Of the 7,650 cases reported approximately 7,100 were handled in the field, and the remaining 550 were handled in the Washington office. The first two categories above make up the greater part of the total of 7,650. A substantial number of the cases handled in the field involve individual counseling; many, of course, involve only the forwarding of data applying to the problem that was obtained from other sources. You have asked for an expression of my views on S. 244 predicated on the assumption that no area assistance legislation will be enacted. As you know, S. 244 amends subsection (b) (1) of section 207 of the Small Business Act to enlarge the present authority to make disaster loans by providing that such loans may be made to businesses located in an area determined by the Secretary of Labor to be an area of substantial labor surplus, if it is also determined that the granting of such financial assistance will tend to alleviate unemployment in such area. The extension of this agency's authority to give financial assistance in the wake of a natural disaster to include the granting of similar emergency-type financial help to firms in surplus labor areas creates certain problems. When a credit evaluation is made of a natural disaster loan applicant, it is possible to ascertain the financial productivity of this business immediately prior to the incapacitating flood or other disaster. It is reasonable to assume that if the applicant is restored to his original position through SBA financial assistance, the business will continue to be productive at the original rate. This assumption is not applicable to concerns located in surplus labor areas which have, in many cases, been suffering from slow financial attrition over a period of years. Under these circumstances it would be difficult to establish any workable credit standards which will avoid making loans that will not be repaid and still bring about the aims of S. 244. I note that under S. 244 any business in a surplus labor area, regardless of its credit standing, is eligible for a 3 percent disaster loan if such a loan will tend to alleviate unemployment. Financial assistance under S. 244, in my view, should be confined to firms which cannot meet regular business loan credit standards. Aside from the credit problems raised by S. 244, it is doubtful if this legislation will in fact alleviate unemployment in surplus labor areas on a permanent basis. The manifold problems encountered in depressed regions cannot be solved by financial assistance alone. An integrated program must be established to provide area development, technical assistance, and other similar needs. Financial assistance, although necessary, is only one facet of a program for the permanent relief of labor surplus areas. In his economic report of January 1956 the President pointed out that any program to help local communities reduce unemployment must be designed around four major principles: (1) Federal assistance should aim at helping communities help themselves; (2) the program should aim at lasting improvement of job opportunities by the establishment or expansion of productive industries as contrasted with projects that generate only temporary employment; (3) Federal assistance should be contingent on the active participation of local government and community groups; (4) Federal aid must not be extended to a community for projects which will create unemployment in some other area. In my view S. 244 does not meet these standards. While it is clear that enactment of S. 244 would provide a measure of relief to surplus labor areas, in order to achieve a lasting solution to the problem, a more comprehensive program should be provided. For this reason, as well as the reasons set out above, I do not recommend the enactment of this legislation. The Bureau of the Budget has no objection to the submission of these comments. In your final question, you have asked for information concerning the policy questions deliberated by the Loan Policy Board during the period from March 1956 to date. The principal general policy questions discussed at the Loan Policy Board meetings during this period are as follows: Date of meeting Apr. 5, 1956.. July 30, 1956__ Summary of general policy questions discussed Question of making loans to development corporations. Request of amusement park concessionaires to be considered eligible for financial assistance. Eligibility of private schools operated for profit. May 28, 1957____ Eligibility of theaters as an exception to present Eligibility of real estate development businesses. Eligibility of television stations. Further discussion of loans to local development corporations. Eligibility of professionals for financial assist ance. Eligibility of newspapers, magazines, radio and television stations. General discussion of loan policy statement. We trust that this information will complete the record of our testimony before your subcommittee. Sincerely yours, WENDELL B. BARNES, Administrator. Senator CLARK. Thank you very much. I appreciate your patience. The hearings will recess. We will not at this time set another date for hearings, but I am not going to close the record yet. (The following was received for the record:) CHAMBER OF COMMERCE OF THE UNITED STATES, Washington, D. C., June 20, 1957. Hon. JOSEPH S. CLARK, Chairman, Small Business Subcommittee, Senate Banking and Currency Committee, Senate Office Building, Washington, D. C. DEAR SENATOR CLARK: The Chamber of Commerce of the United States opposes S. 244, S. 2160, and S. 2286, special legislation to provide financial assistance to selected areas. This statement is limited to discussion of these bills. These bills would put the Federal Government in the unjust and unsound position of favoring a few at the expense of others in the search for new industry and jobs. Such discrimination must be based on arbitrary criteria which cannot always reflect real need. Federal financial assistance will not meet the underlying problems which each area must face. Locally oriented effort can provide the best answer. There exist in 15 States, statewide privately financed development credit corporations which are designed to meet current needs. Essentially what is proposed in S. 2160 is the nationalization of these development credit corporations. This proposal would mean that control of the existing private organizations would shift to the Federal Reserve banks or some other Government agency, instead of maintaining their present private-enterprise orientation. These development credit corporations should receive strong support as a means of meeting area credit needs. Federal intrusion in this field as proposed in S. 2160 and S. 2286 would defeat the objective of establishing effective privately financed credit organizations at the State level, energetically supported by a broad cross section of the business and financial community. The objective of S. 2160 and S. 2286 should be considered with full cogni→ zance of the basic underlying problem which has brought about the need for a new type of credit organization, represented by the existing development credit corporations and the proposed national investment companies. This basic problem of financial aid for industrial development goes far deeper than the remedies proposed in these bills could reach. The chamber has endorsed proposals for a monetary and financial study by a competent independent group, as proposed by the administration. Such a study, which should carefully avoid partisan controversy, could contribute much to main taining the vigor of our private enterprise system in terms of modern conditions. As an immediate step, more widespread development and effective operation of privately financed development credit corporations can help. Because of the very real importance of these private efforts it is vital that Federal funds not encroach upon this field. Cordially yours, CLARENCE R. MILES. (Whereupon, at 12:30 p. m., the hearings were recessed subject to the call of the Chair.) |