than to say, “a reasonable chance of recovery." What would be a more reasonable definition?

Mr. SACIA. I am not really sure. We would be certainly happy to try to provide some language to you.

Mr. STENHOLM. Let me come at you a different way.

In arriving at this recommendation, assuming you sat on the Farmers Home Board three-man committee, what criteria would you use that would be more definitive, you yourself? When you are looking at a man or a loan portfolio, and what you are talking about is a reasonable chance of recovery, at some point you have to make a judgment, don't you? And that is what you are talking about.

Mr. SACIA. I am not saying that that language is poor or unfair. I am just saying there is a danger that they will take that, what you could call, loophole, and use it to their advantage. Maybe that is the best language we can come up with.

I would just like to alert you to the danger of that.

Mr. STENHOLM. So really you don't have a specific recommendation. Just be cautious in that area that there could be some abuse? Mr. SACIA. Yes. We would be glad to provide some different language shortly.

Mr. STENHOLM. Thank you.

Mr. BEDELL. Mr. Gunderson?

Mr. GUNDERSON. No questions, Mr. Chairman.

Mr. BEDELL. You mentioned the fact that the Comptroller General had said that the Department is not obeying the law in the way they are handling the program. They indicated that they felt that the Comptroller General is not necesssarily the one that they need to listen in that regard. Were you here this morning?

Mr. SACIA. I was not able to be here, no.

Mr. BEDELL. Do you understand that if the Comptroller General tells you you are disobeying the law, it does not necessarily mean you are disobeying the law?

Mr. SACIA. I understand that.

Mr. BEDELL. Is that the reality?

Mr. SACIA. Yes, that is the reality. However, I think they have taken his advice to some extent. There have been some revisions in that program, and applying it on a case-by-case basis. Our concern was why does this even have to take place. The intent of the law was clearly stated in the law.

Mr. BEDELL. We didn't have time this morning. But if the Comptroller General tells the Department of Agriculture it is obeying the law and the Department of Agriculture doesn't agree with that, who is it that then decides who is right?

Mr. SACIA. The courts would.

Mr. BEDELL. We have to go to court anyway.

Mr. SACIA. Our complaint is farmers are now less than 3 percent of the population. When it comes down to interpretation of the law, we are going to lose out every time. We can take it through the courts, but it is a long laborious process. Our hope is that Congress will assert its will and put enough pressure on its Department of Agriculture to make sure that they do the thing that Congress first intended. That is our only hope.

Mr. BEDELL. Thank you very much.

Mr. SACIA. Thank you.

Mr. BEDELL. Because of the possibility of more bad weather, we will move along as rapidly as possible.

Ms. Mary Thatcher, please proceed.

STATEMENT OF MARY KAY THATCHER, ASSISTANT DIRECTOR, NATIONAL AFFAIRS DIVISION, AMERICAN FARM BUREAU FEDERATION

MS. THATCHER. Mr. Chairman and members of the subcommittee, the Farm Bureau appreciates the opportunity to present testimony on the Emergency Agricultural Credit Act of 1983.

The American Farm Bureau Federation is the Nation's largest general farm organization with a membership of over 3 million families in 48 States and Puerto Rico. Farm Bureau members produce virtually every type of commodity grown on a commercial basis in the country. Farm Bureau policy is developed by the producer members at the county, State, and national levels of the organization.

Let me make a few observations about the Farmers Home Administration in general before I discuss the specifics of this bill.

First, the FmHA was originally created for one purpose-to make loans to depression-stricken farm families. Today, although FmHA still aids family farmers, its resources are not concentrated on aiding family farmers because its programs have become so highly diversified.

Programs which require not only funds, but time and effort of FmHA personnel include homeownership loans, rental housing loans, mutual self-help housing loans, congregate housing loans, water and waste disposal loans, energy impact assistance grants, community facility funding, business and industry program funding, watershed and flood prevention loans, and resource conservation and development loans.

These programs all draw on the time that FmHA personnel at the national, State, and local levels have to spend on the agricultural credit programs-those programs which FmHA was established to address.

