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Memorandum Accompanying the Foregoing Letter.

December 27, 1934

The Congress, by the passage of the Act of May 19, 1924, provided for the granting of additional compensation to each veteran, with certain specified exceptions, of $1 per day for services in the United States and $1.25 per day for services over seas, in excess of the first sixty days of services. The amount thus determined was increased by 25 percent because of deferment of payment. Using the aggregate as a net single premium according to the American Experience Table of Mortality with interest at 4 percent per annum, entitlement was granted to the veterans to payment, twenty years after 1925 or date of application, of a sum approximately two and one-half times that of the basic adjustment. The 150 percent increase represents the additional amount granted because of deferment of payment and the compounded interest. Thus an original grant of $400 in 1925 would enlarge itself to $1000 in 1945. If in 1925 the $1 and $1.25 per day adjustment had been paid in cash the veterans would have received a total of $1,400,000,000, but by deferring the payment twenty years the sum became $3,500,000,000.

Under the original law, veterans were permitted to borrow on their certificates according to the reserve value thereof, but in February 1931 an amendment increased, without regard to actuarial value, the amount which could be borrowed to 50 percent of the maturity value. This amendment also fixed the maximum interest which could be charged on loans at 4 1/2 percent, which rate was subsequently reduced to 3 1/2 percent by the Act of July 21, 1932. The amount, including interest charges now outstanding because of loans made to veterans, is slightly less than $1,690,000,000. Of this amount, $1,470,000,000 is represented by actual payments disbursed by the Veterans' Administration. The difference between the maturity value and the present liens on certificates is $1,810,000,000. However, the difference between the present value of the certificates, actuarially computed, and the amount outstanding as liens is only $410,000,000. As the major portion of this difference is represented by the value of the onehalf million certificates which have not been borrowed upon, only $130,000,000 would be payable on the present value basis to the three million men who have borrowed on their certificates, representing an average equity of about $43 on the average certificate in contrast to the $500 which is now sought to be paid by the resolution of the American Legion.

In substance, this resolution seeks the remitting of interest in an amount in excess of $220,000,000 charged to the veterans' accounts, but would require the immediate payment by the Government of interest that will not have been earned until 1945, which together with the amount granted on account of deferred payments totals $2,100,000,000 more than the $1 and $1.25 a day adjustment provided by the original Act. The present value of the certificates in force is $2,100,000,000, whereas it is sought to have now paid $3,720,000,000 (the maturity or face value plus remittance of interest), or an additional amount of $1,620,000,000 over and above the present value and $2,320,000,000 more than the original basic adjustment.

Franklin D. Roosevelt, Memorandum Accompanying the Foregoing Letter. Online by Gerhard Peters and John T. Woolley, The American Presidency Project

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