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notes issued by the Secretary pursuant to this section and any renewals thereof and for such purchases may use as a public-debt transaction the proceeds from the sale of any securities issued under the Second Liberty Bond Act, as amended, and the purposes for which such securities may be issued under such Act, as amended, are hereby extended to include any such purchases. All redemptions, purchases, and sales by the Secretary of the Treasury of such notes shall be treated as public-debt transactions of the United States.

(e) In any case in which the mortgagor violates any covenant or condition of his mortgage, the Secretary may require the mortgagee to assign such mortgage, together with the incidents thereto, upon payment of the value of the mortgage determined in accordance with this section.

ELIGIBILITY REQUIREMENTS

SEC. 10. To be eligible for the benefits of this Act, a borrower must show to the satisfaction of the Secretary that the facility is needed and that the location, design, method of financing, method of operation, and such other requirements as the Secretary may determine necessary to effectuate the purposes of this Act, will be met, including the following:

(a) That the market facility will reduce the cost of distribution of perishable agricultural commodities and handle a sufficient volume of business to enable the loan to be amortized within the period specified at the time the loan is made.

(b) That the market will be so located and designed as to make possible the direct loading and unloading of rail and truck receipts into or from the buildings of handlers receiving substantial quantities of perishable agricultural commodities by such methods of transportation, and that no restrictions will be imposed which will prevent access to the facility of supplies handled by any rail or truck transportation company.

(c) That sufficient land is included as a part of the facility to meet the needs of the initial construction, plus a reasonable amount of land for expansion of the market facility, and in no case shall the land available for future expansion be less than one-fourth of the acreage utilized in the initial construction.

(d) That not more than one-third of the total cost of the market facility, including the land set aside for future expansion, is to be expended for the acquisition of land, graded and placed in condition for construction.

(e) That the market facility will not be operated in a manner which would discriminate against any perishable agricultural commodity on account of geographical origin of such commodity or prevent any producer, seller, or buyer from utilizing the market facility because of his organization, business methods (if not unfair or unlawful), membership or nonmembership in any organization, or on account of the method of transportation of the products.

(f) That the rentals and other charges for the use of the market facility will be established as reasonable levels approved by the Secretary and designed to meet the obligations, defray the costs of maintaining and operating the market facility, and provide reasonable reserves.

(g) That any substantial alterations of the market facility will be made only with the approval of the Secretary.

(h) That reports will be made to the Secretary at such intervals and giving such information concerning the market facility as the Secretary may require, and that the books and records of the market facility will be available for examination by the Secretary at its offices at any time during business hours.

(i) That the title to the market facility, or any part thereof, will not be transferred or encumbered, or leased for any purpose not related to the operation of the market, and that any of the vacant land of the market facility will not be leased for a period longer than one year (including the period of any renewals or extensions of such lease), except with the approval of the Secretary.

MAXIMUM CHARGES

SEC. 11. If mortgage insurance is extended by the Secretary under this Act, to aid in financing the construction of a market facility, the maximum charges which may be received for the use of the market facility shall be subject to the approval of the Secretary during the period between the date the assistance is extended and the maturity date originally specified in the mortgage instruments. The Secretary shall approve such maximum charges if he determines they are reasonable and nondiscriminatory.

DEFAULT

SEC. 12. Whoever knowingly demands or receives a charge in excess of the applicable maximum charges approved under section 11 or violates any covenant or condition arising out of a mortgage insurance contract, other than a default in payment, shall be liable to a penalty of not more than $2,000 for each such offense. Each distinct violation shall be a separate offense, and in the case of a continuing violation each day shall be deemed a separate offense. Such penalty shall accrue to the United States and may be recovered in a civil action brought by the United States.

