You hit the nail right on the head when you point out that the real void that we have here is assistance to individuals, and although the subject might not be completely related here, in my opening statement I alluded to the fact that in the last decade we have spent over $700 million in assistance to foreign governments for disasters. This is just disaster funds.

In addition, we spent billions in foreign aid, but in disasters alone we have contributed over $700 million.

Senator ALLOTT. I might point out, if the chairman will yield to me, that in the Chilean earthquake, we put up $500 million in that disaster, alone.

Senator BAYH. There has been a lot of money spent, and I am not saying necessarily that this has not been well spent, but it seems to me we should at least be consistent and treat the individual citizens of America with the same degree of compassion that we are aiding those of other countries.

Senator ALLOTT. May I say I think it is going to be very difficult to set up specific standards.

If you have a retired couple you have one set of circumstances. Or, if you have a man with four children who has a job which pays him $5,000 or $6,000 a year, you have another given set of circumstances. It is obvious that he has no way of going out and purchasing a new house, purchasing new furniture, and things like that.

The man next door may have the means of doing it, and can do it without any particular bind on himself.

I think providing standards and considering all the factors upon which such assistance could be given is one of the most difficult tasks. And at the same time, it is not just the impact of the floods upon the individual and his home, and a business and the home. It also deprives people of jobs, which accelerates the situation, and this factor has to be considered.

Senator BAYH. It is depressing both to the community and the State. Senator ALLOTT. Yes, sir.

Senator BAYH. Thank you very much, sir.

Senator ALLOTT. Thank you very much, Mr. Chairman.

Senator BAYH. Our last witness this morning is Mr. Ray P. Bland, the Assistant General Counsel of the Veterans' Administration, who I understand is accompanied by Mr. John M. Dervan, Director of the Loan Guarantee Service of the Department of Veterans Benefits. Gentlemen, we appreciate your patience and are particularly grateful that you will let us have your thoughts.

STATEMENT OF JOHN H. KIRBY, DEPUTY ASSISTANT GENERAL COUNCIL, VETERANS' ADMINISTRATION; ACCOMPANIED BY JOHN M. DERVAN, DIRECTOR, LOAN GUARANTEE SERVICE, DEPARTMENT OF VETERANS BENEFITS; AND ROBERT K. COON, ASSISTANT DIRECTOR

Mr. KIRBY. Mr. Chairman, may I say first that unhappily Mr. Bland was not able to be here to represent the agency this morning.

I am John H. Kirby, and I am Deputy Assistant General Counsel of the Veterans' Administration. And I would like the opportunity to introduce Mr. John M. Dervan, to my right, who is the Director

of our Loan Guarantee Service in the Veterans' Administration. Department of Veterans' Benefits, and also Mr. Robert K. Coon, who is the Assistant Director on Mr. Dervan's staff for Loan Policy. Mr. Chairman, we have a statement which I would be pleased to read, if I may, sir.

Senator BAYII. Fine. Please do.

Mr. KIRBY. Mr. Chairman, we appreciate this opportunity to present our views on S. 1861, which you have under consideration.

S. 1861 proposes to provide various types of relief for areas suffering a major disaster. Section 3(b) is the only section of the bill which affects the Veterans' Administration. Therefore, my remarks will be confined to that section.

Section 3(d) authorizes the Administrator to refinance any loan "made" by the Veterans' Administration where he finds that refinancing is necessary as a result of loss, destruction, or damage to property securing such a loan as a result of a major disaster.

The section authorizes reduction in the interest rate on such loans to a rate not less than 3 percent per annum. Term of the mortgage may be extended for such a period as will provide a maturity not to exceed 40 years.

Under the section, the Administrator may also suspend the payment of principal and interest charges and extend the maturity date for an additional 5 years, where such action is necessary to avoid severe financial hardship.

Since the section applies to loans "made" by the Veterans' Administration, it would be applicable only to our "direct loans" and loans made to borrowers who purchase homes owned by the Veterans' Administration-our so-called vendee accounts.

Loans acquired by the Veterans' Administration would not be included, since they are purchased from private lenders and are not "made" by the Veterans' Administration.

The authority to refinance provided in the section is interpreted to mean the authority for recasting the terms of payment of an existing loan, which could include postponement of payment, extension of maturity, reamortization, or a combination.

We do not interpret the section to mean that additional moneys will be advanced.

The Veterans' Administration agrees with the objective of section 3(d). The section, however, provides but little statutory authority which is not already contained in laws pertaining to veterans' benefits. Authority is provided in the section to extend the maturity of a direct loan by refinancing for a period not to exceed 40 years. Under present statutes, direct loans for the purchase of residential property must mature in 30 years. However, on farm realty loans, the maximum maturity is already 40 years.

The statutory maximums do not apply in vendee account cases. However, the Veterans' Administration practice has been to limit the maximum maturity of such loans for 35 years.

The section would also grant the Administrator specific authority to reduce the existing contract rate to not less than 3 percent in refinancing the limited class of cases to which the section applies.

Section 1811(d) of title 38, United States Code, provides that the interest rate for direct loans shall be the same as for guaranteed loans. The guaranteed loans

bear interest not in excess of such rate as the Administrator, with the approval of the Secretary of the Treasury, may from time to time find the loan market demands; except that such rate shall in no event exceed 54 percent per

annum.

