cash basis our standard of living today might be entirely different than what it is. Our production would be much less than it is if we tomorrow had to sell automobiles on a cash basis.

I do not know what the number would be that we would sell, but I expect it would be over 50 percent less than we do now. Our rate of prosperity in the United States is due to our great banking institutions and their ability to finance on generous loaning terms.

In my opinion, if they are going to build up the standard of living of these so-called backward countries, they, too, have to find some way to make their dollars or money go further. I think that is their problem. I think that is the problem that we are to try to solve in the United States, both Government and private enterprise and private capital.

They have just so many dollars in each of these countries in the world to spend in the United States. I could name the amount that most of them have, particularly Latin American countries, right now. Maybe they can earn more and maybe they cannot. Maybe reducing tariffs might help them earn more, but I doubt it.

Maybe they do not know how to sell in the United States market. Maybe they do not have what we want in the United States market.

There are a lot of reasons why they might not be able to earn more dollars in the United States market. I think tariff is one of the least factors involved in international trade.

So, I think it is the problem of helping, if I may say it, them to make their dollars go further. That is what we do in the United States. If a man has $100,000 worth of capital he can do so much business. If he is on a cash basis, he has to pay c. o. d. for everything he buys, then he can do a certain amount of business.

If he can get 6 months on a $100,000 amount of capital, he can possibly do 6 times as much business. So I think the problem is one of credit, one of banking, and one of financing this world business that we are talking about; the building up of the standard of living of these people, and getting production for them in their respective countries, which they need and must have if they are to build up their standard of living.

They are not going to do it by importing goods because that will not give anybody a job. If they are going to keep their people working-let us talk about Latin American countries-they have to have jobs for them. They have to build up the trade among themselves, because our prosperity in the United States comes primarily from our domestic business, trading among ourselves.

Our export business is 10 percent or less. It is wonderful. We ought to have it. We ought to have more of it. I am not trying

to discount it.

I think the problem is not one of tariffs, not one of anything except money, credit, and financing. Then there should be the building up of the production within those countries, so that they can build these things that they need to give employment to their people so that they have a higher standard of living and so that they will be in a position to buy more of what everybody makes throughout the world. Then you will really get an increase. That is the way we did it in the United States.

Fortunately, in the United States we got our capital 100 years ago. It was private capital. It was invested over here privately. But

today private capital does not have courage, or something. I do not know. It is not flowing. Government is sticking its nose in everything, in every direction. So today, it is Government capital, primarily, that is going in and developing these mines, and so forth, where 100 years ago it was private capital. But, nevertheless, 100 years ago it was capital coming in here until we built up the United States. After we built it up, we bought everybody out who had capital over here. Some of them were forced to dispose of it by a couple of wars. But it was picked up by private people here. It was not expropriated, or anything else. It was purchased at a high price. They were paid a lot of dividends for it in the meantime, and then they were paid a high price for it when some Americans purchased it from them.

The problem is to find some way of making their dollars go further, and to give them more credit. That is the purpose of this study. We are just thinking out loud. We are being just as frank and honest as we can be. We have no preconceived ideas. We are just looking for the facts.

How can we be helpful and not hurt the United States? How can we help and, at the same time, help ourselves and not do harm to anybody in the United States? I think the answer, as I see it at the moment, is credit, making their money go further. It is not tariffs. It is not a lot of things we think it is. It is just simply to make their money go further.

If we could sell just as freely to Latin America, American automobiles on 24 months, or 3 years, washing machines and all of the other things that we sell in the United States, we would pretty well have the problem solved. They would have enough dollars to buy a lot of automobiles, and turn them over and over. I am not unmindful of the fact that this thing eventually catches up with you. We do business in the United States on the credit and installment setup, long term. And yet we might just as well be frank and honest with ourselves. We, in America, today, are trying to do business throughout the world on a cash basis. About the only fellow who is not giving cash is what little the Export-Import Bank and the international bank is doing. We give 6 months, and a little longer, but generally speaking it is a cash basis.

Isn't there some way or some formula whereby we can extend the terms somehow, make the dollars that these people have go further, and get this job done that we all want done, and at the same time protect the United States, protect the industries of the United States, building up the other fellow rather than tearing down the United States? I am looking for that formula. We certainly need the help of every banker and finance man and credit man in the United States. Mr. STRELOW. I certainly hope you get it.

