lation yet that kept you from getting your job done." That is what I am talking about in terms of mechanism.

But those are not the kinds of convictions that it seems people have when they get to Washington and get into these large bureaucracies. They forgot what the purpose of the program is.

Senator MELCHER. I note in your testimony that you said there was a favorable article in the Washington Post referring to the Indian health programs as a Federal program that worked.

There may be some truth to that, but there sure are a lot of faults with it and a lot of blank spots.

I do not want to sound discouraged or pessimistic, and I do not think I will on this subject, but could we help it by upping the status of the Indian Health Service within the Department of HHS?

Dr. JOHNSON. I am convinced it would. First of all, you would avoid this dilution of the communications process. Don Smith, at the University of Minnesota, many years ago did a study of communications through five levels, and the conclusion was that at the end of the fifth level you had 100 percent of the story but only 20 percent of the story was true.

If you put that through 38 layers, then

Senator MELCHER. You come up with the 1 percent, and that would be the part that is true.

Dr. JOHNSON. Yes; and, I think the more of that you have the less likely you are to get the kind of sound and responsible decisions. I have found occasionally when we would get access to a secretary, which was quite rare, that you could get some good decisions. But the Director simply cannot spend all of his time trying to batten down these walls. That, unfortunately, is what is required. I think it is even worse now than when I was there.

Senator MELCHER. Perhaps one of our greatest handicaps is that these layers above the Indian Health Service within the Department-and, do not get me wrong, Doctor Johnson, I do not think everything you had under you at the Indian Health Service was perfect either.

Dr. JOHNSON. I would quite agree with you.

Senator MELCHER. I think there is plenty of bureaucracy at every level in Washington, including quite a few layers that could be either streamlined or minimized within the Indian Health Service itself.

I hope we see some progress on that, but in the Department itself above the Indian Health Service it seems to me that our greatest handicap almost overshadows everything else and that is that there is nobody who really knows about Indian health care or the delivery system for it. I am just not aware of anybody coming out of the Indian Health Service and becoming one of the assistant secretaries or the deputy or something like that. I do not think it has ever happened at HHS. Has it?

Dr. JOHNSON. Not to my recollection.

Senator MELCHER. I think that is a grave handicap. Perhaps if we had upped the Indian Health Service to the assistant secretary level, then maybe we would eliminate some of the problems. I detect that you very much concur with that.

Could we say that it would save us money? I do not mean cut the budget, but save money in terms of health care delivery, in other words, get more bang for the buck and the dollar would go further.

Dr. JOHNSON. Certainly, because so much of the Director's time is now spent-it certainly was when I was the Director and I am sure it is even worse now-in fighting these layers so that you do not have the time to manage the system that you are supposed to manage. How in the world can you manage an Indian Health Service if you spend 80 percent of your time dealing with layers above you?

Senator MELCHER. I can not tell you how strongly I feel.on that point. If you are going to practice medicine, and if you get into an administrative role where you have to make sure that those under you are practicing medicine, and if all they do is worry about the bureaucracy, then the practice of medicine is terribly diluted. That is the primary goal of the Indian Health Service. It is the overriding goal.

If everybody who is in a responsible position has to worry about the layers, then the bureaucracy certainly robs the effective practive of medicine from that point on. I should say that it cuts it down a high percentage.

Well, Dr. Johnson, I want to thank you very much for your testimony. It has been a real pleasure to have you here, and it has been a great help to have you here.

Before I leave-and I am going to have to leave shortly-I have asked Mr. Froman to be here because there are a couple of questions he can answer for me.

Mr. Froman, welcome.

Senator MELCHER. The first question, Mr. Froman, is this. Having had quite a bit of experience in Indian housing, is there not a method for an Indian owner of land which is trust land, that is, held in trust status, being able to get a mortgage through FHA and VA?

STATEMENT OF MR. RON FROMAN, TREASURER, NATIONAL AMERICAN INDIAN HOUSING COUNCIL, CARSON CITY, NEV. Mr. FROMAN. That is correct. It has been for a long time. Let me put it to you this way. The ability to mortgage individual allotted land has been in place as long as FHA has been in place.

