Senator CONNALLY. He said a while ago that he was assuming this being only for six years. He was taking six-twentieths of the $500. General HINES. I am assuming that because I am putting in the record a table that will show you the situation. The other bill, I think, contemplates something of that kind.

Senator HARRISON. Your construction is that the Dill bill does not contemplates the addition of 25 per cent on this bonus proposition? General HINES. No, sir.

Senator THOMAS of Idaho. If the veterans were all to take the present cash value in settlement it would require $1,700,000,000? General HINES. Yes, sir.

Senator THOMAS of Idaho. Will you be able to give the committee any information as to how many would probably take advantage of that kind of settlement?

General HINES. It would be my best judgment that not more than 50 per cent would take advantage of that proposition.

Senator THOMAS of Idaho. If we were to authorize this kind of payment it would require an actual outlay out of the Treasury of about how much?

General HINES. About $800,000,000.

Senator THOMAS of Idaho. Of about $800,000,000 to $1,000,000,000.

Senator HARRISON. As proposed in the Dill bill.

General HINES. Yes, sir.

Senator HARRISON. If they were good business people, they would not do that.

Senator COUZENS. There would be no reason for taking advantage of this plan, then?

General HINES. This plan would of course attract those veterans, I take it, who actually had to raise money. Veterans of the group who have not taken full advantage of the loan value existing to-day would probably pay no atetntion to it. I am assuming that those who would take advantage of it would be those in urgent need of

money.

Senator COUZENS. This Dill bill would about use up the $700,000,000 we have in the Treasury now without the issuance of any new securities.

General HINES. Yes, it would probably just contemplate offering those securities, I mean converting them into cash.

Senator BARKLEY. You suggested that my bill and the Dill bill should be changed by taking out the name of the Secretary of the Treasury. The reason he was put in there was because if there was any financing to be done, or bonds to be issued, he has to do it.

General HINES. My thought is that the records are with the veterans' administration.

Senator BARKLEY. I know, but the payments are made by the Treasury Department.

General HINES. No; we draw the checks.

Senator BARKLEY. Oh, no.

General HINES. Under the bills it would be different. But they provide the money.

Senator BARKLEY. The Secretary of the Treasury can not be eliminated from the picture if there is to be any financing.

General HINES. No; you would have to give him instructions to issue bonds, or sell those in the fund.

Senator LA FOLLETTE. You gave as your best judgment that approximately 50 per cent of the veterans would take advantage of the offer as you interpret the Dill bill?

General HINES. Yes.

Senator LA FOLLETTE. What would you say about the percentage that would take advantage of it if the so-called Garner plan were adopted?

General HINES. That would be the basic credit for 25 per cent? Senator LA FOLLETTE. Yes.

General HINES. I should think a large majority of them would take it, somewhere around 80 per cent, at least.

Senator HARRISON. If they were good business fellows they would take it, wouldn't they?

General HINES. Yes.

Senator CouZENS. What is the next bill?

General HINES. The next one is the Brookhart bill, S. 1222. That proposes that the Secretary of the Treasury shall make settlement, and it has the same objection as the others from the standpoint of the records. The bill proposes to pay the face value, which, based on the computations made at the present value, amounts to $3,412,000,000, or $1,670,000,000 more than the present bill. In other words, it is practically the same bill as the Barkley bill. This bill makes no provision for deduction of outstanding loans, so this would have to be taken off.

The next bill is the Caraway bill, S. 5060. That bill proposes that the Secretary of the Treasury shall make settlement. It provides for deduction of loans, and deduction from face value when paid would involve considerable expense to the Treasury to secure this information in each case from the Veterans' Administration. Therefore, of course, it should be amended to take care of that. The bill also proposes to pay the face value, which, based on computations made as to present value, amounts to $3,412,000,000, or $1,670,000,000 more than the present value.

Senator COUZENS. So in effect the Barkley, Brookhart, and Caraway bills are about the same?

General HINES. Yes.

Senator COUZENS. Have you the Vandenberg bill?

