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The trend of disbursements from the adjusted-service certificate fund has been materially affected by amendments to the original act which have extended the time limit for filing claims and increased the loan value from an amount not in excess of 90 per cent of the reserve value of the certificate to 50 per cent of the face value of the certificate at maturity.

The original act specified that the time limit for filing applications for benefits provided in the act would be January 1, 1928.

. This date was extended by Public 570, Seventieth Congress, to January 2, 1930, and was again extended by Public 303, Seventy-first Congress, to January 2, 1935. During the period indicated by the first extension 290,557 certificates were issued, having a loan value of approximately $145,278,500.

CERTIFICATES Issues JANUARY, 1930, to SEPTEMBER, 1931 The following table shows the number of certificates issued during the period January 2, 1930, to September 30, 1931:

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That total is 138,684.

The act provides that the loan value of a certificate will not be effective until two years after the date of issuance. This provision was not modified at the time the loan value was increased from 90 per cent of the reserve value to 50 per cent of the face value of the certificate at the date of maturity

The following table shows the distribution of 18,204 certificates by months, which as a result of the application of the 2-year provision will be available as security for loans during the period September 30, 1931, to June 30, 1932, inclusive

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The average face value of certificates in force as of September 30, 1931, was $1,000.97 and the average loan value was approximately $503.18.

The estimated loan value of the 18,204 certificates shown in the above table, based on the loan value of certificates in force as of September 30, 1931, is approximately $9,159,888.72.

As of September 30, 1931, the current loan value of outstanding certificates was approximately $1,709,995,000, and as of that date loans amounting to roughly $1,227,937,000 had actually been made and were outstanding. However, only $1,152,937,000 of this latter sum represents loans made direct, the remaining $75,000,000 being the estimated loans made by banks and which the Veterans' Administration will be called upon to redeem in the future. Consequently, the difference between the current loan value of outstanding certificates and the amount of direct loans, $557,058,000, represents the potential gross valance of securities available for additional loans which the Veterans' Administration may be called upon to meet.

Combining the potential balance in the loan value of certificates in force as given above with that of certificates which will be placed in loan status during the period September 30, 1931, to June 30, 1932, maximum additional loans on certificates presently issued are indicated in the approximate amount of $566,217,000.

Based on a trend established during the past several years, approximately 15,000 certificates will be matured by death during the period September 30, 1931, to June 30, 1932. The face and loan value of these certificates, based on the averages given above, will be approximately $15,014,000 and $7,547,700, respectively.

As of September 30, 1931, approximately one-third of the outstanding certificates had not been pledged as security for loans. Applying this factor to the certificates that may be matured by death, the outstanding loan value indicated above will be reduced by approximately $2,515,900. Therefore the loan value on outstanding certificates will be approximately $563,702,000.

As of September 30, 1931, 111,862 death claims had been approved having a value of $112,725,233. During the month of September, 1931, death claims were approved having a value of $1,917,978. However, it is estimated on the basis of experience that the average value

of death claims during the fiscal year 1932 will be approximately $1,667,000 monthly.

To meet the payments expected to be made from the adjusted service certificate fund through the balance of the fiscal year 1932, the following estimate has been prepared. This estimate is not based upon an actuarial computation inasmuch as the Act of February 27, 1931, increased the loan value of certificates to 50 per cent of the face value and requires that this fund be viewed, for the present at least, on the basis of providing sufficient funds to meet the demands for loans upon the adjusted-service certificates issued rather than the amortization of the face value of the certificates issued under insurance fund principles, as originally contemplated. The experience of prior months has been the determining factor, together with an attempt to anticipate a reasonably conservative increased trend of loans during the winter months, since experience has shown in past years that such a scaling may normally be expected.

Estimated monthly expenditures, fiscal year 1932, October to June, inclusive

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Based upon the above developed facts, it will be seen that the amount of loans estimated for the balance of the fiscal year 1932, $168,000,000, is only 29 per cent of the total potential loan value of certificates during the period. When it is considered that loans have been made on approximately 66 per cent of the total certificates to date and have resulted in an average disbursement of $22,065,619.75 per month during the first three months of the fiscal year 1932, the above estimate appears to be extremely conservative.

BALANCE OF FUND ON HAND OCTOBER 31, 1931 The CHAIRMAN. General, you have been making your loans up to this time, as stated, out of this fund that has been set aside?

General HINES. Yes, sir.
The CHAIRMAN. How much have you on hand now?
General Hines. We have approximately $23,000,000. I have

HINES a statement which can go in the record, showing the exact condition of that fund up to November 30. This statement shows the total that I read there, the appropriation of $896,000,000; shows the interest earnings, the redemptions to banks, and so on, and finally shows, as we have stated, that the balance on hand November 30, 1931, is $23,003,281.17. Statement of net expenditures under World · W’ar adjusted compensation act as of Statement of net expenditures under World War adjusted compensation act as of

October 31, 1931

Totals to Sept.

