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July llf.:19U5 -- 10:30'?A'iM.
' :<i
Hearings before the Banking and"Currency Committee of the,House
of Representatives on H*R* 3U9Q*\St bill ffto 'provide for increasing the
lending authority of the Export-Import-Bank" of-Washington and for, other
purposes," introduced by Rep* Spence on "Juare ll8; 1945% began with the
testimony of Leo T* Crowley who appeared &s "Chairman of "the Boarc| of .Trustees of the Bank* Mr* Crowley pointed out the five important'changes which
the bill would make in the legislation governing the operations of the Bank.
These changes (l) would raise jbhe limit'oh outstanding'loans and guarantees
of tho Bank from $700 million to.$3*5 billion, (2) would*remove the prohibition on loans by the Bank to any.government*in'default upon its obligations to the United States Government,on April 13* 193U* and wov(ld repeal
the Johnson Act prohibiting private .lo&ns to governments in default on
obligations to the United States Government, (5} would extend the life of
the Bank to January 22, 1957* (h) would provide for semi-annual reports by
the Bank to Congress,, and (5) would provide for the purchase "by, the Treasury of $1 billion 4of' 'capital stock of-fcho'Bank, for the' xietir,omeht of
present stock outstanding* .and for the purchase by the *k*reasury of obligations of the Bank, tp the extent .of two and one^haif ti'mbs the capital
Mr. Crowley stressed,the necessity of1 getting action on this
legislation before the adjournment of Congress* He said that'the Bank
at proseht has only $117 million- of free fiinds, that loans'now under
active negotiation would absorb this margin, and that other projects, now
in the discussion stage, arc #being hold, iiy-aSbeyance because' of .lack of
funds* Ho*'also' said that private and govQrnmental funds must b.e iriade ^
available to finance purchases of much' needed United States .equipment by
foreign countries which will easo,th$ problem-of redonversion ,in the United
States* Mr* Crowley stressed the-fact that Lend-Lease aid'will be furnished only for war purposes and that the* International Bank Will not come
into operation for some time* The • appropriation-r re quest for Lerid-Lcaso v
for 19i+6 was* based' on the assumption that Congress would expand the lending authority of the Export-Import B ank to permit 'the financing ofportions 6f the:agreements &ade under Section 3(c) of thS Lend-Lease Acti
for the delivery of equipment and supplies to Prance, Belgium $,nd the
Netherlands* In Mr. Crowle^y's gpinion, tlio propo&e'd * increase *o*f $2f8
billion in the Bank*s lending authority..would suffice tp fihancq. essential
exports for reconstructi.onand other purpose's during the present .fiscal
year* At the bnd of\ the year, the Bxport-Import JBa.ftk could-return to*
Congress to request additional, lending authority. It is impossible at
present to determine what fu?ids will bo needed for a program of rehabilitation' and development^

l/ Section 3(c) o^ the Lend-Lease Act authorizes the President of the
United States during the three years immediately following the expiration of tho Act to continue to exercisb sfuch powers of "procurement and transfer of goods, and services as may: be'necessary to carry
out contracts' entered into prior; to such expiration* Tho agreements
made under this* section, provide for cash payihent in 30 annual installments for goods 'delivered after the President determines they are no
longer necessary for use in the defense of the United States*

- 2 Mr* Crowley favored* the idea* tji^t .tho'N^tional- Advisory., Council
proposed in the Bretton Woods bill should coorclihkio-tfte policies of the
United States representatives 'on the. International Bank and Fund with those
other agencies making foreign loans,-, inoluding the ;fexpprt-Import B^.nk# As
a member of .this. Council the Chairman of /the idaifdhof the Export-Import
Bank wpuld keep t'heJ Council informed of /the,Bank•'$' activities* and >wo\ild
be kept informed of the Council1s\policy, decisions' affecting the Bank's
At the close- of his statement, Mr.. Cirbwley announced that W #
Randolph. Burgess, President io£ the Ajne-rican Banker's' Asaociati'cto, and W#>
L# Hemingway and Rob'drt V* Fleming, all feiLt, it was' ndecssary to--increase
the lending -authctfity^of the Bank. Rep* Sgence . ( D v K y 0 then said, he had
hearcl of no opposition 'to'^uch an increase and .Mr; Crowley agreed, that he
likewise knew of ho bpposition..
