part in identifying and solving small business management deficiencies.

HOUSE ACTION ON REVOLVING FUND

The request for $130 million for additional capital for the revolving fund was approved by the House and is needed for increased business loans and investment and development company assistance activities. As you know, Hurrican Carla will result in additional demands on the fund. I might add here that, in addition to Hurricane Carla, Hurricane Esther will apparently add additional demands on the fund, also. The House report recognizes that disaster loan requirements may make it necessary to request an additional supplemental at the next session of Congress.

I hope the committee will find it possible to restore the amounts cut by the House action. I sincerely thank you for the opportunity to appear before this committee.

Senator HOLLAND. I see we have two Senators here who are quite familiar with the functioning of this committee: the ranking minority member, Senator Saltonstall, and a Democratic member, Senator Monroney.

Do either of you gentlemen have questions you want to address to the witness?

Senator SALTONSTALL. As a Republican, I defer to my distinguished Democratic opposite first. I have a couple of questions.

Senator MONRONEY. I yield my time.

Senator HOLLAND. You do not have anything?

Senator MONRONEY. No.

Senator HOLLAND. He says he has no questions.

Senator SALTONSTALL. I have this question, Mr. Fine.

The House has recommended the full $130 million budget estimate for increased capital; is that correct?

Mr. FINE. That is correct, sir.

WORKLOAD INCREASE DUE TO HURRICANE CARLA

Senator SALTONSTALL. As I understand it, this Carla hurricane disaster means a very substantial increase in your workload, presumably?

Mr. FINE. That is right, sir.

Senator SALTONSTALL. Under this fund, what you are saying to us is that, because of the increased amount of capital allowed for the revolving fund, you need more people if you are going to process the loans that are requested under that fund?

Mr. FINE. We need more additional money in the fund, sir, for the necessary loans to be made. I might defer, Senator, to Mr. Lanman, who has just come back from Texas, having spent 4 days setting up the loan procedure process there.

Senator SALTONSTALL. Aren't you getting away from what I asked? Aren't there two questions: (1) whether we should increase the revolving fund even further than has now been set up by the House and, (2) whether you need increased amounts for processing that fund correctly?

Mr. FINE. May I ask Mr. Hanna to answer those questions?
Senator SALTONSTALL. Yes, sir.

Mr. HANNA. With respect to the additional administrative expenses, Senator, in our original Appropriations Act for the year, there was an authorization for the transfer of an additional $500,000 to pay the expenses of additional employees that might be needed in connection with disasters, and it is anticipated, at least for the moment, that that would be adequate to meet our needs.

Senator SALTONSTALL. If the Carla hurricane puts on enormously increased amounts, then you can, as the House suggested in its report, come back here in January when you find out what those amounts are, can you not?

Mr. HANNA. I was speaking with respect to the capital in the fund. Senator SALTONSTALL. Yes. The same thing applies to the capital, too, doesn't it? If Carla puts an additional burden on you beyond what you anticipated when this budget was offered, is there anything in the law that prevents you from going forward with the loans at a faster rate than you might otherwise go to cover the Carla hurricane? Mr. HANNA. To the extent that funds are available, Senator Saltonstall. Would you like to have me elaborate on this question?

REVOLVING FUNDS AVAILABLE

Senator SALTONSTALL No, I don't think so; but you have funds available, have you not?

Mr. HANNA. At the end of August we had about $15 million left in the revolving fund. The additional appropriation here of $130 million would make approximately $145 million in total capital available. In July and August the net charges against the fund each month was running about $28 million.

Senator SALTONSTALL. That would be $56 million out of the $145 million then?

Mr. HANNA. No, sir. We had about $15 million left after those charges.

Senator SALTONSTALL. So you have $145 million as of September 1? Mr. HANNA. That is correct.

Senator SALTONSTALL. Then Carla comes along and will take a substantial loss.

Mr. HANNA. That is probably true, yes, sir.

Senator SATLONSTALL. Assuming, that that capital is enough to carry you forward until January, we will say, as the House has suggested, what you are asking us for is, first, to put back an additional amount of employees so that you can process this additional amount of work and then, secondly, you are asking for this grants for research, which is another problem. Am I correct?

Mr. FINE. May I answer that? First of all, we have not asked for an increase for disaster loans. I merely pointed out to you that this situation existed.

Senator SALTONSTALL. I understand.

PERSONNEL REQUEST

Mr. FINE. On the personnel which we requested, we requested a reinstatement of the personnel dropped by the House from our original request, which had to do with the investment division which takes care of local development company loans and the processing of small

business investment company applications as well as four positions which were dropped in the management research program.

Senator SALTONSTALL. Then this request would not cover additional needs for processing this revolving fund at a quicker rate than you might otherwise have it?

Mr. FINE. The only point which I would make, sir, is, no, we have not requested any, but, on the figures that Mr. Hanna gave you a moment ago, you note that there was $145 million, including this $130 million, as of August 31. Assuming for a moment an arbitrary figure of approximately $35 million as the cost of hurricane Carla-this is a very arbitrary figure because it may be $100 million; it may be more or less-that would leave a balance of $110 million in the revolving fund for the normal operations of SBA. At the average rate of $28 million per month, which were in July and August of this year, you will see that by January 1 of 1962 we will just about be at the bottom of the barrel.

Senator SALTONSTALL. Yes. Then if you are in that situation, it is much better, where the House has allowed this amount, and are contemplating adjourning quickly, not to contest that amount at this time, but rather to wait until January and come back after you have a firmer idea of what you may need.

ITEMS APPEALED

Mr. FINE. We have not contested it. What we are here appealing is the drop of $500,000 in the amount for the management program and the personnel.

Senator SALTONSTALL. And we have been talking about personnel up to the present time.

