FEDERAL GRAIN INSURANCE CORPORATION THURSDAY, NOVEMBER 8, 1973 HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON LIVESTOCK AND GRAINS The subcommittee met, pursuant to call, at 10:10 a.m., in room 1301, Longworth House Office Building, the Honorable Bob Bergland [acting chairman] presiding. Present: Representatives Bergland, Denholm, Litton, Gunter, Teague of California, Zwach, Price, Sebelius, Findley, Thone, and Symms. Also present: Steve Allen, staff consultant; Steve Pringle, staff assistant; L. T. "Tex" Easley, press assistant; and Mrs. Martha Hannah, subcommittee clerk. Mr. BERGLAND. The subcommittee will come to order. We are meeting today to hear administration witnesses on H.R. 10209 which has been introduced by the gentleman from Illinois, Mr. Findley and the chairman of this subcommittee, Mr. Foley. "The bill creates a Federal Grain Insurance Corporation and would provide protection to farmers' deposits of grain in an elevator or warehouse, up to a maximum of $25,000. The Corporation would be self-financing with fees charged to members sufficient to cover all expenses and would be administered by the Secretary of Agriculture. This is the first part of the overall hearings on the bill. We will hear congressional and administration witnesses today, and at a later date convene further hearings for the testimony of public witnesses. Our first witness this morning is our colleague from the Committee of Agriculture, and an outstanding Member of the House, Paul Findley, from the State of Illinois. [The bill, H.R. 10209, introduced by Mr. Findley and Mr. Foley, follows:] [H.R. 10209, 93d Cong., first sess.] A BILL to provide safeguards to producers in the storing and selling of grain; and to establish the Federal Grain Insurance Corporation Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, SHORT TITLE SECTION 1. This Act may be cited as the "Federal Grain Insurance Act". SEC. 2. It is the purpose of this Act to promote the national welfare by improving the economic stability of agriculture through a sound system for the storing, selling, and insuring payment for producer originated grain. (1) DEFINITIONS SEC. 3. (a) MEANING OF WORDS.-Words used in these regulations in the singular form shall be deemed to import the plural, and vice versa, as the case may demand. (b) TERMS DEFINED.—The definitions of terms contained in the Act shall apply to such terms when used in any regulations issued thereunder. In addition, unless the context otherwise requires, the following terms shall be construed, respectively, to mean: (1) "Act" means the Federal Grain Insurance Act, as amended and supplemented. (2) "Department" means the United States Department of Agriculture. (3) "Secretary" means the Secretary of Agriculture of the United States, or any officer or employee of the Department to whom authority has heretofore been delegated, or to whom authority may hereafter be delegated, to act in his stead. (4) "Producer" means a landowner, landlord, or tenant involved in the originating of the grain to be insured. (5) "Grain" means all products commonly classed as grain such as, wheat, corn, oats, barley, rice, rye, soybeans, flaxseed, grain sorghums, dry edible beans, sunflower seed, and such other agricultural products merchandised at or stored in a member's facilities. CREATION OF THE CORPORATION レ SEC. 4. To carry out the insurance purpose of the Act: (a) There is hereby created as an agency of and within the Department of Agriculture a Federal Grain Insurance Corporation (hereinafter called the Corporation). The principal place of business of the Corporation shall be the District of Columbia, but there may be established agencies elsewhere in the United States under rules and regulations prescribed by the Board of Directors. (b) The Corporation shall have a capital stock of $50,000,000 subscribed by the United States of America, payment of which shall, with the approval of the Secretary of Agriculture, be subject to call in whole or in part by the Board of Directors of the Corporation. (c) There is hereby authorized to be appropriated such sums as are necessary for the purposes of subscribing to the capital stock of the Corporation. (d) Receipts for payments by the United States of America for and on account of such stock shall be issued by the Corporation to the Secretary of Treasury and shall be evidence of the stock ownership by the United States of America. (e) Management of Corporation: (1) The management of the Corporation shall be vested in a Board of Directors (hereinafter called the Board) subject to the general supervision of the Secretary of Agriculture. The Board shall consist of the Manager of the Corporation, two other persons employed in the Department of Agriculture, and two persons experienced in the grain and insurance business who are not otherwise employed by the Government. The Board shall be appointed by, and hold office at the pleasure of the Secretary of Agriculture, who shall not, himself, be a member of the Board. (2) Vacancies in the Board so long as there shall be three members in office shall not impair the powers of the Board to execute the functions of the Corporation, and three of the members in office shall constitute a quorum for the transaction of the business of the Board. (3) The Directors of the Corporation who are employed in the Department of Agriculture shall receive no additional compensation for their services as such Directors, but may be allowed necessary traveling and subsistence expenses when engaged in business of the Corporation, outside of the District of Columbia. The members of the Board who are not employed by the Government shall be paid such compensation for their services as Directors as the Secretary of Agriculture shall determine. (4) The Manager of the Corporation shall be its chief executive officer, with such power and authority as may be conferred upon him by the Board. He shall be appointed by, and hold office at the pleasure of, the Secretary of Agriculture. (f) The Corporation (1) Shall have succession in its corporate name. (2) May adopt, alter, and use a corporate seal, which shall be judicially noticed. (3) May make contracts and purchase or lease and hold such real and personal property as it deems necessary or convenient in the transaction of its business and may dispose of such property held by it upon such terms as it deems appropriate. (4) Subject to the provisions of the Act, may sue and be sued in its corporate name in any court of record of a State having general jurisdiction, or in any United States district court, and jurisdiction is hereby conferred upon such district court to determine such controversies without regard to the amount in controversy: Provided, That no attachment, injunction, garnishment, or other similar process, mesne or final, shall be issued against the Corporation or its property. (5) May adopt, amend, and repeal bylaws, rules, and regulations governing the manner in which its business may be conducted and the powers granted to it by law may be exercised and enjoyed. (6) Shall be entitled to the free use of the United States mails in the same manner as the other executive agencies of the Government. (7) With the