make the Small Business Administration a permanent agency. There are now before the committee various proposals which would provide further changes in the SBA legislation. Many of these proposals have great merit. All are worthy of careful study. It is perhaps natural that some of the suggested changes in the basic legislation may stimulate controversy.

Should the disagreement endanger or delay final action on all of the recommended changes now pending here, I urge that the committee give first consideration to the matter of the agency's performance. By such action, we can provide the basic stability the agency requires for its future operations and from this point, we can proceed to consider the other substantive changes which have been recommended.

Thank you, Mr. Chairman, for the opportunity to make this state

ment.

The CHAIRMAN. One of our colleagues on the committee gave his views on this subject.

Are there any questions?

Mr. BETTS. I think, Mr. Chairman, that Mr. Henderson made a very logical and excellent statement.

The CHAIRMAN. Thank you, Mr. Henderson.

Mr. Hill is our next witness. Apparently he is not here.

Mr. Riehlman, of New York, is the next witness.

STATEMENT OF HON. R. WALTER RIEHLMAN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW YORK

Mr. RIEHLMAN. Mr. Chairman, I would like permission of the committee to file a statement. I suggested in the first place reading it, but I think it would be to some degree repetitious of the testimony which has been given before the committee in the past few days. I would like to subject myself to the committee's questioning on the bill which has been presented by Mr. Multer representing Subcommittee No. 2 of the Small Business Committee. I would like to say this to the members of the full committee here today, that that bill was supported by 12 members of our full committee. I feel it is a bill which has been given thorough study by our subcommittee, and one that has great merit.

Now there are controversial changes, which differ in some degree - from the administration bill, and for that reason, if there are some questions from the members of the full committee, I would be very delighted to try to answer them.

The CHAIRMAN. Without objection, your statement may be filed, Mr. Riehlman.

(The statement of Hon. R. Walter Riehlman follows:)

STATEMENT BY HON. R. WALTER RIEHLMAN

Mr. Chairman, it is a pleasure to appear before this committee and to comment on pending legislation for small business. I have a very personal interest in the problems confronting this most important segment of our economy. As a member of the Small Business Committee for 10 years, I have attempted to keep in close touch not only with the problems of small business but also with efforts on the part of the Congress and the Federal Government to strengthen the competitive position of small business in our economy.

It has been my good fortune to serve as a member of Subcommittee No. 2 of the Small Business Committee under the chairmanship of my distinguished

friend, Mr. Multer of New York. As you may know, Subcommittee No. 2 has the responsibility of conducting studies and investigations with respect to the activities and operations of the Small Business Administration and problems of small business concerned with Government procurement, financing, and disposal of surplus property. In the 84th and 85th Congresses, Subcommittee No. 2 has carefully examined the operations of the Small Business Administration and has carefully gone into the relationship of this agency with other departments and agencies of the Government and, particularly, those agencies which deal extensively with Government procurement such as the Department of Defense and the General Services Administration.

Throughout the years it has been found that small business has had a continuous battle to obtain a larger share of Federal Government contracts and to achieve equitable and expeditious treatment of problems arising from the administration of these contracts. Small firms have been unable to secure equity capital in the organized security markets, and while private financial institutions have apparently supplied most of their demand for short-term credit to fill working capital requirements, these same institutions are unable to advance credit of relatively long maturities. Frequently it is found that the type of long-term credit desired by small business could not be handled by commercial lending institutions. An unduly heavy tax burden has probably contributed more to financial weakness, to increased mergers among business concerns and to a small firm's inability to expand than any other factor in our economy. These are only a few of the broad categories that have concerned the members of the Small Business Committee as well as the other Members of Congress. Subcommittee No. 2 in the discharge of its responsibilities in the 84th and 85th Congresses has introduced bills and issued reports to correct some of these inequities. In addition, many of us on the Small Business Committee have introduced measures designed to reduce the tax burden and to allow small business to grow and to expand through retained earnings. Many recommendations have been made to the procurement agencies, intended to improve the small firms' opportunities to secure Government contracts.

The establishment of an independent small business agency to provide financial and other types of assistance has been a long step forward and in the right direction. Twelve members of our Small Business Committee have now introduced identical bills to continue the Small Business Administration as a permanent agency. The bill as introduced received the unanimous approval of our subcommittee. Its membership, in addition to Mr. Multer as chairman, includes Mr. Yates, Mr. Steed, Mr. Seely-Brown, and myself.

As I have mentioned, for the past 2 years Subcommittee No. 2 of the House Small Business Committee has conducted a rather exhaustive analysis of the operations of the Small Business Administration. Our purpose has been twofold: first, to see if existing law was adequate to provide the kind of assistance Congress desired small firms to receive; and secondly, to see how effectively the programs established under Public Law 163, as amended (83d Cong., 1st sess.) —— authorized by the then distinguished chairman of the House Small Business Committee and presently the ranking minority member, Mr. Hill of Colorado-were working as administered by the Small Business Administration.