General HINES. That bill was handed to me this morning. I have not had a chance to work it out according to the same data. But I understand the Vandenberg bill contemplates permitting borrowing up to 50 per cent of the loan value of the certificate.

Senator COUZENS. No, the face value.

The nearest

General HINES. Yes; the face value of the certificate. proposition of that kind that we have studied was the one submitted in a letter from Senator Vandenberg, which contemplated really advancing the loan date. For instance, in 1931 the amount available for loans is 221⁄2 per cent, that is, on the value of the certificate. If we are to give 50 per cent of the loan value, that would be reached on a certificate known as January 1, 1937, it would be a loan of 0.48484 of the maturity value, which is about 50 per cent. The commencement of the 14th year would give us a loan value of 0.53562, or a little more than half the value. So that if a loan at 50 per cent of

maturity value were authorized at the present time, even on the basis of interest at 4 per cent, the average certificate loan value would be exceeded up to January 1, 1943, before it would be eligible again for another loan.

Senator COUZENS. In other words, it would then be put up to the veteran to take his 50 per cent and surrender it, practically that, would it not?

General HINES. Yes. In other words, it would only leave, among those first issued and which would fall due in 1945, only two years. more to run, and the latest date probably would be 1948, with five years longer to run.

Senator HARRISON. What interest does it provide for?

General HINES. Four per cent. There is one advantage of this bill over some others, in that it does retain for the veteran if he desires to redeem his loan at any time, an equity in his certificate. And it protects his family in event of his death by the certificate still being in force, and the balance being available for his family. Making it optional, which would provide, I should say, on an average to a veteran of approximately $300. That would probably meet the need of the veteran in the greatest need at this time, and of course it would leave other veterans who do not care to get a loan, their certificates still in effect.

Senator COUZENS. How much would this require to be raised? Have you any computations on that?

General HINES. We have not made them on this bill. It came to me this morning, but I will be glad to put it in the record.

(The data to be inserted in the record will be furnished by General Hines and placed at this point.)

S. 5811-VANDENBERG BILL

The Vandenberg bill contemplates fixing, arbitrarily, a loan value of 50 per cent of the face value of the certificate as the emergency basis in place of the present loan value figured on an actuarial basis. Thus, if a holder of a $1,000certificate were to borrow $500 with 14 years to run, there would be a lien against the certificate at its maturity of $865.84, and an equity to the veteran of $134.16. There would be no ultimate additional cost to the Government except that the veteran would receive as a loan a sum closely approximating the certificate's present value and would be credited with the whole of the 25 per cent additional credit allowed because of deferred payment.

General HINES. As to a bill of this kind I should call attention to the fact that in the long run it would increase the Government's obligation by about $375,000,000 due to the fact that you are taking out of the reserve a large amount that would be there working before that time.

Senator COUZENS. Yes, but it would also be working on the outside. I do not see how you get your reduction.

General HINES. For the simple reason that we leave in the fund a certain proportion of the certificate that is still working, and the actuaries tell me that a bill of that kind will increase the obligation. I should like to have it worked out and will give you the basic data on my assumption.

Senator COUZENS. I do not get your point.

General HINES. I did not either at first. I asked them to work it out and present it. They claim that is so. Personally I had the feeling it would make no difference because the rate of interest was

the same. But apparently the remaining amount of the certificate working against the amount of the loan does build up a difference over a period of twenty years.

Senator BARKLEY. Taking the case of an individual borrower, $300 on which he pays interest under this bill, what interest is there offsets against that, so as to offer him an advantage other than getting money immediately?

General HINES. Do you mean under this last bill?

Senator BARKLEY. Yes.

General HINES. There is no advantage to him. In other words, he is just being offered an opportunity to get more money.

Senator BARKLEY. So there is no compensatory interest that he draws in any form to offset the interest that he pays?

General HINES. No; the interest is the same in the fund and in this. Senator WALSH of Massachusetts. It gives him an opportunity to borrow more money?

General HINES. Yes.

Senator COUZENS. And at a lower rate than the existing rate?

