The CHAIRMAN. Fifty per cent.

General HINES. Fifty per cent increase. First, before I take that up, I might say that in connection with the Fish bill, I understand a suggestion is made by Congressman Fish, to make the advance an interest-bearing obligation. If he does that, he practically makes it an increased 25 per cent loan proposition, which would make it, then, a 472 per cent increased loan over the present-day loan value, and it would cost, under those circumstances, $1,625,925,000 if all the veterans took advantage and borrowed the full amount. The 50 per cent loan plan, if all of the veterans borrowed, would cost $1,711,500,000; and for a certificate of $1,000, of course, this year the veterans would be able, on an average, to borrow $500 on his certificates, and he would be able to, if he had made a loan, in other words, up to the maximum, taking the average certificate, he would be able to borrow the additional amount between $225.46 and $500, or about $275 more.

Mr. BACHARACH. Have you finished your statement, General? General HINES. Yes.

Mr. BACHARACH. I want to ask a question. If the veteran had a policy of $1,000, an old-line insurance policy, an adamant policy, how much could he borrow on it?

Mr. CROWTHER. Do you mean an annual premium or a one-payment?

Mr. BACHARACH. One payment.

General HINES. We have a table which I will get to in just a second. We do not have it in exactly the form, but this will give you a very good comparison, Mr. Bacharach. The paid-up values of oldline companies American Experience Table of Mortality, 32 per cent reserve basis, where the purchase premium is $500, will take the same as against a $400 purchase credit of the bonus certificate. At the end of the sixth year the holder would be able to borrow $537, and that also is the cash surrender value.

Mr. BACHARACH. That is 53 per cent?

General HINES. Yes. Now, then, taking the 4 per cent reserve, which is the basis of the adjusted-service certificate with the credit purchase of $400

The CHAIRMAN. What per cent did you give?

General HINES. 4 per cent. The net premium without loading at the sixth year would be $607.

Mr. BACHARACH. What I want to bring out is this

General HINES. In other words, if we put it this way-that the adjusted-service credit of $400 is equivalent to the net premium in the line company on $500, and the paid-up values of the two are, as I have read, $537 at the sixth year as against $607.

Mr. BACHARACH. In other words, the policy is worth 53 per cent? General HINES. That is right. Does the committee desire this table.

The CHAIRMAN. Yes. You may insert it in the record. (The table referred to is as follows:)

Comparison between the values of a single premium 20-year endowment issued at age 25 for a premium of $500 applied to purchase a policy of $842, as shown on page 243 of hearings, Ways and Means Committee, February 3, 1931, and the corresponding values on an adjusted-service certificate purchased at age 25 with an adjusted-service credit of $400

1 All values are the full American Experience Table of Mortality, 4 per cent paid-up endowment reserve. Values the fifth year and thereafter are the full American Experience Table of Mortality, 31⁄2 per cent paid-up endowment reserve.

General HINES. The act of October 6, 1917, provided for the issuance by the Government to persons on active duty in the military and naval forces of the United States of term insurance against death and permanent total disability, premiums to be computed on the basis of the American Experience Table of Mortality. Premiums were payable on a monthly basis and were automatically adjusted on each anniversary date following the application. Premiums payable for this type of insurance are on the basis of the current risk assumed, so that as a person grows older the premium advances accordingly on the basis of the increased hazard of the risk assumed. This type of insurance is favorable only for a young person desiring protection for a short time, so that the Congress very wisely made provision for the conversion of term insurance into the usual major forms generally written by old-line companies.

There is, however, a much more marked distinction between term insurance and converted insurance than the form of policy written, in that in the case of term insurance, all premiums were paid into the Treasury and all losses were paid from the Treasury, a minor

portion being covered by the premiums collected but the major portion of the losses being provided for by direct appropriation made from the general funds of the Treasury by the Congress. In contradistinction, the converted insurance receives no support, directly or indirectly, from the Government by way of appropriation or otherwise, the United States Government life-insurance fund representing, in substance, the assets of the veteran holders of United States Government life-insurance policies. This fund is self-sustaining and in its essentials is elementarily comparable to a mutual insurance organization of veterans, the Government simply acting in the rôle of administrator and trustee.

The Government makes no direct loans on notes secured by adjusted-service certificates, all loans being made on account of United States Government life-insurance fund, and all interest received on such loans being paid into such fund. It might here be pertinent to state that loans made out of this fund to its own policyholders are at the rate of 6 per cent per annum, which is the same as that charged by the great majority of the old-line insurance companies. The assets of the United States Government lifeinsurance fund amount to approximately $490,000,000, about $286,000,000 of which are represented by notes secured by adjusted-service certificates. In making provisions for the granting of loans on adjusted-service certificates, the United States Government lifeinsurance fund has sold, from time to time, millions of dollars worth of most desirable securities on the basis of adjusted-service certificates being available as collateral security for notes at reasonable rates of interest over a long period of years. Thus, any proposition providing for loans being made at other than reasonable rates will adversely affect the interests of the 650,000 veteran holders of United States Government life-insurance policies.

Mr. BACHARACH. There is one other question I have in mind. I have heard these statements about over a billion dollars, and so forth. In the last 18 months we have had quite a little depression in this country. I think most of us conceded that. During all that time, with the privilege of the veterans borrowing, they borrowed from the Government on their policies a little more than $300,000,000. I think you told me the other day it was under that amount, but I understand to-day it is over $300,000,000, probably $312,000,000.

General HINES. Yes. They are borrowing very rapidly and increasingly. In other words, I told the committee when I was before them that our loans for January would run $20,000,000 as against $8,000,000 that they averaged the year before.