The CHAIRMAN. I think that is the answer. Maybe I am wrong. I think that is the answer: Credit, longer terms, to make their money go further, I am thoroughly convinced the so-called backward countries, these raw material producing countries, are on the march and are going to move. They are going to become pretty selfsupporting on foodstuffs and manufacturing. If they do not get the machine tools in the United States and the productive type of machinery to go into business, they are going to get it from Europe. They will get it from someplace, because they are going to do it.

Mr. STRELOW. Of course, we did it in 100 years, and they want to do it in 5.

The CHAIRMAN. That is the danger. They may, in their enthusiasm to do it, and their zeal to do it, and they really have enthusiasm to do it, go socialistic. I mean by that, they may get the government into it too fast, so that the government owns too much. They may keep down private enterprise, the individual incentive to do it, with the result that they may kill the very thing they are trying to do and the very thing I would like to see them do.

I think that is where we can help, not only by working out, maybe, some longer terms, making their dollars go further, but likewise, cooperating with them, visiting with them, working with them, being more friendly with them, just sitting down talking to them discussing these things.

I am thoroughly convinced that this is what we ought to do. That is the purpose of this study.

Mr. STRELOW. Very good, sir.

The CHAIRMAN. We appreciate your coming here, as we do every other witness. I am sorry we got off the schedule. I was sick for a couple of weeks. Thank you very much.

The next witness will be Mr. Basil Hwoschinsky, senior vice president, the Hanover Bank of New York City. Mr. Hwoschinsky, suppose you proceed in your own way. We are delighted to hear from you.

STATEMENT OF BASIL HWOSCHINSKY, SENIOR VICE PRESIDENT, HANOVER BANK OF NEW YORK, N. Y.

Mr. HWOSCHINSKY. My name is Basil Hwoschinsky. I am vice president in charge of the foreign operations of the Hanover Bank, 70 Broadway, New York 4, N. Y. I have filed the answers to your questions, and I filed a statement for the record. I do not think you want me to read them.

The CHAIRMAN. We would be very happy to receive them. Would you like to have those placed in the record?

Mr. HwOSCHINSKY. Yes.

The CHAIRMAN. Without objection, these statements will be placed in the record.

(The material referred to follows:)

Statement of BASIL HWOSCHINSKY, SENIOR VICE PRESIDENT, Hanover BaNK OF NEW YORK, N. Y.

My name is Basil Hwoschinsky. I am vice president in charge of the foreign operations of the Hanover Bank, 70 Broadway, New York 4, N. Y. I have been employed in the foreign department of that bank since August 1, 1927. Prior to that, from 1920 onward, I was employed by other New York banks in their respective foreign departments.

I thank the committee for inviting my views on the subject before you.

GENERAL CONSIDERATIONS

The Export-Import Bank was created for the purpose of facilitating the foreign trade of this country. Narrowly interpreted, this would mean that the bank was expected to grant credits to facilitate the manufacture, purchase, or sale of goods shipped to or from this country. This interpretation has been properly expanded to include the financing of development projects in foreign countries which require the purchase of our equipment and/or services. This concept has been gradually

extended to cover spheres which in themselves did not necessarily come within that classification, but which indirectly increase the abilities of such countries to pay for our goods.

As time went on, special situations creating problems of a temporary character have developed, and to help meet them the Export-Import Bank has stepped in with its assistance.

There is no reason to doubt that under competent management the bank has handled its credits skillfully. Danger comes if it be required to engage in purely financial transactions which are the province of some other agency, unless it act as agent only.

It is important, therefore, that the organization of the Export-Import Bank, as a separate unit, be left intact.

THE NEED FOR THE EXPORT-IMPORT BANK AS PRESENTLY CONSTITUTED

The bank has extended a great many loans for the development of public utilities, industrial and other undertakings abroad, with the provisions that all purchases of equipment had to be made in the United States. These loans have been frequently made with fairly long-term maturities, and as such, could not have been handled by the commercial banks. The readiness of the ExportImport Bank to extend credit for sound projects abroad has been helpful to our manufacturers. It has been of great benefit to foreign countries as well. Frequently, as a result of the construction of new plants abroad, and the development of natural resources (accomplished with funds borrowed from the Export-Import Bank) an increase in means to pay for imports became possible, thereby providing additional markets for goods shipped from here.

As the capacity to turn out goods in many countries in Europe increased, our manufacturers have found it more difficult to sell their products, and, among other things, have had to contend with extremely liberal credit terms offered by others. In a great majority of cases, the commercial banks would not be prepared to finance purchases by foreign buyers on intermediate or longer term. It is unlikely that our exporters would care to undertake the risk of selling on such terms, and this tends to reduce the volume of our exports.