In fiscal year 1982 FmHA's rural housing insurance fund, spent mainly on various housing progams, had a budget exceeding $3.7 billion. The rural development insurance fund, spent on alcohol production, community facility, and water and waste disposal loans, had a budget exceeding $1 billion. In addition, FmHA's budget for grants for programs such as farm labor housing, mutual and self-help housing, home repair, and water and waste disposal exceeded $560 million. At the same time, the agricultural credit insurance fund, which funds farm ownership and operating loanswhich should be the backbone of all FmHA funding-had a budget of only $2.3 billion. This included funding for soil and water loans, Indian land acquisition loans, recreation loans, and others. Our point is simple. Farmers could be aided much more if FmHA did not have to spend so much time and money on all the nonfarm programs presently administered by FmHA.

A specific example would be a recent discussion one of our State Farm Bureau presidents had with his country FmHA personnel.

He complained of the long periods of time farmers had to wait before hearing from FmHA about their loan applications. The farmer pointed out that forcing a farmer to wait until mid-April to see if his operating loan would be approved was too late in the year. He was told that one of the biggest time constraints was the fact that at least 2 days each week were spent on housing loans. We must not let this continue. The answer to aiding more farmers is not simply more money—it is better and faster servicing by FmHA personnel.

Farm Bureau cannot support the Emergency Agricultural Credit Act of 1983, mainly because of provisions regarding a moratorium on foreclosures and mandatory deferral of payments on principal and interest. As the subcommittee knows, the Secretary of Agricluture already has discretionary authority to forego foreclosure and defer payments. Even though 1982 was the third straight year of low farm income, the FmHA was able to stay with over 97 percent of its farm borrowers. According to FmHA figures, 3,600 borrowers had their principal and/or interest payments deferred, 12,000 borrowers had their loans rescheduled or reamortized, and nearly 30,000 loans were subordinate to allow the farmers to obtain loans from private lenders. In addition, one-quarter of the FmHA borrowers were being carried delinquent at the end of the year.

On the other side of the coin, foreclosure was undertaken in 844 cases during fiscal year 1982-less than three-tenths of 1 percent of the borrowers. Another 6,000 liquidated their loans and 1,245 chose bankruptcy. In all, about 8,000, or 3 percent, of the FmHA borrowers stopped farming.

Farm Bureau also opposes the deferral of payments provision because there are many FmHA borrowers who can make their payments on time, but with a mandatory deferral provision, probably would choose to wait until September 1984, and use the money elsewhere until that time. Therefore, mandatory deferral would be a very costly item. The Department of Agriculture estimates that deferrals would cost the Government about $13 million for every $100 million deferred. With 270,000 FmHA borrowers with outstanding loans of approximately $22 billion, you can see how costly the mandated deferral might be. In addition, it would be unfair to borrowers who use sources of credit other than FmHA.

Another concern about this bill is the increase in expenditures by FmHA. In such a difficult economic time for farmers, it would be easy to simply allocate more money or more easy money to try to solve the problem. The bill asks for an additional $200 million in direct operating loan funds and $600 million in direct loans in the economic emergency loan program. Farm Bureau cannot support increased funds of this kind-which will add to the ever-rising Federal spending. We would encourage instead that funding be transferred from nonfarm programs such as the business and industry and housing program to the operating loan program or the economic emergency program.

In addition, the bill requires that the interest rate in rescheduled, reamortized, or consolidated loans be set at the interest rate on the original loan or at the current interest rate, whichever is lower. Again, Farm Bureau cannot support this concept because of the cost involved and the unfairness to those producers who rely on

the free market for the money they borrow, especially if the provision whereby the period of time over which the FmHA may reschedule or reamortize operating loans is increased from 7 to 15 years becomes law. We instead would support legislation making the interest rates variable to reflect the market conditions over the term of the loan.

Farm Bureau believes that cheap credit is not the solution to the problems that now confront agriculture. Cheap credit in the past has lead to an expansion of productive capacity above the level which market forces will now support. The Farmers Home Administration should do the maximum to lessen the difficulties associated with this adjustment period, but should not attempt to stop the economic adjustment process that must occur if American agriculture is to return to long-term health and prosperity.

Farm Bureau appreciates the opportunity to testify on this bill, and I would be happy to answer any questions.

