Mr. CLARK. Well, again, those are borrowers who are so far down that tube, if you will, that there is no salvation.

Senator DASCHLE. Why are so many people waiting in line to get some kind of assistance? Why is a restructured debt application 6, 8, 10 months in the making? Why does it take that long if you are so aggressively pursuing this kind of a policy?

Mr. CLARK. Senator, I have asked you before to give me examples. It is not an 8 or 10 month waiting period. That is just not true. And I ask you to give me a name somewhere in your State because that is not so.

Senator DASCHLE. I tell you what. I will have some on your desk tomorrow morning.

Mr. CLARK. Thank you, and I will be happy to report back to you. Senator DASCHLE. I would like to know, though, how is it that there are so many people out there who complain to me about the lack of availability of loans, who complain to me about the lack of cooperation that we are getting from supervisors in the State of South Dakota today, and then you turn around and say we are going to aggressively pursue this and we are going to be as fair and accessible as we can be? There seems to be a dichotomy 3 miles wide, Mr. Clark, between what you are suggesting and what is actually reality out there. I do not understand where the breakdown in communication comes. But clearly, there is a huge breakdown in communication between what you think your policy is and what is actually articulated and implemented in the rural parts of South and North Dakota.

Mr. CLARK. I would suggest you pick at random county supervisors, four or five of them across the Nation, and you ask them that same question, and I will not talk to them before they appear at this table, because that is just not so.

Senator DASCHLE. The question is not the articulation of your policy. I am sure they will say the same thing. They may have a policy, a company line, that right down the line they read word for word from what you have just said. The problem is in implementation. Either you are not given the tools, or if you have the tools you're not using them. It is one or the other.

But we would not be here. I mean we are obviously very sensi- < tive to this thing because we are out there all the time, and we would not be here if we do not hear it all the time. There would be other things we could be doing with our time and your time. But we are hearing it. Now one of two things is happening. Either we are being lied to, or we are being lied to here, one of the two.

We are either not being told the truth in South Dakota, or we are not being told the truth in Washington. And given the frequency with which we are getting these complaints in South Dakota, it has got to be the latter here in town. I mean we hear these policies time and time again. You were here 4 months ago, and you said the same thing. We go back and we hear something totally opposite in South Dakota.

Mr. CLARK. There is a spark of discontent in both your States, and you seem so anxious to throw gas on that spark. It is very disappointing to me.

Senator DASCHLE. Where do you think it comes from? Where do you think it comes from?

Mr. CLARK. I think you look very hard for it.

Senator DASCHLE. You do not have to look very hard for it. Let me tell you.

Mr. CLARK. I again throw the challenge out. You call at random any of our people throughout our 14,000 employees and ask them the same questions. Our policy is uniform.

Senator DASCHLE. We will get the same rhetoric whether it is in Pierre or Washington. Rhetoric is not what we are looking for. What we are looking for is results.

Mr. CLARK. We have results to prove that it is working, too. 100,000 cases last year that we have resolved.

Senator DASCHLE. 100,000 out of how many? How many borrowers do you have?

Mr. CLARK. 274,000. And they are not all past due.

Senator DASCHLE. You say you have resolved more than 100,000

cases.

Mr. CLARK. I say we have offered special servicing action last year to help resolve those cases.

Senator DASCHLE. Special servicing action, does that include voluntary liquidation?

Mr. CLARK. Yes.

Senator DASCHLE. Well, of course. What kind of special servicing is that? You know bulls service cattle, too, and there is another name for that.

Mr. CLARK. The word is "volunteer."

Senator DASCHLE. You are right. Cows would say that, too. Well, I have no other comments or questions.

Senator CONRAD. Again, I find the gap between what I hear you saying and what I find in my State just enormous. You have just said you are restructuring. You have the legal authority to restructure; right?

Mr. CLARK. Correct, and we do.

Senator CONRAD. And does restructure include forgiveness of debt?

Mr. CLARK. It can, yes.

Senator CONRAD. But you think it is wrong to forgive debt?

Mr. CLARK. In a liquidation basis, no. And we do that all the time.

