Senator PAYNE. You think they are going in pretty well on the long term? Mr. HWOSCHINSKY. We are limiting the amount of money available for that purpose. I have not heard any complaints in that regard. I think for well-thought-out projects, the money is available. The next thing I would like to dwell on a little bit was touched upon this morning, as to what types of loans the Export-Import Bank should grant and should not grant. The opinion was expressed that, perhaps, development loans in the majority of cases should not be the province of the Export-Import Bank, that perhaps they should be passed on by the world bank. I would like to place emphasis not so much on what the aim is, but how much they help our economy, our foreign trade, because very often a development loan has helped our foreign trade. I will go one step further. I am afraid that you, Senator Capehart, will disagree with me, but very often a loan that creates competition to us is not a loan that should be disregarded offhand, because eventually, it either saves exchange, which in its turn, will be used for other purchases in this country, or else it creates new exchange. In other words, a loan may result in the sale of equipment, or manufacturers have benefited, a factory has been built and starts competing with us, importing goods to this country which might hurt that particular industry, but it will improve the chances of some other industry to sell in the same market, because the dollars are still available. Most of the dollars are used for purchases, some are invested, but by and large, that type of operation results in a switch from one type of export to another. We must not forget that our best customers, our best foreign customers, are countries that are most industrialized, Great Britain and Canada. They have all kinds of competing industries. But that operation breeds on itself. You create more demands and it takes more goods. The CHAIRMAN. I can agree with you, except that I think more loans ought to be made to private enterprise within those countries, rather than for the government to go into the private enterprise system. Mr. HwOSCHINSKY. Quite right. That is where I want to come in and say that I am 100 percent with you in this. But we must not forget that when the Export-Import Bank and the world bank started, the climate was not ready for loans without a guaranty. The international bank is precluded from making them by their charter. Of course, in a somewhat similar situation, they are considered an investment corporation, which would not necessitate having that guaranty, and which would enable the world bank to go into partnership with private capital, and that is the first step where they want to divorce themselves from getting a hold on private business, which is not their province and not their intention. The Export-Import Bank does not have that provision under the charter. It has made a lot of loans without that guaranty. I think that if they continue insuring the risks, they will find that the banks would be willing to loan funds, not for 10 years, but for perhaps intermediate credits, if the rates are right. Banks are always glad to loan money at reasonable rates. The CHAIRMAN. If they have it, they are. Mr. HWOSCHINSKY. I think that that is all I want to say. The CHAIRMAN. We are certainly pleased to have your testimony and your viewpoint. You agree with me that the biggest problem is the one of credit and terms? Mr. HWOSCHINSKY. Quite right. That is our biggest problem today. The CHAIRMAN. It is our biggest problem, don't you think, in building up and helping the other countries to build up their standard of living? Mr. HWOSCHINSKY. Quite right. I would add to credit and terms, that our next problem is the development of the proper climate for investment. Efforts are being made, now, through tax relief and different ways, so I think that is going on. The CHAIRMAN. You are not going to encourage that if, every time you make a loan, you insist that the government guarantee it and insist that the government become involved in it, as the international bank and the Export-Import Bank do in a good many instances. Mr. HWOSCHINSKY. They had to do it in the beginning, Senator Capehart. It has been that without additional obligation, without their guaranty, you are apt to find yourself vis-a-vis a government that would be opposed to repaying. The CHAIRMAN. I make that statement because I want to discourage the government from taking a part in private enterprise, because I do not think that is the way to build up their standard of living. I do not think that is the way to get the big money out of the United States for the kind of investments they need in these so-called backward countries. Thank you very much. We appreciate your statement. Our next witness will be Mr. Curtiss C. Grove, vice president, Bank of the Manhattan Co., New York City. You may proceed, Mr. Grove. STATEMENT OF CURTISS C. GROVE, VICE PRESIDENT, BANK OF THE MANHATTAN CO., NEW YORK, N. Y. Mr. GROVE. Mr. Chairman, my name is Curtiss C. Grove. I am a vice president in charge of our foreign department. It is a privilege to be here before this committee. I have a statement, Mr. Chairman, which is not very important, but I would like to read it. It will take 3 minutes. The CHAIRMAN. You go ahead in your own