Mr. AREY. No, sir.

There are some cases that we have it. But

we try to avoid it wherever we can.

The CHAIRMAN. You understand that the International Bank under its charter does not make a loan unless it is guaranteed by the government in which the loan is made?

Mr. AREY. Yes.

The CHAIRMAN. Thereby it immediately places the governments throughout the world in the loaning business or gives them some control in it. In other words, as far as I am concerned, it is very, very socialistic, because we have an International Bank that cannot make a loan unless the government in which the loan is made. guarantees it.

The International Bank, as you know, was founded at the Bretton Woods Conference. It was founded by a man by the name of White, who seems to have been the architect and author of it, who since has been shown to have had quite an affinity toward socialism and communism.

The situation in the International Bank is that every loan they make is guaranteed by a government, thereby putting that government in business, making that government control the loan, regardless of whether the loan is made for highways, public improvements, or whether it is made to private industry. It does not make any difference for what purpose the loan is made, the International Bank under its charter must get the guarantee of the government.

Frankly, I am not saying this to criticize the International Bank or to criticize the Export-Import Bank, I am looking for a new formula. To me, all that communism is is an attack upon the private enterprise system, or an attack upon the ownership of property. That is what socialism is. That is exactly what the Communists did when they took over Russia back in 1917. They took complete control of all the property and thereby everybody in Russia could only work for the Government because the Government owned all of the property, owned all the jobs, and controlled all the industry of that nation.

We are fighting, supposedly, communism. We are trying to teach the people of the world that the private enterprise system, the ownership-property system, the capitalistic system, is better than the socalled Communist system, which is nothing more or less than the government owning all the property.

I am looking for a formula whereby we can get away from governments controlling and owning these properties.

I find in your loans, as I go through them, and we found it in Latin America when we made our trip, that in too many instances the loans were made either to the governments or the governments had a part in them. The governments were in there running things, dictating. We are eventually going to end up, in my opinion, if we continue this process of the International Bank making loans and you making loans, whereby these governments throughout the world control them, either directly or indirectly, that we ultimately will have lost the private enterprise system, the ownership of property system, the capitalistic system.

I am looking for some formula, some plan to get away from it. I am not criticizing the bank. I want to say that so far we have found no basis of any irregularities in connection with the Export-Import Bank. We have found you have been very careful, and that, gen

erally speaking, you have done a good job. As I say, I am not criticizing you at all.

One of the purposes of this study, as far as I am personally concerned, is to find some way of helping in doing the things that you have been doing. I will say this is true of the International Bank, likewise.

I want it done in what I call the private enterprise way, keeping government as far away from it as we possibly can. If the banks are going to inject government into loans in every instance-and I think the record will show that you have done so-not intentionally, but it has worked out that way, and I know it is 100 percent true of the International Bank-then we are going to end up here eventually with government ownership or government control. We will have this thing we are fighting and talking about, spending all of our time and lives resisting, whether we want it or not. It will be upon us because we will gradually get it. Day by day we are putting government further into business.

I want to ask this question: Was it necessary and is it necessary to the functioning of this bank in the future to inject government into it as much as you have in the past? Can we work out a formula, a plan, a policy here where we can assist, as we all want to do, foreign countries, assist our own exporters, assist our own importers, to work out a plan where we do it in what I call the private enterprise system, the private ownership of property, and get government out of it as far as it is humanly possible to do?

I am looking for that formula. I want to be helpful, and that is, as far as I am concerned, the purpose of this unquiry and study.

I want to say that on our trip to Latin America, some of your people went with us, and they were very, very helpful. We did not find the least irregularity in any respect in connection with anything you have done. I am not saying it is not there, but we did not find it or observe it.

