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INCREASING THE LENDING AUTHORITY OF EXPORT

IMPORT BANK OF WASHINGTON

FRIDAY, FEBRUARY 16, 1940

HOUSE OF REPRESENTATIVES,
COMMITTEE ON BANKING AND CURRENCY,

Washington, D.C. The committee met at 10:30 a. m., pursuant to notice, Hon. Clyde Williams presiding.

Present: Messrs. Williams, Spence, Ford, Brown, Evans, Sacks, Gore, Mills, Folger, Monroney, Hull, Wolcott, Gifford, Luce, Gamble, Simpson, Johnson, Kean, Miss Sumner, and Mr. Miller.

The committee had under consideration the following bill:

[S. 3069, 76th Cong., 3d sess.)

AN ACT To provide for increasing the lending authority of the Export-Import Bank of

Washington, and for other purposes

Bc it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That section 9 of the act approved January 31, 1935 (49 Stat. 4), as amended, is amended (1) by striking out “$100,000,000" and inserting in lieu thereof “$200,000,000", and (2) by inserting before the period at the end thereof a colon and the following: "Provided further, That the aggregate amount of loans to any one foreign country and the agencies and nationals thereof which are hereafter authorized to be made and are outstanding at any one time shall not exceed $20,000,000, and such amount shall be in addition to the amount of loans heretofore authorized or made to such foreign country and the agencies and nationals thereof: Provided further, That the Export-Import Bank of Washington shall not make any loans in violation of international law as interpreted by the Department of State or for the purchase of any articles listed as arms, ammunition, or implements of war by the President of the United States in accordance with the Neutrality Act of 1939."

Passed the Senate February 13 (legislative day, February 7), 1940.
Attest:

EDWIN A. HALSEY, Secretary. Mr. WILLIAMS. The committee will please be in order. This meeting has been called to consider S. 3069, a bill to enlarge the lending authority of the Export-Import Bank of Washington. I am sorry to announce, in the first place, that our chairman is not able to be here on account of illness, and has asked me to go ahead with this hearing.

We have with us this morning Mr. Jones. It is not necessary to introduce him to this committee. We will be glad to hear from you, Mr. Jones, at this time on this bill.

1

STATEMENT OF JESSE H. JONES, FEDERAL LOAN ADMINISTRATOR,

AND MEMBER OF THE BOARD OF TRUSTEES OF THE EXPORTIMPORT BANK OF WASHINGTON

Mr. JONES. Mr. Chairman, I think it might be better if the members of the committee would ask me such questions as they would like enlightenment on.

Mr. WILLIAMS. You do not care to make a general statement to start?

Mr. JONES. Well, we discussed a similar bill in detail last year before this committee, which had for its purpose increasing the revolving credit fund of the Export-Import Bank from $100,000,000 to $200,000,000, and your committee reported it out favorably.

Mr. WILLIAMS. In order that we might have a record of this hearing, and for the benefit of members of the committee, and especially for the benefit of the membership of the House, what is the ExportImport Bank?

Mr. JoNEs. The purpose of the Export-Import Bank is largely to aid in the exportation of our agricultural and manufactured products.

Mr. WILLIAMS. When was it organized!
Mr. JONES. It was organized in 1934.
Mr. WILLIAMS. There were originally two banks, were there?
Mr. JONES. Yes, sir; there were two.

Mr. WILLIAMS. There was some question raised about that, and just in order to clear the record, what has happened with reference to the two Export-Import Banks?

Mr. JONES. The first Export-Import Bank, which is the present one, was organized originally to facilitate trade between this country and Russia

at the time the Soviet Union was recognized, and later the second Export-Import Bank was organized with a smaller capitalization to aid Cuba. All it ever did was to buy silver for Cuba and have it minted in this country. Payment was made when the coins were shipped. That bank did something over $20,000,000 in that character of service for Cuba, and all with no loss, but with some profit. The second Export-Import Bank was merged into this bank later. When the contemplated trade increase between our country and Russia did not materialize this bank was then used to assist financing exports to countries all over the world. We have since that time extended credit to aid our manufactures to export their products-small amounts mostly—and to some 55 countries.

