COMMODITY CREDIT CORPORATION (CCC)

The boost in the farm economy in mid-1933 occasioned by early New Deal efforts in monetary reform and commodity reduction was threatened by a bearish fall slump unless significant amounts of cash could be quickly infused into farmers' pockets. Demands for inflated currency and above-market government loans reflected panic from both the Congress and the farm belt, especially the cash-deprived cotton South.

The Roosevelt administration showed no panic but acceded to a suggestion apparently made by Oscar G. Johnston, a big-time cotton planter from Mississippi and finance director of the Agricultural Adjustment Administration (AAA), that the government make ten-cent-per-pound non-recourse loans to cotton farmers who agreed to participate in the New Deal's 1934 cotton reduction program. Such a loan would be slightly less than actual or spot market prices. The controversial non-recourse feature, which Jerome Frank, head of the AAA's Legal Division, thought was outrageous and a dangerous precedent, freed the borrower from any liability if prices fell. In such a case, the government would possess title to the cotton, but nothing more. When President Franklin Roosevelt told Jesse Jones, head of the Reconstruction Finance Corporation, to provide for the loans, a new agency, the Commodity Credit Corporation (CCC), was created to make them. With Congress out of session the CCC was authorized by Executive Order 6340 and chartered under the laws of Delaware on October 17, 1933. The quasi-public CCC was incorporated by Secretary of Agriculture Henry Wallace, Treasury Secretary Henry Morgenthau, and Oscar Johnston from the AAA. The new agency represented a creative legal and fiscal response to a very serious economic threat to the cotton economy in the fall of 1933. Millions of loan dollars soon flowed into the cotton belt covering approximately two-and-a-half million new bales, thus permitting orderly marketing by producers. In fact, by early 1934, prices rose above the loans, vindicating the early process.

Developed to dispense funds to producers and support normal lending institutions, the CCC soon helped rescue commodities other than cotton. According to Commodity Credit's own internal study, its loans throughout the Depression (October 1933 to June 1940) pumped nearly $900 million into the cotton economy, more than $470 million into corn, nearly $167 million into wheat, more than $46 million into tobacco, and smaller amounts into figs, pecans, raisins, peanuts, and other crops. The result was an increase in commodity prices—nearly doubling cotton and tobacco prices, even more for corn, and dramatic increases for other commodities. The balance sheet registered a mere $26 million loss during that time. Negatively, in some years, the CCC made loans excessively above market levels which led to the amassing of huge carry-over commodities; only World War II relieved the pressure and avoided a potential disaster. Positively, by employing a pragmatic mixture of government intervention and market forces, the CCC promoted price stability and orderly commodity marketing. In doing so, it quietly became an excellent antidote to poverty in the Great Depression and one of the most effective institutions to emerge from the New Deal.

See Also: FARM POLICY; FEDERAL SURPLUS COMMODITIES CORPORATION; RECONSTRUCTION FINANCE CORPORATION (RFC).

BIBLIOGRAPHY

Benedict, Murray R. Farm Policies of the United States, 1790–1950: A Study of Their Origins and Development. 1953.

Benedict, Murray R., and Oscar C. Stine. The Agricultural Commodity Programs: Two Decades of Experience. 1956.

Jones, Jesse, and Edward Angly. Fifty Billion Dollars: My Thirteen Years with the RFC (1932–1945). 1951.

Nelson, Lawrence J. King Cotton's Advocate: Oscar G. Johnston and the New Deal. 1999.

New York Times, January 9, 1941.

Records of the Commodity Credit Corporation. Record Group 161. National Archives, Washington, D.C.

Lawrence J. Nelson