I will say the people in Latin America like the Export-Import Bank. They think it is a fine thing and they want it continued. But I also want to say, as I said down there to every government I talked to, that they themselves were injecting government too much into business. Every one of those governments down there is interested in becoming self-supporting in the production of foodstuff and manufacturing. They need and want more capital. They need more capital goods. They need more roads, more highways, more power. They have great capabilities down there, great potentialities They are intelligent people, wonderful people. They are on the march.

It will be in the best interest of the United States, in my personal opinion, if they do become bigger producers, manufacture more and produce more. It will increase their standard of living. There is no question about it. They want to do it. They will tell you frankly they want to do it. Unfortunately, it is too mixed up in politics. We, through the International Bank and the Export-Import Bank, are further mixing it up in politics because we are doing business with the governments down there rather than with private enterprise.

In their zeal and enthusiasm down there to get into the manufacturing business, which I hope they will do, because they can do it, I am fearful that they are going to end up with too much socialism.

With the governments owning too many private enterprises, the government having its nose in every business.

As I say, I am looking for a formula. I do not want to see us defeat the very thing we are trying to do, which is to promote the private enterprise system and the capitalistic system and the ownership of property.

That is all communism and socialism is. Losing your freedoms, losing individual freedoms, only comes when the government gets complete control of all the property. That is when you lose your freedom. The loss of freedom and the loss of the right to worship God as you see fit, loss of freedom of the press and all those things are byproducts of having lost all the property rights of the individual. That is all communism is.

I am looking for a formula here. I hope you gentlemen in this study, as we go along, will help us find a formula. There is no question in my mind but what we are going to have to give, and should give, considerable help to many countries, particularly the raw-materialproducing countries and the so-called backward countries. I do not know why we call them backward countries, but they are so designated.

I think we ought to help them to increase their standard of living, to get into the production of many things. Maybe it is in the best interest of the United States to do it. But I do not think it is in the best interest of the United States for us and for they themselves to do it on what I call a socialistic basis, or a basis where the government is going to eventually end up owning and controlling all the property and business in the country.

Is there not some better formula than we have been using? I wish you would give a lot of thought to that. I think the record definitely shows too much government in these loans.

Let me say that I am not unmindful of the fact that you were directed by the Congress of the United States, as a result of the war, trying to increase the production of minerals, to inject the governments into it. I am not unmindful of that. I know that. I am not personally criticizing you or personally criticizing the Export-Import Bank.

I am anxious to see the other nations of the world build up their production, their supply of foodstuffs, and their standard of living, because I know it will be in the best interests of the United States. But I am not willing that they do it at our expense. I am certainly opposed to doing anything that is going to hurt the people of the United States. I will not be a party to it.

By virtue of the same thinking, I would like to see a higher standard of living, more production, more manufacturing, the production of more things, better roads, better highways, better communications, more power, particularly in Latin American countries, which I think are so important. We should have their friendship and good will, stand together, North, South, and Central America. But I do not want to see us by virtue of our policies, the things that we do, end up in a socialistic manner, end up with the government owning all of the property or controlling all of the property, because if we do we defeat the very thing that we say we are opposed to at the moment.

Mr. AREY. Senator, I can assure you we want to give you all the facts that we can that will help in trying to answer these things.

I would not be so presumptuous as to say that I could answer that statement. I would like to make a few observations.

The CHAIRMAN. I wish you would. You are the Assistant Director?
Mr. AREY. I have been with the bank since 1938.

The CHAIRMAN. I thought you went with the bank in 1934?
Mr. AREY. No, sir.

The CHAIRMAN. Since 1938?

Mr. AREY. Yes, sir.

The CHAIRMAN. I again want to say that so far we know of no irregularities in connection with the bank. We found none on our trip to Latin America, and I am not personally criticizing you or the bank, but I certainly am looking for a formula that will keep us away from what I am fearful is eventually going to be socialism or communism. It automatically arrives when a given government gets control of not necessarily all of the property, but a great majority of the property in a country, when it gets control of certain industries in that country, where the government is the only employer. Then you have the equivalent of socialism and communism.