ACQUISITION, OPERATION, AND DISPOSAL

SEC. 13. In the event of default, and conveyance of the property to the Secretary under the applicable provisions of this Act, the Secretary is authorized to accept title to such property; to maintain and operate (but not including engaging in the business of buying or selling perishable agricultural commodities) or lease such property for such period as may be necessary to protect the interest of the United States therein and to sell or otherwise dispose of such property at public or private sale to the highest responsible bidder on such terms and on such conditions as the Secretary deems feasible. All net amounts realized from the operation or disposal of any property acquired under this section shall be deposited in the insurance fund. The insurance fund shall be available to defray expenditures in connection with the acquisition, maintenance, operation, and disposal of any such properties without regard to the provisions of section 3709 of the Revised Statutes.

FEES AND COMMISSIONS SEC. 14. No officer or employee of the Department of Agriculture shall directly or indirectly be the beneficiary of or receive any fee, commission, gift, or other consideration for, or in connection with, any transaction or business under this Act other than such salary, fee, or other compensation as he may receive as such officer or employee. Any person violating any provision of this section shall upon conviction thereof be punished by a fine of not more than $2,000 or impris. onment for not more than two years, or both.

ADMINISTRATIVE PROVISIONS

SEC. 15. (a) The Secretary is authorized to promulgate such rules and regulations as may be necessary for the administration of this Act.

(b) The Secretary shall administer this Act by agencies within the Department of Agriculture presently engaged in investigating and developing plans for improved market facilities.

ADMINISTRATIVE EXPENSES

Sec. 16. There is authorized to be appropriated such sums as Congress may from time to time determine to be necessary to enable the Secretary to carry out the provisions of this Act, except that any expenses in connection with marketing facility research, development of plans for market facilities, determination of the need for market facilities, and methods of operation of market facilities shall be financed from funds made available pursuant to the Agricultural Marketing Act of 1946 and the “marketing farm products” item in the Department of Agriculture Appropriation Act.

The CHAIRMAN. I assume that most of the older members of the committee are entirely familiar with the subject covered by the bill.

I understand the objectives sought to be accomplished by the bill, and I thought we should have hearings to the end that the new members of the committee might be entirely familiar with the provisions of the bill and also with the subject of the bill.

I have requested the Department to send up someone to discuss the bill and to give us the benefit of the Department's views. I understand that Mr. Kenneth L. Scott, the Director of the Agricultural Credit Services, is here this morning.

Mr. Scott, we will be glad to hear from you at this time.

STATEMENT OF KENNETH L. SCOTT, DIRECTOR, AGRICULTURAL

CREDIT SERVICE, DEPARTMENT OF AGRICULTURE

Off the record.
(Discussion off the record.)

The CHAIRMAN. Mr. Scott, do you want to file your prepared statement for the record and then submit to questioning?

Mr. SCOTT. I would be glad to do that, Mr. Chairman; yes, sir.

The CHAIRMAN. Well, suppose you do that, and without objection, your statement will be accepted in toto for the record and then we would like to ask you a few questions here for at least a few minutes.

(The statement of Mr. Scott is as follows:)

STATEMENT BY KENNETH L. Scott, DIRECTOR, AGRICULTURAL CREDIT SERVICES,

UNITED STATES DEPARTMENT OF AGRICULTURE We in the Department of Agriculture appreciate this opportunity to present our views on H. R. 4054. We have given a great deal of thought and study to this bill. In the main, its general purpose is to facilitate, encourage, and assist “in the creation and development of modern and efficient public wholesale markets for the handling of perishable agricultural commodities in areas where markets are found to be needed * * * to the end that unnecessary costs and burdens attendant with the marketing of perishable agricultural commodities caused by, inadequate or obsolete facilities may be eliminated and that the spread between the amount received by producers and the amount paid by consumers may be reduced."

We are convinced that improvements in marketing facilities for farm products are needed, and that the most pressing needs exist in the wholesale produce markets of large cities. These markets are interstate in character since they are the outlets for products grown in practically every State in the Nation and are important price-making institutions even for products that do not move through them. Repeated investigations by the Federal Trade Commission, the Joint Commission of Agricultural Inquiry established by the 67th Congress, and other congressional committees have pointed out the unsatisfactory situation that exists in many such markets.

