A SECTION-BY-SECTION EXPLANATION OF THE TERMS OF 8. 3664

Section 1: Where a finding is made by the Tariff Commission of a substantial injury to an industry under the so-called escape clause of the Trade Agreements Act and where a recommendation has been made to the President which the President fails to approve, thereupon a small-business concern within that industry becomes eligible for loans from the Small Business Administration. Such loans are based upon the disaster loan provisions of the present law (which are substantially easier to obtain than normal small-business loans.

Section 2: The bill further contemplates that small businesses which have been adversely affected by the foreign trade policies of the United States may pool their productive capacities with the consent of the Federal Trade Commission and Attorney General without violating the antitrust laws. This will enable them in some cases to make their own operations more economical and less vulnerable to foreign competition.

Section 3: The Secretary of Commerce, acting through the Office of Area Development, is charged with the general coordination of governmental assistance to these businesses which are so affected.

Section 4: Finally, the bill provides amendments to the Internal Revenue Code of 1954 providing for a rapid amortization (and therefore a tax abatement) as follows:

1. Where the line of business, and hence the capital investment of a company has been hurt by the United States trade policy described above, and where the facilities are not fully depreciated for tax purposes the bill would permit a stepup in the depreciation rate of the existing equipment; the justification being that as trade policies have adversely affected the company, they have had a serious economic effect on the investment of the small business in its capital equipment. It is not illogical that this should be reflected in a tax deduction based upon the economic loss incurred.

2. The bill also provides for rapid amortization of facilities of a small business which did not exist at the time when the trade policy first affected it, but was acquired subsequently for the purpose of converting the business and developing new and different lines of production or improving old ones in order to cope with the adverse effect of the trade policies. This will, of course, provide an incentive for the small business to take account of the changed condition brought about by the trade policies of the United States and develop other fields of enterprise.

STATEMENT OF HUBERT H. HUMPHREY, A UNITED STATES SENATOR FROM THE STATE OF MINNESOTA

Mr. Chairman, I wish to express my appreciation to you for being afforded this opportunity to testify on my bill, S. 3434, which is among the bills presently being considered by this subcommittee in its deliberations on the amendment and extension of the Small Business Act.

S. 3434 would amend the Small Business Act by providing disaster loans to small-business concerns which suffer economic injury due to condemnation proceedings under federally aided highway construction programs.

The State hightway commissioner of the State of Minnesota, L. P. Zimmerman, brought to my attention the fact that may small businesses have been forced to move due to condemnation proceedings in connection with federally aided highway construction programs, and as a result thereof many such businesses have suffered severe economic injury.

In view of the Interstate Highway construction program now under way, this is a problem which will be affecting more and more businesses in the years ahead. It has been estimated that as many as 50,000 businesses may be forced to move from their current sites in the next few years as a result of such construction. It is, of course, true that when property is condemned the owner is entitled to just compensation. But it is a difficult question as to what "just compensation" is in a particular case-especially when it is business property. As pointed out in a recent newspaper article on this very subject:

"Sometimes this can be very tough, indeed, on the person whose property is taken, especially if it is a business property. For the courts rarely allow appraisers to take into consideration such items as loss of goodwill, costs of moving the business to a new location, or loss of profits occasioned by the move

or the inability to start over again." (Condemnation Evolves as Hot Public Issue, by Phil Yaeger and John Stark, Washington Star, February 14, 1958.) To the businessman who suffers a severe economic hardship as a result of being forced to move, it is just as great a catastrophe as destruction of his property due to floods or other natural disasters.

It seems to me that a businessman who suffers such an economic injury should be entitled to receive a disaster loan from the Small Business Administration, just as he can under present law if he suffers an economic injury due to natural catastrophes such as floods or droughts. The injury suffered-due to natural causes or action of the Federal Government-is in either case beyond the businessman's control.

It should be emphasized that such disaster loans as are proposed in S. 3434 would only be given when the SBA determined that actual economic injury was suffered by a business. My bill does not propose that all businesses forced to move under such construction programs automatically qualify for disaster loans. In my opinion, it is an obligation of the Federal Government to provide lowinterest long-term loans to small business concerns which suffer economic injury due to the action of the Federal Government itself.

For these reasons, I respectfully urge that this subcommittee favorably consider S. 3434.

Senator CLARK. A number of statements and letters we have received on this legislation will go in the record, together with any others that may be received.

(The statements and letters referred to follow :)

STATEMENT OF GEORGE J. BURGER. VICE PRESIDENT, NATIONAL FEDERATION OF INDEPENDENT BUSINESS

I am George J. Burger, vice president, National Federation of Independent Business, 740 Washington Building, Washington 5, D. C. We are the largest business organization in the Nation. Our membership is made up exclusively of independent business and professional people. These people who are your independent enterprise constituents-they alone set our stand on bills and issues by direct, signed votes, through our mandate polls, which they return to their respective Members of the House. In that sense, when I speak here, I speak only through their collective voice as though they were here before you to speak for themselves.

