Mr. SACKS. Is it not more or less guesswork that Russia will make a formal declaration of war against Finland? What more can they do than they are doing now, and is it not guesswork that they will declare war?

Mr. WOLCOTT. The only countries who are actually fighting are those who are not at war; we meet that condition.

Mr. MILLER. Has the State Department given the Export-Import Bank any official decision as to whether or not it would be a violation of neutrality to make a loan to Finland under the existing circumstances?

Mr. JONES. Have they given us an opinion as to whether it would be a violation?

Mr. MILLER. Yes; of the neutrality law, to make a loan to Finland? Mr. JONES. The State Department is represented on the board of the bank, and under no circumstances would the bank make a loan in violation of the foreign policies of the State Department.

Mr. MILLER. That is what I wanted to get; you do have contact with the State Department or contact the State Department? Mr. JONES. Yes.

Mr. WOLCOTT. Mr. Jones, if this is to be put on the basis of whether we shall or shall not help Finland, I do not think there is a handful of Members of the Congress who do not want to go along with it, but we want to put the legislation, however, in such condition that we are not going to destroy our neutral position. That is why I have gone into this matter as thoroughly as I have.

I wish that you would discuss this proviso on page 2 which to me is ineffective and sort of meaningless. The only effect of it would be to prevent our munitions manufacturers from selling to Finland and would force the orders for munitions to other countries. Let me give you an example. We will assume that you are asked to contribute to a community chest. You like the Salvation Army, which is a participant, but you do not like the Y. M. C. A., which is also a participant. You specify that the $100 that you are donating to the community chest must go to the Salvation Army. You get a nice letter back from the board assuring you that your $100 is to go to the Salvation Army. When it is all made up the Salvation Army will get $10,000, and your $100 goes to the Salvation Army. It all goes into the common pot before it is distributed. It seems to me that the loan to Finland of $20,000,000 for the purchase of noncombatnant material just releases that much money for the purchase of munitions in other countries. That is the effect of it, is it not?

Mr. JONES. I think that is a very good assumption.

Mr. WOLCOTT. Then it is just a little bit demagogic; it does not mean anything?

Mr. JONES. I would not say that.

Mr. WOLCOTT. I did not expect you to.

Mr. JONES. The Senate passed it, and I would not want to accuse its Members of being demagogic.

Mr. WOLCOTT. I should perhaps withdraw the question.

Mr. SACKS. Would you object, Mr. Wolcott, if some of the surplus in farm produce going to England and France were eventually traded to foreign countries for munitions?

Mr. WOLCOTT. I think that we should stop kidding ourselves with respect to this international situation.

Mr. SACKS. Who is kidding themselves?

Mr. WOLCOTT. I think we are.

Mr. SACKS. I am not. When I vote for this loan to Finland I can see that it is going ultimately to some other country for munitions. I do not blame myself for voting that way.

Mr. WOLCOTT. It will give you an opportunity to go back and tell your people that you are not for the sale of munitions to Finland.

Mr. SACKS. No; not me. When I voted on the Neutrality Act I stated at that time I was willing to help France and England with munitions.

Mr. WOLCOTT. Have there been, Mr. Jones, any loans made by the Export-Import Bank for the purpose of financing imports? Mr. JONES. What is the question?

Mr. WOLCOTT. Have there been any loans made by the ExportImport Bank for the purpose of financing imports?

Mr. JONES. Well, in effect, the loan to China is that, because we import tung oil from China.

Mr. WOLCOTT. That is a bargaining proposition?

Mr. JONES. Both ways.

Mr. WOLCOTT. They pay back their loan with wood oil?

Mr. JONES. Well, they ship wood oil to this country and sell it, paying us the money. That is financing imports.

Mr. WOLCOTT. But the loan was made for the purpose of exporting United States products to China?

Mr. JONES. Immediately; yes, sir.

Mr. WOLCOTT: Immediately?

Mr. BROWN. We also get tin from China; do we not, Mr. Jones? Mr. JONES. Yes.

Mr. WOLCOTT. Yes; but have any loans been made primarily for the purpose of financing imports from any foreign countries?

