not meet the full needs of any. Cross-agency assignments present the same kind of problem and, at least as a general practice, would not best serve the peculiar needs of this agency. RECOMMENDATION NO. 29 "That in the event the proposed Federal Advisory Council of Health is not created, the President assign the functions of review and advice proposed for it to other agencies.' Comments of Veterans' Administration This recommendation is vague and indefinite as to just what is contemplated. As indicated in the discussion of recommendation No. 1, some of the functions proposed for the Advisory Council are now being exercised by the Bureau of the Budget and the Office of Defense Mobilization. Reference is made to our comments on recommendation No. 1 concerning this general subject. REPORT ON LENDING, GUARANTEEING, AND INSURANCE ACTIVITIES OF THE FEDERAL GOVERNMENT RECOMMENDATION NO. 9 "That no change he made in the expiration dates of the loan privileges under the veterans' housing program, other than in the direct loan program referred to above." Comments of Veterans' Administration In its discussion preceding this recommendation, the Commission states that the guaranty or insurance of loans made by banks and others to veterans pursuant to title III of the Servicemen's Readjustment Act of 1944, as amended, expires in July 1957 for veterans of World War II and in January 1965 for veterans of the Korean service period. This is substantially correct, as is the further statement that the authority under the same act to make direct loans to veterans for home and farm dwelling purposes expires on June 30, 1955, and that the President has recommended that the direct loan authority be continued until July 25, 1957, the date of expiration of the basic World War II loan guaranty program. Legislation to implement this latter recommendation of the President is included in S. 654, 84th Congress (amended in the House to conform to H. R. 5715, 84th Cong.), extending the authority to June 30, 1957. The acceptance of recommendation No. 9 that no change be made in the expiration dates of the basic loan guaranty program for World War II and Korean conflict veterans would, of course, not require legislative or administrative actions altering the existing situation. Acceptance of the recommendation would have its initial effect upon the World War II program, with termination on July 25, 1957, of the prescribed period within which loans may be made in order to qualify for guaranty or insurance under the act, except as to a limited group of persons who enlisted under the Armed Forces Voluntary Recruitment Act of 1945. Following the expiry dates the activities of the Veterans' Administration would be reduced to liquidation operations. The basic question as to whether or not there should be an extension in the time limits governing the existing loan programs under the Servicemen's Readjustment Act is one of broad legislative policy involving a number of important considerations. In a recent report to the Senate Committee on Labor and Public Welfare on legislation (S. 302, 84th Cong.) to extend the terminal date of the World War II loan guaranty authority from July 25, 1957, to July 25, 1960, the Veterans Administration outlined these considerations. At that time, advice was received from the Bureau of the Budget that the committee had been informed by the Bureau that the proposed extension of the program at this time would not be in accord with the program of the President. It is believed appropriate, however, to indicate in these comments some of the factors to be weighed in the consideration of this problem. There are approximately 1534 million veterans of World War II, counting those who have reentered service, and about 3.8 million veterans have obtained GI loan benefits, using World War II entitlement, from the inception of the program through January 25, 1955. Some 11 million World War II veterans, excluding those who also served in the Korean conflict period, have not used any GI loan entitlement, and most of those who have received a guaranteed or insured loan have a substantial amount of unused entitlement remaining. Through January 25, 1955, the total principal amount of home loans which had been guaranteed under the Veterans' Administration program was nearly $26.5 billion. It is therefore evident that the impact of this program on the home-building industry has been highly significant and that its effect on the national economy, in general, has been substantial. In the last half of 1954 the activity of the loan guaranty program was at a near-record level. This was due in large part to the increased availability of mortgage credit, and a continuation of high-level activity may be expected, barring any unforeseen rever-ai of present economic trends. As the guaranty entitlement termination date for World War II veterans approaches, it is quite possible that a further acceleration of activity may occur as a result of the advancement of purchase plans by veterans prior to the expiration deadline. Such a development could be so pronounced as to have undesirable effects on the housing industry. This is mentioned to point up the practical importance of a policy decision concerning adherence to or extension of the present terminal date of the World War II program. If any kind of extension should be contemplated, it would seem preferable to authorize it early so that the veteran public would become aware that no rush would be necessary to avoid losing the opportunities afforded by the availability of the GI loan assistance. Recommendation No. 9 should be considered primarily in the light of experience and the question of need for the special type of assistance afforded veterans through the guaranteeing or insurance of loans made by private lenders. The authority to make direct loans merely supplements the guaranty or insurance activity which emphasizes the making of loans by private lenders, the direct loan authority being designed to make loans available to veterans in rural areas where private capital is not available. Despite the present improvement in the availability of guaranteed loans and the expected further improvement as a result of voluntary home mortgage credit program activities, there will continue to be certain rural areas in which private loans will be unavailable at the current interest rate of 42 percent, and, therefore, a continuing need for the direct loan authority exists. The Veterans' Administration, accordingly, recommended favorable consideration by the Congress of legislation to extend the direct loan authority to carry out the recommendation made by the President in his budget message of January 1955. RECOMMENDATION NO. 18 "That the Government dispose of all repossessed housing units held by it as soon as practicable." Comments of Veterans' Administration The property management and disposition activities incident to the Servicemen's Readjustment Act loan program have not assumed large proportions. However, it is the definite policy of the Veterans' Administration to dispose of properties as soon as buyers can be found who are willing to pay reasonable prices. It is believed, therefore, that the present policies and practices of this agency are essentially in accord with the foregoing recommendation. RECOMMENDATION NO. 40 "That the veterans' life-insurance program be reorganized on a selfsustaining basis, paying its own administrative expenses and be made subject to the Federal Corporation Control Act in order to secure the advantages of more efficient organization under that act." Comments of Veterans' Administration In the text preceding this recommendation it is stated that the administrative expenses of the insurance program could be covered by the premiums without