the Veterans' Administration that these provisions would be more workable than those of the present act.

In connection with the short intensive courses and correspondence courses, I would like again to invite your attention particularly to the amendments proposed by the Veterans' Administration to section 5, H. R. 3119. These would leave the approval of the institution to the State as provided in the present act but would give the Administrator authority to contract with such approved institutions for satisfactory courses at agreed rates. While, of course, this involves some administrative difficulties, it is believed far more desirable than to throw the matter wide open as would be done by the House-approved H. R. 3749.

Particular note has been taken of your comment respecting the payment of additional tuition. I am sure you realize that that is authorized in the present law. The underlying bases and reasons are set out in Administrator's Decision 580, copy of which is enclosed. The intent of the act was not to provide a State subsidy for education, although it is difficult to sell this idea to some State officials, but rather to provide that the increased cost due to the Federal program would be borne by the Federal Government rather than by the States. It was assumed, of course, that each State would bear its normal burden. It will be realized, however, that there is a tremendous backlog of persons who would have progressed normally through the school system but for the intervention of the war period. This has not been a total saving to the States or even what might be determined a deferred expenditure. Doubtless, if the Federal Government pays the expenses together with maintenance allowance, there will be many more than the normal number seeking educational advantages. It was the intent of the act for the Federal Government to take up this additional expense.

While it is difficult to express in statutory language, it is believed that the formula proposed in section 6, H. R. 3119, would be more reasonable than the one contained in the present law. The Veterans' Administration originally recommended a provision similar to that contained in section 2 of Public Law 16, whereby the Administrator would be granted authority to contract for such additional services as were found necessary to accomplish the Federal program. Neither House of Congress, however, would accept this suggestion. For your information, it may be stated that there was the additional consideration that because of the provisions of section 1505 veterans who did not desire to have any charges set up against any possible future bonus would elect the State schools with little or no tuition instead of the private or endowed institutions charging tuition rates approximating at least the cost of instruction. I do agree, however, that it is not necessary to state that section 1505 will not be applicable. This can well be left for consideration should the Congress later decide upon bonus legislation. The above, however, is explanatory of what has heretofore been considered. It appears that something should be done as great dissatisfaction has arisen under the present language of paragraph 5, title II, of the Readjustment Act. Specifically, that language is "That if any such institution has no established tuition fee, or if its established tuition fee shall be found by the Administrator to be inadequate compensation to such institution for furnishing such education or training, he is authorized to provide for the payment, with respect to any such person, of such fair and reasonable compensation as will not exceed $500 for an ordinary school year." If you have any alternative suggestion which would adequately implement the intent of the Congress to have the Federal Government assume the additional cost of the Federal program, I would be very glad to give consideration thereto.

It will be appreciated if I may have your advices at the earliest possible moment, inasmuch as I have been requested, both by Senator Walter F. George, chairman, Committee on Finance, United States Senate, and Senator Edwin C. Johnson, chairman, Veterans' Subcommittee of said committee, to supply reports on these bills at the earliest possible moment in order that hearings may be afforded many persons and organizations interested in such matters.

Respectfully,

OMAR N. BRADLEY, General, United States Army, Administrator.

EXECUTIVE OFFICE OF THE PRESIDENT,

BUREAU OF THE BUDGET, Washington 25, D. C., September 14, 1945.

Gen. OMAR N. BRADLEY,
Administrator of Veterans' Affairs,

Veterans' Administration, Washington 25, D. C.

MY DEAR GENERAL BRADLEY: By his letter of June 28, General Hines transmitted two copies of a proposed report on H. R. 3119, Seventy-ninth Congress, a bill to amend parts VII and VIII of Veterans Regulations No. 1 (a), as amended, to liberalize and clarify vocational rehabilitation and education and training laws administered by the Veterans' Administration, and for other purposes.

By his letter of July 24, General Hines transmitted two copies of a report submitted to the Committee on World War Veterans' Legislation on June 26, 1945, on H. R. 3749, Seventy-ninth Congress, a bill to amend the Servicemen's Readjustment Act of 1944, to provide for readjustment allowances for all veterans of World War II, with copies of analysis of the bill and draft and explanation of proposed amendments. The report was also furnished to Hon. Walter George, chairman, Senate Committee on Finance, under date of July 19, 1945. The House of Representatives subsequently passed H. R. 3749, without giving consideration to the amendments proposed by General Hines.