The Administrator now has authority under section 1820 (a) (5) to fix the terms of sale of properties in vendee account cases the only limitation being "as he determines to be reasonable."

The existing VA regulations afford assistance through postponement of payments on direct loans and authorize extension and reamortization in situations sought to be relieved by the 5-year moratorium and reamortization features of section 3(d).

We consider section 1820 (a) (5) of title 38 to be broad enough to permit the same relief in respect to vendee accounts.

While section 3 (d) is not applicable to guaranteed or insured loans, we believe it appropriate to point out that under present laws and regulations pertaining to veterans' benefits, there is ample authority for the holders of guaranteed and insured loans to afford borrowers similar assistance.

In addition, the holders of guaranteed and insured loans, as well as the Veterans' Administration as a holder of vendee and direct loan accounts, may make advances for necessary repairs.

We have no basis from which to make an estimate of the cost to the Veterans' Administration if this section of the bill were enacted. However, past experience with loans on properties in areas designated as disaster areas indicates that any additional cost would be minimal.

To summarize, our existing authority appears to be sufficiently broad to afford the type of relief contemplated by section 3(d). The section would provide some additional authority which might prove helpful in this area. Accordingly, we do not object to its favorable consideration by your committee.

The Bureau of the Budget has advised that there is no objection. from the standpoint of the administration's program to the submission of our report on S. 1861, which is along the lines of this statement. The Bureau is making its own report to the committee.

Mr. Chairman, this completes our formal statement on S. 1861, and we will be more than pleased to endeavor to answer any questions you may have, but if I may, although not covered in the statement, I would like to make a technical observation.

Some years ago, the laws relating to veterans were recodified, as you may know, sir, and appear in title 38, and we feel that it might be desirable if this or similar legislation to that in section 3 (d) is enacted, to have that legislation recast in the forms of appropriate amendments to the sections to which they would relate in title 38, and we offer that suggestion.

And might I say, sir, we would be more than pleased to work with the committee staff to that end.

Senator BAYH. Thank you very much, Mr. Kirby.

I appreciate your letting us have your statement, and you pointing cut the facts that the Veterans' Administration presently does have rather liberal statutory provisions.

I would appreciate it if you would give us your thinking as far as specifics. We certainly don't want to complicate the job of administering this by unnecessary statutory authority. Rather, we are trying to coordinate a bit better.

We appreciate the support which your statement gives to our granting the additional authority, which is minimal, to be sure.

I think we could also use some of your assistance to that, perhaps by interpretation, the exclusion of the guaranteed and what was the other one, guaranteed and insured loans, might be to incorporate those all together and treat them similarly.

If you feel this is necessary, we don't want to risk that.

I have no questions. I appreciate very much your coming. Again I apologize for the length of the hearing. It is a subject touching many people very deeply, and as you could see, Senator Allott, having just experienced what some of us had experienced earlier, was convinced that something needs to be done.

And I appreciate your cooperation in helping us to get it done.
Thank you very much.

Mr. KIRBY. Thank you very much, Mr. Chairman.

Senator BAYH. We will be in adjournment until 9 o'clock tomorrow, at which time we hope to be able to terminate the hearing.

(Whereupon, at 12:45 p.m., the subcommittee was recessed, to reconvene at 9 a.m., Tuesday, June 22, 1965.)

1

DISASTER RELIEF ACT OF 1965

TUESDAY, JUNE 22, 1965

U.S. SENATE,

SUBCOMMITTEE ON FLOOD CONTROL,
RIVERS AND HARBORS, OF THE

COMMITTEE ON PUBLIC WORKS,
Washington, D.C.

The subcommittee met at 9:10 a.m., pursuant to recess in room 4200, New Senate Office Building, Senator Birch Bayh (chairman of the subcommittee) presiding.

Present: Senators Bayh and Jordan.

Also present: Senators Bartlett, Mondale and Hartke.

Senator BAYH. We will reconvene the hearing this morning.

The first witness will be Mr. Ross Davis, the Executive Administrator of the Small Business Administration.

Mr. Davis, we appreciate your coming.

You look like you are well armed there.

Inasmuch as the Small Business Administration does have a considerable role to play in disasters, we are anxious to have your thoughts as to how we can better do the job that is to be done.

I might say in retrospect, looking at the disaster we had in Indiana, that although it was well administered, the Small Business Administration's role in the disaster relief program, as well as that of the Federal Housing Administration, as I discussed with the gentlemen from that agency yesterday, was subject to some unfortunate publicity at the beginning of the crisis, in which I think we did not adequately specify when and how one could avail himself of the 3 percent money, and, as a result, there were some applicants who were most discouraged because they were directed into normal lending channels.

You might speak to this question, sir, as well as your prepared statement, and any other thoughts you might have on the subject. STATEMENT OF ROSS D. DAVIS, EXECUTIVE ADMINISTRATOR, SMALL BUSINESS ADMINISTRATION; ACCOMPANIED BY CLARENCE COWLES, DIRECTOR, OFFICE OF DISASTER LOANS; JOHN KIVLAN, COUNSEL; AND LOGAN HENDRICKS, DEPUTY ADMINISTRATOR FOR FINANCIAL ASSISTANCE

Mr. DAVIS. Well, thank you, Mr. Chairman.

I would like to introduce my colleagues here.

On my left we have Mr. Clarence Cowles, our Director of the Office of Disaster Loans.

49-751-65-7