Senator GEORGE. That would be the average they would receive now, at the present face value?

General HINES. Yes, sir.

Senator BARKLEY. You are figuring that on a basis of cash-surrender value?

General HINES. That is what I am figuring on. I am taking the basic credit plus the earnings of the basic credit, plus a proportional part of the 25 per cent added. In other words, if a man got a certificate in 1925, he has earned six-twentieths. In other words, six years have gone by and he has been credited with six-twentieths of the additional 25 per cent added.

Senator COUZENS. It is 6 years of the 20 years?
General HINES. That is right.

Senator COUZENS. So it is six-twentieths of the full 25 per cent? General HINES. Yes, sir. It is to give him a proportional part of the payments deferred.

Senator BARKLEY. Have you calculated the status of the payments so as to give approximately the amount that would be involved if the face value of the certificates should be paid subject to all credits that might be properly deducted from them?

General HINES. We have that. And as to each bill as I take it up, I will mention it. I think your bill comes pretty close to it.

Senator CONNALLY. Now, General Hines, you have testified that at the present, or as of December 31, 1930, the estimated amount which this would produce was $2,738,000,000.

General HINES. If I have the figures you are referring to they are $2,738,479,665.

Senator CONNALLY. Yes. What is that?

General HINES. That is taking the straight basic credit on this date and computing it as a single premium up to the date of the certificate, what would be the earnings at 4 per cent if compounded annually, in 1945.

Senator CONNALLY. You say the estimated paid-up value is $1,628,000,000, or cash surrend value now, is that right?

General HINES. No; the estimated paid-up value on December 31, 1930, on the amount of certificates purchased by the adjusted service credit; in other words, that is the value on December 31, and the amount of credit given if it had been invested as a single premium up to December 31, 1930.

Senator CONNALLY. It would have earned that much? It would be worth that much?

General HINES. Yes.

Senator CONNALLY. You say the present value is $1,742,520,393. General HINES. Yes.

Senator CONNALLY. Does that include the entire 25 per cent credit?

General HINES. No; it only includes a proportional part of the 25 per cent credit for the number of years that have gone by.

Senator CONNALLY. It seems to me that is an arbitrary assumption, because it was the intent of the Congress to take the $500 for domestic service and $625 for foreign service, and then to arbitrarily add 25 per cent, wasn't it?

General HINES. Yes. But Senator Connally, I am giving you here the basic information, and am not attempting to argue that, that is what you wished to do.

Senator CONNALLY. I did not mean that. I wanted to get it the other way round. Taking it on that basis and adding 25 per cent, and then compounding the interest semiannually, at what rate? General HINES. Four per cent.

Senator CONNALLY. Now, what I want to know is, if you take that basis to date, and leave that 25 per cent in there because they were going to give them 25 per cent, it seems to me if we cashed them in now, with this basic value of 25 per cent added, and 4 per cent up to date, we would be meeting entirely the Government's obligation. Now, what would that cost?

General HINES. I will be able to give you that in a minute.

Senator CONNALLY. And also to adjust the interest on those loans at 4 per cent, so that the Government would be loaning the money back to the boys at the same rate they were charged. It seems to me if we do that we will be doing all we owe on these certificates.

General HINES. What I was going to say was that the 25 per cent, as we have always understood it, was added to the basic credit on account of the deferred payment of these certificates. So that we felt the Congress would probably desire to know what value, or what it would cost, in other words, to buy these certificates, plus the basic credit value, plus interest at 4 per cent, plus a proportional part of the 25 per cent earned up to the number of years that have gone by since they were originally issued. In other words, deferred payments up to 1931.

Senator COUZENS. You are assuming that if the Congress had determined those portions due in six years it would have given them only six-twentieths of the 25 per cent.

General HINES. Yes, sir. I am not arguing that that is right. I think the different bills propose different methods, and I contemplated taking the bills up in their order.

Senator CONNALLY. You can get that information for me, can you not?

General HINES. Yes, sir.

Senator CONNALLY. The reason I am asking that is that I am offering an amendment to these bills which does that very thing. General HINES. One of my assistants has figured that while you were asking, and it is $2,036,000,000.