In some of the countries abroad credit and/or transfer insurance is available, and as a result, foreign exporters frequently obtain credit facilities either through specially organized banks or other organizations, or in some instances, even through commercial banks to whom the benefits of such insurance are properly assigned. With such insurance, the manufacturers are sometimes willing to finance the sales themselves. Except for the Export-Import Bank, we have no instrumentality giving our exporters similar benefits available to those in foreign In view of all the foregoing, it would appear that the Export-Import Bank, in its present form, is desirable.

lands.

COOPERATION WITH COMMERCIAL BANKS

I know of no instance where the Export-Import Bank has entered the field handled by the commercial banks. In fact, officers of the Export-Import Bank have often sent those applying to them for credit to their own banks in order to be certain that the financing could not be done by them. I have uniformly found those running the bank most cooperative and ready to discuss with us business offered to them. We have financed credits carrying the guaranty of the ExportImport Bank either in the form of demand obligations or with payments at maturity. We have also joined with them in credits without guaranty by them. Moreover, we have extended credits benefiting foreign trade where we would have hesitated doing so had not parallel facilities been available through the ExportImport Bank.

EXPORT-IMPORT BANK AND INTERNATIONAL BANK FOR RECONSTRUCTION AND

DEVELOPMENT

I have heard it suggested that the Export-Import Bank's activities be limited to short-term credit obligations, and that those of longer term should be handled by the International Bank for Reconstruction and Development.

It is true that the United States manufacturers and traders can and do participate at times in the benefits derived from intermediate and longer credits granted by the International Bank for Reconstruction and Development, as similarly do foreign sellers. To this extent, they are, therefore, in a position to

compete with sellers from other lands. However, producers abroad have, as mentioned earlier, in addition to the access to the benefits resulting from the operations of the International Bank for Reconstruction and Development, facilities in their own countries that help their sales. Without comparable assistance in this country from the Export-Import Bank, our manufacturers and traders would be at a disadvantage.

I feel, therefore, that in order to protect our export trade, the Export-Import Bank should continue granting intermediate and longer credits, as they have done up to now.

CONCLUSION

Competition in international trade is increasing. Very often an order is placed in a foreign country not because the quality is better or the price lower, but because the exporter is able to grant medium- and long-term credits. Most countries in Europe have special institutions whose prime business is to assist exporters in such circumstances. In the United States, the Export-Import Bank is the only institution which comes near to performing such a function. While American banks are ready to finance short-term transactions arising out of foreign trade, in most cases they are not prepared to finance transactions involving payment over long periods.

It is, therefore, important that the Export-Import Bank be permitted to continue its operations, and that the resources at its disposal be not curtailed. (The answers to the questionnaire follow :)

Hon. HOMER E. CAPEHART,

THE HANOVER BANK,
New York, September 16, 1953.

Chairman, Committee on Banking and Currency,

United States Senate, Washington, D. C.

DEAR SIR: We are glad to reply to your letter of September 10 and to answer your questions in the order that they were put:

1. The Export-Import Bank has been of assistance to many of our clients. 2. To the best of our knowledge, it has not competed with private capital in the area in which this bank operates.

3. It has never taken any business away from this bank.

4. We believe the Export-Import Bank could use our services more than it has in the past, but that is largely a question of the distribution of participations in its credits.

5. This bank has on occasion made term loans with maturities exceeding 6 months to carefully selected risks.

6. We have on a few occasions financed shipments to foreign countries without recourse to the shipper.

7. In view of the recent rise in interest rates, it is our opinion that the interest return on loans made under the guaranty of the Export-Import Bank is currently unattractive.

8. We have on one occasion participated in a credit granted by the ExportImport Bank without its guaranty. In this instance, our experience to date has been satisfactory.

9. We consider that continuation of the Export-Import Bank's loaning facilities is an important factor in the interest of international trade.

10. We believe the Export-Import Bank has greatly facilitated the expansion of international trade and that it should continue to operate under its present policies.

We are happy to cooperate with your committee, but would prefer that the opinions we have expressed be treated in confidence.

Sincerely yours,

BASIL HWOSCHINSKY.

The CHAIRMAN. If there are any other statements that you gentlemen have which you would like to place in the record, we will be glad to do so. In fact, all your statements will be placed in the record. Mr. Hwoschinsky, just proceed in your own way.

Mr. HWOSCHINSKY. I would like to touch on a few things that came up this morning. I like very much the question of Senator Payne. I would like to enlarge a little bit on that.