Mr. FINE. We have been talking about personnel, but in the area where the House cut the request, the cut in the investment program and in the management program. Neither are involved in the processing of disaster loans.

Senator HOLLAND. Weren't those items involved in the regular budget?

Mr. HANNA. No, sir. The supplemental budget was filed in May of 1961, based on a regular budget which had not yet been approved. The regular budget request for the investment program, included 12 positions which were not included in the final appropriation. The additional positions requested in the supplemental budget assumed that these would be granted; so that, as pointed out in the statement, the gross loss of positions is substantially above those cut out of the supplemental budget by the House. Senator, it was originally submitted as a budget amendment, rather than as a supplemental. Unfortunately it arrived at the House a few days after the markup; so, instead of being a budget amendment, it had to be treated as a supplemental.

Senator SALTONSTALL. Mr. Chairman.

Senator HOLLAND. Senator Saltonstall.

BASIS OF REQUEST

Senator SALTONSTALL. Then what you say is that you base this supplemental request on an assumption that the Congress was going to give you the full amount of your previous request. The Congress

did not give you the full amount of your previous requests, so you are now in a position of asking for these four positions, plus how many more?

Mr. HANNA. That is all, sir.

Senator SALTONSTALL. Four positions?

Mr. FINE. Yes, sir.

Senator SALTONSTALL. That is the investment end of it?
Mr. FINE. Yes, sir.

Senator

SALTONSTALL. Then the House cut out your research

management?

Mr. FINE. That is right.

Senator SALTONSTALL. How many positions does that require?
Mr. FINE. Four, sir.

Senator SALTONSTALL. Four more?

Mr. FINE. The four that were cut out by the House?

Senator SALTONSTALL. Yes.

Mr. FINE. Yes, sir.

Senator SALTONSTALL. So you have four more there, plus the amount of money that you want for the research work?

Mr. FINE. That is right, sir.

HOUSE RECOMMENDATION

Senator SALTONSTALL. Why was the research work eliminated in 1959, as the House says, that funds for this program were rescinded as of June 30, 1959 by the Department of Commerce and Related Agencies Appropriations Act of 1960, because it was pointed out that schools of commerce in major universities and colleges were going along with this program without the aid of Federal grants.

If these grants are to be resumed the matter should be deferred for consideration in the regular annual budget submission next year.

That is what the House says.

Mr. HANNA. Senator, the fund initially was rescinded by the House Appropriations Committee. This was a fund which was created by the return of approximately $271⁄2 million from the special fund previously made available to the Federal Reserve bank for loans to small business enterprises. It had not been used to any degree in recent years, and therefore in the Small Business Investment Act, a pool was created and the $272 million returned to it. The House Appropriations Committee stated that they felt that matters of research of this kind should come directly to them in a recommendation for appropriations and it therefore recommended rescision of the fund. There had been no item included, I believe, in the last 2 years pending receipt of reports from the first 2 years activity, and an opportunity to evaluate the worth of the research program. The recommendation came through this year based upon our evaluation of the early reports and the opinion that it was worth a resumption. It was included, and, as I mentioned to the chairman a moment ago, it was submitted as a budget amendment, assuming it would be considered by our regular committee at the House and the Senate. Unfortunately, it arrived too late to be considered in a regular item and therefore is now part of the supplemental.

Senator SALTONSTALL. Thank you very much.

HOUSE COMMITTEE REPORT

Senator HOLLAND. Have we placed in the record the wording of the House committee on this matter? I am going to place in the record two sentences from the House committee report.

Funds for this program were rescinded as of June 30, 1959, by the Department of Commerce and Related Agencies Appropriations Act, 1960, and at that time it was pointed out that similar programs are carried on by most schools of commerce in the major universities and colleges throughout the country without the aid of Federal grants. If these grants are to be resumed the matter should be deferred for consideration in the regular annual budget submission next year. Apparently the House committee felt that, since this program was knocked out in a regular bill and after regular hearings, a request for resumption at least was entitled to the same sort of deliberate hearing and consideration that the opposite actions had when taken in

1960.

Senator Monroney.

Senator MONRONEY. No questions.

Senator HOLLAND. Senator Hayden.

Senator HAYDEN. No questions.

Senator HOLLAND. Do any of you gentlemen wish to be heard?

HURRICANE CARLA DAMAGE IN TEXAS

Mr. LANMAN. The only statement I might make, Senator, is that I was down in Texas, from Tuesday night through Friday night, trying to set up the systems in the offices down there and had a chance to observe some of the physical damage in the area.

Senator HOLLAND. Speaking now of the disaster alone?

Mr. LANMAN. Yes, sir. I had a chance to observe some of the damage at Galveston and Corpus Christi and I think it is substantial. I talked to a number of the bankers in the immediate area, to get some statement of what they thought of the damage, and while it is difficult to come up with a specific figure, it is apparently going to cost at least in the neighborhood of $175 or $200 million. Probably, according to the insurance statements, perhaps 40 percent of that may be covered by insurance. Of course, as you know, the rain damage and the water damage is generally not covered by the insurance because of the exclusion in the policy, so consequently we feel, while we can't make any absolute statement, that the call on the SBA could be anywhere between $20 million and $50 million in disaster loans.

FARMERS HOME ADMINISTRATION LOAN PROGRAM

Senator HOLLAND. The Farmers Home Administration also has a disaster loan program for rural problems?

Mr. LANMAN. For the agriculture, but I excluded that damage in the $200 million. That related more to the commercial and personal loans and homes.

Senator HOLLAND. That is covered fully, more or less, by insurance and would have to be excluded also. I am sure the committee would want to leave your agency in an ample position to handle this necessitous work. What I suggest is, as this record is going to be closed in the next 2 or 3 days, that if you hear through Mr. Horne, on his return, that in his judgment sums larger than what you have men