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cerned and there is a tremendous need to put affirmative action into the proposed legislation that we have testified to this morning. There is no other opportunity for black farmers to be saved unless something is in the pending legislation. We have never had the opportunity before to support a bill or to work with farmers.

I hold that if it was not for the crisis that all farmers are in now, this hearing would not be held. If it were only black farmers the remaining 57,000 would go out of existence. We have tried for several years to talk about it, and this is the first opportunity we have ever had to have some real input, first through the Family Farm Coalition and now this. So we are grateful for that.

But also the statistics speak for themselves. The revised statistics show that there is under 40,000 black farmers. When white farmers lose land, white farmers or someone else white buys it back. When black farmers lose land, we cannot buy it back. We cannot afford it. So we are talking about a real problem, the issue of social justice here as well as agricultural rural economic development. Black people in this country will not be owners of land, and that has a serious consequence. So the matter is very serious.

We can look in the paper. I had a friend to send an article where there are foreign investors. I have no objection to that, getting together investment groups to buy land. That has happened in Georgia, most recently where they bought up several acres of land. This land, the Department of Agriculture, or FmHA is going to lose, they could buy land now at the average of $400 an acre, and it goes up 3 years from now to $800, they have lost $400 there off the bat. If the farmer could keep it and have a write-down, that means FmHA would gain, because they would still have the paper on it. They would gain $400 per acre. There are serious consequences if we do not have some legislation now. I am sure the Department talked about there is no discrimination, but you know it is out there. I know it is out there. It is happening. Farmer loans are being systematically late. You apply in early January or November, and you do not get the loan until over a year later. Your credit committee, who in some cases do not act on the loan so these are serious things we need some help with. And this is the only opportunity I see to making that happen.

Senator CONRAD. Gene.

Mr. SEVERENS. Yes, just a few brief comments on your question, Senator Conrad. I think that the discrepancy between congressional law and policy and Agency commitment is as big a gap as exists in the Federal Government in the case of Farmers Home Administration.

And I think that Senator Harkin has hit the nail on the head. The common denominator of everything that has been said today, including Vance Clark and our complaints here, is that Farmers Home Administration is out, closed the doors of that Agency.

Mr. Clark's most serious reservation to your bill, Senator Conrad, was not that it was $7.6 billion giveaway. I think he responded to that point very well. His main objection to it was it implied an ongoing commitment. He wants to close the doors. They do not want any more ongoing commitments. That is why they are classifying inventory property as surplus rather than suitable. Sell it as surplus, sell it for cash, no more ongoing commitment. Sell it

as suitable to an FmHA eligible borrower, you are implying and inviting the Agency to continue to exist.

I think they are bound and determined to sidestep every law that we pass if it implies an ongoing, continuing Agency relationship to this public policy. And that is why Sarah is right that anytime we write a Farmers Home law, man, we have got to dot the "i's" and cross the "t's" because they are going to find some way or another, and they will fight it in court and they will drag it out to interminable ends to avoid doing anything that implies an ongoing commitment. They want to close the doors. I think Senator Harkin is right, and I think that is what we are up against.

Senator CONRAD. Senator Harkin.

STATEMENT OF HON. TOM HARKIN, A U.S. SENATOR FROM IOWA Senator HARKIN. Mr. Chairman, thank you. I apologize for getting here late. I just want to welcome all four of you back to the committee again, and to say it is good to see you again, and to congratulate you on the fine work all four of you have been doing for a long time. Not only farmers, themselves, but others who live in rural areas and small towns and communities across America, owe you four a great debt of gratitude for all that you have done and hanging in there and keeping up the good fight. You are really the shock troops out there on the front lines. It has been a long siege over the last few years, but hopefully it is drawing to a close. The efforts you have made in the legal field, especially Sarah and Jim, have kept this thing alive.

And Mr. Paige, what you have done, and Gene Severens in Nebraska, all of you have done a great job, and I really appreciate it very much. Just keep it up. Do not let them grind you down.

Mr. Chairman, I have a letter here from the Equity Control Corporation of Clear Lake, IA, dated May 21, 1987, that I would like to have inserted in the record at this point. Basically, this letter tells what Farmers Home Administration is doing. The fact is they are not doing anything to reach any kind of accommodation with those they have liquidated and closed out. As an example, here is a couple that have an approximately $50,000 deficiency with Farmers Home. They have nothing left. Absolutely nothing. They were led to believe that, with full cooperation with Farmers Home, they could offer between 5 and 10 percent of the deficiency amount to Farmers Home over a period of 5 years at no interest. In this case, the Maschings offered $5,000 to settle an approximately $50,000 deficiency. They have no farm or business assets, yet they offered anyway.

The local Farmers Home office refused this offer and said they wanted more, even after admitting the Maschings did not have the ability to pay. That is the kind of thing FmHA is doing.

I would like to insert the Equity Control Corporation letter for the record.

Senator CONRAD. Without objection.

[The letter follows:]

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I am writing in regards to Mr. and Mrs. Jim Masching of Carroll,
Iowa. Recently this firm helped the Maschings' to liquidate
their farm operation under the direction of their Bank and the
FmHA, State and Local offices. We were led to believe that with
full cooperation, we could offer between 5% 10% of the

deficiency amount to FmHA over a period of 5 years at no
interest. In this case, the Maschings' offered $5,000 to settle
approximately $50,000 deficiency. They have no farm or business
assets to pay such an amount but yet they offered anyway. The
local FMHA office at Jefferson, Iowa, refused; they said they
wanted more even after admitting the Maschings' did not have the
ability.

