SHORT-TERM CREDIT Question: What criteria do you use in determining whether or not to grant a short-term adjustment credit advance? Answer: The first step in analyzing a request for short-term adjustment credit is to determine that it meets the purpose requirements as set forth in Title III of the Federal Credit Union Act. Assuming this requirement is met, the loan officer analyzes the credit union's creditworthiness based on information contained in the financial statements and other documentation submitted with the loan application, and on information received from contacts with the appropriate state or Federal supervisory authority and with the credit union's management. The basic determination which must be made is whether the credit union has the ability to repay the loan according to its terms and to maintain itself as a going concern. In general, this requires a favorable operating record and financial record, and management of established integrity and competence. To assist loan officers in determining whether or not a given credit union is creditworthy, several financial indicators have been identified. These include: Tolerances have been developed for each indicator based on acceptable operating ratios for the credit union industry, and a code is assigned to each indicator to reflect the credit union's condition. The results of the financial analysis, together with an assessment of the credit union's operating record and of its management, form the basis for approving or denying the application. PROTRACTED CREDIT Question: How do you define a "protracted credit advance?" Answer: A protracted credit advance is one made to meet liquidity needs in the event of unusual or emergency circumstances that are expected to be of an extended duration. A significant contributing cause must be national, regional or local difficulties, as opposed to mere managerial problems. In general, protracted credit is available to meet problems stemming from unforeseen economic conditions, such as unexpectedly high interest rates, and other unusual or emergency circumstances that might cause an otherwise sound credit union to experience persistent liquidity problems. 78-072 0 - 82 - 19 Plant closings, extended layoffs, strikes, fires, floods, and tornadoes are examples of situations that may qualify for protracted assistance. Question: What particular situations required the eight protracted adjustment credit advances you referred to in your statement? Answer: All of the eight protracted loans were to meet liquidity problems caused by the combination of relatively low yielding investment portfolios and persistent unusually high interest rates. These liquidity problems had their roots in the mid-1970s when many credit unions, flush with liquidity, invested in what were considered at the time to be relatively safe and high-yielding U.S. Government Agency securities. In the late 1970s, when interest rates rose to and remained at unprecedented high levels, the credit unions began experiencing earnings problems and were having difficulty maintaining these portfolios with borrowed funds. Question: Have any of these been repaid? Answer: All of the eight protracted loans had maturities of at least four years. As of this date, there have been no repayments. Interest charges are being paid currently. SUBCOMMITTEE RECESS Senator GARN. The subcommittee will stand in recess until Tuesday, March 17, at 9:30 a.m., when we will receive testimony from the Veterans Administration. Thank you very much. Mr. CONNELL. Thank you very much. [Whereupon, at 11:50 a.m. Tuesday, March 10, the subcommittee was recessed, to reconvene at 9:30 a.m. Tuesday, March 17.] DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT-INDEPENDENT AGENCIES APPROPRIATIONS FOR FISCAL YEAR 1982 TUESDAY, MARCH 17, 1981 U.S. SENATE, SUBCOMMITTEE OF THE COMMITTEE ON APPROPRIATIONS, Washington, D.C. The subcommittee met at 9:45 a.m. in room 1224, Everett McKinley Dirksen Senate Office Building, Hon. Jake Garn (chairman) presiding. Present: Senator Garn. VETERANS ADMINISTRATION STATEMENT OF R. H. WILSON, ACTING ADMINISTRATOR C. R. HOFFMAN, CONTROLLER E. MARKHAM, DIRECTOR, BUDGET SERVICE R. E. COY, DEPUTY GENERAL COUNSEL R. S. BLUNT, ASSISTANT ADMINISTRATOR FOR PLANNING AND PROGRAM EVALUATION M. B. SILVERSTEIN, DEPUTY INSPECTOR GENERAL W. V. ROBUCK, ASSISTANT ADMINISTRATOR FOR ADMINISTRATIVE SERVICES S. J. SHUMAN, CHAIRMAN, BOARD OF VETERANS APPEALS L. R. MOEN, ACTING ASSISTANT ADMINISTRATOR FOR INFORMATION SERVICES C. E. CLARK, ASSISTANT ADMINISTRATOR FOR PERSONNEL R. G. JOHNSON, JR., ACTING ASSISTANT ADMINISTRATOR FOR HUMAN GOALS C. C. COOK, ASSISTANT ADMINISTRATOR FOR SUPPLY SERVICES M. DINUNZIO, DIRECTOR, MANAGEMENT SERVICES OFFICE OF CONSTRUCTION W. A. SALMOND, ASSISTANT ADMINISTRATOR FOR CONSTRUCTION OFFICE OF DATA MANAGEMENT AND TELECOMMUNICATIONS W. R. MARTIN, ASSISTANT ADMINISTRATOR FOR DATA MANAGEMENT AND TELECOMMUNICATIONS J. J. SHARKEY, DEPUTY ASSISTANT ADMINISTRATOR FOR DATA MANAGEMENT AND TELECOMMUNICATIONS ACCOMPANIED BY: T. H. ACKLEN, ASSOCIATE DEPUTY ASSISTANT