tral agency to process all of these so-called GI loans and the veteran may go to that central point and he may either, if it is a loan that one bank would ordinarily make, he may be referred to that bank, or it may be made out of a pool of resources contributed by the separate lending agencies to that central agency.

Senator JOHNSON. But suppose that a hundred veterans should decide that they want to buy a business, one business, and run it as a corporation or a partnership.

Mr. ODOм. What you have in mind is the proposition of whether under the present act corporate stock can be the subject of one of these guaranteed loans. It can be but it would have to be purchased by the veteran not as an investment but in order that he might enter into and pursue a gainful occupation.

In other words, if two, three, or four veterans should decide to create a corporation to engage in a certain type of business and they wanted a corporation rather than a partnership, for the usual reasons, under the present act, the present act could be construed to permit the purchase of the stock of the corporation if, and only if, each one of those veterans is going to be an active participant and manager of that business.

Senator JOHNSON. He is going to be employed.

Mr. ODOм. That is right.

Senator JOHNSON. By the corporation.

Mr. ОDOм. Yes.

Senator JOHNSON. Are there any other questions?

Senator LUCAS. I would like to have a further explanation of this last suggestion. I am not sure that I clearly understand it. Senator JOHNSON. The group proposal.

Senator MILLIKIN. Give us an example of that, please.

Mr. COLLINS. Lender A may have a dozen loans aggregating $20,000. When the loans were approved by the Veterans' Administration, we would set up on our books and he would set up on his books, a reserve of 15 percent, or $3,000. We would compensate him for any losses up to the amount of the reserve. Thus, if one loan went completely bad and the rest of them were good, he might be reimbursed for that entire loss under this group plan.

Mr. ODOM. That would finish it if that were the amount. Mr. COLLINS. That would finish it; that would wipe him out. Senator LUCAS. This is an additional benefit to the veteran? Mr. COLLINS. This is an alternative plan. We would under this suggestion have an additional section that would leave this option to the lenders. They could either avail themselves of the regular procedure for guarantee or could participate in this group plan.

Senator LUCAS. Wouldn't there be an advantage to the pool plan over the regular plan?

Mr. COLLINS. It is believed that some leaders, now reluctant, would come in. Some lenders prefer the present plan under which the first loss is covered. If a lender loses $2,000 on any particular loan he can come in for the $2,000. Under the group plan he could only get an aggregate of 15 percent of his loans. But there would be benefits to him as well. If a loan went completely bad under this, he might get the entire amount paid to him.

Mr. ODOм. It would simplify processing, would it not?
Mr. COLLINS. Very much.

Senator LUCAS. Where does the veteran get any benefit out of it? Mr. ODOM. It is mainly in the expedition in processing the loans. In other words, the lender and the borrower would have to comply with the provisions of the law as it is or as it would be amended. As Mr. Collins pointed out in his comment, all that he would have to do would be to come in afterward and show that he had done that and he would then have a stake in this participation.

Mr. COLLINS. There has been quite a bit of agitation, I might say, on the part of lenders for this type of group plan as facilitating the operation. It would cut down our expenses tremendously in administration.

Senator LUCAS. This is a plan solely for the benefit of the lenders? The GI gets no benefit other than, perhaps, that it might encourage the lender to make these loans?

Mr. COLLINS. He would get an expedited service.

Mr. ODOм. It would not reduce the benefit to the veteran.

Senator LUCAS. No; but we are paying some extra money out of the Treasury.

Mr. PAVESICH. As a matter of fact, Senator Lucas, I think it would make more credit available to the veteran because of having the ease of making loans in this way. Only 15 percent of his $2,000 would be allotted.

Senator LUCAS. I can see some advantage there. There might be a little more encouragement to the lender to make the loan.

Senator CONNALY. What do you mean in "(c)"?

The Administrator shall pay the same amount on each loan insured hereunder as he would be required to pay under the first sentence of section 500 (b) hereof if the loan were guaranteed rather than insured.

Mr. ODOм. Four percent of the guaranteed portion for the first year. Senator CONNALLY. It doesn't say anything about interest.

Mr. ODOм. That is what the first section as we propose it, to be amended, would provide.

Senator CONNALLY. If the loans were guaranteed rather than insured?

Mr. ODOм. Yes.

You may have a question on the interest rate on that next one, too; the 3-percent discount rate. Business loans would be more practical on a discount rate than a straight interest rate, perhaps. But on a nonamortized loan it would be advantageous to an agency making business loans to have a somewhat higher rate and we propose there that it would be a rate equivalent to the discount rate at 3 percent. That would be less than 6 percent.

Senator JOHNSON. Mr. Odom, does that complete all the suggested amendment the Veterans' Bureau has to the so-called GI bill of rights?