Mr. JONES. One or two very small ones, but we are prepared to do it, and we must do it. Otherwise we will soon have all the money in the world, and then we will have to break up the game.

Mr. WOLCOTT. Would you have any objection to an amendment to this bill restricting the use to which the money may be put to the effect that it should not be used to finance the importation of products to this country, of which there is a surplus in this country?

Mr. JONES. I have no objection, but I do not think it is necessary. Mr. FORD. Mr. Chairman.

Mr. WILLIAMS. Yes, Mr. Ford.

Mr. FORD. I would like to ask Mr. Wolcott what he is trying to develop? Is he trying to make it clear here that the Export-Import Bank is set up for the purpose of financing imports into the United States to compete with American products?

Mr. WOLCOTT. That is what I was trying to find out, if it had been done, because they are extending their activity, doubling their activity. I think there should be some assurance given to the American farmer and the American workingman that no part of this money is to used for goods coming in in competition with them.

Mr. FORD. You limit it as to competition?

Mr. WOLCOTT. Yes; competition, Mr. Ford, with the manufacture and production of goods of which there is a surplus in this country.

Mr. GORE. Mr. Jones, on Tuesday the junior Senator from Ohio made this statement in a speech in the Senate, which I read to you:

Mr. President, the Export-Import Bank is largely lending to governments.
Is that statement substantiated in fact?

Mr. JONES. I do not think it is, but I think the best way to answer it is to give you what we are doing. In the case of Finland, Finland organized in this country an American corporation with $1,000,000 paid-in capital stock, and we agreed to lend that company $10,000,000, 90 percent of the cost of the items that we exported. The notes are endorsed by the Government of Finland. Now, that is an indirect loan to Finland or fairly direct.

In the case of the China loan, that is also an American corporation, the Universal Trading Co., owned in China. We loaned the money through the Universal Trading Corporation upon the guaranty of a Chinese bank.

Mr. FORD. You said before the Bank of China.

Mr. GORE. Yes; the Bank of China.

Mr. JONES. The Bank of China; yes. Mr. Pierson, what percent of the capital stock of the Bank of China is owned by the Chinese Government?

Mr. PIERSON. About half of it.

Mr. GORE. And this loan which is ordinarily referred to as a loan to Finland, which you have just explained, is really a loan to an American corporation?

Mr. JONES. Yes; guaranteed by Finland.

Mr. GORE. Now, if Finland's guaranty becomes of no value, what assurances then would you have of repayment?

Mr. JONES. Nothing except the responsibility of the corporation, and if it had assets in this country we would have them.

Mr. GORE. Does it have any assets in this country?

Mr. JONES. Probably if it had assets, not necessarily in this country, and to the extent it had assets we would have them.

Mr. GORE. What percent of the commitments now are to governments per se?

Mr. JONES. What do you mean, per se?

Mr. GORE. I mean as such.

Mr. JONES. How do you regard the Finnish loan?

Mr. GORE. Well, from your explanation, I would call that a loan to the Government.

Mr. JONES. That is $10,000,000, and the Chinese loan is $25,000,000 less payments.

Mr. GORE. Now, there was a difference between your loan to China that you referred to and the loan to Finland.

Mr. JONES. Yes.

Mr. GORE. As I understand it, the bank in China, which is really a governmental bank, is called the Central Bank of China; is it not, instead of the Bank of China?

Mr. PIERSON. Yes; the Central Bank of China is another institution. Mr. GORE. Is not that more largely controlled by the Government than the Bank of China is?

Mr. PIERSON. Yes. The Bank of China is a private bank in which the Government owns a substantial part of the stock.

Mr. GORE. Do you have the guaranty of a private bank in China? Mr. JONES. Yes, sir.

Mr. GORE. And in the case of the loan to Finland, you do not have? Mr. JONES. Yes; and in the case of Sweden, Sweden wants $25,000,000 to $30,000,000, and they want that credit for their nationals, their industries that buy in this country, and the loan will be guaranteed by the Bank of Sweden, which is an institution of high credit.

Mr. GORE. Is that a private bank or a Government bank?
Mr. JONES. It is a Government-owned bank.

