of it has merit. But today, we have a goodly percentage of the Congress that want to abolish the FSA. That it has served its use. We no longer need it. Farm programs are being phased out. There is no need for a FSA office.

We saw last year in the farm bill, the removal of the FCIC from the FSA. Federal Crop Insurance convinced the Congress that they have no valid reason for being a part of the FSA. We created, instead of downsizing and reducing the bureaucracy, we up-sized and increased the bureaucracy. Because instead of having FCIC as a part of FSA, we said "No, we're going to have a separate entity and we're going to go off in another direction." I know for a fact-and we'll talk about this at the proper hearing, but I'll mention it today-instead of utilizing the trained personnel that we had available in the FSA offices, FCIC in their supreme wisdom, would fly people from Minnesota down to Texas to make one or two claims adjustments when we had properly trained, hired by, paid by the same taxpayer, people available in the counties in Texas. And yet, they circumvented you, Mr. Bennett, and all of your dedicated employees because they had to do it their way, and they had the money.

This is one of the statements that I really like to hear. "We had the money to do it." You're telling us that you have not had enough personnel in cases, but you have worked together with the folks at this table. You've done the best you could. But they had the money to fly, in one case, two people from Minnesota, made a few adjustments, rented two cars, drove halfway across Texas, made a few other adjustments, when at every step of the way, we had properly trained personnel there to do the job. Now, that is ridiculous.

And now, my colleagues, we're going to have to come up with 200 or 300 million additional bucks for the Federal Crop Insurance Program, and that's awfully important. The safety net in the Crop Insurance Program is absolutely life and death to not only Texas, but a good part of the rest of the United States. And yet, the management-and here the belief by some, that there is no role of the Federal Government even though we put over a billion dollars, and we're probably going to have to put more to get a proper safety net under our agricultural systems really bugs me. We'll have those questions for them.

But I want to say this to set the proper tone. NRCS, it used to be the Soil Conservation Service. Here, again, many of us thought that it would be very proper to put them in the FSA. That there were certain efficiencies that could be gained by having check writing, various administrative duties done in an FSA office and letting our soil conservation personnel do what they are trained to do, and that is provide the technical service. Soil conservation, now NRCS, comes to this committee and says "We've got to have more money. We don't have the personnel out there to administer the programs that we have. We need more money." But yet, we have had a consider amount of foot-dragging about the proper relationship between the FSA concept.

And now we talk about farm credit today and we've known and we've talked about that enough, but we've had some difficulties, some of which was in the legislation. And we can address that, and I believe the chairman has indicated his desire to look at proposed

changes. I certainly will support him on that. But if we choose to go our separate ways, then I have to ask the question, "Where are we going to get the money?" All three of us at this dais, at this moment, are in favor of balancing our budget. We do not hold any illusions of gaining additional funding for agriculture. Any funding that we're going to find in order to provide the necessary service, the research, and the safety net are going to have to come from us gaining efficiencies out of the available dollars being spent.

Here, I just so strongly believe that we could, by sitting down with the next panel which has been done over and over-but by sitting down one more time and listening to the private sector and looking at some of the criticisms that we have of the current system, that we could come up with a system in which we could literally, truly arrive at a Team USDA approach for the servicing of the Federal part in the kind of cooperation with the private sector that would have a great amount of support. We would see many of the complaints of the timeliness, the dotting of the i's and the crossing of the t's and all of this evaporate almost overnight.

And that's the challenge that, Ms. Cooksie, you and the Secretary above you are going to have because we're running out of time. We're running out of time on making these changes and that's why it's very timely that we have hearings like this and set the proper stage, and also then have the questions that need to be asked and answered by those of us who have the responsibility of changing the laws because some of this is going to require a law change. You know, this packaging question, we will hear fromwell, one of my constituents has expressed great concern about the packaging. Most private lenders do not require packaging of their loans in order to get a loan. That was a requirement of the 1990 farm bill and we've already agreed we're going to take a look at that, but most do not. Why do we?