The Committee on Agriculture of the House of Representatives has rendered real service by its studies of these markets, its reports pointing out the need for their improvement, and its actions designed to bring about many needed changes. The results of one of these investigations stimulated interest in and contributed greatly to the development by this committee of legislation which was enacted by Congress as the Agricultural Marketing Act of 1946. In that act the Departinent of Agriculture was authorized and directed, among other things, to determine the needs and develop, or assist in the development of, plans for efficient facilities and methods of operating such facilities for the proper distribution and handling of agricultural commodities. In addition, the Department was given responsibility to foster and assist in the development and establishment of more efficient marketing facilities for the purpose of improving the marketing of farm products and reducing the spread between prices paid by consumers and those received by farmers.

Under the authority of this act and upon request of the groups concerned, the Department has made detailed studies :of the market facility needs of many localities. For each of these localities specific plans have been developed for the construction of efficient market facilities of many kinds including, in addition to large city produce markets, facilities for assembling, grading, and packing fruits and vegetables in producing areas, egg-assembly plants, poultry-processing plants, grain storage and handling facilities, livestock auctions, frozen food plants, warehouses, and other major types of facilities used in handling products between the farm and the consumer. During the past year the Department assisted 43 localities in planning and constructing improved facilities. In 19 of these localities the new facilities were built or were under construction by the end of the year.

The large city wholesale produce markets studied include Boston, New York, Philadelphia, Baltimore, St. Louis, Kansas City, Dallas, San Antonio, Houston, Minneapolis, St. Paul, Indianapolis, Rochester, Louisville, Nashville, Atlanta, Jackson, Miss., Birmingham, Columbia, S. C., Miami, Raleigh, Richmond, Norfolk, Hartford, New Haven, Bridgeport, Milwaukee, Little Rock, San Juan, P. R., and many smaller places. In each of these studies the representatives of the Department have carefully analyzed the way food is being handled, the costs of present operations, the inadequacies and inefficiencies of present facilities, and determined what costs could be reduced or eliminated. On the basis of this information on existing conditions the kinds and amounts of facilities needed have been determined, the best location for such facilities ascertained, and the probable cost of the proposed facilities calculated. The expected savings and other benefits are developed, and possible ways of bringing about the construction of the new facilities are explored.

When each study is completed the proposed facilities are set up in the form of a model set at a meeting of all interested groups at which the findings and recommendations are presented. Followup assitance is given as needed.

Altogether, produce market studies have been made in at least 55 localities, in 26 of which new facilities have been built or are under construction. The interest in improving the conditions in these cities is shown by the fact that every study made has been upon local request and that so many requests for assistance have been received that we have been unable to respond to all of them.

Our studies show that the wholesale produce markets in many of these large cities are antiquated and inefficient. In some places the markets have been in their present location for more than 100 years. Since these markets were established, the population they serve has increased manyfold and per capita consumption of these foods has greatly increased. The markets do not have sufficient space to handle the products properly. Supplies arriving by rail usually must be hauled by motor truck from the railroad track to the wholesale store at a cost often exceeding $50 per car. Stores are not large enough to handle the volume, so products are stacked on sidewalks. Refrigeration is lacking. Streets are narrow. Traffic congestion is serious. The design of buildings is such that modern handling equipment cannot be used. Parking spaces are not available. There is no room to expand. Under such conditions costs are high, deterioration and spoilage is great, and pricemaking forces operate with difficulty.

The stated general purpose of this bill is to help correct conditions such as these to the end that unnecessary costs and burdens on the marketing of perishable agricultural commodities caused by inadequate or obsolete facilities may be eliminated. We in the Department of Agriculture are in accord with that objective. This committee is to be commended for the interest taken in this subject and the contribution it has made and is making to the solution of the marketingfacilities problem.