Mr. GORE. It is a Government-owned bank?
Mr. JONES. What?

Mr. PIERSON. The Bank of Sweden.

Mr. JONES. Entirely?

Mr. PIERSON. The private banks cooperate with the Bank of Sweden but it is under the control of the Government.

Mr. JONES. The bank has very high credit standing in this country. Mr. GORE. Mr. Jones, the junior Senator from Ohio also said this, and I quote him:

"As a matter of fact this increase in capital"-referring to the capital stock-"is equivalent to an increase in general Government expenses." Do you agree with that?

Mr. JONES. No: I do not.

Mr. WILLIAMS. Mr. Jones, there is a quorum or roll call in the House. They meet today at 11 o'clock, and the membership of this committee suppose will have to go over there. I do not suppose we will be able to have a meeting this afternoon.

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Mr. MILLER. They will be reading the Navy bill.

Mr. WILLIAMS. When will it be convenient for you to come back, Mr. Jones?

Mr. JONES. Any time at all. The sooner the better.

Mr. WILLIAMS. I suggest that the committee adjourn until 10:30 Monday morning.

Mr. JONES. Ten-thirty?

Mr. WILLIAMS. Yes; at which time we will hear from you further. Mr. WOLCOTT. May I suggest to Mr. Jones that a short time ago you sent to us the report of the Export-Import Bank showing the commitments and the amount of commitments which have been taken up by each of the countries or people who loaned from it. That is in shape, is it not, so that you can put it in the record?

Mr. JONES. Yes, sir.

Mr. WOLCOTT. Will there be any objection to inserting that in the record?

Mr. WILLIAMS. It depends upon how long that report is, but to that part of it I do not think there would be any objection. You do not mean the entire report? We will discuss that on Monday.

The committee now stands adjourned until 10:30 a. m. Monday. (Thereupon, at 11:40 a. m., the committee adjourned until Monday, February 19, 1940, at 10:30 a. m.)

INCREASING THE LENDING AUTHORITY OF EXPORT

IMPORT BANK OF WASHINGTON

MONDAY, FEBRUARY 19, 1940

HOUSE OF REPRESENTATIVES,

COMMITTEE ON BANKING AND CURRENCY,

Washington, D. C.

The committee met at 10:30 o'clock a. m., Hon. Clyde Williams presiding.

Present: Messrs. Williams, Spence, Ford, Brown, Patman, Barry, Gore, Mills, Folger, Monroney, Hull, Wolcott, Gifford, Luce, Crawford, Gamble, Johnson, Kean, Miss Sumner, Mr. Miller.

Mr. WILLIAMS. The committee will be in order. Mr. Jones will resume his statement to the committee.

STATEMENT OF JESSE H. JONES-Resumed

Mr. WILLIAMS. Mr. Jones, before asking you any further questions, there were some questions put to you when you were here Friday with reference to a certain situation that perhaps should be cleared up.

In the first place, there was some question under the Johnson Act as to whether the R. F. C. or the Export-Import Bank could make a loan to a foreign country that had defaulted in the payment of its obligations to the United States. I believe you expressed the opinion at that time that your corporation was excepted from the Johnson Act.

Mr. JONES. Yes, sir. Any corporation in which the United States Government has, I believe it says, or exercises a controlling interest through stock ownership or otherwise.

Mr. WILLIAMS. Now, as the representative of the lending agencies of the Government, what is the reason, Mr. Jones, for excepting these public or Government-owned corporations?

Mr. JONES. Well, Congress did that, but not at our suggestion.

Mr. WILLIAMS. Yes; it is an act of Congress, of course. But, from your standpoint, is there any reason for that?

Mr. PATMAN. Mr. Chairman, may I ask if Mr. Jones did not state that he was going to comply with it, anyway?

Mr. WILLIAMS. Undoubtedly so; there is not any question about that. I want to clear up this situation positively so there will be no further contention about it.

Mr. JONES. You want to know if I thought there was any reason for that?

Mr. WILLIAMS. Yes. I have been thinking about that myself, and personally I can see no reason for it. If there is one, I would like to know it.

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