consent of any board, commission, independent establishment, or executive department of State or Federal Government, including any field service thereof, may avail itself of the use of information, services, facilities, officials, and employees thereof in carrying out the provisions of this title. (8) May conduct researches, surveys, and investigations relating to insuring payment for producer originated grain and shall assemble data for the purpose of establishing sound basis for such insurance. (9) Shall determine the character and necessity for its expenditures under this Act and the manner in which they shall be incurred, allowed, and paid, without regard to the provisions of any other laws governing the expenditure of public funds and such determinations shall be final and conclusive upon all other officers of the Government. (10) Shall be empowered to issue subpenas and subpenas duces tecum, as authorized by law, and to revoke, quash, or modify any such subpena. (11) Shall have such powers as may be necessary or appropriate for the exercise of the powers herein specifically conferred upon the Corporation and all such incidental powers as are customary in corporations generally. (g) Personnel : (1) The Secretary shall appoint such officers and employees as may be necessary for the transaction of the business of the Corporation pursuant to civil service laws and regulations. (h) Moneys of the Corporation: (1) Moneys of the Corporation not otherwise employed shall be invested in obligations of the United States or in obligations guaranteed as to principal and interest by the United States. (2) The banking or checking accounts of the Corporation shall be kept with the Treasurer of the United States. (3) The Corporation is authorized to borrow from the Treasury, and the Secretary of Treasury is authorized to loan to the Corporation on such terms as may be fixed by the Secretary of Treasury and the Corporation, such funds as in the judgment of the Corporation's Board of Directors is needed for insurance purposes not execeding in the aggregate $200,000,000: Provided, That the rate of interest shall not be less than the average rate on outstanding marketable and nonmarketable obligations as of the last day of the month preceding the making of such loan. (4) The Corporation shall at all times maintain complete and accurate books of account and shall file annually with the Secretary of Agriculture a complete report as to the business of the Corporation. The financial transactions of the Corporation shall be audited at least once each year by the General Accounting Office for the sole purpose of making a report to Congress, together with such recommendations as the Comptroller General of the United States may deem advisable Provided, That such report shall not be made until the Corporation shall have had reasonable opportunity to examine the exceptions and criticisms of the Comptroller General or the General Accounting Office, to point out errors therein, explain or answer the same, and to file a statement which shall be submitted by the Comptroller General with his report. (5) The Corporation, including its franchise, its capital, reserves, and surplus, and its income and property, shall be exempt from all taxation now or hereafter imposed by the United States or by any territory, dependency, or possession thereof, or by any State, county, municipality, or local taxing authority. (i) The Corporation shall establish a Grain Insurance Fund of $50,000,000 to be held by the Corporation for the payment of valid claims for producer originated grain insured under the Act. Such payments shall be restricted to a limit of $25,000 for any one producer with any one member. (j) A member is any party approved for the purpose by the Secretary of Agriculture under provisions of the Federal Grain Insurance Act and producer patrons of a member are eligible for insurance benefits. (k) Producer patrons are insured under the Act for payment for producer originated grain up to the limit prescribed in (i) above and valid claims will be paid whenever the Secretary determines that a member has failed to meet the demands of his producer patrons. ADMINISTRATION SEC. 5. (a) The Secretary shall administer the Act. (b) That the Secretary or his designated representative is authorized, upon application to him, to issue to any party a certificate of membership in the Corporation in accordance with this Act and such rules and regulations as may be made hereunder. Such certificate shall be prominently displayed in the member's place of business. INSURANCE BENEFITS SEC. 6. To carry out the purposes of the Act (a) Commencing with May 1, of the year following passage of the Act, the Corporation is authorized and empowered to insure producers of grain dealing with a member of the Corporation against loss due to the failure of such member to make proper payment for such grain. (b) Insured grain shall be that grain to which the producer has retained continuous legal title. (c) The insured price of grain shall be (1) the insured price shall be that price agreed upon, if any, at time of sale between the producer and the member; (2) or as determined by the method of pricing agreed upon, if any, at time sale between the producer and the member; (3) or in the absence of any such agreed price, the price shall be full market value less member's usual trading margin at the member's location as of the date the Secretary determines demand was made on the member by the producer and the member failed to make payment; (4) or if a receivership develops and no prior demand has been made the price shall be as determined by the receiver; and (5) and such prices shall be reduced by any unpaid liens against the grain. (d) The quantity shall be that evidenced by original source documents less any quantities for which settlement has been made, and less any quantities required to offset conditioning authorized by the producer. (e) The Corporation may withhold payment of such portion of the insurance payment of any producer as many be required to provide for the payment of any liability of such producer to the member. (f) Upon payment of any insurance claims hereunder the Secretary shall be subrogated to all rights of the beneficiary of such claims to the extent of such payment. (g) Such insurance is limited to the persons and dollar restriction prescribed in section 4, paragraphs (i), (j), and (k), and claimants for losses must comply with regulations issued hereunder. ELIGIBILITY REQUIREMENTS SEC. 7. Parties making application for membership in the Corporation shall(1) Legally be in the business of buying and/or storing grain and have suitable fixed facilities for the receiving and handling of grain. (2) Shall have and maintain at all times a financial condition at least equivalent to that required for the issuance of a certificate of membership; the failure to maintain such a condition will render the certificate subject to suspension or revocation. (3) Have reputable, experienced, and competent management. (4) Have a bond or bonds to secure the faithful performance of his obligations as a storer and/or buyer of grain in such amount as may be determined by the Secretary. |