The main specific approach taken by this bill is, however, open to serious question at this time. The bill seeks to aid the establishment of improved wholesale market facilities for perishable agricultural commodities in large market centers by making available, for a charge of one-half of 1 percent per year on the outstanding principal, mortage insurance on not more than 85 percent of the total cost of the facilities, provided that they meet certain prescribed standards. The aggregate amount of principal obligations outstanding at any one time on all mortgages insured under this bill, and on all mortgages with respect to which commitments to insure have been made, could not exceed $100 million. Thus, basically, H. R. 4054 is a bill to help finance improved wholesale market facilities.

The rather extensive experience that the Department of Agriculture has had in working with this problem in various parts of the Nation, clearly shows that financing is not the limiting factor in the establishment of improved wholesale market facilities for perishable agricultural commodities in large market centers.

The main problem in getting improved market facilities built in large cities appears to be the lack of some agency or group to take the lead in bringing together the various interests concerned with market improvement which include wholesalers of the different kinds of foods, railroads, trucking companies, real estate owners, financial institutions, city officials, retailers, farmers, and others. The task of developing a proposal acceptable to all these interests is tremendous. After such a suitable plan has been developed and the necessary agreements reached, comes the task of getting the land, signing leases, arranging the financing, building and operating the facilities. The problem of finding an agency or group to carry through a program of this kind from the very start, is made even more difficult by reason of the fact that each city is usually without experience in this field because new wholesale food districts are not built in a city more frequently than once every 50 to 100 years.

It is recognized that the willingness of private capital to enter the field of financing produce-market facilities at present seems to be somewhat limited. This, however, appears to be largely the result of a lack of familiarity with market facility projects on the part of financial interests and investors. The problem is most evident where responsible local leadership has not developed to a point where an attractive program has been effectively presented to financial agencies equipped to provide the amount of financing required. Thus, while the Department is in accord with the objectives of H. R. 4054, it believes that any consideration of insured loans for market facilities for perishable commodities should be withheld until a more thorough effort has been made to attract private capital for the purpose of financing such projects.

The CHAIRMAN. First, I note that the present Secretary is opposed to the pending bill, if I understand this report, is that right?

Mr. Scott. Mr. Chairman, we feel that the financing of these marketing facilities is not the limiting factor. As is brought out in this statement, the Department has been doing a great deal of work with various cities in getting marketing facilities thought through and making plans, and they are making a lot of progress. We are very much in sympathy with the objectives of this bill and recognize the fine work which this committee has been doing in this field.

The Department recognizes that improved marketing outlets and increased markets are very important in this situation. We do not feel that financing alone is keeping the facilities from being improved as they should be at many of these central markets.

The CHAIRMAN. Mr. Scott, if I may say so, for more than 10 years this committee has been considering this very problem, and I remember back in 1945 I was appointed chairman of a small subcommittee of this committee by Mr. Fulmer of South Carolina who was then chairman of this committee, and that subcommittee, of which I was the chairman, made an investigation of these general markets in the metropolitan areas and we found, and so reported to the full committee, that they were antiquated, that they were outmoded and inadequate to meet the needs; that they were in some instances just nothing but ratholes and that they were actually a burden upon our distribution system.

From that time until this, we have been trying to do something about it. Now, I agree with you that the Department of Agriculture has done a lot to help these cities in the field of marketing facilities. I know that Mr. Crow down there has done a magnificient job. He has devoted his time and talents through the years to this very subject and I do not know anyone in the country who is better qualified to do this than Mr. Crow.

We have had these surveys made in many of the cities, but very few markets have been built as a result of those surveys. Very few of the municipalities are able to finance the building of these markets on long term amortization and at reasonable interest rates. Therefore, the markets have not been built.

In many of these metropolitan areas such as New York's Washington Street market, people do not regard the marketing facilities as altogether a local problem. It is a problem which is impressed with the national interests, because large quantities of fruits and vegetables go through these markets. I believe that they have indicated that at the Washington Street market in New York about 20 percent of all the produce going to New York in America went through that market and that market is a burden on the distribution system and everyone

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