Mr. ODOм. Yes, sir; but, Mr. Chairman, I want to inquire now what will be your pleasure. Under date of July, sometime in July, General Hines, then the Administrator of Veterans Affairs, forwarded to Senator George, chairman of the full committee, a copy of a letter addressed to the chairman of the World War Veterans' Legislation Committee of the House of Representatives, under date of July 16, 1945, with a complete analysis of and recommended amendments to H. R. 3749. It is so lengthy that I would not attempt to go into that analysis

unless the committee, either at this time or at some other time, desires it. My purpose now is to ask whether it would not be appropriate to put into the record at this point the letter and the analysis and recommendations concerning H. R. 3749, and also the correspondence with the Bureau of the Budget which, as General Bradley told you yesterday, the Director suggested should be brought to your attention.

Those matters are very lengthy and I am satisfied, if the committee is, to simply insert them in the record at this point, subject to any further questions that you may desire to ask at any other time.

Senator JOHNSON. What is the pleasure of the committee with respect to that matter?

As I understand it, it is an analysis by the Veterans' Bureau, section by section, of H. R. 3749, which has passed the House and is now before us, and upon which we will receive a great deal of testimony as this hearing continues.

Mr. ОDOM. Yes.

Senator JOHNSON. Do we want that put into the record for our reference?

Senator LUCAS. Is that the bill that was passed in the last session? Mr. ODOм. Just before the recess, passed by unanimous consent. Senator LUCAS. On the floor of the house."

Mr. ОDOм. Yes, sir.

The CHAIRMAN. We might put it in the record now so that we will have it before us.

Senator JOHNSON. Yes. We may want to call upon the representatives of the Veterans' Bureau for further comment and assistance and interpretation on that matter. Without objection, the matter referred to will be placed in the record.

(The correspondence above referred to is as follows:)

Hon. OMAR N. BRADLEY,

EXECUTIVE OFFICE OF THE PRESIDENT,

Administrator of Veterans Affairs,

BUREAU OF THE BUDGET, Washington, D. C., September 26, 1945.

Veterans' Administration, Washington, D. C.

MY DEAR GENERAL BRADLEY: Your letter of September 20, giving your views with respect to reports proposed by your predecessor, Brig. Gen. Frank T. Hines, on H. R. 3749 and H. R. 3119, Seventy-ninth Congress, satisfactorily explains many of the questions raised in my letter of September 14.

There is no objection to the submission of the proposed reports. However, it is believed the Congress will be interested in the comments on the proposed legislation contained in your letter of September 20, 1945, and it is accordingly suggested that these comments be submitted to the appropriate committees of Congress.

Very truly yours,

PAUL H. APPLEBY, Acting Director.

DIRECTOR, BUREAU OF THE BUDGET,

WASHINGTON, D. C., September 20, 1945. Washington, D. C.

SIR: This is in response to your letter of September 14, 1945, requesting my views with respect to reports proposed by my predecessor, Brig. Gen. Frank T. Hines, then Administrator of Veterans' Affairs, on H. R. 3749 and on H. R. 3119, Seventy-ninth Congress. The first-mentioned bill would amend the Servicemen's Readjustment Act of 1944 in several respects, the two chief ones being title II, education of veterans, and title III, guaranty of loans.

I am generally in accord with the proposed reports, but feel that consideration should be given to the points which you state were raised by members of your staff.

Public Law 346 is a Readjustment Act intended to assist veterans in resump-. tion of their civilian pursuits. The time limitations placed upon the filing of applications for the several benefits were intended, not so much to limit the period of readjustment as to preclude the duplication of benefits. It was realized at the time that to an extent this limitation, particularly with respect to applications for guaranty of loans, would be inflationary, and as an offset, as well as added protection to the veteran and the Government, the condition was added specifying that the purchase price of the property offered as security for a guaranteed loan must not exceed the "reasonable normal value as determined by proper appraisal." In practice it has been found that both of these requirements are questioned. In the first instance, it may take more than 2 years to so orient himself either by way of education or training or otherwise so that he would be in a position to take advantage of the loan-guaranty provisions. Further, it has been found that few homes and fewer farms can be purchased today at a price representing, or not in excess of, the "reasonable normal value." Procedure essential to make determination of the statutory requirements has also led to considerable delay in approving applications for guaranty of loans. This is of particular importance in connection with business loans and, to a certain extent, with farm equipment loans where the transactions usually require the immediate payment of cash costs.

Specifically, I agree with General Hines' recommendation against the provisions of title III, of H. R. 3749 insofar as they would provide automatic guaranty of loans made by a lending institution without prior or subsequent approval of any Federal agency. Further, I feel that the provisions of said bill substituting "reasonable value as determined by the lender's appraisal" for "reasonable normal value as determined by proper appraisal," would be highly dangerous, not only to the veteran but to the Government, and that this would not be overcome by the fact that the lender would share in the loss. There are other technical difficulties in title III as passed by the House, all of which are pointed out in the analysis supplied with the proposed report, but in my judgment the above-mentioned difficulties are the most important and the most dangerous.

