Oakville, in Napa County, Calif., was purchased by the Department of Agriculture in 1921 for $15,000. Improvements costing $11,210 were made between 1924 and 1927, making a total investment by the United States of $26,210. For budgetary reasons, only limited research has been conducted at Oakville during the past 18 years, although there is a recognized need for further experimental work in this field. The University of California has indicated a desire to conduct an active agricultural experimental program on the property and, by merely transferring this property, the United States will receive the benefits from |