Basically it involves the trust status from the standpoint of the Department of the Interior approving that mortgage.

Senator MELCHER. Well, the people from HUD were telling us yesterday that for Indian housing they need a legislative correction of the law for an exemption for an Indian family; an Indian owner of land with trust status on a reservation in order to qualify for either FHA or VA Loans. Is that correct or not?

Mr. FROMAN. That is what they said, but there is conflict in their testimony because they also said that they had insured FHA mortgages and so forth on Navajo and in Oklahoma on trust land. So, if they did, they broke the law.

Senator MELCHER. Is it your experience that Indian owners on reservations on trust land have been able to get FHA or VA loans?

Mr. FROMAN. The answer to that question, sir, is "No". There is no legal impediment keeping that from happening.

Senator MELCHER. But the Secretary of the Interior has not approved it? Is that what you are saying?

Mr. FROMAN. No, sir. I am saying that there is no legal impediment regarding individually allotted land to the attainment of an FHA insured mortgage. But the practicality of it is that the lender will not lend it. There is nothing illegal that keeps it from happening, but what happens in these particular instances is that it goes into a foreclosure situation or into a default situation and then the lender, to initiate the FHA insurance, has got to get a default judgment, and it has got to be a court action. They are refusing so farand to my knowledge, I do not know of any of them that have-to take those actions or to take those risks by virtue of having to go to tribal court.

Senator MELCHER. Would the default action be in tribal court? Mr. FROMAN. That is correct.

The other nonsense in this business-I call it nonsense and I really do not want to get to talking about it and I probably am wrong in having done so-is that many people have told the Department of HUD that a program based on FHA insurance is unworkable. It is not just me. It is tribe after tribe. When they went through their interagency task force, the Indian Health Service told them the same thing. The Farmers Home Administration told them the same thing. The Department of the Interior told them the same thing.

It is a myth to say that you have got to change the law to make FHA work on trusts lands. They have been able to do it for years. Even the FHA underwriters and the HUD field staff and so forth have told the central office that it will not work.

Senator MELCHER. Just to make sure that this is not confusing in the record or to anybody hearing this, when you say FHA, you are referring to the Federal Housing Authority?

Mr. FROMAN. That is correct.

Senator MELCHER. And, when you say Farmers Home Administration, you are not referring to it as FHA?

Mr. FROMAN. The Farmers Home Administration also faces the same problem, sir.

Senator MELCHER. Let me ask you a question on that.

Can not the Farmers Home Administration make these loans without any impediment at all? They do not have to sell that paper to a local bank.

Mr. FROMAN. That is correct.

Senator MELCHER. Can they not sell it to one of the Government handlers of paper?

Mr. FROMAN. The Farmers Home can do the same thing.

Senator MELCHER. That is what I am talking about-the Farmers Home.

Mr. FROMAN. Yes, sir, they can do the same thing. They can carry the paper themselves or they can carry it to a local bank. But the truth of the matter is that the Farmers Home Administration is not making these loans either because they do not want to take the chance that they would get adverse decisions in tribal court. That is the crux of the problem.

Yesterday, Mr. Abrams-

Senator MELCHER. Well, he was not giving us the whole story yesterday.

Mr. FROMAN. That is correct. He was not.

Senator MELCHER. We could pass this legislation he has described and not accomplish one thing?

Mr. FROMAN. And he will not build any houses, Senator. That is what I am telling you.

Senator MELCHER. Well, it is another step beyond that. Do you believe the first step that he was talking about is essential or necessary?

Mr. FROMAN. That is right; it is not necessary.

Senator MELCHER. And the second step beyond that; that would have to be cleared up or there would not be any housing built under FHA, Farmers Home Administration, or VA?

Mr. FROMAN. That is correct.

You line them up. You asked a question the other day about how many houses have they built under FHA. We need to ask the question how many houses has the Farmers Home Administration built. We need to ask those same questions because they are pertinent to the whole nine yards.