Mr. AREY. What I would like to state are some general things and not just to argue about the particular cases.

The CHAIRMAN. I just want you to help us, if you can. Maybe we need new legislation. Maybe we need a new policy. I just want you to give some thought to it.

Mr. AREY. Maybe I can make these statements on it. Of these loans that are listed, 184 of them are to governments; 144 are to private industry.

The CHAIRMAN. Does a government have any part in that 144? Mr. AREY. No, sir.

The CHAIRMAN. We found in Latin America a number of instancesit may well be with the International Bank, I do not know, as I do not have my record here that the government would own a part of it, private industry would own a part of it and you would finance the balance. For instance, that is true of a big steel mill in Brazil. The charter of that organization says that the President of Brazil shall name the president of the steel mill.

Is that an International Bank loan or an Export-Import Bank loan? Mr. AREY. That is one of our loans. There are 102 loans which are to private or mixed public and private companies where there is a guaranty. Then there are 47 loans in this list that are to banks. Some of those are the central banks.

I would like to point out certain things. There are listed among these loans to governments, as I stated before, in this 184, many in which we hold the paper of government-owned foreign raliroads, which we bought from our suppliers. This is about the only country in the world, I guess, where most of the railroads are not owned by the governments. And our exporters, if they do not sell to the government-owned railroads, do not sell railway equipment.

We have a lot of loans like that. We have government guaranties, Senator, in many cases because today, however wealthy a man may be in his own country, unless he gets the guaranty of the central bank or someone else to furnish him the dollar exchange when the time comes, he cannot pay the loan. It is an unfortunate thing that that has been necessary.

Many of the loans, such as for highways, port works, things of that sort, would most naturally go to the governments.

The CHAIRMAN. We know highways, schools, sewers, streets are the responsibility of government. We have established that in the United States, and any loans you make for that purpose would be made to a government and that government would guarantee them. Nobody is objecting to that.

Mr. AREY. In our discussions with private groups, many times they say, "If you will help finance these basic roads and other things, then we can go in, but until those are provided we cannot make our investment."

I am not saying this as an excuse for an answer because you have to wrestle with each case as it comes along. It is true that in the steel mills in Chile and Brazil there is government participation to a great extent. I will say, however, that in the Chilean case 51 percent of the common stock is privately owned, and I think the law so provides. Maybe they will change the law.

In the Mexican setup, 70 percent was privately owned at the time of our loan and one of our own United States companies had the management contract.

In Brazil, that was one of the first times the Brazilians invested in industry; that has not been the pattern and the custom. Some assistance to a country that has such possibilities to encourage its people to start investing, we felt at the time, plus the war exigencies, was of great value.

It has been traditional that their funds have gone into land rather than into industry, as we have been accustomed to do in this country. I just point out a few of these problems that we are wrestling with. The CHAIRMAN. I understand and I see the problem. The bigger the problem the more thought you must give to it. I have always had a great belief and feeling that if you think about a thing hard enought, long enough and intelligently enough you will find a way to solve it.

Mr. AREY. The majority of loans we have made in more recent years I think have been private. That is partly because the International Bank is taking care of some of these basic facilities. We have made 2 in Brazil in the last few years, 2 large loans to the American & Foreign Power Co., in which there were no Government guaranties, to expand privately owned facilities that United States private enterprise was interested in.

The American & Foreign Power Co. has sold stock in Brazil and encouraged people to invest. That was one of the first instances of a company with a lot of United States capital successfully floating big issues in the foreign country. They could not have done it if we had not stepped in and helped.

I just say that when you look at that list you sometimes notice that the obligor is a government because we had to get somebody as a guarantor of exchange, but 144 of the loans in that list were to private companies without any guaranties.

The CHAIRMAN. Wherever we went on our Latin American trip we were preaching the private enterprise system as being the best kind and type of system for developing their respective countries, which I am sure it is.