In the 84th Congress, our subcommittee found that while the Small Business Administration has made steady progress in every program, certain changes in the law were desirable to broaden the scope of its activities. We, therefore, made certain recommendations for consideration by your committee, some of which you adopted. Similarly, as a result of our recent hearings on the activities of the Small Business Administration, we again submit to you suggested changes which we believe will strengthen the act and the administration of the Small Business Administration programs. Other changes recommended in our bill we believe will be beneficial to small business and will aid in more accurately carrying out the intent of the Congress.

Our subcommittee has found that Small Business Administration personnel have been diligent and hardworking in their effort to provide assistance to small business. Each 6-month period since its establishment in July 1953, the Small Business Administration has shown an increase in the assistance rendered to small business. The Small Business Administration informs us that of the 15.377 applications for business loans received through April 30, 1957, there have been 6,443 approvals for a total of $294,618,000. I do not distinguish between the total amount approved and the Small Business Administration share since I firmly believe that without Small Business Administration participation most of these loans probably would never have been made. We must, therefore, and

the law establishes this procedure, look at more than just the direct and immediate participation loans. In deferred participation loans where Small Business Administration money is only committed for a possible future withdrawal, there has been positive assistance rendered which would not otherwise be forthcoming. As I have stated many times during debate on Small Business Administration legislation, the Congress does not intend that Small Business Administration activities supplant the normal lending functions of our private financial institutions. The Small Business Administration is designed to supplement these functions in those areas where the private institution cannot meet the demand of small firms. Despite the difficulties encountered by small business in securing adequate long-term credit, I think all of us would have to agree that our private banks have done a magnificant job in financing the growth of our economy. For example, it is reported that as of March 27, 1957, weekly reporting banks had some $31 billion in commercial and industrial loans outstanding. We would also all agree, however, that while the Small Business Administration lending will never reach such proportions, this program is vitally necessary to the welfare of thousands of small businesses which are so essential to our local communities and to our economy as a whole.

There has been a continued effort on the part of the Small Business Administration to expand the financial assistance program. Loan policy has been changed to permit loans to firms not formerly considered eligible such as four-wall theaters, private medical facilities, and resort hotels.

The development of the limited loan participation program has met with considerable success. This type of loan was designed to assist the small retailer, wholesale distributor, and service establishment which are normally limited in the amount of collateral which can be pledged to secure a loan. Some 1,361 of these loans had been made, as of March 31, 1957, where the Small Business Administration will participate up to $15,000 or 75 percent of the loan, whichever is the lesser.

In an effort to expedite the processing of loans, the Small Business Administration has delegated greater authority to its field personnel. This has always been our recommendation since by such delegation much redtape can be eliminated. Regional officers can now approve direct and participation loans up to $20,000; participation loans up to $100,000, where there is a 25 percent participation, and where one-half of the bank's share is new money; and finally they may approve disaster loans up to $50,000.

As you know, the workload of the Financial Assistance Division at the Small Business Administration has steadily increased. I am informed that the Small Business Administration's 1957 budget was based on the anticipated receipt of approximately 350 business loan applications a month, as compared with an average of 340 applications received in fiscal 1956. Actually, in fiscal 1957 applications have averaged more than 550 per month with a high of 702 in March. I believe that as banks throughout the country become more familiar with the Small Business Administration program, with the increased acceptance of the limited loan participation program, and with a continued expansion in our economy and in competitive activity, this workload can be expected to remain at a high level.

Mr. Chairman, I would like to preface my next comment by stating that for 10 years I have been a member of the Government Operations Committee and a member of the Subcommittee on Military Operations. In the 83d Congress I had the honor of serving as chairman of the Military Operations Subcommittee. Therefore, I have some intimate knowledge of the procurement processes as they have been systematized by the Department of Defense. The joint determination or set-aside provisions of the Small Business Act are extremely important. These provisions of the act should be strengthened, and the subcommittee in its bill has made a suggestion to that effect. It is true and we are told by the Small Business Administration that in essence our suggestion is a part of the rules and regulations governing the joint determination program. However, it is our conviction that the "right of appeal" which we have incorporated in our bill will result in more effective cooperation by the procurement agencies in carrying out the Small Business Administration's joint determination program.

As noted, the procurement as well as the technical assistance programs have been increasingly effective each year since the beginning of the Small Business Administration. Much reliance is placed by the Small Business Administration on its set-aside program whereby all or certain portions of particular procurements are set aside for exclusive bidding by small-business concerns. There 92432-57-16

has been an increase in set-asides, from $386,610,589 for fiscal 1955 to $506,800,270 for fiscal 1957 (9 months). In all, some $1,581 million in set-asides have been agreed to by the military procurement agencies since August 1953. As you know, the Small Business Administration has broadened its set-aside program to include the civilian procurement agencies such as the General Services Administration, the Veterans' Administration, the Departments of Agriculture and Commerce, and the Post Office Department. Already some $381⁄2 million in set-asides have been agreed to by these civilian procurement agencies. I should like to mention parenthetically that this has been accomplished by only 37 procurement specialists of whom only 16 are full time, covering some 159 procurement offices throughout the country.

