Senator ROBERTSON. Are we also supposed to read United States and Its Foreign Trade Position, which is 239 pages; an Analysis of Legislation of about 200 pages; the Foreign Trade Position, which is about 100 pages; and a Statement of the Managing Director of about 75 pages; International Position and Commitment, which is about 50 pages; and the material in these 2 big envelopes which I have before me?

The CHAIRMAN. What is the Senator's question?

Senator ROBERTSON. Are we supposed to read all of that to know what to do?

The CHAIRMAN. It is a question of whether or not you want to legislate on the facts or whether you want to legislate from your hip. You are the judge of that because you are a Senator from the State of Virginia. You know your own judgment. What we are trying to do in this study is to be 100 percent factual. We are trying to present the true story. We are trying to give everybody the facts. We have a very efficient staff. They have done a lot of work and they will proceed to do a lot of work. They will present to this committee and to each member all the factual information that they think, under my guidance, that each member of the committee ought to have and ought to read in order to come to an honest conclusion.

Each Senator will have to be the judge himself as to whether he wishes to read it or whether he does not.

Senator ROBERTSON. Mr. Chairman, I used to do pretty well shooting from the hip on quail, but most of those were straightaway shots. When you are shooting at ducks, you have to lead them a bit. think there will be a good deal of lead on some of this.

I

The CHAIRMAN. I do not know whether the Senator is opposed to the fact that we are trying to be factual, trying to dig into this thing in a factual way, or whether he is opposed to the study, or whether he just simply wants to ask an honest question.

Senator ROBERTSON. The Senator is trying to emphasize his position that we should be factual. We have here enough work to keep all of us busy for the next 2 months on this issue alone.

As I suggested to the chairman a few minutes ago, I am on five subcommittees on appropriations bills one of which meets at 10.30 this morning, dealing with civil functions, always a highly controversial issue. If we are going to keep deficit down to about $3 billion, which the President has requested us to do, it is very important for the members of the Appropriations Committee to know what all these items are and be able to form intelligent opinions.

I wish merely to emphasize that we face at this session more work, if we are to do it on a strictly well-informed and factual basis, than any one man has the time to do.

The CHAIRMAN. If we are going to be factual and get the facts and legislate from the facts, instead of hearsay, then we are going to have to study most of these subjects from a factual standpoint. are going to have to get the facts.

We

If we simply want to legislate on the basis of what is hearsay, or gossip, or rumor, or what somebody thinks, without having the slightest idea of what the facts are, that is another thing.

I was hopeful on this matter of the Export-Import Bank and the International Bank, and their relation to international trade, that we could make a real, honest-to-goodness factual study; that when we

got through with that we would have the facts as they are and be able to come to a decision based upon facts and not upon hearsay. That is the purpose of our method of procedure.

I hope we can continue along that line. As you well know, the administration, as well as the Congress, are very much interested at the moment in foreign trade. The Randall Commission has just issued its report on which it has spent many, many weeks. This committee has jurisdiction over the Export-Import Bank, the International Bank, and the general policies applying to foreign trade. If we are going to legislate, going to improve our methods, it seems we will have to do it based upon facts and based upon experiences that we have had in the operation of the Export-Import Bank and the International Bank during the past many years. That is the reason for our procedure.

Senator ROBERTSON. I note that all of the Republicans on the Randall Commission are opposed to all of the tariff recommendations of that Commission. If we proceed along the lines that we are proposing here

The CHAIRMAN. I am not going to pass judgment on the Randall Commission at this point or what the Republicans did or did not do. What I am primarily interested in here is in getting a good factual study and getting in one book or one pamphlet the entire story of the United States' participation in foreign trade as it applies to banking and as it applies to credits. That is what we are going to try to do. I hope we will be able to do it. I realize it is a big job. Nobody knows better than I do how busy each Senator is, how many problems he has, and how much work he has.

I still say we would be much better off as a country if we would legislate from facts rather than from hearsay and sentiment and observation and rumors and gossip. That is what we are going to try to do in this hearing if we can, deal with the facts.