While I am sure there will be some interests that will desire to retain the guaranty features of the present act, I am of the opinion that the insurance provisions suggested as a possible alternative or substitute merit careful consideration. Some, of course, have advocated that the insurance extend to the full amount of the loan, or at least 90 percent thereof, but with a limitation of any individual case of $3,000. I feel that the suggested 75 percent and $2,000 limitation are conservative and therefore safe. With respect to values, I think the suggestion may be a good one that the purchase price not exceed the reasonable normal value as determined by governmental appraisal but with a proviso that in the event the agreed price does exceed the reasonable normal value, but not to exceed a limited percentage, say 15 percent, that the loan may be insured in an amount not to exceed the reasonable normal value, the difference being made up by the veteran by way of a cash payment or in other acceptable manner. To the extent that this would permit such purchases at increased valuations, it would be inflationary, but there would be adequate protection for the Government and a certain degree of protection for the veteran.

With respect to whether the Veterans' Administration should have any responsibility for these loan programs, I am sure you realize this involves a broad question of public policy. Literally, every responsibility of the Veterans' Administration, except perhaps the historic pensions, could be functionally assigned to other existing governmental agencies. I am in agreement with the view that veterans' benefits as such should be administered by one agency rather than by many. I am not sure that loans should be included in the category of veterans' benefits, and if this view could be made to prevail, I would favor the assignment of full responsibility therefor to those agencies operating in the several loan fields. I do not, however, agree that there should be any divided responsibility for I do not see how the Veterans' Administration could be made responsible for policies and for payment of losses without any responsibility in connection with approval of the loans on which the losses occur. It can readily be realized that any such scheme would result in the Veterans' Administration receiving all of the criticism and blame and in the operating agencies being relieved of any responsibility therefor. Under the present law the Veterans' Administration does in some cases utilize other governmental agencies in processing the applications. Approval,

however, is made only by the Veterans' Administration. Under the proposed insurance provisions, the processing would be reduced to a minimum, and while the utilization of other Government agency facilities would not be precluded, it is not at all clear that it would be advantageous to continue the present arrangements. I am sure you realize the Veterans' Administration never requested that it be made responsible for any part of the loan program, in fact, it advised against it, but under the circumstances I would hesitate to be too insistent upon recon-· sideration of this matter by the Congress. I will, however be very glad to present to the congressional committees such views as you may have on this or any other matters in connection with this legislation.

Neither title II of H. R. 3749 nor H. R. 3119 meets the view of the Veterans' Administration with respect to necessary amendments to the Vocational Rehabilitation Act, Public Law 16, Seventy-eight Congress, or title II of the Servicemen's Readjustment Act. Our views in that respect are expressed in the proposed report on H. R. 3119 and the amendments to the said bill which accompanied the report.

The Vocational Act does not permit the approval of a course in excess of 4 years and it has been found there are numerous apprenticeship courses which require more than 4 years even though the actual training might not exceed that limit. Too, there are certain professional courses which cannot be completed in 4 years. In view of the need of professional'y trained persons and the lag in such training that has been occasioned by the war period, it seemed desirable to afford some leeway in this respect.

It has also been urged that the rates of training paid are insufficient under existing costs of housing and other living expenses. This has also been urged with respect to the maintenance allowance under the educational provisions of the Readjustment Act. It was intended to make attractive the rehabilitation of handicapped veterans, while on the other hand, the view prevailed that education or training under the Readjustment Act should not be made too attractive from the standpoint of remuneration. There is much to be said for your suggesthat a flat amount be provided in each instance with an additional amount for dependents and permitting the veteran also to receive whatever pension or other benefit he may be entitled to. In some instances, however, this would reduce the amount received by persons in training under Public Law 16 and in others it would increase the amount. The cases which would be benefited would be those receiving large payments of pension or of retirement pay which might extend to as much as $300 per month. However, this is possible at present under the Readjustment Act, there being no maximum limitation. I feel such a provision could be justified and I am willing to advocate it to the congressional committees if you think desirable.

From your comment on the suggestion to remove the distinction that now exists between veterans under 25 and those over 25 at the time of entering the service, I wonder if you have fully appreciated the purpose of the sugestion as explained in the proposed report on H. R. 3119. It is true that in the genesis of the education provisions of the Readjustment Act the intent was expressed to restore educational opportunities lost by entrance into the active military service. The proviso with respect to 25 years of age established only a rule of evidence for the purpose of enabling those under that age readily to establish that their education was interrupted. The difficulty is that those over that age, even though having the intent and desire to continue their education when they can afford to, cannot submit any very concrete evidence of such fact. This proviso, therefore, has been very unpopular in that the older veterans insist it is discriminatory. Experience does not show that there is a great proportion of those over 25 who desire extensive additional education benefits but they do feel that they are discriminated against in that they gave as much time out of their lives as did those who were younger. But the real purpose of the suggested amendment was to shorten the average period of training rather than to throw it wide open. If you will consider carefully the amendment proposed to paragraph 2, you will see that period of training, instead of being equal to the period of service plus 1 year, would be "for such lesser time as may be required for the course or program of education or training chosen." This again should be considered in connection with the proposals respecting the short intensive courses. Under the act as it exists at the present time, a veteran with 4 years eligibility cou'd take as many of such courses as he can crowd into 4 years. Under the amendment he would be restricted to the time necessary to complete the program elected. Of course, the right in the Administrator to authorize change of courses for good cause shown would be retained. It is the opinion of