GENERAL FARM PROGRAM 1121 



The insurauce concept makes possible a convenient and flexible mechanism 

 for combining crop-yield and income insurance; for establishing premium rates 

 either on a national, regional, or individual farm basis: for building up a fund 

 with farmer participation through premium payments; and for determining and 

 paying income deficiencies to farmer policyholders. It is possible, and may 

 prove necessary, to follow the example of fire insurance underwriters in establish- 

 ing State or eountv farm insurance rating bureaus. This can be conveniently 

 done, and they will have the advantage of being purely statistical bureaus, rela- 

 tively free from political pressures. 



The proposal offered for consideration is as follows: 



PL.\N FOR IXSTJRED FARM IXCOME 



1. It is proposed that the Federal Crop Insurance Corporation be reconstituted 

 under a Federal charter into a new corporation which shall be called the Federal 

 Farm Insurance Corporation. 



(o) The purpose and object of the Corporation shall be to provide insurance 

 to farmers, or reinsurance to insurers of farmers, aeainst the hazards of the 

 accident of abnormally low yield and the incidence of abnormally low price, or 

 both in comV^ination. The purposes and objects shall be clearly set forth in the 

 charter of the Corporation. 



(b) The Corporation shall have the usual specific and general powers common 

 to Government corporations, which shall be carefully defined in its Fede''al 

 charter. These shall include the power to borrow money from the Treasury 

 of the United States. 



(c) The management of the Corporation shall be vested in a Board of Directors, 

 which shall consist of the Secretary of Agriculture and 6 to 10 other members 

 who shall be appointed bv the President and confirmed by the Senate. The 

 Corporation's charter shall specify how the personnel of tlie Board of Directors 

 is to be constituted, in order to insure its independence, its freedom from political 

 pressures, and its competence in the business of insurance underwriting in con- 

 nection with agriculture. 



(d) The executive officers shall be appointed by the Board and shall serve at 

 the pleasure of the Board. 



(e) The Corporation shall issue a receipt to the Secretary of the Treasury for 

 the value of the net assets transferred to the Corporation: such receipt shall be 

 evidence of the ownership of the Corporation bv the United States of America. 

 The capital of the Corporation .shall be not less than $100,000,000. 



(/) Congress shall authorize to be appropriated to the Secretary of the Treasury, 

 to be paid over to the Corporation from time to time, such sums as may be neces- 

 sary to cover losses of the Corporation. 



2. Specifically, it is proposed here that Federal agricultural price policy for 

 selected farm products be based upon a system (a) of governmental insurance 

 against abnormally low yield; and (b) of farm-income insurance paid (when the 

 occasion for payment arises) by the Federal Farm Insurance Corporation against 

 approved claims by policyholding producers as insurance against abnormally 

 low prices, down to (c) a disaster-level floor price (say at 60 percent of parity), 

 at which level the traditional methods of price support should be kept available 

 to stop the snov.'balling effect of market declines in a depression. 



3. In this outline very little need be said about governmental insurance again.st 

 abnormally low yield. This program suffered originally from inexperienced 

 management by a shifting series of executives, chosen not for any special fitness 

 for the task. Domination by the Department of Agriculture probably resulted 

 in adverse selectivity of risks and softness in dealing with claims. A satisfactory 

 selectivity mav be attained bv tving in crop-yield insurance with farm-income 

 insurance, with producers obliged to choose between taking both or neither, to 

 the extent that crop-yield insurance can be made available. 



Aside from the above difficulties the crop-vield insurance program now con- 

 ducted on an experimental basis for wheat, flax, corn, tobacco, and cotton, onh- 

 in certain counties, is beginning to .show signs of maturitv. A great deal of 

 pctiia'-ial dat-i. has been accumulated, with studies by counties, areas within 

 coun*''^-;, an'' bv in^Mvidual fa'-'Tis. This information can be of great value to 

 the C'orporatiou, Ijoth in connection with crop-vield and farm-income insurance. 

 It has even been suggested recently that crop-yield insurance might be taken over 

 by private insurance comnanies, with certain minimum Government guaranties 

 against unusual losses. Such a development would be highly desirable and in 

 harmonv with democratic ideals. 