Senator CONRAD. Well, Mr. Clark, what logic leads you to a conclusion that it is OK to forgive debt in a liquidation, but it is not OK to forgive debt in a case that would allow somebody to stay on the land when that would leave the Federal Government with less of a loss? That is what this bill tries to do. Are you against that concept?

Mr. CLARK. I am against the inference in there of a commitment to go on with more money, and I am against that. If we charge off $100,000

Senator CONRAD. Now, wait a minute. Let us not deal with inferences. Let us deal with what is in the bill. There is no requirement that you go on. What it requires is that in those cases where the Federal Government would experience less of a loss, we would write-down to current market value. Now you have the authority to restructure and that includes forgiveness of debt. You say you do it in liquidation.

Mr. CLARK. We do.

Senator CONRAD. Why would you not think that was something worth doing if it would leave the farmer on the land and allow the Federal Government to lose less?

Mr. CLARK. I repeat. We would not be losing less because you would need to extend more credit.

Senator CONRAD. Ah, now wait a minute now. You are making an assumption. Why not? If you could have a situation where it was demonstrated you would lose less, would you take that kind of deal?

Mr. CLARK. Logic says yes. But let me tell you, if you pass this bill, and force us, if you will, to write that debt down, and then we refuse to grant credit, ongoing credit to that individual, I will be up here at your table again.

Senator CONRAD. Let me ask you this. Are there any sections of this bill that you can support?

Mr. CLARK. I would have to look hard, but I think there is something in here about county committee people, extending notification periods of election county committee people, I think we could probably go along with some of those, yes.

Senator CONRAD. Let us go section by section. We know we have a very clear and serious difference on section 1. Section 2 provides standards for loan servicing, eligibility and reform, requires FmHA to notify the borrower of all loan servicing options to provide means by which the borrower may apply for each alternative.

Now that is the subject of a Federal court suit, and the judge has made clear that this kind of thing needs to be done. So I assume that you do not oppose that.

Mr. CLARK. No, I think we are doing that.

Senator CONRAD. Well, the judge did not think so.

Mr. CLARK. I realize that. I say I think we are doing that.

Senator CONRAD. The borrowers did not think so that brought the suit. So why not, why do we not do this? We are going to have to do it anyway; right? Let us look at section 4. That is the reform of the election procedures. That you feel has some merit?

Mr. CLARK. Yes, I do.

Senator CONRAD. Section 5 requires that appeals of FmHA administrative decisions be held before hearing officers appointed by the Secretary, and that such hearings be conducted in accordance with administrative law. What is your reaction to that?

Mr. CLARK. I am opposed to it.

Senator CONRAD. And for what reason?

Mr. CLARK. Mr. Chairman, credit decisions are unique and different. You know it is a form of art as well as a logic as you analyze credit. And I think somebody from the outside trying to determine whether or not a credit is creditworthy causes us some real problems.

Senator CONRAD. Let me then ask you in how many cases, in what percentage of the cases are FmHA appeals successful?

Mr. CLARK. As I recall 82 percent of the appeals are upheld. The rest of them are granted in favor of the borrower so I think that system is working. That is not a bad record.

Senator CONRAD. The number I have is that 2 to 5 percent of FmHA appeals are successful.

Mr. CLARK. Well, the last figure we had was almost 19 percent. However, there are different sectors of success, if you will. Some are withdrawn. Some are restructured and redone in some way, and some are strictly turned over.

Senator CONRAD. Well, let me just say if we have a factual misunderstanding between us, we should get that clear. My statistics indicate that 2 to 5 percent of FmHA appeals are successful, and where agencies have independent appeals officers, 20 to 40 percent of appeals are upheld. So that is an enormous difference. That is the reason for this section. If, in fact, 18 percent of your appeals are being upheld in favor of those who bring the question, that is a dramatic difference.

Mr. CLARK. I will be happy to furnish that to you.

[The following information was subsequently received by the committee:]

Mr. CLARK. A recent survey conducted in twelve states covering FY 1986 and through May 31, 1987, indicated that 3,444 appeals were received. Of this number 271 were withdrawn and 375 were modified or overturned. Discounting those appeals which were withdrawn 11.5 percent of the appeals are either modified or overturned by the review process. If the withdrawal of the appeal resulted from the applicant and FmHA reaching an agreement then the percentage of appeals being modified or overturned increases to 18.75 percent.