Why does Farmers Home, FSA, Farm Credit, whatever we're called, why do we? It's according to the law, right? Well, you know, we could debate that, that really what was intended in all cases. But then if we have the packaging required, why do we nitpick some loans that they're not properly packaged? When every lender I know, that I've ever dealt with, they package it and you work on it and you work with that individual until you get it to where you'll either make the loan or you won't. But for us to require a packager-as you can tell, it bugs the out of me. I want to see us take a look at that because that is really creating some problems from a lot of our banks that would like to be making more of these loans. But the frustration that occurs and then the timeliness on the individual, your customers, is a real problem.

Thank you, Mr. Chairman. We're looking forward to being a part of many, many more hearings and other committees as we try to deal with this question that you have convened this hearing on today, and that is an area of farm credit. It was rather interesting when you mentioned 19 percent delinquency. I was in Stevenville last night. The PCA in Stevenville told me that 19 percent of their dairy loans have been called in the last 6 months because of the problems with the dairy industry. When you're not making any money, more credit is not the answer. We've got to deal with the

price and safety net above a lot of it and it just-19 percent PCA farm credit

That's why I asked you the question, "Have we started to look at where we're going to be in 2002?" When Mr. Combest convenes this committee in 2002, or whoever is in that position at that time, what will be the tenor of the conversation at that time? It's about time we started looking at it because we're really going to have some challenges on the insurance side of this.

And I want to make it very clear, because I get in trouble every time I make this little speech. As I said, the private lending sector has a major role to play in farm credit. The Guaranteed Lending Program is the most important program for the future of agriculture. Not the direct lending-guaranteed lending. We've been talking about these problems, as Mr. Combest says, as long as he and I have known each other on the House Agriculture Committee and we have not made near the progress we should have made to this point.

In the area of crop insurance, I want to state it unequivocally, the private sector has a major role to play in the provision of crop insurance. It can not, nor should be, a Government-dominated program. But for the private sector, you have to understand, when you want the taxpayers to help subsidize that which you serve, do not expect not to have oversight. The oversight, the proper oversight, I strongly believe must come at the county level with the county elected committee system of some type, period.

Mr. COMBEST. Thank you, Mr. Stenholm.

Mr. Thornberry, do you have other questions?

Mr. THORNBERRY. Mr. Chairman, let me ask two quick questions because I know you're anxious to get on to the next panel.

Ms. Cooksie, you told us what you all are going to propose on the training program where direct borrowers don't have to go through that. What are you going to propose, or can you tell us yet on the lifetime exclusion for borrowers? How are you going to modify that? Ms. COOKSIE. What we're proposing right now is not on the direct program. The training is the guaranteed training program. Mr. THORNBERRY. I'm sorry, the guaranteed program. I misspoke myself.

But can you tell us what your proposal is going to look like as far as modifying this part that was in this last farm bill that excludes folks that have had

Mr. RADINTZ. The proposal is basically to allow people to come back at some point after some period of time has passed. I think that, you know, the amount of time should be subject to debate. Basically, that whatever the cause of the problem was has had a chance to work out, that they've reestablished their credit record. And that basically, whatever the problem was is either addressed or gone.

Mr. THORNBERRY. So, we're going to go from your proposal would change from a lifetime exclusion down to a set time period, 10 years or whatever it's going to be? 5 years?

Mr. RADINTZ. Yes, I think it would

Ms. COOKSIE. That's what we proposed to the Secretary's office for our farm loan programs.

Mr. RADINTZ. One number was 5, yes.

Mr. THORNBERRY. I understand.

Mr. RADINTZ. Right.

Mr. THORNBERRY. We'll be anxious to see that because, as you know, that's been a topic of conversation.

Ms. Cooksie, what's your thought on some sort of offset for folks who have delinquent loans from taking it out of their Government payments before they get them?

Ms. COOKSIE. I think with the new Debt Collection Act, we've had to take a look at it. I think that we have to look at it honestly. There are some abuses of the program where we have people who owe the Government. On one of side of the hall, they owe the Farm Loan Program. Then they go on the other side of the hallway and pick up an offset payment, and never the twain shall meet. So, I think we have to look at that.