Mr. Crowley" assured Rep. Crawford, (R. Miphv.)< that'.the -Bank
would :be, prepared to finance agricultural as wol*L as /industrial "exporjt^Rep. Brown (,D. Ga.) asked Mr. Crowl<?y to. compare the bill undor .cewsideration with the Wolcott bill." Mr. Crowley .replied'that there- was little
difference in what the bills were intended to accomplish, only a difference in the.amount of the Bank's lending authority. The Wolcott bill
also made, provisions regarding the management of the Bank which he preferred not to discuss at the ^nome-nt, but he said that' the* Bank Angl Rep#
Wolcott were not far apart in their thinking on .the-Bank-'1 s "management.,
Rep. Gamble (R* 'N*Y#) questioned Mr. Crowley on the ExportImport Bank's ope'rations and their relation to those of the International
Bank» Mr. Crov^ley said1 the Bank would..continue to guarantee private
loans through, its, take-out arrangements (and that tli§re would'be no objection to transferring loans from the,, Export-Imjport Bank to- the Inter-^
national .Bank. The Advisory- Council- would presumably pre-vont a» -borrower
turned do.wnby the International-Bank from going to'thc Export-Import
Bank* !£ere may be 'aome^Qn the 'two institutions • Mr.
Crowley said he.did not want the InternatiQnai" .Bank' to dominate .th
p^ Ji/Iorironoy (D. Okla.) asked-a numbed 61!• questions; pibout
the; effect of the repeal of the Johnson Act provided' foir in th,i3 bill.
He felt it woul'd be bettor-merely to r,epep-l tho lGgris'ltction prohibiting
loans by the Exgort-Import Bank to governments ifr default - an -th^ir .-abli-l
gations to the Unit od Stages Government. He feared repual of tho, Johijsori
Act would result in the flotation of questionable issues on the.United
States market* Mr. Crowley pointed out that the Security*and. Exchange
Commission law protects the private investor against such issues by rer
quiring that full and accurate information be published about all issues ••
In Mr. Crowleyfs opinion the repeal of'the-Act- is necessary to encourage
private investment *
"•"- Rep. Sumner (R. 111.) asked" for a definition of the phrase
"lending authority of the Bank" and wondered if the Bank could use part
of its funds as a. guarantee fund with which, to guarantee loans perhaps
several times larger in amount than the fund itsolf • Mr.' Crowley stated

- 3that the Bank's, total loans a.nd guarantees were included in the limit of
$3.5 billion on the Bank's lending authority, Rep. Sumner asked about
the gold and dollar exchange reserves of foreign-countries and Mr. Crowley
promised to supply data for the record.
Mr. Crowley explained to Rep. Tallc (R. 'Iowa) that he doubted
there would be any transfer'of loans'from the Export-Import :Bank to the
International Bank and said the Export-Import* ;Bank would certainly not
sell paper to the International Bank; However,.he felt:a country might
pay off the Export-Import" »'Bank and then borrow from the -International
Bank. Rep# Thbm, (D. Ohio) pointed^ out that a loan by'the International
Bank for the purpose of paying off an obligation to the Export-Import Bank
could not be considered a loan for productive purposes1 under the terms of
the Bank Agreement. Mr, Crowiey- said that the Export-Import Bank should
not become "involved with"' the International Bank- and that' it would not
need to be "baled out" by the International Bank* Rep. Thorn inquired if
all the proceeds of Export-Import*Bank loans must be spent in the United
States and Mr. Crowley explained that loan funds in some cases may be used
to finance local expenditures•
Rep# Buffett (R\ Nebr,) asked Mr. Crowley to name the United
Nations which lack resources with which to make purchases in the United
States. Mr. Crowley listed Ppland, Czechoslovakia, Greece, Yugoslavia
and Italy, andalsb stated' that 'Belgium* Holland and Norway would need
rehabilitation credits. Mr. Crowley assured Rep. Wolcott (R. Mich.)