Mr. WILLIAMS. The second Export-Import Bank was liquidated?

Mr. Jones. Yes; it was liquidated, and its commitments assumed by the other bank.

Mr. WILLIAMS. Were there any losses in conection with that liquidation ?

Mr. Jones. No; there were no losses, and there was some profit.
Mr. WILLIAMS. What is that?
Mr. JONES. There was some profit; not a large profit.
Mr. WILLIAMS. What is the capital stock now of the present bank?

Mr. JONES. The capital stock is $46,000,000, of which $1,000,000 is common stock and $45,000,000 is preferred. The preferred stock belongs to the R. F. C.

Mr. WILLIAMS. Who owns the $1,00,000 worth?

Mr. Jones. The United States Treasury. Mr. WILLIAMS. What business have you done so far? Mr. JoNEs. I can give you the figures fairly accurately, I think. The total loans authorized have been $290,770,000. Of this authorization, $109,554,000 were canceled due to the fact that in most cases the manufacturer was not successful in securing the order for which he made a bid, and a few cases were canceled because the situation changed.

Mr. WILLIAMS. Right in that connection, what do you mean by the situation changing ?

Mr. JONES. Well, in one case we made an authorization to Uruguay for $4,000,000. They had an improvement in their exchange situation due to extraordinary sales to England and other warring countries, and they did not use the loan. There have been other similar cases.

Mr. WILLIAMS. All right, continue your statement. You had some other figures, did you not?

Mr. JONES. Well, I have a lot of figures.

Mr. WILLIAMS. I am asking you for the present situation. That is what we want to get before us as well as we can,

what business you have done, and what your present situation is.

Mr. JONES. We have, under authority of Congress, a total revolving credit fund of $100,000,000. We have outstanding now $70,196,000. So we have approximately $30,000,000 unused, but we have commitments outstanding of $60,000,000. Therefore we are $30,000,000 overcommitted at the present time, and the reason we can be overcommitted is because of repayments and the cancelations.

Mr. Sacks. Mr. Jones, at this point I would like to ask you a question. Would this $100,000,000 increase in this act be used solely for the purpose of loans to Finland and other countries such as Denmark and other countries in Europe? Is that all that it would be used for, or will it be used in the general business of the Export-Import Bank?

Mr. Jones. It would be used generally, and it is the same amount that we asked for last year when there was no war in Europe and when there were no applications from the Scandinavian countries.

Mr. SACKS. Is not this amount similar to the amount that was asked for and that we agreed upon in the lending and spending bill ?

Mr. JONES. Yes; I just stated that.
Mr. BROWN. Have you any commitments to Finland now?
Mr. JONES. To Finland ?
Mr. Brown. Yes, sir.
Mr. Jones. Yes; we have given them a credit of $10,000,000.

Mr. SPENCE. What are your present commitments? You have $60,000,000 commitments at the present time?

Mr. JONES. Yes, sir; $60,000,000.
Mr. SPENCE. Of what do they consist ?

Mr. JONES. We have a complete list here of every loan that has ever been made by the bank, which I would be glad to introduce for the record. At a glance I will give you some of the items.

Mr. SPENCE. Is the contemplated loan to Finland considered a commitment now? Is that one of the commitments ?

Mr. JoNEs. The $10,000,000; yes.
Mr. Sacks. Are there any others, Mr. Jones?
Mr. JONES. We have a commitment to Norway.
Mr. Sacks. How much is that?

Mr. JONES. $10,000,000. That is not included in the $60,000,000. Mr. Sacks. That makes $70,000,000 then?

Mr. JoNEs. Then we have a tentative commitment of $10,000,000 to Sweden, and that is not in the commitments.

Mr. Sacks. That is $80,000,000 ?

Mr. JONES. Those commitments are conditioned on getting the money from Congress. I mean, if we get this legislation through.

Mr. SACKS. Are there any more contemplated commitments to Finland besides the $10,000,000?

Mr. JONES. Finland wants more credit.
Mr. Sacks. What is the attitude of the board; you know.

Mr. Jones. When Finland has expended the entire $10,000,000 we will then give consideration to additional credits.

Mr. Sacks. Is there a commitment there to China?