ADMINISTRATOR FOR DATA MANAGEMENT AND TELECOMMUNICATIONS T. F. BUB, ACTING DIRECTOR, BENEFITS DELIVERY SYSTEMS SUPPORT SERVICE D. B. VAN HOOSER, ASSOCIATE DIRECTOR, HEALTH CARE DELIVERY SYSTEMS SUPPORT SERVICE R. F. ROUTT, ACTING DIRECTOR, MEMORIAL AFFAIRS AND GENERAL SYSTEMS SUPPORT SERVICE J. D. GARRETT, CHIEF, FINANCIAL RESOURCES DIVISION DEPARTMENT OF MEMORIAL AFFAIRS V. L. CORRADO, DEPUTY CHIEF MEMORIAL AFFAIRS DIRECTOR DEPARTMENT OF VETERANS BENEFITS D. L. STARBUCK, CHIEF BENEFITS DIRECTOR J. W. HAGAN, JR., DEPUTY CHIEF BENEFITS DIRECTOR A. S. KRAUT, DIRECTOR, BUDGET STAFF DR. N. L. WILLIAMS, DIRECTOR, COUNSELING AND REHABILITATION SERVICE J. C. SCHAEFFER, ASSISTANT DIRECTOR, EDUCATION AND REHABILITATION SERVICE H. M. JACKSON, DIRECTOR, ADMINISTRATIVE SERVICE A. W. GLASS, DIRECTOR, LOAN GUARANTY SERVICE J. J. COX, DIRECTOR, VETERANS ASSISTANCE SERVICE S. W. MELIDOSIAN, DIRECTOR OF PHILADELPHIA CENTER (INSURANCE) DEPARTMENT OF MEDICINE AND SURGERY DR. D. L. CUSTIS, CHIEF MEDICAL DIRECTOR DR. W. J. JACOBY, JR., DEPUTY CHIEF MEDICAL DIRECTOR DR. T. C. CAMP, ASSOCIATE DEPUTY CHIEF MEDICAL DIRECTOR DR. L. M. KLAINER, SPECIAL ASSISTANT TO CHIEF MEDICAL DIRECTOR R. L. NELSON, DIRECTOR, RESOURCE MANAGEMENT STAFF DR. W. H. WHITCOMB, DIRECTOR, COMPUTERIZED MEDICAL SYSTEMS STAFF DON A. PABST, DIRECTOR, FACILITY ENGINEERING, PLANNING AND CONSTRUCTION STAFF DR. C. W. HUGHES, ACMD FOR PROFESSIONAL SERVICES M. R. QUANDT, ACMD FOR ADMINISTRATION DR. D. M. WORTHEN, ACMD FOR ACADEMIC AFFAIRS DR. H. G. BOREN, ACMD FOR RESEARCH AND DEVELOPMENT DR. A. J. AARONIAN, ACMD FOR DENTISTRY DR. H. M. BAGANZ, ACMD FOR PLANNING AND PROGRAM DEVEL OPMENT DR. P. A. HABER, ACMD FOR EXTENDED CARE BUDGET REQUEST Senator GARN. The subcommittee will come to order. Mr. Wilson, I would like to welcome you and your distinguished colleagues here this morning. I apologize for being late. Since I have be come chairman of this subcommittee and the Banking Committee, this is the first time I have not started a hearing on time. I just had a leadership breakfast with the President and I did not think I could gracefully walk out on him. There are 30.1 million veterans, 58.9 million family members of living veterans and 3.6 million survivors of deceased veterans. Thus almost 93 million, or about 41 percent of the total U.S. population who are potential recipients of veterans benefits provided by the Federal Government. Almost 90 percent of the VA's total employment of 217,466 is engaged in providing medical care and treatment to all eligible beneficiaries. The functional arm of the VA that administers and operates this medical care delivery system is the Department of Medi-cine and Surgery which was established in 1946. The Department operates the largest medical care delivery system in the United States with 172 medical centers. VA's funding request of approximately $22.7 billion is composed of about $14.6 billion in benefits, $6.9 billion in medical programs, $547 million in construction programs, and $604 million for general operating expenses. In aggregate, this request represents a decrease of $526,308,000 from the January 15 budget. An additional $217,423,000 in legislative savings are also included in the March 10 budget revisions. These budget amendments and legislative savings are expected to result in a reduction of 7,995 in average employment during fiscal year 1982. Please go ahead with your opening statement. HIGHLIGHTS OF STATEMENT Mr. WILSON, Thank you, Mr. Chairman. I am pleased to appear before you to testify in support of the Veterans Administration's fiscal year 1982 budget. On March 10 President Reagan transmitted to the Congress the administration's amended 1982 Federal budget, a key element in the economic recovery program. The stated goal of this budget is to reduce the amount of increase in spending from 1981 to 1982. A major factor applied in reducing VA levels to meet this central goal of the economic program is a lowering of overhead and personnel costs. The Veterans Administration's 1982 budget authority requirements were reduced from $24.9 billion in the January 1982 budget to $24.2 billion for a net reduction of $744 million. We expect to review in depth each proposed reduction with the committee during the course of these hearings. There may, however, be areas of questioning by the committee on the revised budget where answers will have to be supplied for the record. As you are probably aware, the Presidential decisions did not become available to the VA until March 2. Allowing for the appeal process, little time remained to make final decisions on the distribution of the budget revisions. Therefore, certain decisions and possible allocations are still being reviewed. During the course of the questioning I am sure the details of these reduced costs will be made evident. The budget authority requested by President Reagan for VA activities totals $24,202,496,000. This includes a permanent authorization of $720,675,000, legislative proposals of $806,202,000, and an appropriation request of $22,675,619,000. This is a |