This kind of behavior on the part of the FmHA Office is appalling
and embarrassing. It appears they are after blood money or
trying to force Bankruptcy. In fact, our office works in eight
states; in my opinion, we have more trouble with the FmHA
Jefferson Office than we do with all the other offices in eight
states combined. Please look into this matter for us. Possibly
an investigation of this office would be in order. Thank you in

auvance LUL Your

Sincerely,

Gerald B. Murphy
President

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Senator HARKIN. I would like to ask Jim and Sarah, maybe you covered this before I came in, but what were Judge Van Sickle's decisions as of a couple of weeks ago?

Mr. MASSEY. Mr. Chairman, Senator, there were two decisions, one May 7 and one June 2. So within the past month, there have been two.

Senator HARKIN. In regard to the June 2 decision, what does that decision mean for FmHA now? Can Farmers Home still go out and foreclose? What does it mean?

Mr. MASSEY. For the record I have given the committee a memorandum from our office that we have issued. It will essentially be a public document so I have asked that it be put in the record-that answers that question in some detail. Let me briefly respond. The May 7 order the judge issued, held that the notice of intent to take adverse action procedure, with which I know the Senator is familiar, which was adopted on November 1, 1985, and has been sent to, I do not know how many tens of thousands of FmHA borrowersthere is a discrepancy in the numbers that we hear-was unconstitutional in three respects.

The judge did not issue an injunction on that date that stopped any ongoing liquidations or foreclosures that Farmers Home was engaged in. We went back to court and had a hearing on May 21, I believe, and asked the judge to issue a broad injunction stopping Farmers Home from proceeding with liquidation of any of those persons who had received the notice and from using the notice to initiate any other liquidation or collection actions.

The judge kind of split the pot, if you will, and as a result, there are three categories of people under the judge's current injunction. Those persons who have not yet-actually there are four. But the judge threw out the whole procedure and said that the Government could not use it in its current form to initiate any further liquidation procedures. In other words, until they change that form and then file it with the court, and the court is satisfied that it is in the office as it should be, they cannot start any new ones. As to the people in the pipeline

Senator HARKIN. Yes. What happens to those people?

Mr. MASSEY. Those are the people we are really concerned about. We are not sure how many. Our numbers indicate that there are at least 65,000. The Government seems to suggest fewer. But there are 13,000 of whatever the total is whose loans have been accelerated. That is the point at which they lose their right to income from farm production resources and also to receive ASCS program payments. The judge did not issue an injunction of any lasting duration for these people. He basically created a window of breathing space which will probably end up being about 60 days in which the Government is temporarily stopped from continuing any liquidation or foreclosure against the 13,000 on the theory that will allow those people to assess their situations and take individual action. Now, unfortunately, the judge has not provided for any form of notice to that group, and that is our next step, in addition to asking the judge to broaden the injunction. We are going to go back one more time, try to convince the judge to broaden the injunction to include those 13,000 because there is really no distinction between them and the others in the pipeline other than the

fortuity of bad timing. And at the very minimum we will ask him to require a notice to be issued to those people advising them to take individual action if they choose to do so.

As to the remaining 50,000 or 60,000 or 70,000 people who are in the pipeline but not yet accelerated, the judge enjoined the Government from proceeding and threw out everything that has been done. As far as we read the order that will require the Government to start all over again with corrected procedures for those people. One of the things the Government has said is that this is nothing but a Pyrrhic victory. It only buys time for people who are not going to make it anyway. And that is really rubbish for two rea

sons.

One, this is not merely a technical decision. It is substantive because the court ruled that the unconstitutionality was in the deprivation of access to programs designed to avoid foreclosure or liquidation. Borrowers simply were not allowed or able through this procedure to get to some of those programs.

Two, I think that because of this legislation and other similar bills in Congress, the window of time now is of the utmost importance. If these people had access to meaningful debt restructuring a great number of these tens of thousands of people would, in fact, even those with unbearable debt burdens today, be able to show a positive cash-flow. We are the first to admit that you cannot cashflow something that will not cash-flow. That is why we are here. If this Agency would use the 1985 authority as it was intended, or if this bill passes and makes it very clear that FmHA has to provide debt settlement in an early enough stage, then that window of opportunity can lead to meaningful restructuring for a great number of those tens of thousands of people.

Senator HARKIN. I guess what I do not understand is why there is a differentiation between those who have been accelerated and those who have not been accelerated.

Mr. MASSEY. Well, from our judgment there really is not, and I think there are two or three explanations to that part of the decision. First, the Government came in with a $969 million price tag attached to those 13,000 people. They said this is a billion dollar ticket item here, judge. The judge said he was not impressed with the numbers, but those are big numbers. Second, I think the Government once again obfuscated the situation and convinced the judge that the great majority of those people were totally beyond hope, that they were out of farming, that they had given up. They had gone to town and were drinking coffee or something, but that is just not true.

Senator HARKIN. Are you saying those are the accelerated ones? Mr. MASSEY. The accelerated ones. And it is just not true. Every accelerated client we brought up there to put on testimony from, in fact, is still farming and attempting to maintain a viable operation and so on.

I think, third, quite frankly, the order represented the judge's attempt to balance what he perceived to be an unfortunate situation that resulted from the Government not telling the truth from the beginning about its procedures, which led to the judge denying the preliminary injunction we asked for last year. In March 1986, the judge said, "I'm not convinced that you are going to win this, so I

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