Mr. BACHARACH. How about February?

General HINES. About $12,000,000 in February.

Mr. BACHARACH. This is what I have in my mind: That the amount that they borrowed during the time of all this depression amounted to a little more than $300,000,000. If we enact this proposition that I have advanced, we are going to increase that by doubling it and then adding another 5 per cent. That would cost the Government $320,000,000 or $325,000,000 plus the extra 5 per cent. It has been figured out by most persons-by people who, I think, understand quite a little about life-insurance policies, and by men that we consider experts-that will cost considerably under $500,000,000.

I can not see by any stretch of imagination how anyone can figure that, after all this time, as I say, of this 18 months of depression, with everybody shouting the blues-and we probably are at the end of the road-we hope so, at least-we certainly are scraping the bottom if we have not touched it-how anyone could figure that a proposition that is going to cost $1,800,000,000, because if all the soldiers are going to take it, in the first places their families are not going to allow them to take it. Many of these persons have borrowed three years ago, two years ago the General can verify just what I am saying and have not come back to borrow any more money and will not be allowed to come back because most of the folks borrowed when they were independent, were not married, and many of them to-day are married and their wives will not allow them to touch it. As a matter of fact, just this morning in the barber shop in the Mayflower I asked one of them about his policy, whether he was going to borrow. He said, "I can not borrow, because my wife took it away from me." I think that is generally true of a married man, that he is not in a position to handle his own life insurance policy.

Mr. RAMSEYER. Will the gentleman yield there?

Mr. BACHARACH. Certainly.

Mr. RAMSEYER. How much of this $300,000,000 that is now borrowed was borrowed during the last year?

Mr. BACHARACH. I would leave that to the Veterans' Bureau. General HINES. We estimate that at the end of this year we will probably loan out of the $730,000,000 available at maturity loan value, about $400,000,000. It was $90,000,000 last year.

Mr. RAMSEYER. That is the calendar year 1930?
General HINES. That is the calendar year.

Mr. RAMSEYER. That you loaned $90,000,000 additional!
General HINES. That is right.

Mr. BACHARACH. What is unfair about this proposition?

Mr. GARNER. I want to ask Mr. Mills a question when you get through.

Mr. BACHARACH. All I want is to get in the record my complete

statement.

Mr. GARNER. I thought you were through.

Mr. BACHARACH. What I had in mind was, if a soldier had a policy in any old-line insurance company and needed the money and could go out and get $530 from that company why the Government should not be as liberal, I will leave that to some of these gentlemen to answer.

Mr. RAMSEYER. Let me ask you another question there, General Hines, suppose those who have borrowed to the limit up to date take advantage of this increased 50 per cent, how much will that amount to? Do you get the question?

General HINES. Yes. In other words, those that have borrowed up to date?

Mr. RAMSEYER. Yes.

General HINES. Would take full advantage and borrow the additional amount?

Mr. RAMSEYER. Yes.

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General HINES. In other words, that would mean about 50 per cent of the veterans would take advantage of this loan, because that is about the rate that borrow now-between 48 and 50 per cent. Under the 40 per cent plan it would take just one-half of $1,369,200,000, or about $700,000,000.

The CHAIRMAN. $684,000,000?

General HINES. $684,000,000.

Mr. TREADWAY. Just what does that $684,000,000 represent?

General HINES. It represents 50 per cent of the veterans taking advantage of increasing the loan value up to 40 per cent as against 222 per cent that they now can borrow.

Mr. TREADWAY. Up to 40 per cent, whereas the Bacharach suggestion is up to 50. Let us get that.

General HINES. We have the 50.

Mr. TREADWAY. Let me get this clear, also, General. You are now loaning to 48 per cent of the veterans?

General HINES. No; 48 per cent of the veterans that are eligible to make loans have taken advantage of it.

Mr. TREADWAY. That is what I mean. It is not an aggregate of 48 per cent now, because some have paid it off. General HINES. That is right.

Mr. TREADWAY. What are you carrying?

General HINES. Some have reborrowed.

Mr. TREADWAY. About what are you carrying now in number of veterans?

General HINES. About 1,600,000 have borrowed. That has been increased a little. About 1,600,000 different veterans have borrowed. Mr. TREADWAY. Let me see if I get this right. I do not want to interrupt Mr. Bacharach.

Mr. BACHARACH. No; go ahead.

Mr. TREADWAY. They are now borrowing

Mr. RAMSEYER. Interrupting me is all right.

Mr. TREADWAY. Then go ahead, Mr. Ramseyer. I am in no hurry. They are now borrowing, how many?

General HINES. One million six hundred thousand, in round numbers.

Mr. TREADWAY. That is pretty close to 50 per cent.

General HINES. Forty-eight per cent is what we worked it out to be. Now, then, under the 50 per cent plan you would have one-half of $1,711,500,000, which would be $855,750,000.

Mr. HADLEY. General, right there, that is on the assumption that those who are now borrowing and have been borrowing would borrow to the limit, 50 per cent?

General HINES. That is right.

Mr. HADLEY. It might well be that a good many would not feel the necessity of borrowing up to the 50 per cent limit and might want 10 or 12.

General HINES. Yes; and there might be new borrowers. There is also the possibility that men who have not borrowed on the loan value now, with the increase may find it attractive to borrow.

Mr. TREADWAY. Therefore, carrying out your experience records, it is apparent to me-perhaps I am wrong-it is apparent that Mr. Bacharach's estimate of the total cost is very low.