There are many cruel things in this world, Senator, but one of the crueliest things that I think can be perpetrated on anybody is to take an Indian mother or an Indian father who has lived in a tarpaper shack and put the promise to him that you are going to build him a house and then you do not deliver.

In my judgment-and it certainly is my hope and my prayer-we are down to the end now. The answer to this is going to be in the Congress because the administration has drawn the line and has made these statements which will not work. The Indian people have told them that they will not work, as well as other people in the administration. But they have gone unheard.

I certainly hope that this Congress will not be a party to such cruelty, sir.

Senator MELCHER. You know, this is just one aspect of it. If they could help out this way, if it would satisfy some Indian families, if they had the capability of qualifying, and if they could clear through VA or the Farmers Home Administration or FHA, then it would be welcome news to me. I would be delighted.

As for the other stuff that they are talking about, it seems to me that when you want the tribes to show some resources and some capability of picking up any default or in effect reselling the default, then that is fine for tribes which have quite a bit of money on hand; but it is impossible for tribes that do not have money.

I think what we are really talking about with Indian housing is trying to meet the greatest needs, and those greatest needs are going to be among tribes that do not have much money. It is ironic. Mr. FROMAN. It is ironic. It is sad.

Senator MELCHER. Yes; it is very sad.

Mr. FROMAN. But let me ask you this. If the tribes are on the insurance program where the FHA makes that loan hold and brings the default into place, then if in fact we have lenders that do this, you are paying a half a percentage point that goes into the FHA insurance fund to begin with.

Then why does HUD demand that the tribe make the FHA insurance fund whole? Nobody else in the country does it.

Senator MELCHER. No; I do not think so.

Mr. FROMAN. That is right; they do not. So, why do we have to do it here? Because that is why you pay insurance.

Senator MELCHER. Yes; that is the point of the whole program. Mr. FROMAN. Sure, what is the sense of having an insurance program if that is what you are going to do. What you are doing is in fact making the banking industry have no risk. There is no risk for them. That is what you are attempting to do.

One of the ironic things in all of this is that when this all started it was said that we needed a new approach because the present program was too costly and too cumbersome and mismanaged. We have now come down to this point. If you look at their proposal, mathematics was taught the same in Montana as it was in Oklahoma, but they have a different mathematician over at HUD.

This program for 1,500 units is going to cost the Federal Government $508 million. Two thousand units of public housing last year is going to cost the Federal Government $362 million. Is that what we are doing?

We have a situation here where the Department is insisting that they drive the wagon. It is a turf fight between Interior and so forth as a result of Senate bill 2847 that was introduced and passed out of committee last session. That is what we have got here.

They do not give a damn if they drive that wagon-and I am talking about HUD-off into the Arkansas River as long as they are driving it. Anytime that they do this, they are talking about $508 million.

Senator MELCHER. Why the Arkansas River?

Mr. FROMAN. Well, that is where I come from. It could be any river.

But, you know, one of the things we did with S. 2847, in working with the staff of the Senate select committee and some of the other people up on the Hill, is that we met the criteria that OMB put out as to what a new program should meet, and in doing so it was probably our undoing because they had a hidden agenda and that was not to spend any money.

Senator MELCHER. The bill moved last year. It was not passed but it moved. Do you think that is now causing the Department of the Interior-I guess the BIA-and HUD to be fighting over turf?

Mr. FROMAN. No; the Interior Department is not fighting, sir. HUD is fighting.

Senator MELCHER. HUD is fighting?

Mr. FROMAN. Yes. They are fighting this thing, and I am here for several reasons and that is to point out this. We are as sincere as we can be and we sincerely hope that the Senate select committee will reintroduce that bill. It is needed. If we do not, then Indian people will get lulled into a situation where we cannot in any shape, form, or manner, house our people who need it worse than anybody else in the country.

Senator MELCHER. I think there is intent to try to move that bill. I think there is some foolishness-and I am going to say this just for myself-about Davis-Bacon. For my part this would be a program that will have Davis-Bacon in it. That is for my part. I ́am