I think we have to be very careful that we don't bankrupt these borrowers, and that we work with the banks that they are working with. And that we look at it on a case-by-case basis and that we don't have a blanket policy that is so tight that we run farmers out of business. But I think we do have an obligation to make sure that we are looking at those payments, to make sure that we're getting some part of the payment if we are entitled to it. If we are not entitled to it, we also have responsibility to make sure that the farmer keeps it.

I think we have to have regulation out there. But I also think that it can not be so tight and so tied down that we're going to run farmers out of business, that their banks won't deal with them. So, I think there has to be a policy, but I think we've got to be very careful about the policy.

Mr. THORNBERRY. Are you all going to have a specific proposal or regulation along that line?

Ms. COOKSIE. Yes, we are.

Mr. THORNBERRY. OK, what

Ms. COOKSIE. There's a regulation that is due out, what, in maybe a month or so?

Mr. HALL. Probably about 60 days.

Ms. COOKSIE. Yes, in about 60 days. It's been held up because of all the debate over it. But I think the misunderstanding is that people don't understand that we're going to look at it very carefully. We're not going to take blanket payments. That we're just going to take everybody's payment and not understand that they have other bills that they have to pay or other obligations to banks. I think it's important that we do that.

Velden, did you want to comment?

Mr. HALL. Yes, could I add something to that?

The way that the regulations are being drafted is that we're talking about those seriously delinquent bars first. If it's current, you know, there's no problem. But if they get seriously delinquent, then we're going to ask the farmer to come in and see if we can't work up some kind of repayment plan, to see if they have the resources to take care of that delinquency. If they do, then we would not be taking the offset. But for some reason if they can not be able to work out some repayment schedule, then the Government would consider the offset.

Mr. THORNBERRY. Thank you, Mr. Hall.

Mr. COMBEST. Pardon me.

I could continue for hours, but I'm not going to do that. We'll try to balance this somewhat.

Ms. Cooksie, that area is something too, we would very much like to work with you on. I think we're going to be spending a lot of time together in the next couple of years. I appreciate very much the fact that our first subcommittee hearing was here and that you would travel down here.

I also appreciate your comments and your opening statement about that you were interested in hearing from others and how they work with you. I had hoped that maybe at one point, we may want to even, you know, call you back to address some specifics and I don't know that we're going to have to do that in time. But there may be questions that we still have, and others that are prompted, that we may want to correspond with you for the record, in writing.

Ms. COOKSIE. That's fine.

Mr. COMBEST. We appreciate that very much.

Ms. COOKSIE. I'd be happy to do it.

Mr. COMBEST. Thank all of you on the panel for your information and attentiveness. We will let you move to some more comfortable chairs. We have tried to save the first two rows here for witnesses. At this time, I would invite Mike Mauldin from Security Bank, Idalou, TX, here on behalf of Texas Bankers Association; Mike Wright, ABC Bank, Wolfforth, TX; Don Townsen, First National Bank in Spearman, TX; Joe Hodges, Midland American Bank in Stanton, TX; and Bill Harmon, of the Lubbock Production Credit Association, to please come to the table.

As introduced, they're in a line from Mr. Mauldin to the north, and we'll just take the testimony right down the line, if that's agreeable with the witnesses and works with your schedule. Mr. Mauldin, welcome and please proceed.

STATEMENT OF MIKE MAULDIN, SECURITY BANK, ON BEHALF OF TEXAS BANKERS ASSOCIATION

Mr. MAULDIN. Thank you, Mr. Chairman.

First off, I appreciate the opportunity to address each one of you all. It's good to come before a common sense bunch of Congressmen. I know that in the past, that all your voting record has pretty well represented that. I appreciate your comments addressing the panel before us and I hope that we can shed some light on some of the issues that have come up.

I'm here on behalf of the Texas Bankers Association, Security Bank Idalou and Security Bank Ralls.

On June 17, 1991, I gave an oral testimony to a panel of Congressmen hosted by Congressman Larry Combest regarding the problems that bankers and farmers were having with the then Farmers Home Administration Guaranteed Loan Program. I have attached a copy of that testimony, marked exhibit A for your review. Since that date, there have been some changes that were supposed to make the process better, but for the most part the problems that we faced then are still the problems that are being dealt with today.

The areas that in my opinion should be addressed are: