a 1-year period, as proposed by S. 2889, would be a relatively desirable term for such an extension.

With respect to the funds to be authorized for the future operations of the direct-loan program, the attention of the committee is directed to the fact that the existing allocation of $25 million per quarter has not been sufficient to satisfy fully all the requests for direct loans which have been received since the quarterannual system was established by Public Law 325, 82d Congress, although this sum has contributed measurably toward meeting the needs of veterans in rural and semirural areas.

An analysis of the monthly trend of the number of veterans waiting to obtain direct loans indicates that the size of the waiting list, though substantial, has remained relatively stable during the past year and has declined slightly in the past 3 months. It, thus, appears that the present rate of quarterly advances has been enough to keep even with incoming requests for direct loans.

For the information of the committee, the amount of funds available for direct loans has been projected through June 30, 1955, the expiration date provided in the subject bill, based on the assumption that the amendatory legislation would be enacted during the April-June quarter of 1954, and that the increased authorization would become immediately available. Under the proposed legislation there would be available for new loans from Treasury advances, sales and principal repayments during the 17 months ending June 30, 1955, a total of about $288 million or enough for about 41,000 direct loans. Veterans who have already filed requests for loans presumably would receive first priority, and it is estimated that not more than 15,000 to 20,000 loans would finally be made to veterans who were on the waiting list on January 31, 1954. If it is the intent of the Committee that the increased quarterly allotment be available only during the four quarters of fiscal 1955, it is suggested that clarification of this point would be advisable.

If the quarterly authorization of direct loan funds were to be doubled, as provided by S. 2889, it might be expected that there would be some indeterminate increase in the number of new requests for direct loans over the level of recent months. It is probable that many veterans may have been deterred from requesting direct loans by the limited amount of available funds and the consequent long waiting period in some regions, although there is no way of estimating how many veterans were so deterred. The publicity attendant upon an increase in funds would also undoubtedly generate an increased flow of direct-loan requests.

It may be further noted that an increase in the quarterly allocation of directloan funds might also stimulate an increase in the requests for designation of additional areas as eligible for VA direct loans. As heretofore stated, the present policy of the Veterans' Administration, pursuant to law and guided by the intent of the Congress as expressed in committee reports which provided additional funds for direct loans, is to confine direct-loan eligibility primarily to the small towns and rural areas of the country. If further increase in the funds for direct loans is authorized, without a further expression of congressional intent in this regard, there will undoubtedly be some increase in requests for designating additional areas as eligible for direct loans.

The proposed amendment to section 512 (d), whereby the Veterans' Administration would be enabled to sell direct loans to "any person or entity approved for such purpose by the Administrator" instead of being limited in such sales, as at present, "to any private lending institution evidencing ability to service loans," would apparently expand considerably the potential market for such loans. Individuals, pension funds, trusts, educational institutions, and eleemosynary institutions would thus be permitted to purchase direct loans and it is reasonable to expect that this added market would help the direct-loan fund to revolve more rapidly and thereby reduce the financial burden on the Treasury.

In considering proposals to increase substantially the amounts to be authorized in connection with an extension of the direct-loan program, the committee will, of course, wish to take into consideration the increased financing burden which would be imposed on the Treasury by these measures at a time when the need for reducing such burdens is paramount.

In summary, it would appear that private lending sources are not yet able to supply funds for loans to veterans in most rural or semirural areas at an interest rate comparable to that for Veterans' Administration guaranteed loans and, therefore, the committee may wish to give favorable consideration to a

continuation of the direct-loan program beyond June 30, 1954. Whether or not any increase in the funds available for direct loans should be authorized would appear to be a matter of policy for the Congress to determine.

Due to the urgent request of the committee for a report on S. 2889, advice has not been obtained from the Bureau of the Budget concerning its relationship to the program of the President.

Sincerely yours,

Mr. KING. Thank you.

H. V. HIGLEY,
Administrator.

In brief, that letter pointed out the indicated overall improvement in the availability of money for GI loans had yet to be felt appreciably in those areas eligible for direct loaning and if money for the purchase of homes or farm houses was to be put within the reach of World War II or Korean veterans resident in those areas, action by the Congress to extend the direct-loan program beyond its June 30, 1954, expiration date, would be required. The 1-year period of extension proposed by the bill is considered appropriate to that purpose.

It was pointed out further that some increase in the total directloan authorization would be needed were an extension to have effective results, or, indeed, to achieve its purpose.

The VA makes no recommendation as to the amount of such increase in the belief that such a determination is essentially one for the Congress to reach in the light of overall policy dictated by its concern over other demands upon the resources of the Treasury.

That provision of the bill which would broaden the classes of those to whom VA can sell loans is welcomed. To the extent that it results in a wider outlet to such sale, it will aid the revolving feature of the present law and thus enable the limited funds authorized for the program to be reused more rapidly.

Passing along to S. 2938

Senator BENNETT. May I stop you there? Are there any questions about S. 2889?

Senator SPARKMAN. Yes. Is his testimony

Senator BENNETT. He has completed his testimony on S. 2889 and wants to move on.

Senator SPARKMAN. Yes; I would like to ask a few questions, if I may. I was reading the letter Mr. Higley sent to the committee. Do I understand the essence of the position taken by the Administrator is that the program should go through June 30, 1955, and you feel you do not need the additional amount that has been suggested, this $50 million a quarter rather than $25 million a quarter?

Mr. KING. Senator Sparkman, we, in substance, state that if it is the will of Congress that this apparent need continue to have some assistance under the law, it would be necessary to extend the program, and we think, in the light of the purposes and the history of the bill, and so forth, that a 1-year extension would be appropriate.

As to the amount needed to make that extension effective, we do not attempt to draw a conclusion as between, for example, the $25 million a quarter which we have heretofore been receiving and the $50 million. per quarter proposed by the bill. It is very difficult to establish a conclusion which would support adequately one figure rather than the other. It is historically true that under the $25 million per quarter allocation, veterans have had to wait in line to use this

privilege until we could catch up with their demand, by reason of the next quarterly allocation.

Senator SPARKMAN. In that connection, may I call your attention to a letter that I received from a veteran just a couple of days ago in which he tells me that he has an application in, and he says, "The Veterans' Administration informs me that I am 576th on the list."

I am not clear as to whether that relates to the State or to the region, but he goes on to say that, "Each quarter they take care of about 120." He says, "Only about 120 applications are processed with each allocation, and the next allocation will be for April."

In other words, April 1 comes around and he stands 576; 120 are processed each quarter. That means it would be 15 months, assuming they were all acceptable, before he would be reached.

The day I introduced this bill, I made some remarks in the Senate. Senator Stennis from Mississippi produced a letter he had just received from a veteran, somewhat along the same line.

I don't know how they are in other areas. Of course, this is a program that has its heaviest impact in the rural and semirural areas, as you so well point out, or as the Administrator so well points out in

his letter.

I don't know how it is in different areas.

I wonder if you could give us any breakdown-without too much trouble; I wouldn't want a great deal of work to be required; showing the backlog that has been built up in different areas.

Mr. KING. I believe, Senator, we have a national figure on backlogs and here, on this table which Mr. Brownstein has supplied to me, it breaks it down by VA offices.

Senator SPARKMAN. Now, let's go back to this one case: Does that mean the VA office in each State, or in a Territory or a region?

Mr. KING. Commonly, Senator, as you know, we have but one office in the State, but in some of the larger States we have up to 4 or 5 offices.

Senator SPARKMAN. Let's go to Alabama, for instance. Does that cover the State of Alabama?

Mr. KING. Yes, sir.

Senator SPARKMAN. What kind of a backlog do you have?

Mr. KING. As of January 31, 1954, we had a backlog in Alabama of 1,371. Those were veterans on the priority, or waiting list. Now, from the point of experience

Senator SPARKMAN. This fellow is pretty well along, then, if he is 576 out of 1,371. I thought he was stating a pretty bad case.

Mr. KING. From the point of experience, the figure is somewhat fallacious because we find-and undoubtedly it is in part consequent upon the waiting-we find that when we reach the people on that list

Senator SPARK MAN. That a good many of them have made other arrangements?

Mr. KING. A good many are no longer interested so that, although our number on the waiting list on a given day was 32,000 we probably would find somewhere between 18,000 and 20,000 actually step up when they are told they can get the money.

Senator SPARKMAN. If you applied the same proportion to Alabama's 1,371, even if you took a third of that off, you would have

1,000 and at 120 a quarter, it would take about 8 quarters to get around to it, wouldn't it?

Mr. KING. We don't guarantee any of them that they are going to be reached.

Senator SPARKMAN. I realize that.

Mr. KING. We try to maintain a strict order of priority with reference to incoming requests.

Senator SPARKMAN. May I say I want to commend you for the job you have done. I think you have done a fine job on this program, and the approval with which it has met is eloquent testimony.

Mr. KING. Thank you, Senator.

Senator BENNETT. Don't you think it would be well to have the total breakdown by VA offices?

Senator SPARKMAN. I think it would be well to have that in the record, Mr. Chairman.

Senator BENNETT. I would also like for you to make a little more definite for the record, if you will, your estimate of the percentage of the gross list that eventually becomes an actual applicant.

Mr. KING. We will do the best we can on that, Mr. Chairman, but actually, we will be giving you what are really estimates, because we can't go back and probe the reasons why they dropped off.

Senator BENNETT. I am not interested in that, but give us a single percentage figure which would represent your estimate so that we can apply it to the list.

Mr. KING. Yes, sir; I will be glad to do that.

(The information requested follows:)

Status of VA direct loan applications and requests-Continued

1 Based on attrition experienced in recent months following notification to veterans on waiting list that funds were available.

2 This total includes 44,308 fully disbursed loans and 7,074 loans in process.

No areas in this region eligible for direct loans.

Senator BENNETT. Were you through, Senator?

Senator SPARKMAN. I wanted to ask just 1 or 2 more questions. I don't believe you gave in your statement any facts as to how the program has worked, the delinquencies or anything of that kind? Mr. KING. We have had an extremely satisfactory experience with the program in that regard, Senator.