Mr. BEDELL. Thank you, Ms. Thatcher. We will hold questions until all of the panel has had an opportunity.

Ms. Waller, would you care to be next?

I should say to all of you, any summarizing you wish to do would be most welcome by the committee. If you summarize, your prepared statement will be placed in the record.

STATEMENT OF KATHRYN J. WALLER, EXECUTIVE DIRECTOR, RURAL ADVANCEMENT FUND/NATIONAL SHARECROPPERS FUND, ACCOMPANIED BY CATHY LERZA

Ms. WALLER. I would like to try to summarize this.

Before I begin, I would like to say with me is Cathy Lerza, former legislator of the National Family Farm Coalition and now works with the Rural Coalition. Since I serve on the board of the Rural Coalition and am currently president of that, I have asked Cathy to come along and answer any questions.

I am Kathryn Waller. I am the executive director of the Rural Advancement Fund and the National Share Cropers Fund. We are based in Charlotte, N.C. We have problems which focus now on the promotion and the survival of the family farm. Particularly we are interested in low-income farmers, small farmers, smali family farmers and minority farmers. We have staff working in several different Southern States and we operate a hot line where farmers can call in and ask for assistance if they are having credit problems.

I appreciate the opportunity to be here and in particular to be able to support this bill. We are very grateful to Mr. Jones and Congressman Coleman for introducing this bill. We are extremely supportive of most of it.

I would like to address most of my comments this afternoon to the limited resource loan program and to the loan deferral parts of the bill.

The limited resource loan program is particulary important to the kinds of farmers that we work with in the rural south. Since 1978, it has provided much needed credit to qualified low equity and beginning farmers who would otherwise be shut out of agriculture. We support the bill's requirement that all Farmers Home bor

rowers be notified of the existence of the limit at the resource program as well as procedures for qualifying as limited resource applicants.

One of the problems that we find most often is that farmers simply don't know what the limited resource program is all about. They don't know of its existence or if they do, they don't know how to apply for it. I was interested this morning when you were raising questions with Farmers Home about how they notified people about the limited resource program and how much they really pushed that program. Our experience is that farmers really have to search to find that program.

In addition, I believe the chairman asked questions about a provision that requires that farmers put up not only the property that they are trying to buy if they are qualifying for a limited resource loan, but also the property they already own. This particular provision, it is our understanding, is at the discretion of the local county supervisor, and is one of the main reasons why black farmers in the South will not take advantage of the limited resource loan program. They have found to their detriment that they can lose everything they own that way.

In 1981, blacks received only 21⁄2 percent of the total dollar amount loaned to Farmers Home credit programs. Again, this morning you were questioning about the Civil Rights Commission report. I was very interested that that was raised and, of course, that is something that we are terribly concerned about in the South. I have seen the reply that the Farmers Home Administration around the Department of Agriculture sent to the Commission's report and I find it was lacking. I hope and trust you will be asking for more response on this issue.

One of these things that the Commission pointed out was that there seemed to be discrimination amongst Farmers Home programs. I notice this moring that the officials here did not seem to think that was the problem. My experience in the South is that that is a problem. I know that the records show there have been many investigations into discrimination charges and that these charges usually are not found to be true. I would suggest that there is some kind of problem about an agency investigating itself. I have lived in the South all my life. I don't understand why it is so hard to prove discrimination or racism. When you have lived around it all your life, you know it. And I think many people in this room will know it when they see it. When a Farmers Home supervisor calls a grown black farmer "Boy," that is discrimination. When a Farmers Home supervisor tells a black farmer he can only have a loan if he can get a tobacco allotment at 45 cents a pound and he is unable to do so, and then the Farmers Home supervisor gives a white farmer down the road a loan at 55 cents a pound, that is discrimination. When a Farmers Home official tells a black farmer who is delinquent on a $6,000 loan, he is going to foreclosure on it and yet he allows a white farmer who has a $50,000 delinquent loan to get another loan, that is discrimination.

I'm not trying to suggest that the Farmers Home nationally has a policy of discrimination. I am suggesting that there are supervisors on the county level who need to be examined and whose own