way. Mr. GROVE. It is a privilege to appear before this committee to testify concerning the Export-Import Bank. Ever since the formation of the bank, Bank of the Manhattan Co. has gladly participated to the extent allowed in credits arranged by the Export-Import Bank. We would have liked to share such business to an ever greater amount, but since it is largely directed by the banks in the country to which the Export-Import Bank credit is extended, we had to depend on our foreign correspondents to direct this business to us. According to our records of this business, going back to August 1939, Bank of the Manhattan Co. has participated to the extent of $46,737,000 in Export-Import Bank credits aggregating $582,844,000. From the beginning, we welcomed and have been sympathetic with the purposes of the Export-Import Bank. Not only have its activities furthered the export of goods from the United States, but also, they have been most helpful in keeping the channels of trade 42493-54-pt. 1-15 220 STUDY OF EXPORT-IMPORT BANK AND WORLD BANK open to our friends throughout the world in their economic and political struggles during very trying times. The Export-Import Bank is not a competitor of the commercial banks in the United States. It is our understanding that the bank arranges credits only after it has been determined that the commercial banks cannot accept the risks involved. Commercial banks have available for risk, for the most part, funds of depositors, most of which are repayable on demand or at the expiration of relatively short periods of time after demand. The major portion of loans made with such funds must be for shorter periods of time, and at less risk than has been possible for Export-Import Bank, which was formed to take not bad risks, but different risks from those normally taken by commercial banks and, of course, in light of its purposes, its credits can be for longer terms than commercial banks normally provide. Bank of the Manhattan Co.'s continuing interest in participating with the Export-Import Bank is not based on the rate of return available in such credits, for the rates on Export-Import Bank credits in every instance were lower than the prime rates of interest prevailing at the time. Our interest in such transactions stems from the fact that we are in business in those parts of the world where we have in the past maintained close and normal relations. We are also interested in participating in business in other places where there is prospect of normal business relations in the future. Through the Export-Import credits, we can participate in areas which at this time are not yet attractive for commercial bank transactions. By continuing the old channels of trade, the Export-Import Bank has been very helpful to United States exporters, both farmers and manufacturers, since it has made possible sales and exports of United States products which otherwise could not have been made. There are still various areas abroad requiring materials from this country which, under existing conditions, cannot be paid for in 90 or even 180 days, but require financing for 2 or 3 years. The areas I have in mind are not bad business risks, and if Export-Import Bank guaranties of a substantial portion of sales to such areas are available, the United States commercial banks would be able to furnish the necessary financing without the use of money supplied by the United States Government. In our judgment, the Export-Import Bank still has a genuine opportunity to increase United States export trade. We should like to see the Export-Import Bank continued, perhaps even enlarged, until the world again takes on a semblance of peace and normality. It will be our pleasure to give every cooperation that we can in the period ahead. The CHAIRMAN. Thank you very much. Without objection, your letter of September 22, 1953, in relation to the questionnaire, will be made a part of the record at this point. (The material referred to follows:) BANK OF THE MANHATTAN Co., UNITED STATES SENATE, COMMITTEE ON BANKING AND CURRENCY, (Attention: The Honorable Homer E. Capehart, Senator.) DEAR SIRS: In connection with a study which you are making of the operations of the Export-Import Bank of Washington and the International Bank for Reconstruction and Development, you are seeking answers to certain questions which are set forth in your letter of September 10. It is indeed a privilege to have the opportunity to provide the information requested as it is our sincere desire to give your committee all possible assistance for the attainment of your extremely worthy objective. The following are our considered and frank replies to the specific questions propounded in your letter: 1. The Export-Import Bank has been of inestimable assistance to many of our clients. 2. To the best of our knowledge and belief it has not competed with private capital in our area. 3. As far as we know, it has not taken any business from our bank. 4. We would be happy to have a larger share in the temporary financing and facilitating of exports and imports between the United States and other countries 5. Term loans have been extended by us to certain foreign governments and central banks for periods ranging from 2 to 5 years. We have not made such loans to our domestic or overseas clients for the purpose of financing foreign trade. 