First, let me make one point clear, and that is we have not polled our members on recent bills introduced to make equity capital and long-term credit more readily available to small business. Whether this will be instituted by the federation will depend largely on the overall correspondence we receive from our nationwide membership on this new proposal introduced by Members of Congress.

We want to be on record in complimenting the committee and its efficient staff for the splendid action being taken on the subject matter relating to smallbusiness financing. It goes without saying such action is very encouraging to small business throughout the Nation.

We are not unmindful of the thoroughness of the committee and its staff in public hearings held during the 1st session of the 85th Congress on the expanded operation of the Small Business Administration. The House took a

very forward and constructive step in bringing about the improved, far-reaching legislation as recently voted by the House. It is our hope that by this time the Senate would have followed through with concurrent action. This in itself will be another inspiration to small business throughout the Nation. Mr. Chairman, last fall, by direction of our head office at Burlingame, Calif., I personally visited and conferred with regional directors and top staff members of the Small Business Administration in Chicago, Minneapolis, Seattle, branch office at Portland, Oreg., San Francisco, Los Angeles, and after my return east, with the regional office in New York City. In each instance the regional director was not aware of the firsthand information we desired on the operation in the various regions. In each instance the conference lasted close to 2 hours and, to be on the safe side, I made it mandatory that another person

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accompany me on these visits so there would be no conflict in our findings as to the operation in these various regions.

The information we were after was:

1. Applications filed in the regional office from its inception to June 30, 1957.

2. Loans approved in that period.

3. Loans disbursed.

4. Timelag between filing and approval.

5. Timelag between approval and disbursement.

6. Average amount of application.

7. Applications filed for certificates of small business: (a) Number approved; (b) number denied.

8. Applications filed for certificate of competency: (a) Number approved ;. (b) number denied.

9. Number of banks participating in the regional area.

10. Percentage of bank participation loans.

Mr. Chairman, I have the complete recapitulation of the results of this extensive survey, and I believe it should be made a part of the record of these hearings. In each and every instance no attempt was made by the Government official to conceal any of the information requested.

Averages covering SBA loan applications in area covered by 6 regional offices

New York regional office of SBA answers to questionnaire would increase overall percentage of bank participation loans from 43 to 46 percent. Their figures would increase overall percentage of banks participating from approximately 10 percent to slightly over 12 percent.

The New York figures for timelag between time of filing application and approval, and the timelag from time of approval to time of disbursement, agrees in substance with the timelags given for the six other regions. Also the difference in number of applications approved and number disbursed seems to be pretty much in line with figures given for the various areas.

However, there is one very interesting difference in the figures and that is as it relates to tax number of applications filed for certificates of small business. (They have had 10 more than the Chicago area which had the next highest figure, so suppose this can be attributed to the locality of the business.)

The most interesting figure is the 92 applications filed for certificates of competency. That figure is just 9 short of the total for the other 6 areas combined, those 6 areas having a combined total of applications filed numbering 101. Shortly after the Small Business Administration was constituted by the Congress I had personal visits with regional directors of SBA in San Francisco, Los Angeles, and Kansas City. Although SBA was at that time in the embryo stage I must confess it did not look very promising as to its help to small busiShortly after those visits the entire operation of the Small Business Administration was changed for the better, and as I review the present operation of SBA it shows considerable advancement and progress-more in keeping with the intent of Congress.

ness.

I think it is most necessary for the committee to have this firsthand information because such information coming from small business itself should be the determining factor as to whether there is any need for further financial assistance to small business.

These nationwide surveys made by us disclose some interesting action taken by the various regional offices. For example, in one area personal visits were made to all towns in that area, 500 or over in population, to acquaint the banks with the operation of the Small Business Administration. They believe such action brought greater interest from the banks in the area to SBA. They believe the 5-percent interest rate provided in the House bill would be a deterrent. We found, in many instances, that regional offices of SBA were plagued with inquiries at the time of the announcement of the President's Conference on Small Business and the question was put to them: "Who selected the small business from this area?"

It was reported in many areas that chain banks may look more favorably on the operation of SBA if it is made a permanent agency. Then, again, some regional offices maintained they should have a "closing" attorney which would, in a more effective way, speed the closing of loans. Additional help was needed in some of the regional offices, and in many instances complaints were made of the continual paperwork placed on the regional offices from the head office of SBA.

It was also brought to our attention that additional work is placed on the regional offices through loans issued by the Wildlife Service of the Department of Interior, and in connection with Reconstruction Finance Corporation loans. Criticism, in some areas, was leveled at the big banks for failing to cooperate with SBA.

Mr. Chairman and members of the committee, after my return to Washington I kept my ears to the ground to get the reaction from well-informed financial people as to what beneficial effects to small business would take place if the