In studying the proposed reports on these two bills, members of my staff have raised questions on both the educational and loan guarantee provisions. The attached memorandum outlines the points of difficulty.

I would appreciate it very much if you would review the proposed reports on these bills in the light of these comments and advise me of your attitude toward the two legislative proposals.

Very truly yours,

HAROLD D. SMITH, Director.

MEMORANDUM FOR THE DIRECTOR

Subject: Reports of Veterans' Administration on H. R. 3119 and H. R. 3749. H. R. 3119 makés various changes in the vocational rehabilitation and GI education programs of the Veterans' Administration. H. R. 3749 amends the GI bill in several particulars, especially the education and loan provisions. In considering the reports on the two bills it was deemed more satisfactory to consider them together due to the overlapping found in the proposed changes in the education program.

We would first like to clarify the background against which our comments are made. The announced purpose of Public Law 346 was to provide for the readjustment to civilian life of returning veterans. Consequently, we feel that all proposed amendments should be considered in the light of their effectiveness in accomplishing this purpose.

VOCATIONAL REHABILITATION AND EDUCATION

H. R. 3749 proposes to extend the period of time after discharge or the end of the war in which the veteran may commence his education from 2 to 4 years and the period of time in which he may complete his education from 7 to 9 years. This is subject to some question on the grounds that long extension of the education privilege would not serve to accelerate the veterans' adjustment. Both H. R. 3749 and H. R. 3119 provide for intensive courses of less than 30 weeks and for correspondence courses. The actual aid to the veteran by the use of such intensive or correspondence courses would depend upon the quality of such training. Many institutions offering intensive and correspondence courses are not supervised in any manner by State educational bodies, and the quality of the courses is subject to serious question. It would seem that the burden of approving such nonsupervised institutions, which would fall upon the Administrator of Veterans' Affairs, would be most difficult to carry on in a manner affording adequate protection to the veteran.

H. R. 3749 proposes to increase the subsistence allowances under the GI bill from $50 to $60 a month without dependents, and from $75 to $85 a month with dependents. H. R. 3119 proposes increases in the rates of pension payable to veterans while receiving vocational rehabilitation. The present maximum is $82 and the proposal is for a new maximum of $115. The present law provides that the pension of those receiving vocational rehabilitation shall be increased 77877-45- -7

from the rate normally paid to the maximum while undergoing the training. As a result, such training is financially attractive to those veterans who have suffered the least disability (10, 20, or 30 percent), but not particularly attractive to those veterans who have suffered the heavy disability-70 percent, and up. We feel that no change in the vocational rehabilitation or the GI education payments should be made without first considering the disabled veteran who is most in need of help. It would appear that the payment of a flat additional amount to all veterans receiving vocational rehabilitation without changing the pension payable for disability would be much more equitable.

H. R. 3119 proposes to remove the distinction that now exists between veterans under 25 and those over 25 at the time of entering service. The present law provides that the full benefit of the educational provisions should be given to those whose education was interrupted as a result of service, but States that all veterans under 25 at time of entering service shall be presumed to have suffered such an interruption. With the background of readjustment in mind, it is difficult to see what aid would be granted to the veteran by a change in the present law. All those whose education was actually interrupted are provided for despite their age at the time of entering service. Furthermore, the present provision for 1 year's training for all veterans with 90 days of service should enable those who have completed their education, but whose duties in the armed forces were such that reeducation is now required, to place themselves on the footing they would have gained had military service not intervened.

H. R. 3119 provides in section 6 that the Administrator of Veterans' Affairs may provide for the payment of additional tuition to institutions which can show that their regular rates are not sufficient to pay for teaching costs and supplies and also amends section 1505 of Public Law 346 which now provides that all benefits received by the veteran from the education, loan, and readjustment allowance programs shall be recorded at a central point and the total of such benefits shall be deducted from any future bonus. Section 6 of H. R. 3119 provides that any additional tuition beyond the customary rates shall not be charged to the veteran as provided in section 1505. We feel that both of these proposals are quite objectionable. It was not intended that Public Law 346 would operate as a direct subsidy to educational institutions. It would furthermore seem unwise to countenance any practice by educational institutions of charging more tuition for veterans than for nonveterans. Finally, even if such a practice were to be allowed, the justification for it should be so well documented that there could be no reason for failing to charge the total cost to the veteran under section 1505 of Public Law 346.