Senator CONRAD. Let us look at section 6: It requires FmHA to participate in programs for credit resolutions required under State law prior to initiation of foreclosure activity. What is your feeling about that section?

Mr. CLARK. Well, again, I am against it.

Senator CONRAD. Even though those State programs have been enormously successful in dispute resolution.

Senator DASCHLE. Would the chairman yield for just a minute? Senator CONRAD. Yes.

Senator DASCHLE. I have to go back to what you said in your answer to my question about what is the policy of the Farmers Home Administration. And what did you say, Mr. Clark? You said something to the effect that we will do everything possible, we will bend over backward to help every farmer that legitimately can be assisted in some way to restructure their loan. We are going through a section-by-section analysis of a bill, and in section by section you emphatically say you are opposed to it.

Now how in the world can you rationalize what you told me and what you are reporting to Kent Conrad? I mean it seems to me that is a public dichotomy coming at the same sitting from the Administrator who claims to have such forbearance in his attitude toward farmers. How do you rationalize that?

Mr. CLARK. Well, you want to stick a lot of fingers in the pie, Senator. The more fingers you get in there

Senator DASCHLE. Just answer the question. What is your answer to that? How can you express forbearance and a willingness to cooperate and do everything you can for the farmers and then turn right around and say, but we oppose the bill that will do just that? Mr. CLARK. In your opinion that works. In my opinion it does not. We think we can do it on our own. You are saying let somebody else be part of that decisionmaking process, somebody outside, and I am against that.

Senator DASCHLE. But is that not going along with what you just said? Can you not provide greater assistance by advocating something like this? Is this not a tool that you could use?

Mr. CLARK. No.

Senator DASCHLE. Why not?

Mr. CLARK. Again, it is bringing in outsiders to help make our credit decisions.

Senator DASCHLE. Well, if you have a fire that is bigger than your ability to put it out, would you not call in the local fire department to help you?

Mr. CLARK. I do not think our flame is that high.

Senator DASCHLE. Well, I tell you what. You are going to get engulfed with them here pretty soon if you have not been already, and most of these guys are dying in the process. And you have people yelling for help, and you have a little garden hose squirting out the back bedroom. I mean it is just incredible to me, and I hope that the hearing will so indicate.

It is rhetoric. That is all we get from the Farmers Home Administration time and time again is rhetoric. And I cannot think of a more glaring example of just the pure poppycock rhetoric than what I am getting this afternoon and this morning as I hear your responses to these questions.

Senator CONRAD. Let me just close out section 6, and then we will ask Senator Melcher if he would like to have an opportunity to ask some questions. Section 6 also directs the Secretary to follow a specified preference order in selling acquired land. Do you have any problem with that part of section 6?

Mr. CLARK. I am sorry. Inventoried land?

Senator CONRAD. Yes, it sets up a priority order which is, number one, the person from whom the Secretary acquired the property; number two, the immediate family of the person referred to in paragraph one; or three, in the event the person from whom the Secretary acquired the property is a native American from a recognized tribe, other members of the same tribe, or a tribal corporation or partnership of members of the same tribe. In other words, it sets up a priority order that goes a little beyond the principal to the immediate family, and in the case of the tribe to other tribal members.

Mr. CLARK. We are doing that now. As you say, it goes beyond what we are doing. We are now offering that land to the previous owner or operator and that is working. We are doing that.

Senator CONRAD. Yes, but this goes

Mr. CLARK. You want to go beyond to the kin, if you will.

Senator CONRAD. Right. For example, the children. I have cases right now pending in my State where the father owned the land, and he is simply too old to be the one to buy it back. And he has sons who grew up on the place. It seems to us there would be some logic to having those people in line.

Mr. CLARK. I would have no problem with that, and we could work it into our present regulations.

Senator CONRAD. OK.

Mr. CLARK. It does not take a law to do it.

Senator CONRAD. Well, it does take a law if you do not have it in the regulations and they are not there now.