General HINES. Well, at the same rate in some of the disbursements that we have now, but lower than the average.

Senator GEORGE. The average loan value now is about $216.
General HINES. Yes.

Senator GEORGE. This would make it about $300.

General HINES. Yes. $300 more.

Senator HARRISON. If you take the Garner plan, and he proposes to pay on the cash-surrender value, and you take into consideration at the same time 25 per cent granted to them, give us the difference between that and the figures that you gave in the matter of the 25 per cent on a six-twentieths basis.

General HINES. The Garner bill proposes, on section 509, paying veterans the net basic credit, increased by 25 per cent, with interest at 4 per cent compounded annually; and the expenditures necessary for all veterans if they availed themselves of the privilege it would be $2,120,000,000, less the loans.

Senator WATSON. What would that be?

General HINES. That would be $1,800,000,000, the present value of the certificates outstanding on the basis of allowing only that portion of the 25 per cent additional credit, with reference to the ratio of number of years that the certificates have been in force to 20 years, and is about $1,742,000,000. The bill also contemplates remitting to the veteran all interest charges in excess of 4 per cent for all previous loans we have made. But to accomplish this it is conservatively thought that over 6,000,000 transactions would have to be recomputed, making it almost an impossible administrative task. The administrative cost of that readjustment of interest would probably run from two to three million dollars. And any payments made might be greatly delayed while we were making those readjustments, due to the enormous amount of extra work involved. The amount that would be refunded by the adjustment of this interest would be approximately $10,236,000 exclusive of any adjustment because of loans made through banks. One other great administrative difficulty in the adjustment of the interest would be that many of these loans having been made by banks we would have no way of getting the banks to make the adjustment. So that you would have

inequity to that extent. The excess of cost on present value is about $378,000,000. In other words, by adding this 25 per cent in value instead of 6/20 it would run about that amount more.

Senator HARRISON. It would be about $370,000,000 difference as between the two plans.

General HINES. Yes. And then of course plus the $10,000,000 adjustment of interest.

Senator HARRISON. Which would be about $370,000,000.

General HINES. Yes, sir.

Senator WATSON. Senator Connally, you said you had some amendment you wanted to propose.

Senator CONNALLY. It was on the basis of the Garner bill. I just wanted to get it before this committee.

Senator WATSON. Go ahead.

Senator CONNALLY. There has been lots of complaint about the Government charging them 6 per cent and only paying them 4 per cent. The idea here was to make the interest the same, to offset that. General Hines, you think there would be a lot of administrative difficulties about that matter?

General HINES. I think it would be almost impossible. We have not had a chance to study the matter, not any more than to glance over it, but we know that we would have 6,000,000 of these adjustments to make, and we have no way of handling the banks.

Senator CONNALLY. You can dismiss the banks. That is not the Government's concern, unless the Government has taken this, and of course we would like to see some adjustment if we could.

Senator COUZENS. It would only be a few cents in any case.
General HINES. It would be small.

Senator CONNALLY. The loans that you still have, there would be no difficulty about them.

General HINES. We would have to renew all of them.

Senator CONNALLY. But you would have a little table by you by which every dollar at so much would be worked out.

General HINES. We have a table now, but it would be a great job. Senator CONNALLY. Not all of this would be a difficult job.

Senator SHORTRIDGE. As a result of letters I have received, I wish to put to you this general question: General Hines, have you any estimate as to what the administration cost to the Government will be if there is no further legislation and the present law remains in effect up to 1945?

General HINES. Yes; Senator Shortridge, it is running about a million dollars a year. Do you mean for the banking business we are in now, making loans?

Senator SHORTRIDGE. Yes.

General HINES. It will run between $1,000,000 and $1,500,000 a year.

Senator COUZENS. So you would save between $14,000,000 and $20,000,000 by paying now?

General HINES. Yes.

Senator SHORTRIDGE. That perhaps covers my next question: Assuming that some bill should be passed the result of which would be the closing out of these accounts, what saving would there be in the matter of administration costs?