GUARANTIES OF VETERANS' LOANS

The loan provisions of H. R. 3749, as passed by the House, would completely overhaul the existing title III, notably by providing for automatic guaranties of loans without any prior review, either by the Veterans' Administration or by any other Government agency. Any lending institution established prior to the act would be given full authority to determine on the basis of its own appraisals that the purchase price of the property to be financed does not exceed its "reasonable normal value" and that all other requirements of the law have been met. We concur with General Hines in opposing such a drastic change, since it would almost completely remove the present protection for the Government and the veteran by placing appraisal of the security and approval of the loan entirely in the hands of the most interested party, the lender, without the usual safeguards arising from the possibility of losses on unwise loans.

The alternative amendments suggested by General Hines include several needed improvements. We are especially in sympathy with the apparent intention to provide loan insurance on a pool arrangement, rather than solely through individual loan review, and with the proposed limitation of the amount payable on such insurance to 75 percent of the lender's loss or $2,000, whichever is less (instead of the present guaranty of all losses up to 50 percent of the loan, or $2,000).

The proposal to limit the purchase price to "reasonable market value" instead of the reasonable normal value contemplated in the present law, however, would make the appraisal requirement virtually meaningless. Alternatively, the loan, rather than the purchase price, might possibly be limited to a reasonable normal value, conservatively appraised, thus requiring the veteran to finance any excess cost with his own funds. Such a requirement would be less inflationary and

would put the veteran on notice that the value of his purchase may possibly decline later.

The suggested amendments would also eliminate the use of the housing, farm, and business lending agencies to aid in processing guaranteed loans. Although we have long opposed the present duplicate review, we seriously question the wisdom of this solution. Rather, it might be preferable at this time for the Veterans' Administration to reconsider the possibility of vesting these specialized lending agencies with the full responsibility of caring for the veteran in this area, subject to general policies prescribed by the Administrator of Veterans' Affairs. This arrangement would not only relieve the Veterans' Administration of a difficult operation, foreign to its previous experience, but would also assure greater efficiency and coordination in the loan programs for veterans and nonveterans in these three important areas.

JULY 24, 1945.

The DIRECTOR, BUREAU OF THE BUDGET,

Washington, D. C.

SIR: There are transmitted herewith two copies of a report submitted to the Committee on World War Veterans' Legislation on July 16, 1945, on H. R. 3749. Seventy-ninth Congress. A bill to amend the Servicemen's Readjustment Act of 1944 to provide for a readjustment allowance for all veterans of World War II, with copies of analysis of the bill and draft and explanation of proposed amendments.

This report was submitted to the committee without usual clearance through your Office in conformity with Budget Circular No. A-19, dated August 1, 1944, in view of information received that the committee had voted to report the bill without amendment and the desirability of making available to the committee the results of the study made of this proposed legislation by the Veterans' Administration in the event the bill should be considered by the House of Representatives before its contemplated recess. The bill passed the House of Representatives, without amendment, July 18, 1945.

A copy of the letter of July 16, 1945, with enclosures was furnished Hon. Walter F. George, chairman, Committee on Finance, July 19, 1945, as indicated by the copy of letter enclosed.

Your advice is requested as to the relationship of the proposed legislation, and amendments proposed by the Veterans' Administration, to the program of the President.

Respectfully,

FRANK T. HINES, Administrator.

JULY 19, 1945.

Hon. WALTER F. GEORGE,

Chairman, Committee on Finance,

United States Senate, Washington, D. C.

MY DEAR SENATOR GEORGE: I am informed that H. R. 3749 was passed by the House of Representatives yesterday. Unquestionably it will be referred to your committee and I trust that full opportunity will be granted for hearing the objections and suggestions of the Veterans' Administration and of the many organizations interested, particularly in the loan provisions of title III of the Servicemen's Readjustment Act of 1944. For your immediate information I am attaching copy of letter addressed to chairman of the Committee on World War Veterans' Legislation, House of Representatives, on July 16, 1945, together with an analysis of and recommended amendments to H. R. 3749, and a proposed substitute for title III.