30, 1931

October

Totals to Oct.

31, 1931

1 $280, 25

$4, 347. 116. 45

203, S51. 11 33, 955, 781.64

2, 863, 684. 82 41, 370, 434. 02

386, 846. 27

1 60.00 386, 506.02

$4, 346, 836. 20

203, 851, 11 34, 342, 627. 91

2, 863, 624, 82 41, 756, 940.04

Adjusted service and dependent pay:

Veterans' payments, $50 and less
Dependents' payments under $50.
Dependents' quarterly payments.
Bonus of soldiers who died in service.

Total.....
Adjusted service certificate sund:

Beneficiaries' payments.
Redemption to banks
Loans repaid to Government life insurance fund.
Interest on loans repaid to Government life in-

surance fund.
Loans direct to veterans.
1 Credit.

109, 491, 929. 21
49, 798, 647.69
26, 269, 431. 72

1, 112, 896. 50
4, 153, 110. 87

545, 133. 96

110, 604, 825. 71 53, 951, 758. 56 26, 814, 565, 68

556, 212. 82 783, 460, 126. 42

15, 675. 05 14, 428, 069. 38

571, 887.87 797, 888, 195. 80

October 31, 1931Continued

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The CHAIRMAN. How much will the reduction be by December 31?

General Hines. If they run at the rate they ran in the last month, it will probably take between seventeen and eighteen million dollars. The winter months have been running right straight along at the highest. It seems that they are forced to ask for loans during the winter.

The CHAIRMAN. And you have not enough to carry you through this month?

General HINES. Not through December. Then, of course, we have--which will come in the next item--some of those dependency pays.

The CHAIRMAN. I was speaking particularly of these loans.

General HINES. We never know, of course, Mr. Chairman, when the banks may throw a bunch of certificates at us. We have been getting large quantities every once and a while. They may send in 10,000,000

a for redemption. You see, they can redeem them with us at any time.

The CHAIRMAN. They have had this opportunity to make 50 per cent loans for nearly a year?

General Hines. Yes, sir.

The CHAIRMAN. Do you anticipate they will come in as rapidly from now on?

General Hines. Yes; we anticipate that is present conditions are maintained there will be a greater demand for loans. If employments pick up, I think that would affect them materially.

I have with me to-day, and would be glad to give the committee, the result of a little study that we have made as to how they have used this money.

The CHAIRMAN. We would like to have it.

General Hines. And I thought I would follow my statement by giving you that; but I did not want to break into the statement on an item that was not quite connected with the fund.

NUMBER OF APPLICATIONS FOR LOANS

We are

The CHAIRMAN. What percentage of the veterans have applied under this, 50 per cent? General HINES. 72.7 per cent up to November 30. We have made,

Hines all told, over 5,200,000 loans. Now, of course that means that many men have borrowed more than once, because there are only three and one-half million certificates outstanding.

The CHAIRMAN. What percentage of the remainder do you expect to apply?

General HINES. Our estimate is based only on 29 per cent of the oustanding loan value being called for.

The CHAIRMAN. 29 per cent of the total amount of those outstanding?

General Hines. Those are eligible for loans right now. only asking for 29 per cent of the amount that they could ask for, considering that such a large percentage have already availed themselves of it; and, of course, due to the unemployment conditions, many men who tried to hang on to their certificates are being forced to make loans who probably would not otherwise, realizing the value of the certificate. Then all of the agitation that has been taking place relative to the payment, or for giving interest, and all that, as the study will indicate to you, has caused them to apply for loans, hoping that they would get their money out. They have even taken it out and invested it in savings banks, bonds, and other securities.

The CHAIRMAN. You say you require $168,000,000 to meet these loans?

General Hines. That is for loans; $15,000,000 for certificates maturing by death; and $75,000,000, the amount that we estimate is in the hands of banks which may be called for redemption during that period. The only item in which, in my judgment, there is any speculation at all—that is, that might stand a cut-would be that $75,000,000, and we would be taking a chance there that the banks did not ask us to redeem them.

The CHAIRMAN. Of course, those loans have been made from the banks by the veterans? General Hines. Yes, sir.

The CHAIRMAN. When those come in to you, are you compelled to meet them promptly?

General HINES. Yes, sir. The CHAIRMAN. In other words, does it amount to a demand obligation?

General Hines. Yes; it is a demand obligation. We are required to pay the bank interest up to the time we draw the Government check on the loans, and we consider it demand paper. It is practically a demand note under the law. The Government redeems it, taking up the note and interest and paying the balance due on the note and interest up to the date of our check to the bank.

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