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General HINES. I estimate it would run over a million dollars a year. That would be my estimate.

Senator SHORTRIDGE. There would be of course the additional cost caused by an adjustment of these matters.

General HINES. We would have of course the additional cost necessary to carry out a thing of this magnitude, say at a minimum $2,000,000,000. It would require a great amount of administrative work. Even the job of writing checks issued after getting certificates in, and making the proper identification, would be a terrific task.

Senator SHORTRIDGE. The net result would be a large saving of administrative cost.

General Hines. The net result I should say should give us a saving of a million dollars a year.

Senator SHORTRIDGE. On up to 1945.
General HINES. Exactly.

Senator WATSON. General Hines, can you come back here tomorrow?

General Hines. Yes, sir. But I should prefer, after having given the basic information, that you would call for some others to give statements. I would be in a position to advise better after some statements have been made.

Senator HARRISON. What have you to recommend, if anything, or are you in a position now to recommend anything?

General Hines. Not at this point in my testimony. I will be prepared to make a recommendation to the committee, but I should prefer to complete it first.

Senator SHORTRIDGE. Meanwhile the figures you have referred to, and the tables, you will give to the committee reporter?

General HINES. Yes, sir.

Senator BARKLEY. General Hines, I should like to get clear the question of interest being paid by the Government. My recollection is that the certificate itself bears no interest.

General HINES. No. You see the certificate itself takes the amount of the basic credit, plus 25 per cent, then an amount is worked out, showing that as a single net premium under the American experience tables of mortality for the age of the veteran, but at 4 per cent instead of 342 per cent as the American tables provide. We work out the value for the policy. In other words, the amount of the insurance that will be purchased by that money at the end of a given time depending on the age of the veteran.

Senator BARKLEY. What is the aggregate amount upon which the Government is paying this 4 per cent interest that you mentioned here?

General Hines. Well, really the Government is only paying 4 per cent interest on the amount that is in that redemption fund. That is the amount the Government is paying on.

Senator BARKLEY. And that is $771,000,000?

General HINES. Yes; but it increases each year, so that the total amount will increase, and the interest to the Government will increase. I think the amount that has been paid by the Government in interest up to this time, if that will be of any interest to you?

Senator BARKLEY. Assuming that these certificates should run until their maturity in 1945, and as to the expense of the Government


involved in that, have you calculated the difference between the aggregate amount that would be paid then, and the amount required now to settle them even at face value in

my bill? General HINES. If I understand your question, you would like to know how much the Government would have to appropriate to this fund, and how much the fund itself will earn?

Senator BARKLEY. Well, I have roughly calculated that, based upon the payment now and the payment in 1945, the Government would save probably $400,000,000 by paying them now instead of waiting 15 years. I am not certain that that is correct.

General Hines. Do you mean by paying them at their face value? Senator BARKLEY. By paying their face value now instead of in 1945, including the increased interest on the redemption fund that the Government will pay.

General HINES. No, Senator Barkley, if the certificates were cashed now at their present value, the Government would save the administrative expense and about $230,000,000. If you pay face value you in effect increase the amount of the bonus that you give them of over a billion dollars.

Senator BARKLEY. That is a matter of policy for the Congress to pass upon.

General HINES. Certainly.

Senator BARKLEY. But I am trying to get at the actual saving as between paying now and paying 15 years from now.

General HINES. If you were to pay the face value of the certificates now there would be no saving to the Government but increased expense. But if you pay the face value of the certificates now, in other words, their present worth, there would be a saving to the Government.

Senator BARKLEY. But, of course, the amount of interest that the Government pays and the administrative charges would continue for 15 years more, and interest would accumulate as the years go by, so that at the end of the period the Government would be paying interest on more than the total face value.

General HINES. What you have in mind is that the Government in effect is paying the earnings into this fund. In other words, we have to borrow the money, and the Government is paying the amount of interest on the investment into the adjusted-service certificate fund.

Senator BARKLEY. Yes. Senator COUZENS. General Hines, have you the history anywhere of the origin and the method of arriving at this bonus?

General Hines. Yes; and I will have that for you if you desire.

Senator COUZENS. I think that is important. I am one of the Senators who was not here when the bonus was first discussed, and I should like to know just what the history of the matter is, and how those figures were arrived at.

General HINES. Very well.

Senator Watson. The committee will meet to-morrow morning at 10.15 o'clock for the purpose of considering confirmation of the nomination of Mr. Bernet; and at 10.30 o'clock to-morrow morning we will resume our hearing of these bills.

(Whereupon, at 12 o'clock noon, Monday, January 26, 1931, the committee adjourned until 10.15 o'clock the following morning.)





Washington, D. C. The committee met, pursuant to adjournment at 11 o'clock, a. m., in its hearing room in the Senate Office Building, on call, Senator James E. Watson presiding.

Present: Senators Watson (presiding), Shortridge, Couzens, Deneen, Thomas of Idaho, Harrison, George, Walsh of Massachusetts, Barkley, Thomas of Oklahoma, and Connally.

Senator WATSON. The committee will please be in order. General Hines, if you have any further statement to make, we will be glad to hear it.