I believe it is understood in all circles that title III, as passed by the House, is wholly inadequate and that affecting amendments offered by the Veterans' Administration, if accepted by the Senate, will probably be accepted by the House. However, I feel that the matter is of such great importance that serious consideration should be given to the proposed substitute in connection with the several bills now pending before your committee.

Very truly yours,

FRANK T. HINES, Administrator.

Hon. JOHN E. RANKIN,

Chairman, Committee on World War Veterans' Legislation,

House of Representatives, Washington, D. C.

JULY 16, 1945.

MY DEAR MR. RANKIN: This letter is in response to your letter of July 11, 1945, requesting report on H. R. 3749, Seventy-ninth Congress, a bill to amend the Servicemen's Readjustment Act of 1944 to provide for a readjustment allowance for all veterans of World War II. Inasmuch as I am informed that the committee voted to report the bill without amendment, and that it may be desirable to have further information available should the bill be considered by the House of Representatives before contemplated recess, I am forwarding this report without securing the usual clearance. A copy has been supplied the Bureau of the Budget.

The careful study and analysis of the bill will, I am sure, lead to the conclusion that its enactment without amendment would raise serious questions with respect to its operation and effect. Among other things, it would repeal section 100 of the Servicemen's Readjustment Act of 1944, as amended by Public Law 138, Seventy-ninth Congress, and it would likewise repeal amendment to section 502 of said act, as amended by section 16, Public Law 98, Seventy-ninth Congress, an act to amend the Federal Farm Loan Act, the Emergency Farm Mortgage Act of 1933, the Federal Farm Mortgage Corporation Act, the Servicemen's Readjustment Act of 1944, and for other purposes. Further, the reenactment of several sections, such as sections 301, 302, and 700 containing specific limitations, and section 101 containing an authorization for appropriation, would raise serious questions of intent.

Of more far-reaching concern, however, is the proposed basic change in title III respecting the guaranty of loans. The present act emphasizes two safeguarding features: First and foremost, the protection of the veteran through prescribing that loans may be guaranteed only if the purchase price of the property concerned does not exceed a reasonable normal value as determined by proper appraisal`; and, second, the safeguarding of the Government through requiring that the fact of meeting the statutory conditions be determined by the Administrator under proper regulations and delegations of authority. The bill would delegate all authority to the lending agent, including the authority to determine the value of the property and that the statutory conditions are met. There would be left to the Veterans' Administration only the authority and duty to pay resultant losses, and the statute is not clear whether this shall be on a pro rata basis or otherwise. Finally, the bill would repeal all of present title III without any specific provision safeguarding the contractual rights of those who have received guaranties thereunder.

There is attached an analysis of the bill showing the amendments which I consider necessary to make it readily operable and to make clear the intent. There is some question whether the act should be revised until further experience shall have demonstrated deficiencies. However, if the Congress reaches the conclusion, as apparently the committee has, that title III should be amended in a fundamental manner at this time, it would be my recommendation that there be substituted for the present guaranty provisions of the act an outright insurance plan, not dissimilar to those which have proved satisfactory respecting other types of loans. I have therefore had prepared, and there is submitted herewith, a proposed bill which, if enacted, would provide such an insurance plan, would safeguard the guaranties already made, and would afford appropriate administrative authority to carry out the purpose of the act.

I am convinced, however, that the matter is one which should receive most careful consideration and if the committee has decided to make a radical change in the manner of handling loans to veterans, it is suggested that they give careful consideration to the amendment suggested in the attached draft of bill.

As stated, advice has not as yet been received from the Bureau of the Budget as to the relationship of the proposed legislation to the program of the President. Very truly yours,

FRANK T. HINES, Administrator.

ANALYSIS OF AND RECOMMENDED AMENDMENTS TO H. R. 3749

Section 100 reenacts same section of Public Law 346, Seventy-eighth Congress, thereby repealing said section as amended by Public Law 138, Seventy-ninth Congress. It is recommended that the bill be amended so as to preserve the latter enactment.