37-713 O 69-4

SMALL BUSINESS ADMINISTRATION
DISASTER LOAN FUND

Program and Financing (in thousands of dollars) (continued)

Obligated balance transferred from Participation Sales Fund
(payment of interest on participation certificates)..
Obligated balance transferred to Participation Sales Fund:
Collection of insufficiencies and interest on pooled
mortgages....

....

Add: Portion of net revenue used for payment of interest on participation certificates.

-1,677

-1,423

-445

SMALL BUSINESS ADMINISTRATION
DISASTER LOAN FUND

Justification for Supplemental Estimate of Appropriations, FY 1970

Floods, tornadoes, hurricanes and similar catastrophes cannot be predicted in such a way as to form a basis for an estimate of loan demands. For budget purposes, the annual estimate for each of the past several years (as well as for 1970) has included an amount of $50 million for "natural" disaster loans.

Compared with the $50 million estimate for the entire year, funds obligated through November 1969 have exceeded $55 million. Approximately $50 million of this total represents loans to Mississippi, Louisiana and Virginia victims of Hurricane Camille. In recent weeks, loan approvals resulting from Hurricane Camille have averaged in excess of $4 million per week. In addition, there is an estimated $26 million in loans pending. Total loan demands from this disaster are currently estimated at $200 million for fiscal 1970. Other disasters will approximate $50 million. This estimate is broken down as follows:

Current resources and those anticipated to become available during the remainder of the year are inadequate to finance a program of this size and to allow the Agency to carry a sufficient uncommitted balance as a reserve against future disasters. Consequently, if SBA is to continue to provide relief to disaster victims throughout the Nation, additional funds by way of a supplemental appropriation are essential.

Authorized appropriations

-

This fund was initially capitalized by the transfer of an applicable portion of the assets, liabilities, and unexpended balance of the revolving fund, Small Business Administration on July 1, 1966. Appropriations are authorized to be made to the fund as capital to the extent required to carry out the authorized functions. The balance of the fund at

June 30, 1969, was $135.9 million. The current balance of the fund at October 31, 1969, was $88 million. The $225 million capital appropriation requested will be sufficient to provide for the loan level above in FY 1970 and also provide a balance of $135.5 million at the end of FY 1970 for the continuation of the program into FY 1971.

Administrative expenses

-

These costs will be financed out of the contingency amount already authorized by the Congress, to be apportioned by the Bureau of the Budget as needed.

Mr. ROONEY. Do you have a statement with regard to this, Mr. Brewer?

Mr. BREWER. Yes, sir.

BACKGROUND OF DEPUTY ADMINISTRATOR

Mr. ROONEY. Where are you from, Mr. Brewer?

Mr. BREWER. I am the Deputy Administrator of the Small Business Administration. I am from Colorado. I have been Deputy Administrator now for 4 months.

Mr. ROONEY. What is your background?

Mr. BREWER. My background is 5 years as president of my company, publicly held, however.

Mr. ROONEY. I did not catch that.

Mr. BREWER. A publicly held company that I was president of.
Mr. ROONEY. What company was it?

Mr. BREWER. OK Tire & Rubber Co. of Denver, Colo., with franchised dealers across the country. We have 84 dealers in foreign countries such as Canada, Mexico, and others, in the tire and rubber business.

Prior to that time I was in the banking business with Western Bank Corp., of which Mr. Maurice Stans was president.

I spent 29 years in the Federal Government with the Post Office Department. Leaving the Post Office Department in 1961, I was regional director for the five Rocky Mountain States. I was confirmed by the Senate as Federal cochairman of the Four Corners Commission in April of this year and served in that capacity.

Mr. ROONEY. Four Corners Commission?

Mr. BREWER. That is one of the title V commissions. The Four Corners Commission comprises the States of Utah, Colorado, Arizona, and New Mexico. I served on a commission there with the Governors, one of the title V commissions similar to the Appalachian Commission for Economic Development.

GENERAL STATEMENT

Mr. Chairman, I have with me today members of our staff: Mr. W. P. Turpin, our comptroller; Mr. Anthony S. Stasio, our acting associate administrator for financial assistance; and Mr. Herbert T. Mills, Director of the Office of Budget and Finance.

Mr. Chairman, and gentlemen of the committee, I am here today in support of a supplemental appropriation of an additional $225 million capital for our disaster loan fund for fiscal year 1970.

The need for this additional capital can be explained very simply. When we submitted our fiscal year 1970 budget estimate to the Congress, we did not request an increase in capital for the disaster loan fund because we had projected a carryover of $135 million into fiscal year 1970 which would have been more than sufficient to provide for the budget estimate of $50 million in disaster loans for the fiscal year. However, on August 17, 1969, the Nation was hit with Hurricane Camille which, from all accounts, will prove to be the most destructive of all those that have hit our shores. Camille devastated the gulf coast with winds up to 200 miles per hour and tides above 30 feet and then dumped 27 inches of rain over Virginia's Blue Ridge Mountains re

sulting in extensive flooding and landslides in southwest Virginia and West Virginia. The total storm damage is estimated at about $1 billion. We estimate that loan demands on SBA from the victims of Hurricane Camille will total approximately $200 million. Other disasters will amount to about $50 million for a total loan program of $250 million in fiscal year 1970.

Through November 15, 1969, we have interviewed over 35,000 individuals and have handed out over 14,000 applications. We have approved over 5,000 disaster loans resulting from Camille amounting to $49,700,000. We are currently approving loans at the rate of about $4 million per week. These figures are the consolidated totals from 11 disaster branch offices situated in six States. They indicate an average loan size thus far of about $10,000 per loan.

The passage of the Disaster Relief Act of 1969 also has a significant effect on our loan program for fiscal year 1970. This act, in addition to providing forgiveness credits up to $1,800, also called for revised criteria on all disasters declared after June 30, 1967, where there has been a Presidential declaration of a major disaster for the same area. Our experience in prior disasters indicates that business loan borrowing normally lags behind home restoration type loans. We have indications that applicants for larger loans were holding their applications in abeyance pending the passage of the more favorable legislation. We recently surveyed some business loan applicants who have needs which would have exceeded our previous lending limit of $100,000 per business to determine the possible impact of the new limit of $500,000. Our analysis indicated that about 208 firms intended to file for $71.7 million in loans. In addition, the Disaster Relief Act will generate new applications from persons and firms that were not previously eligible for our assistance. These will be from individuals who have suffered losses since June 30, 1967, and will probably be primarily from homeowners other than those affected by Camille. Our field offices estimate that these applications will result in about 3,400 loans for about $14 million.

The balance available in our disaster loan fund as of October 31, 1969, was $88 million. Based on the foregoing analysis plus our experience in other disasters, we now forecast approximately 19,600 loans totaling about $250 million for fiscal year 1970. The $225 million additional capital will provide for the 1970 program and a balance of about $135 million to go into fiscal year 1971.

Because of the urgency of the situation, prompt and favorable action by the Congress on this estimate is respect fully requested.

ORIGINAL ESTIMATE FOR DISASTERS

Mr. ROONEY. How much did you originally estimate for disasters for fiscal year 1970?

Mr. BREWER. Our original estimate was $50 million.

Mr. ROONEY. How much of that has been obligated to date? We are now 5 months into the fiscal year.

Mr. TURPIN. Mr. Chairman, $55 million to date, of which $50 million has been for the Camille disaster.

Mr. ROONEY. How much for other than Camille?

Mr. TURPIN. $5 million so far this year, sir.