Statement by the President Upon Signing the Farm Credit Act of 1956.

I HAVE TODAY signed into law H. R. 10285, "To merge production credit corporations in Federal intermediate credit banks; to provide for retirement of Government capital in Federal intermediate credit banks; to provide for supervision of production Credit associations; and for other purposes."

It is my earnest desire that we move toward farmer ownership of the Federal intermediate credit banks, and other institutions supervised by the Farm Credit Administration, as rapidly as may be consistent with the maintenance of a sound and stable system of agricultural credit. Progress toward this objective has been gratifying and should be actively encouraged. My deep convictions about the desirability of this objective have led me to sign H. R. 10285 despite some misgiving. In providing for the retirement of Government capital in the Federal intermediate credit banks, the bill relaxes those safeguards which are required to protect the Government's financial interests and to assure conformity with public policy during the long period of transition to farmer ownership.

Specifically, H. R. 10285 is defective in two respects:

1. The bill removes the budget program of the Federal intermediate credit banks from annual review and approval by the President and the Congress after January 1, 1959.

2. The bill will permit $62,000,000 of public funds to be paid to stockholders, including private production credit associations and other private financing institutions, upon the liquidation of any intermediate credit bank.

With respect to the first objectionable provision, the Federal intermediate credit banks are now required by the Government Corporation Control Act to prepare and submit each year a budget program for review and approval by the President and the Congress. It is through this annual budgetary review that the President and the Congress are best able to keep currently informed of the banks' financial operations and to take such action as may be necessary to assure that the banks operate efficiently and economically and that the Government's investment is protected.

As the debate on the floor of the Senate concerning the bill made clear, enactment of this legislation is not intended to and will not in fact relieve the Government of its responsibility to provide financial support to the banks. Under the bill, the banks will remain congressionally established credit institutions. They will continue to hold themselves before the public as Governmental agencies and, therefore, agencies backed by the full faith and credit of the Government. They will retain the right to call on the Government for additional capital contributions. The requirements of responsible Government dictate that there be some method of Presidential and Congressional oversight which annual review of the bank's budget program would provide. Accordingly, I urge the Congress to enact legislation as soon as possible to keep the budget program of the Federal intermediate credit banks under Presidential and Congressional review until such time as the banks become wholly privately owned institutions.

The second major defect in this bill is the provision which will permit the $62,000,000 surplus made available to the intermediate credit banks by the Government to be paid to private stockholders in the event of dissolution or liquidation of any bank. Fortunately, these banks are intended to be permanent institutions and the prospect of the public funds being handed over to private persons is remote. Even so, some legislative action should be taken to prevent such a "windfall" profit to private stockholders. If these public funds cease to be employed to support the farm credit system and thus to promote the general welfare of the agricultural community, they should be returned to the Treasury as the law provided prior to the enactment of this bill. Accordingly, I recommend that the Congress repeal this provision of the bill at the earliest opportunity.