Senator HARRISON. That figures 4 per cent compound interest up to date?

General HINES. Yes. Taking the value of the 25 per cent credit, because the table shows from the date 1925 to December 31, 1930, the estimated adjusted service credit on the amount in force-that is, the total amount of the credit then showing the total additional 25 per cent credit, and the proportional earned part of the 25 per cent, giving the basic credit plus the proportion of the 25 per cent, and plus interest up to that date. These amounts show that the basic credit plus the earned proportion of the 25 per cent as an additional credit would be $1,457,957,862.

It will be of interest to note what amount of this money we expect at maturity to be paid on the certificates as against the amount which will be expected to be paid out as we go along from year to year. The estimated amount of certificates in force December 31, as I have given it and shown it by years, and this table shows the estimated amount in force in 1930 was $3,423,404,145. The estimated amount

that will mature as an endownment would be $3,040,997,794, the difference being the amount that would be paid out prior to that date in death claims, amounting to some $383,000,000.

Senator COUZENS. Are you going to take up the bills that are before the committee?

General HINES. Yes, sir. The first bill I have before me is the Barkley bill, S. 3324, which proposes that the Secretary of the Treasury make settlement. The Treasury Department of course has not the records necessary to perform this duty, so that if consideration is given to that bill I would suggest that the Veterans' Administration be charged with that duty rather than the Treasury Department. And the bill proposes to pay the face value, which based on computations made as of the present value amounts to $3,412,000,000, or $1,670,000,000 more than the present values on the basis of allowing only the earned portion of 25 per cent additional credit as the number of years the certificates have been in force bears to 20 years, it is $1,742,000,000. In other words, if this bill were carried into effect it would be the same as though the Congress increased the bonus by $1,670,000,000.

Senator SHORTRIDGE. How much money would it call for?

General HINES. It would cause a disbursement, provided all of the veterans took advantage of the bill, of $3,412,000,000.

Senator BARKLEY. Does that take into consideration all deductions? General HINES. That does not take out the loans.

Senator BARKLEY. What would that amount to?

General HINES. That would mean that the $3,412,000,000 would have the total value of the loans outstanding deducted. The amount of the loans would be $267,840,734, which would be deducted, and that amount will change right along because we are making new loans. You can calculate on $300,000,000 or $400,000,000 for that. Senator BARKLEY. In the way of estimating the net new money involved in this, you will deduct the total amount of the accumulation of money in the Treasury now to the credit of these certificates? General HINES. Yes.

Senator BARKLEY. Which is $771,000,000.

General HINES. Yes. I should like to say at this point, if I may, that on the matter of raising money, the question of how this can be done, it would be preferable, I believe, for the committee to get that information from the Treasury Department. All that I can give you is the fact that in this fund in the way of Government securities to-day there is the sum of $771,000,000. Just how to dispose of those certificates, how to raise the additional amount necessary, is a refunding proposition which is solely the business of the Treasury Department and regarding which I understand they are to advise you. As to the working of the thing, and what it will cost, I feel I am competent to testify. But I am not competent to estimate any difficulties that may be involved in raising the money.

Senator SHORTRIDGE. Assuming that this bill should pass and become a law to be carried out, how much money would it require to be paid?

General HINES. It would require to be paid approximately three billions, four hundred millions of dollars in round numbers. But in addition to that you would have at the same time to convert the investments in the adjusted service certificate fund into cash amounting to the sum of $770,000,000.

Senator COUZENS. When you state that you mean, of course, the money advanced on loans would reduce it?

General HINES. No.

Senator BARKLEY. Estimating the amount at $771,000,000, which represents either money or convertible securities, the net amount would be about $2,600,000,000.

General HINES. Yes, approximately that.

Senator WATSON. Inasmuch as the bonus would be increased over a billion dollars by this bill, it is pretty safe to assume every man would take advantage of it, I take it.

General HINES. I assume if they did not they would not be good business men. In other words, they would be having paid to them 14 years in advance of the time, the face value of their certificates. I am sure it was the intent that this amount of money invested for these men would mature at a period in their life at a larger sum, which might be of greater value to them. This bill, or any bill which contemplates paying the face value of the certificates prior to maturity date, necessarily has the same effect as increasing the bonus by a large amount.