Our first witness will be Gen. Glen E. Edgerton, Managing Director of the Export-Import Bank. Mr. Edgerton.

STATEMENT OF GLEN E. EDGERTON, MANAGING DIRECTOR OF THE EXPORT-IMPORT BANK OF WASHINGTON

Mr. EDGERTON. Mr. Chairman, may I read a prepared statement? The CHAIRMAN. You may proceed in your own way, Mr. Edgerton. I believe you have a short prepared statement, which each Senator has before him.

Mr. EDGERTON. It will take me about 10 minutes.

Mr. Chairman and gentlemen of the committee, it is a privilege to appear before you this morning in connection with your study of the Export-Import Bank. At the preliminary meeting on September 14 I said that the Export-Import Bank was gratified that this study was to be undertaken. I am able to repeat that statement today with the same assurance. During the intervening months we have had the pleasant and beneficial experience of working closely with you, Mr. Chairman, and side-by-side with members of the committee's staff assigned to the task of analyzing and appraising the operations of the bank from its beginning.

The Deputy Director, the Chief Economist, and the Chief Engineer of the bank have traveled through Latin America with you and other

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members of the committee. The bank's staff has worked with and at the direction of your counsel and his assistants in gathering from our records and from the memories of individuals volumes of facts, statistics, and opinion relative to this inquiry.

Your judicious approach to the solution of the problems of expanding international trade and your broad view of the relevant factors give good assurance that the conclusions resulting from this study will be sound and authoritative.

As a preliminary to the presentation of more detailed information, I should like to make a general statement concerning the bank and its operations.

Since its creation in 1934, the Export-Import Bank has disbursed $4.5 billion in loans. Of this amount, more than $1.7 billion has been repaid to date. Losses which have been written off against reserves have amounted to a little more than 100 of 1 percent of the disbursement. This business has been transacted at a net profit of about $407 million, $83.4 million of which has been paid to the United States Treasury in dividends. The remainder is carried in reserves for losses and contingencies.

Senator ROBERTSON. Does that cover the interest payments of capital advanced by the Government?

Mr. EDGERTON. That is over and above the interest payments to the Treasury. They are considered one of our operating costs. Senator ROBERTSON. What was the rate of interest?

Mr. EDGERTON. It has varied from about 11⁄2 to 21⁄2 percent.

Senator ROBERTSON. Whatever it cost the Treasury?

Mr. EDGERTON. Whatever the going rate was.

Senator ROBERTSON. This net is over and above the interest?
Mr. EDGERTON. Yes, sir.

Every loan made by the bank has aided in financing and facilitating the exports and imports of the United States in conformity with the purposes prescribed for the bank by the Congress.

As of January 1, 1954, the bank had an uncommitted lending authority of $1.1 billion.

During the 20 years of the bank's existence, many changes have occurred in the needs of our foreign trade. Conditions have varied greatly from time to time in international economy, and emergencies have arisen requiring extraordinary financial transactions dictated by important interests of the United States. The bank has been able readily to adjust its operations to meet these changes as they have occurred. Although the records of the operations of the bank show a great variety of loans, they have been principally in the following several fields:

1. The bank has extended credits in participation with United States manufacturers and suppliers to assist in financing individual foreign sales of United States products. These loans involve the purchase by the bank from the manufacturer, without recourse, of notes of the foreign buyer, usually representing from 50 to 75 percent of the financed portion of the sale. The manufacturer is required to carry at his own risk the remainder of the credit portion of the sale. 2. The bank has extended lines of credit to foreign banks to provide short-term financing for the export of United States commodities, such as cotton, tobacco and other products, in those instances in which the products would not move to customary United States markets

abroad because of lack of the necessary financing from private sources. Such lines of credit are operated through the facilities of United States commercial banks so that usual trade channels are not disturbed.

3. The bank has made loans to foreign private enterprises owned in whole or in part by United States investors to assist in financing the purchase of United States products and services needed for the construction or expansion of the foreign facilities.

4. The bank has extended credits to foreign private enterprises to finance the purchase of United States products and services for the construction or expansion of facilities located outside the United States.