Our subcommittee believes that the Small Business Administration programs which assist small firms in securing Government contracts and which help them to solve their problems while producing under these contracts or which provide them with the latest information on management and technical subjects, will become more important each year. We are very much disturbed over the trend downward in the percentage of military contracts going to small concerns. We are also much disturbed over statements by the military that our weapons for defense are becoming more complex with predictions that small firms can expect even fewer prime contracts in the future. It is, therefore, imperative that the Small Business Administration be allowed to expand its procurement assistance and to advise the Defense Establishment on ways in which small firms may participate more fully in Government work. I believe, personally, that we have given the Small Business Administration too few personnel to accomplish the tremendous task before it. With the tools at hand, however, a good job has been done.

I have not attempted to discuss in detail either the problems confronting small business or the operations of the Small Business Administration programs designed to minimize these problems. The few facts I have mentioned do reveal to me, nevertheless, that perhaps the most important aspect of legislation pending before you, is that of permanency of the agency. The Small Business Administration will never be able to fulfill the intent of Congress or be of significant assistance to small business unless it is made a permanent agency. Problems of staffing and cooperation by other Government agencies and private institutions can only be resolved by permanent extension. I believe that the importance of small business to our economy makes such consideration mandatory.

I know my colleague, Mr. Multer, will discuss with you the details of the bill approved by Subcommittee No. 2 and introduced by 12 members of our Small Business Committee, and I merely wish to reiterate that this bill results from unanimous, bipartisan consideration by our subcommittee. I thank you for this opportunity to appear before you.

Mr. PATMAN. Mr. Chairman, I would like to ask a few questions.
The CHAIRMAN. Mr. Patman.

Mr. PATMAN. Mr. Riehlman, I appreciate the work you have always done on the Small Business Administration bills. I know you are an honest and able member of Congress, and I appreciate that you are serving on the Small Business Committee, and that you have always been very helpful and constructive.

Now I would like to ask you some things about this particular bill. First of all, you have asked for a permanent status for the Small Business Administration.

Mr. RIEHLMAN. That is correct.

Mr. PATMAN. That, of course, has never been done heretofore.
Mr. RIEHLMAN. That is correct.

Mr. PATMAN. Your party has opposed permanent status, has it not? Mr. RIEHLMAN. Well, I wouldn't say that our party has definitely opposed it. I think that in the last Congress, when the Small Business Administration was up for reconsideration, that there was some opposition at that time to making it a permanent agency.

Mr. PATMAN. I think your opposition was justified and I think those of us who oppose it now are justified, because this organization, al

though it has made a good start in the last year, the previous 211⁄2 years were not so good.

But in the last year it has been doing very well, and I am very much encouraged by it. But I think we should wait awhile and see exactly how far we are going before we give the agency permanent status.

Besides, I am not ready to say that the helping of small business is a chronic situation. I would like to help the economy so that smallbusiness corncerns would be able to get their assistance through orthodox channels without having to get aid from the Government. That is my view, and if we adopt the policy that the problems of small business are chronic, that they will always be with us, and that we will always have to help them, I think it is a little antagonistic.

Can't you see that, Mr. Riehlman?

Mr. RIEHLMAN. I couldn't quite agree with you, Mr. Patman, because I think we might consider whether or not it was necessary to have a Small Business Committee in the House of Representatives.

Mr. PATMAN. That is right.

Mr. RIEHLMAN. I hope that we can eliminate some of the problems that small businesses throughout our Nation are confronted with today, but I just can't, in the forseeable future, see where we are going to eliminate all the problems for small businesses in our Nation.

Therefore, I think it is just as necessary to have a permanent agency in the Federal Government looking out for the welfare of small businesses, as it is to have a permanent committee on Capitol Hill known as the Select Committee on Small Business to assist and watch legislation to protect small business.

Mr. PATMAN. I am not for a permanent committee. I opposed that too on the same theory, that I don't look upon the problems of small business as chronic, and always with us.

I look upon it as something that we should do to help the entire economy so that small business would not have any complaint, that they might come in just like anybody else and receive a fair opportunity.

For that reason, I don't want to say that we will always have the problems of small business with us, and that they will always have to be given special consideration. I think that is antagonistic to what we are for in the private enterprise system where everybody will have a chance and not pick out small business for special continued treatment from here on out.

I don't agree with that, and that is the reason I don't agree that we should continue the Small Business Agency permanently. I think it would be a mistake. Of course, that is just a difference of opinion. I realize that.

Now, Mr. Riehlman, 2 years ago, our Small Business Committee met and carefully presented a bill. You recall that, do you not?

Mr. RIEHLMAN. Yes, sir.

Mr. PATMAN. And in the consideration of it we insisted on a pooling provision. I think one of the greatest accomplishments of our committee was initiating the idea of a pooling arrangement whereby a small concern can be loaned $250,000. A number of people could go together and get $250,000 each. I think that is a wonderful thing. And where it is needed and desired, I hope it will be continued.

Under that, the Small Business Administrator has held that an applying concern must be a small-business concern, a going concern. Don't you think that if a person wants to be 1 of 5 individuals to go into a certain business, they should recognize him as a small-business