any increase in present rates, since present premiums have been sufficient to build large reserves and to pay large dividends. Under the War Risk Insurance Act, as amended; the World War Veterans' Act, 1924, and amendments thereto; and the National Service Life Insurance Act of 1940, as amended, premiums paid on United States Government life insurance and National Service life insurance, together with the earnings thereon, were constituted trust funds intended for the sole benefit of the policyholders. These acts also specify that the United States shall be liable for the administrative costs of the insurance program, and this undertaking by the Government is an important part of the insurance contracts. Amendment of the governing laws to authorize the shifting of this burden to the individual policyholders would be wrong in principle as a breach of faith with present policyholders. Since policies of insurance now in effect represent contracts between the individual policyholders and the Government, it seems evident that such legislation would be held by the Supreme Court to exceed the constitutional powers of the Congress. It is assumed from the context that the reference in recommendation No. 40 to placing the program on a "self-sustaining" basis does not contemplate the assumption by the funds of costs due to the extra hazards of the service, now assumed by the Government. Any such purpose would also involve, as against existing policyholders, the abrogation of contractual rights contrary to the fifth amendment. It seems appropriate to point out that virtually all new policies now being issued are governed by the provisions of section 621 of the National Service Life Insurance Act of 1940, as amended April 25, 1951, and this will continue to be true in the future in the absence of changes in the law. The insurance issued under section 621 is nonparticipating. Premiums received are paid into a revolving fund and claims are paid directly from that fund. Experience obtained thus far strongly indicates that a surplus is developing in this fund and will continue to increase in size unless, through some catastrophe, mortality experience reaches a point beyond reasonable expectancy. While the law is silent as to the ultimate disposition of any surplus accumulated in the revolving fund, it is assumed that it will eventually be covered into the miscellaneous receipts of the Treasury. The surplus may equal or even exceed the costs of administering this particular system of insurance, thereby rendering it in effect self-sustaining. The second part of the recommendation, that the veterans' insurance program be made subject to the Federal Corporation Control Act, would, if nothing more, involve the inclusion of a business rather than a trust fund presentation in the annual appropriation estimates. It would also result in a corporation-type audit by the General Accounting Office. Such changes would call for considerable modifications in budgetary and accounting operations. It is not believed that any substantial advantages would result from the recommended change, and the Commission has not indicated deficiencies in the present operations and methods of the insurance activity which would be corrected by subjecting the program to the Corporation Control Act. The Commission's recommendation does not affirmatively state that a corporation should be established to handle the insurance program, although it is preceded by a quotation of the first Hoover Commission's recommendation to the effect that insurance operations be separated from all other programs of the Veterans' Administration and organized as a Government corporation. If recommendation No. 40 contemplates either a corporation or that the program be reorganized in some other form which would completely divorce it from other activities of this agency, there exist strong practical reasons against such action. While the insurance program is conducted on a largely self-contained basis, in keeping with the pattern of reorganization of the Veterans' Administration which was established in 1953, there still exist relationships between the insurance operations and other program operations as well as staff activities which need to be maintained in the interests of efficiency and economy. Among other things, the availability and integration of records containing information which may be needed to determine entitlement to more than one benefit, including insurance, proves highly useful for the protection of both the individual and the Government. It would not be practicable to attempt completely to segregate records which might have a bearing on insurance matters and to proceed on a wholly independent basis without having regularly available for purposes of comparison and association other records within the Veterans' Administration which may be pertinent. In addition, the establishment by law of a separate insurance corporation, or any other "freezing" of the insurance program into a permanent separate organization, would disrupt the flexible organizational authority granted to the Administrator under section 1 (b) of the act of July 3, 1930 (38 U. S. C. 11), under which most of the program activities of this agency can be organized and reorganized by the Administrator to meet changing conditions and to accomplish indicated improvements. For the foregoing reasons, the Veterans' Administration is unable to concur in the Commission's recommendation No. 40. RECOMMENDATION NO. 43 "That the Secretary of the Treasury be required to impose rates of interest on the agencies discussed in this report for Federal advances or contributions equal to the going rate of interest paid by the Treasury on its obligations of comparable maturity." Comments of Veterans' Administration The discussion in the Commission's report preceding this recommendation indicates that it is primarily, if not exclusively, directed to the lending activities of agences of the Government other than the Veterans' Administration. The only aspect of our operations to which this could have any application is already governed by a statutory criterion which should adequately meet the problem. Section 513 of the Servicemen's Readjustment Act of 1944, as amended, provides for advances by the Treasury of amounts to be used in administering the direct-loan program for veterans, and specifies that the Administrator shall pay semiannually on these advances (less amounts deposited in miscellaneous receipts) interest at the rate or rates determined by the Secretary of the Treasury "taking into consideration the current average rate on outstanding marketable obligations of the United States as of the last day of the month preceding the advance." RECOMMENDATION NO. 44 "That all lending and guaranteeing agencies charge such fees to their borrowers as will permit them to reimburse the Treasury for the cost of money advanced to them and cover their own administrative expenses." Comments of Veterans' Administration While this recommendation specifically refers to the charging of fees against "borrowers" from Government agencies, and the loanguaranty program under the Servicemen's Readjustment Act does not involve a direct Government-borrower relationship, it seems evident from the Commission's discussion that it intends that there shall be a charge imposed against the beneficiaries of the particular Government programs, including all veteran beneficiaries under the Veterans' Administration program. Considering the recommendation as having this broad scope, the authority to provide for the charging of fees to veteran borrowers, whether from private sources in connection with guaranteed loans or directly from the Government in connection with the direct loan program, would be a matter for legis |