Mr. JONES. There is a commitment there to the Universal Trading Corporation, which is owned either by China or Chinese capital, a New York corporation, a commitment of $25,000,000.

Mr. Sacks. $25,000,000 ? Mr. JONES. Yes. Mr. SACKS. Will that be included in this? Mr. JONES. About $20,000,000 of that has been used. Mr. SACKS. Yes. Mr. JONES. And $2,250,000 has been repaid. Mr. Sacks. Are there any more contemplated commitments to China?

Mr. JONES. China has asked for additional credit. This $25,000,000 was to be paid back largely through the exportation to this country of wood oil over a period of years. They have already paid from that source something over $2,250,000, and they are ahead of their schedule of payments.

Mr. SACKS. You do not contemplate, do you, any more loans to China under this act if it is passed ?

Mr. JONES. We would, under this bill, be permitted to lend China an additional amount up to $20,000,000, and China has asked us for $75,000,000 additional. They want to pay it back from the sale of tin, and we import tin. So, there is no reason why we should not make the deal if, in our opinion, the tin would come through.

Mr. Sacks. How about the Balkan States; are there any commitments there?

Mr. JONES. The Balkan States?
Mr. SACKS. Yes.
Mr. JONES. No; none that I know of.
Mr. Sacks. Thank you.

Mr. SPENCE. There is no limitation in the law now as to the amount you can lend to any one country?

Mr. JONES. No.
Mr. SPENCE. In the bill before us it will be limited to $20,000,000 ?
Mr. Jones. Yes, sir; in this bill.

Mr. GIFFORD. I have not the original act setting up the ExportImport Bank, but is there any limitation in that original act?

Mr. JoNEs. No; there is no limitation.

Mr. GIFFORD. Is there any limitation that you can loan only to those nations where you think there is a reasonable expectation of its being repaid?

Mr. JONES. There is no limitation except the amount of money we have available which is at the present time the $100,000,000 revolving fund.

Mr. GIFFORD. Would you lend to a country when you did not feel there was a probable expectation of its being repaid? What worries me more than anything else about this matter is that Finland is a very small country, and might not withstand the horde of Russian aggression. Are you to say that she will probably defend her land and repay this money? Or will she be obliterated and therefore unable to pay?

Mr. JONES. My judgment is that the lending of this money will not decide the war, and I do not believe the spirit of the Finnish people will be crushed. You may kill off some of this generation, but in my view there will be a Finnish people, and probably a Finnish Government for a long time; they are an honorable people and will pay

their debts. I would not want to lend them too much money. Mr. GIFFORD. I wish to go on record as saying that I want you to lend them as much as you will and for any purpose. But I wanted to ask if in the original act there was a limitation recited whereby you could not loan unless you felt it could be repaid?

Mr. JONES. I do not feel that the administrator of our act, or of this law under which we operate, has any right to lend money that he does

not expect to get back. Mr. GIFFORD. You think the national spirit of the Finnish people may survive, and if that survives it would be sufficient reason for you to make the loan?

Mr. JoNEs. They have always survived. It may not be appropriate to this discussion, but I think it is a fair assumption that when this war is over the map of Europe will not be greatly changed; that there will still be a Finland, a Sweden, a Norway, and Denmark, as well as other countries.

Mr. GIFFORD. I thoroughly approve of this, mind you, but I simply asked the question if, in the act itself, there is any requirement that would prevent you from doing it?

Mr. JONES. Other than the fact that we think we will get the money back?

Mr. GIFFORD. Yes.

Mr. Jones. We have no right to give the money away, or to make grants.

Mr. LUCE. Have you made any commitments encouraging trade or helping trade with Japan?

Mr. JONES. No.
Mr. LUCE. Would you decline to do it?

Mr. Jones. We would rather cross that bridge when we get to it, Mr. Luce.

Mr. LUCE. How about Russia itself; have you made any commitments to Russia on heavy machinery, or things of that sort?

Mr. JONES. No. We made loans to finance the exportation of cotton to Russia some 4 or 5 years ago but nothing lately, and we have had no application.

Mr. LUCE. You have had no application ?
Mr. JONES. No.

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