The Export-Import Bank has been very helpful to our industry, to our manufacturers, to our exporters. They have to be more helpful in the future. The reason I am saying that is that for the last 5 or 10 years industry abroad has been rebuilt, and there is real competition our manufacturers in every market abroad.

It is not a question of the quality of our goods. We can make the best. But our people have to meet credit terms which they cannot match here without the Export-Import Bank. I have heard of sales of equipment on 5 to 10 years from various foreign countries. I can speak for my bank, that we could not grant that type of credit to a foreign customer. We cannot do that because there are two factors involved. The first is the risk. You have to contend when you lend money abroad with the risk of the individual customer. You have to contend with the risk of the currency transfer.

The CHAIRMAN. You mean, even though your customer may have the money in that currency, when it comes due, if the country does not have the dollars, they still cannot pay it? You always have two problems involved in credit in a foreign country?

Mr. HWOSCHINSKY. Yes. On top of that you have the political uncertainty there, legislation, and whatnot. All of that makes it very hazardous. That is one thing.

The other is the length of time we are loaning money belonging to our depositors. We can only have a certain amount of that money loaned, because otherwise it would not be prudent. So there we are. Without the Export-Import Bank, our manufacturers are at a disadvantage. You might say that the international bank gives benefits to our manufacturers just as much as the foreign, and you would be right. But in addition to that, the foreign manufacturer has facilities which enable him to sell on terms. Principally that is derived from the so-called credit and transfer insurance. You have two types of insurance. One is where you are protected by default of the debtor. The other way you are protected by default of the country in transferring the funds.

With that insurance, frequently they can go to their commercial banks, or to banks specially formed for that purpose, and get credit for 3, 4, 5, sometimes even 10 years.

The CHAIRMAN. You mean, in foreign countries?

Mr. HWOSCHINSKY. Yes. Here they cannot do that. We do not have that insurance. I know it has been considered by Congress, but up to now we do not have it.

The only comparable institution is the Export-Import Bank, which is willing to guarantee the risk. Under their guaranty, we have lent substantial amounts of money, sometimes with their guaranty, and sometimes even without their guaranty, but joining with them in a credit. But that is a very small amount.

We hope that the Export-Import Bank will continue their operations and will not be restrained in the help which they are giving now to the manufacturers.

When I say, "I hope they are not going to be restrained," I say that because I have heard a thought put out that the Export-Import Bank should be limited to short-term operations and the longer-term loans should go to the World Bank. I explained why that would be bad. That would put our manufacturer to a disadvantage.

The CHAIRMAN. If I may say so, it seems to me the commercial banks can take care of the short-term obligations. The need is for credit for the long term.

Mr. HwOSCHINSKY. There is the so-called intermediate credit. We, the banks, are happy to loan, and have loaned 90 days', 6 months' money, sometimes a little longer. I have given credit occasionally slightly longer. But when it comes to 2, 3, 4, or 5 years, we call that intermediate. That is where the Export-Import Bank comes in. Occasionally, in order to buy our equipment, 10 years is necessary. Here the bank cannot do that type of business.

I am coming to your question, Senator Payne. You asked whether it would be advisable to have an institution that would handle that, and why is it that it is necessary to have such protection for sales abroad and not for sales in this country. I think my answer to you is that the banks are giving term credit today to our industry sometimes even as long as 10 years. We have had credit of this kind. In addition to that, the insurance companies have entered that field. they do supply to our manufacturers that type of credit, because they can assess the risk in this country. They do not have that additional danger of conversion of the local currency into dollars. They do not have the political risks which exist abroad, and they are unwilling to take that risk.

When you come to a sale abroad, you have those additional risks which no bank can take. In most cases, the insurance companies, today, are not permitted to do that. So, I say that if you leave the Export-Import Bank in the field, you already have an institution that can provide, in the foreign field, what the commercial banks are not willing to do without that intervention. That, in substance, is what you asked.

I do not feel there is the necessity for a new institution, particularly if Congress is going to pass that export insurance bill. That might help. Today we have the Export-Import Bank that does the job. They do a good job. They have good officers. There is no better man than Mr. Arey, and I am glad to have that put in the record. He knows his work and is a competent officer. But it takes, sometimes, a very long time for them to process a credit obligation. If we had insurance, it is conceivable that applications to commercial banks would be acted on much quicker and, therefore, there would be an overall help to our exporters in that field. With those two instrumentalities, we do not need anything new. It is there. It is in existence. Have I answered your question?

Senator PAYNE. I think possibly you may have misinterpreted what I was getting at. I was granting the fact that the present setup of the Export-Import Bank and its operation was desirable, and I was in full agreement with the statements that have been made here. My question was, rather, whether an instrumentality of a similar nature was necessary here on the domestic scene, within our own setup for our own people in this country, as an avenue of providing risk and venture capital that was not obtainable, possibly, through the normal commercial channels.

Mr. HWOSCHINSKY. I think I would answer it this way: Here we do not have those additional risks that exist abroad, and here the banks are already doing that. And the banks, with the insurance companies, I think, are adequately providing that missing link.

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

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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.,
New York 15, N. Y., September 22, 1953.

UNITED STATES SENATE, COMMITTEE ON BANKING AND CURRENCY,
United States Senate Building, Washington, D. C.

(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