Senator BARKLEY. Let me ask you there in order to get the facts straight in my own mind: You said there were $400,000,000 of loans that would be deducted. Is that included in the $771,000,000, or is that an additional deduction?

General HINES. No, that is not included in the $771,000,000.
Senator BARKLEY. That would come off also?

General HINES. Yes, sir.

Senator BARKLEY. You get down then as the basis of this bill close to $2,000,000,000 in actual new money?

General HINES. Yes.

Senator COUZENS. That would be getting this money now, say, at an average age of 39 years instead of 53 years.

General HINES. Yes; the average now is between 38 and 39. Senator SHORTRIDGE. Deducting all the sums you say the cost of the amount to be paid out under this bill would be $2,000,000,000? General HINES. $2,600,000,000.

Senator SHORTRIDGE. But you just made the answer to Senator Barkley that it would be $2,000,000,000.

General HINES. That is, I say it would be around $2,700,000,000. Senator BARKLEY. Not after deducting the $400,000,000 of loans. General HINES. Yes. The total face value of these certificates would be $3,412,000,000. Assuming that the loans by the date we carry this out were $400,000,000, we deduct that amount, and it would leave $3,000,000,000 in round numbers. Now if you deduct $771,000,000 from that sum it would leave in round numbers $2,300,000,000.

Senator COUZENS. Which still means that you would have to pay it out.

General HINES. Yes.

Senator BARKLEY. Yes, but you would not have to pay it out as new bonds or new taxes.

Senator COUZENS. But you would have to take care of this matter. General HINES. I think the Treasury Department looks upon that fund the same as raising money for any purpose.

Senator GEORGE. In other words, you have a credit as against the Barkley bill of something over a billion dollars, including both the loans and the fund?

General HINES. Yes.

Senator GEORGE. But those credits, of course, are in the form of securities so far as the reserve fund at least is concerned?

General HINES. That is correct.

Senator WATSON. Go ahead.

General HINES. The next bill is the Dill bill, S. 3966. The Dill bill proposes that the Secretary of the Treasury make the settlement, and regarding that bill I have the same suggestion-that the Treasury Department is not in possession of the records; they are with the Veterans' Administration. The bill proposes to pay the adjusted service credit to the veteran, plus interest upon that credit at the rate of 4 per cent per annum, compounded annually from the date of the issuance of the certificate to the date of settlement, upon surrender of the adjusted service certificate. If all veterans availed themselves of this provision, the total cost would be $1,707,500,000. Of course any outstanding loans against the fund would be deducted. Now, that is the only bill that I know of at least that contemplates paying simply the present value of the certificates.

Senator WATSON. The present worth?

General HINES. Yes.

Senator CONNALLY. The Garner bill over in the House of Representatives does that.

General HINES. No; that increases the credit by 25 per cent.

Senator CONNALLY. That is still on that same idea, that you are assuming the Congress did not intend to give them 25 per cent as a part of the $500 and $625.

General HINES. I am not assuming anything.

Senator CONNALLY. Yes, you are. When you testify that the Dill bill doesn't say so, and when you testify that it intends to pay them simply $500 or $625, with interest up to date.

General HINES. That is what the bill provides.

Senator CONNALLY. It says an amount equal to the adjusted-service credit of the veteran. The adujsted-service credit originally was $1 a day, then 25 per cent was added to it.

General HINES. In the terms of the original bill it specified the credit to be the basic credit, that is, a dollar a day for service in this country and $1.25 a day for service overseas. When you go into the deferred-payment plan, it adds 25 per cent as the amount to be determined as a single premium. In other words, to be used to purchase these certificates

Senator CONNALLY. Oh, no. In addition to that it compounds the interest, on top of all that.

General HINES. Yes; it does.

Senator CONNALLY. What I am complaining about is your assumption that you have to prorate the 25 per cent over the whole 20 years. My contention is that Congress because of the deferment of premium says we will give them 25 per cent in addition, and then compound the interest on the compound sum.

Senator GEORGE. I think you misunderstood General Hines. He stated what the Dill bill provided for.