General Hines. Mr. Chairman and gentlemen of the committee, certain information was asked for yesterday, which I have had prepared, and I would like to present it to the committee so that they will have all the available information before they hear the service organizations and the other witnesses.

I was asked to furnish the committee with a statement showing the loans made on adjusted-service certificates from the Government life insurance fund, by months and by years, in order to give a comparison. I have such a statement before me, showing the loans made from April, 1927, up to December, 1930, indicating the number of loans per month, the amount in dollars and cents of those loans, and the percentage increase or decrease, one month over the other.

(The statement referred to is as follows:)


Direct loans made by bureau on security of adjusted-service certificates by months and years, United States Government life insurance fund


2 45 2 30 2 20

142, 835 93, 237 83, 592 71, 108 55, 509 49, 262 47, 933 41,012 31, 118 36, 415 38, 587 57, 263

$10, 192, 857. 14

7, 794, 710.50
7, 299, 258. 86
6, 995,727. 14
5, 466, 677.37

627, 602.34
4, 806, 956. 94
4, 114, 401. 08
3, 263, 099. 11
3,811, 737. 74
3,985, 188. 06
5, 562, 620. 19

83 37 23 21 17 18 33 26 20 46 66 109


214, 370 $14, 146, 353. 90 142, 873 11, 476, 035.72 100, 035 9,752, 138. 36 85, 995 8, 072, 963. 64 68, 902 6,663, 584. 52 63,536 6, 120, 958. 14 61, 826 6,076, 320. 44 57, 294 5, 730, 169. 69 48, 967 5, 172, 350. 40 50, 699 5, 349, 074. 96 48, 753 4, 974, 764. 30 67, 755 6,774, 892. 19

2 10

2 5 2 1 7



747, 871

67, 920, 836. 46


1, 011, 005

90, 309, 606, 26







Per cent

of de-
crease or
increase 1

Per cent

of de-
crease or
increase 1

Per cent

of de-
crease or
increase 1










78, 089
68, 190
68, 031
58, 898
47, 325
41, 821
36, 172
32, 597
25, 969
24, 881
23, 232
27, 453

106, 226
67, 631
52, 055
39, 782
36, 226
27, 306
24, 462
23, 091
25, 578

$9, 989, 620.40
6, 137, 364. 01
4, 836, 992. 71
3,839, 413. 30
3, 487, 639. 71
2, 643, 155. 91
2, 329, 616. 57
2, 165, 644. 20
2, 618, 407.70

$7,836, 513. 17
7, 108, 716.35
7,085, 387. 82
5, 175, 653. 26
4, 536, 986. 44
3, 847, 228. 91
3, 577, 442. 36
3, 243, 822. 07
2, 647,064. 41
2, 680, 854. 54
2, 498, 391. 87
2, 996, 357.55


402, 357

38, 047, 854. 51

532, 658

53, 234, 418. 75

1 Represents percentage of increase or decrease of loans on adjusted-service certificates for each month from year to year.

2 Represents decrease.

General HINES. What prompted the question yesterday was that for December, 1930, over November of 1930, there was an increase of 109 per cent in the demand for loans. The only decreases--

Senator WATSON. What months were those, General?

General HINES. That was between November, 1930, and December, 1930, an increase of 109 per cent.

Senator WATSON. In that month?
General HINES. Yes; between those two months.

Senator Walsh of Massachusetts. Of course, December is a big month on account of the Christmas holidays?

General Hines. Yes. In January, there was still a further increase of 50 per cent over December.

Senator Watson. Has December been the big month in every year, or did it just happen that way?

General HINES. December and January are the large months.

Senator COUZENS. When you say there was an increase of 109 per cent in December, that includes the applications for renewals, too?

General HINES. Yes, sir. That includes both.

Senator WATSON. That 109 per cent has reference to the number of applications?

General HINES. No. That is the percentage increase in the amount of the loans.

Senator Watson. That refers to the amount of the loans, and not to the number?

General HINES. No; I am wrong, Senator. The percentage increase is the percentage increase in the number of loans.

Senator COUZENS. That is the important point.

General Hines. Let me make this correction, so that we will have it straight. Mr. Breining tells me that the percentage increase is the percentage increase over the same month of the preceding year, rather than the preceding month.

Senator HARRISON. The percentage of increase is in amount?
General HINES. In number.
Senator HARRISON. You do not have it in amounts?
General HINES. Yes. I have it in amounts.
Senator HARRISON. That is already in the table.

General Hines. It is in the table now. It shows the amounts, For example, in December of 1929 we made 57,263 loans, aggregating $5,562,620.19, while in December, 1930, we made 67,755 loans, aggregating $6,774,892.19.

Senator Watson. Do you lend to everybody who applies?
General HINES. If they have a value available.
Senator WATSON. That is the only question?

General HINES. That is the only question. If their certificate shows that there is a loan value due, we make the loan.

With the permission of the committee, I will introduce that statement in the record.

I have a similar statement showing the same information on loans made by banks, where those loans, of course, have been redeemed by the adjusted service certificate fund. That statement differs from the other primarily in that most of the amounts are decreased, showing that the bureau has replaced the banks generally throughout the country in making loans. I will also introduce that if it is agreeable.

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