6. We have financed a few wheat shipments to Brazil without recourse to 1 customer for periods slightly exceeding 6 months. 7. Inasmuch as the Export-Import Bank is a Federal agency the rate of compensation could be considered adequate. 8. No participations with the Export-Import Bank have been entered into by us without their responsibility. 9. We are wholeheartedly in favor of the continuation of the Export-Import Bank's loaning facilities, as they are a very worthwhile factor in the extension and expansion of international trade. 10. The Export-Import Bank in our opinion has very definitely facilitated the expansion of world trade. As to the future, we feel that continuance of its prudent policies augmented by a wider use of its guaranty in connection with medium-term financing of exports would be of considerable help in expansion of international trade. It is our hope that this résumé of our experience with the Export-Import Bank will be of some assistance in vour study of its operations and that the conclusions of your distinguished committee will be favorable to its continuation. Sincerely yours, CURTISS C. GROVE, Vice President The CHAIRMAN. I do not believe I have any questions. Senator Payne, do you have any questions? Senator PAYNE. No. The CHAIRMAN. You have been listening to the questions? Mr. GROVE. I think it has been covered very well. The CHAIRMAN. Do you have any comments on any other colloquy that has gone on here today? Mr. GROVE. No, I think not, in the main. I think your own views have been very sound. The CHAIRMAN. Do you agree with me that the problem is one of credit and terms? Mr. GROVE. Yes, I think I do. The CHAIRMAN. At least, that is the biggest job in holding up the standard of living of the peoples of the world? Mr. GROVE. That is right. The CHAIRMAN. That is the way we did in the United States and are doing today. I do not know how we can expect the other fellow to do it on a cash basis when we do not do it. Mr. GROVE. Of course, the American exporter is getting more and more competition from exporters of other countries who have government backing. That was covered this morning. The CHAIRMAN. Thank you very much for your statement. We may want to call you back later. Our next and last witness will be Mr. Frey, and then I want to call Mr. Maffry back for one more question. Mr. Frey, suppose you proceed in your own way. STATEMENT OF HENRY A. FREY, JR., ASSISTANT VICE PRESIDENT, PHILADELPHIA NATIONAL BANK, PHILADELPHIA, PA. Mr. FREY. Mr. Chairman, the Philadelphia National Bank takes a vital interest in all matters relating to the expansion of international trade. The operations of the Export-Import Bank have, therefore, always been followed with great interest, and we are glad to have the opportunity to appear before your committee. At the outset, we wish to state that we believe the original concept. of the Export-Import Bank to have been a good one and that there is a continuing need for such a Government agency. It is our opinion that the bank has made possible a large volume of business which was in the best interests of the United States and friendly foreign countries which would not have been consummated had their financing depended on the facilities of the commercial banks. Our own experience with the bank has been entirely satisfactory. We have participated in loans granted by the bank both with and without their guaranty and have issued letters of credit under the bank's guaranty. We feel that our compensation has been adequate and would welcome further similar opportunities. Many of our customers have directly benefited from the operations of the bank. We refer, in particular, to the loans granted to Argentine banks in 1950, and to the Banco do Brasil in 1953, which liquidated seriously frozen positions of many exporters. We have read with interest suggestions that the bank become more active in offering its guaranty to American banks covering loans made by them to finance exports. It is not the desire of our bank to seek such guaranties because of the credit risk in such transactions, but rather, the risk involved in many countries that the proceeds of an export when paid will not be convertible to United States dollars. It has been our observation that a considerable volume of exports is turned down because of this risk, which, in our opinion, is not a proper one for commercial banks. We believe the bank could fill a very real need by offering such guaranties. The CHAIRMAN. We have a letter from your bank dated September 17, 1953. Do you want to place that in the record? Mr. FREY. Yes. I believe our answer was dated the 17th. The CHAIRMAN. Without objection, the letter will be made a part of the record. (The material referred to follows:) Hon. HOMER E. CAPEHART, THE PHILADELPHIA NATIONAL BANK, Chairman, Committee on Banking and Currency, United States Senate, Washington, D. C. DEAR SIR: We acknowledge receipt of your letter of September 10 relating to the study which your committee is making of the operations of the ExportImport Bank of Washington and the International Bank for Reconstruction and Development. In accordance with your request, it is a pleasure for us to answer to the best of our ability the questions asked in your letter. 1. The Export-Import Bank has unquestionably been of assistance to clients |