5. The bank has extended credits to foreign governments or their agencies to finance United States equipment and services required for public works and other economically sound governmental-type projects like ports, highways, water supply and irrigation systems.

6. The bank has from time to time extended loans to central banks of foreign countries to assist them to fund outstanding commercial arrearages owing to United States exporters, or otherwise to supply the dollar exchange necessary to restore normal private trade and the extension of commercial credit between those countries and the United States.

7. Immediately following World War II the bank authorized approximately $1.8 billion of loans to finance the purchase of United States products and services required by European countries for reconstruction of both private and governmental facilities. These loans, some of which were made in participation with commercial banks, provided financing during the period between the end of lendlease and the inauguration of the International Bank for Reconstruction and Development and the grants under the European recovery program.

In addition to its contribution to the foreign trade of the United States, the Export-Import Bank has served often as an instrument of foreign policy. But in no instance has the bank disregarded provisions of its act in order to extend a loan to serve a political purpose, however important. The loans made that have had political significance have been made available to the borrower to finance United States exports and only in cases in which the management of the bank has determined that there was reasonable assurance of repayment and that the purposes of the borrowing served well the essential objectives of the bank. Even before the policy was written into the law, the Export-Import Bank exercised care to use its powers to supplement and encourage and not compete with private capital. Since its first operations the bank has utilized the facilities of commercial banks in the extension of credits. Consequently, commercial banks have been familiar with the activities of the Export-Import Bank and usual commercial channels have not been disturbed.

In a number of instances, credits which were originally established by the Export-Import Bank have been taken over by commercial banks. The notes held by the Export-Import Bank have always been available for purchase by private interests. Since 1946 the bank has had a division known as the Private Capital Participation Division, the principal duty of which is to investigate the availability of private funds for proposals under consideration by the bank. If

there are any cases in which the bank has extended credit that could have been obtained from private sources, the number is very small. Not only has the bank avoided competition with private capital, but there is ample evidence of positive contributions to the increase of private investment abroad. Examples could be cited to show that developments abroad such as highways, port works and also some undertakings of a private rather than a governmental nature, have opened up new areas for investment and have been followed or accompanied by the development of many new enterprises.

Loans extended by the bank to private groups and entities have generally been accompanied by equal or greater private investment. An analysis of all the credits which the bank has authorized in the past 5 years directly to private enterprises or to governments for relending to private entities, indicates that for every dollar which the bank has loaned, more than $1.50 of private American capital or private or public foreign capital has been invested in the same enterprises.

The benefits from the bank's lending have not often been confined to the immediate advantages flowing from the particular transaction financed. When new capital equipment is employed abroad in the development of the resources of another country, it becomes a better customer of the United States as well as of other markets of the world. With this principle in mind, the bank has consistently endeavored to direct its operations to the financing of those export goods that will contribute best to the development of the importing country and the improvement of its dollar earnings. Of special benefit are those loans which have financed the development of foreign sources of minerals and other products required in the United States, and thus have increased directly the dollar supply of our foreign customers as well as serving the needs of our own industries.

Senator BUSH. Do you want questions at this point, Mr. Chairman?

The CHAIRMAN. Any time.

Senator BUSH. Or would the witness rather finish?

Mr. EDGERTON. It does not matter.

Senator BUSH. At the top of page 6 you say—

An analysis of all the credits which the bank has authorized in the past 5 years directly to private enterprises or to governments for relending to private entities, indicates that for every dollar which the bank has loaned, more than $1.50 of private American capital or private or public foreign capital has been invested in the same enterprises.

I would be interested if you would apprise me of the respective percentages of the private American capital versus the private or public foreign capital in that particular statement. My impression is that the latter, the private or public foreign capital, would constitute the bulk of those participations; is that right?

Mr. EDGERTON. That is correct.

Senator BUSH. Is it something like a horse and a rabbit pie, or is it not quite that bad?

Mr. EDGERTON. It is like a horse and mule pie. Actually, foreign countries have a great deal more public investment in business, in some foreign countries, than we have here. So that was the reason it was stated in that way. We do not have a precise statistic on it, but I am sure you are correct, that the amount of American capital