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Mr. BARNES. No.

Senator Bush. No, sir, that is an electrical manufacturing company in the Naugatuck Valley. They employ about 350 to 400 people.

Senator LEHMAN. Couldn't that company have received loans from banks or investment houses? This is a company of very good credit; is it not?

Mr. Barnes. Yes, but in each case that is thoroughly explored, and there is some reason why it cannot be done. Now, I can't offhand tell you as to that particular case, but the law actually, as a matter of fact, in disaster loans does not have the same requirements that there are in connection with regular business loans, in that there is no legal requirement that the funds must not be available elsewhere. It would be possible to interpret the law as being an indication by Congress that it was intended to make 3-percent loans available to victims of disaster.

Now, we do not stress that but we examine to see if it is possible to obtain the funds elsewhere—if we can get participation by banks or if there is any other way it can be done.

But in that particular case it was not possible, and I can't give you offhand the reason why it was not.

Senator LEHMAN. These loans all have to be repaid, do they not?

Mr. BARNES. Yes, sir. And the figures I gave you a while ago indicated that there was a very small delinquency factor for this type of loan—where you are loaning to home owners, as you indicated, in some cases and small businesses that at times have been wiped completely out and must rebuild.

Senator LEHMAN. I have no doubt that a company like the Hershey Co. or the New York, New Haven & Hartford and other large companies who have received loans from the Small Business Administration will be able to repay them. In the meantime, in most cases, they will be able to recoup a large part of their losses through deductions from their corporate taxes or their income taxes. But I take it that loans made on homes also have to be repaid.

Mr. BARNES. Yes, sir.

Senator LEHMAN. Can you tell me how a small homeowner whose home has been wiped out or so greatly damaged that it is almost use. less, who has lost not only his home but in many cases all his personal possessions, his furniture, his equipment, his appliances, all those things wiped out or so badly damaged that they are rendered virtually useless but with the mortgage still remaining, can get any compensation from anyone? He is just wiped out; that is all there is to it. The old loan is still in existence, has to be paid. A new loan which he receives from the Small Business Administration also has to be repaid.

In the absence of any money which would come to him through reimbursement of losses by insurance companies or by Government or what not, how can he possibly pay off the old loan and the new loan? He has a double liability there without any chance of recouping at all so far as I can see.

Mr. BARNES. Well, I can tell you best, and even give you some examples in this disaster, by indicating the part that most frequently the Red Cross plays, though there are variations from that.

Now, if you will recall, the Red Cross made an appeal, a special appeal, to the American people for a fund to assist in this disaster, and they had a special drive. They asked for some $10 million, and

the American people generously gave a sufficient amount so when they got the drive stopped it exceeded $12 million. And the Red Cross did a magnificent job in going through the area and making grants to those in need.

Now, I'm not talking about the immediate relief of giving food and a place to sleep and things of that nature. But after that was finished, they made a study, a case-by-case study, of what was needed and would then make a grant based on their findings, which in some cases might merely be a sufficient amount to restore furniture, bedding, and household goods that was lost and a sum to clean up a home. In other cases where the home itself was partially destroyed, the amount would be perhaps varied. If the victim was of an age where they had no earning capacity, those are the tough cases since you have no earnings to fall back on. However, in one of the instances we have noted there was a total destruction of a home. The Red Cross advanced $10,200 to this individual, and SBA made a loan of $4,000. The high Red Cross grant was due to the advanced age of the recipient since he had only a few working years left.

My thought is that a mortgage that had been reduced was paid off with the Red Cross loan, leaving only the $4,000 mortgage to SBA due on the property.

In other cases, SBA would make a loan of $7,500. The Red Cross made a grant in this particular case of $5,446 which I am sure included repayment of a mortgage and other household personal property.

In the case of a small bakery up there, for instance, they had lost $25,000 in inventory and equipment during the flood and had an $8,000 mortgage on its property which it could not pay. It was impossible for us to work out a loan with the $8,000 pending. This business was referred to the Red Cross which made a grant to this bakery of $8,500 to pay off the mortgage and certain other small debts, and we then were able to work out a loan to replace his loss in merchandise, inventory, and equipment.

The best explanation I can give you is that that is the way it is done. In other cases it may be that a mortgage is owed to a private savings and loan institution or savings bank, and in many cases they will extend the terms of payment of their loan over a much longer period, cutting down the monthly payments, and we will loan the amount needed to make a repair and take a second position behind the first mortgage. And it is possible to work them out that way, sir.

Senator LEHMAN. Have you any knowledge of how much the Red Cross gave the homeowners or the businsses as grants?

Mr. BARNES. I do, sir. These are subject to correction by the Red Cross itself, but my figures indicate that in Connecticut the sum of $7,650,580 was made available by the Red Cross; in Massachusetts, $1,404,630; in Rhode Island, $243,675; in New York, $250,898; in New Jersey, $416,081; in Pennsylvania, $2,907,388; a total in one disaster of some $12,873,252.

Senator LEHMAN. I know that the Red Cross received from the public somewhat over $12 million.

Mr. BARNES. Yes, sir.

Senator LEHMAN. That $12 million, as I understand it, however, covered all their humanitarian activities, feeding, clothing, giving medical assistance, moving families, providing temporary shelter and

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housing. And while I am not an official of the Red Cross, I have worked with them quite closely in past years and I would assume, and I think that it is a fair assumption, that out of the $12 million to which you refer by all means the greater part of the fund was used in the normal humanitarian activities of the Red Cross.

Mr. BARNES. I don't think so, sir. I don't believe so in this particular disaster. I do not have the figures, and they should come from the Red Cross itself, but

Senator LEHMAN. We will ask them that. It will come as a great surprise to me if my assumption is not correct.

Mr. BARNES. I see.

Senator LEHMAN. Because I know how the Red Cross operates in a general way. I have seen them operate in New York and in many other localities. The urgent needs, the immediate needs are so urgent, so pressing that I am sure that they use a very substantial part of their funds for humanitarian purposes, emergency purposes.

Senator Bush. Mr. Chairman, on this point, I really think the chairman is under some misapprehension about the way the Red Cross operates in a distress area. Of course, I have seen this at first hand, but these figures may throw some light on the case.

There are two phases of Red Cross activity. First there is the mass care and emergency phase, and then the family rehabilitation or the business rehabilitation phase. In other words, they go from a mass problem which lasts a few days or a week and then go to the individual problem.

This report here is only as of October 15, and I think our final record should have their most complete report, but it shows that as of that date in Connecticut alone the mass care and emergency assistance to families was $889,000, and the family rehabilitation awards—that is, by individual families--were $5,572,000, the total being $6,462,000.

So that the mass care only represents about a seventh of the total expended, and six-sevenths has been expended for individual rehabilitation.

To further emphasize that point, I have here a report from the Red Cross as of October 20 which shows that in the whole Northeast area applicable to the August flood they received 14,529 applications for individual restitution and they actually closed cases totaling 13,335, the total being $12,476,000. So that those are on an individual basis, the figures which they have submitted as of October 20. The applications include a number of families and applications for small-business grants. We do not have figures available for the October flood.

I would like to suggest this table be put in the record at this point to enlighten this discussion. Is there objection?

Senator LEHMAN. I have no objection at all.

(The table referred to follows:)

Individual applications for restitution for flood damage received by the American

Red Cross as of Oct. 20, 1955

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NOTE.- Applications include number of families and applications for small business grants.
No figures are available for the October floods, but Red Cross estimates about 1,500 additional applications.

Senator Bush. If I may proceed, I also think that in line with this discussion it would be desirable to include this table, Mr. Chairman, which is from the disaster-indemnity study by our staff of this committee. I would like that to be included at this point, too.

(The table referred to follows:) American National Red Cross statistical summary, Eastern States flood, Oct.

15, 1955

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Senator Bush. Now may I proceed with a slightly different line? Senator LEHMAN. Yes; please do.

Senator Bush. I am very glad that the Administrator has brought out the way that the Small Business Administration has cooperated with the American National Red Cross because that has been one of the great features of our recovery situation up there. I know that

I when the Red Cross testifies in Hartford-I am glad to hear that they are going to—they will attest to the fact of the cooperation between these agencies.

I personally have visited every Small Business Administration branch office which you have established and have seen with my own eyes that there has been close cooperation between the SBA and the American National Red Cross.

69096-56-pt. 1-15

I want to go back to mention that was made of the Hershey Manufacturing Co. in Ansonia, which did get approval of a $1,800,000 loan. I would like the record to show that Mr. Hershey is virtually the owner of that business. He is the proprietor, so to speak. He has no children. He is 66 years old. That business represents an accomplishment of a lifetime, and it was pretty well washed down the river.

I think he showed a great deal of courage at age 66 to go back into business. He didn't have to do it. He could have lived independently, but he was motivated in doing that because he is a public-spirited citizen in that community, employing 350 or 400 workers, and he felt that he owed it to the community and to his people who had been with him and helped him build up that business to make that loan.

I could have understood his refusal to take the loan, but I think, far from gaining any advantage, that the community owes Mr. Hershey quite a debt, a real debt of gratitude, for putting that business back into operation.

He had hardly gotten it back into operation before the second flood hit him, and hit him hard, and he had to apply for an additional $400,000, I believe, from the Small Business Administration. I don't know whether that has been approved. Has it or not?

Mr. BARNES. I don't believe it has.

Senator Bush. Probably not yet. But I do think that this is an example of where not only the Government has helped the situation and done a very constructive thing, but the individual himself is making, I think, a substantial sacrifice in borrowing $1,800,000 from the Government at his age to put this business back on its feet.

Senator LEHMAN. May I say I wish Mr. Hershey the best of good fortune.

Senator Bush. I was very sure that the Senator would.
Senator LEHMAN. It is a very reliable and responsible

Senator Bush. What I say is absolutely no suggestion that the Senator is critical of Mr. Hershey. If he knew him, he wouldn't be.

. Senator LEHMAN. There is no criticism of Mr. Hershey. Senator Bush. No.

Senator LEHMAN. But what I am concerned about is that in the 2 days of hearing we have thus far held I have heard no suggestion, short of Federal flood insurance, that is going to make it possible for the little fellow who has lost his home to regain a home. I have heard no suggestion or plans which would care for that situation. The little fellow with a small income who has lost all his possessions and is left with these big debts—but just can't meet them. That is one of the things that I am very interested in, as I know members of the committee are, too. I have heard no suggestions, no plan.

Senator Bush. I think that what we are trying to do, Mr. Chairman-I think some of the witnesses have and certainly I want to help you—is to show in this record at least what the facts are as to what has been done by way of restitution for homeowners. I think the more information we develop on that the better chance we will have to develop a sound bill. The fact is that while there have been many homes lost and many families destitute, there has been a tremendous amount of restitution made very happily and very quickly and families have been put back on their feet. They are very, very grateful for the assistance that the communities and the governments,

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