that his statement that Lend-Lease was to be/'used only for war purposes
was official. He estimated that'several billion dollars worth pf materials for which there is a residuary use have been made available through
Lend-Leaso, He agreed with Rep. Wolcott that the Export-Import Bank
should have Increased lending authority to finance exports and should
act as'a stop gap between tho end of Lend-Lcaso and cQlhmencement of
operations of5 the International Bank. Mr. Crowley stressed the fact
'that there would'bo groat noe'd f6r tho Export-Import Bank eveii aftfcr
the1 International B ank was in operation. He felt that it wa$ impossible to expect loans to be "adequately secured" as Rep. Wolcott1s'biil
provides. He said the Bank must use its judgment and choose projects
Which would directly*or indirectly produce tho moan^ of Repayment.
Siftce many European countries are not in a sound financial condition,
loans to" these countries must be coiistantly reviewed and judgment must
'be acquired after experience.
"Rep. Sumner asked about'interest rates and maturities on
Export-Import Bank loans• Mi*. Crowley said that I4. per cent was the
usual rate'and' that loans had bten made'for 25 years and might go as
high as 30 years. He also said he thought-Ivper cent was* too high
an interest charge for rehabilitation loans •

*July 11, : 1945 --2:00 P.ftl
At the afternoon session of the hearings Wayne C. Taylor, President of the Export-Import Bank, ana Dean Achesoh* Assistant Secretary of
State, testified* In his prepared statement^ Mr* T&flov* reviewed'the <?rganization, history and operations of the J&nk1. He' classified the loans of
thetBank according to seven categories:' (1) ^hort-teriti loans' to finanfce the
export of agricultural surpluses, (2) loans' to Aihericarj. firms to'finance
the export of industrial commodities, (3) revolving ctWit'linfcs to small
but experienced United States exporters and Iftiportsrs which aro'hampered
by lack of capital, (4) loans to make.possible*continued purchases in-the
United, States by countries temporarily short of;dollar*exchange, (5) loans
to finance development projects abroad, (6) loans t.p stijnulat.e production
and expedite transportation of'' strategic materials required for War production in the United States, and (7) arrangements' to"underwrite* letters of
credit opened in this country by United States' comercial''bb.hjcsl in favor of
approved foreign banks. Mr. Taylor also put in'the record a Statement of
loans and commitments of the Bunk as of June 15, 1945, and a statement of
loans by countries as of the s&me date. '•"
Mr. Taylor confirmcd^Rep. "Wolcott'1 s <R. Miclu) statement1 that all
administrative expenses of the Bank lire paid out of earnings .°nd that the
Bank d$eS not belief i f from any Congressional appropriation.1' In reply to
questions by Rep. Monrdnoy (p. Okie.) Mr. Taylor'said'that the Bank now pays
2 per cent on its preferred stock and that on loans from the*Treasury provided for in this bill the Bank'would pay a rate to be agroed upbnvdth the
Treasury. Mr. Crowley answered a question by Rep. Crawford (R; Mich.) on
the subject of whether the-United States-should attach strings to its loans
through the Export-Import Bank toirisitfe thnt borrowing countries did not
adopt'institutions Contrary to democratic and capitalistic principles'and
to provide for a measure of 'nanagenent of these governments by the United
States'. This discussion'v/as off'the record.^
In response to an inquiry by Re#. ^umner (R. 111.) on t'hat countrie3 the Bank expbctocj'to lend to in th^ near future.^'Mr*. Taylor ''reported
that'the Bank was currently negotiating loans frith Norv;^y, Denmark rincl the
Netherlands (for tho East Indies) and v*as considering lodnc to otber countries vrhich are nov/ subject to the Johnson Abt'. lir. Taylor was unable to
supply gold statistics for Russia. Rep. Sumner felt that,the United States
should attach conditions to EXpoH-Import vBank loans in ordfer that the loans
would not act to subsidize the spread of cofarnttnifenu Rep. Spence (D. Ky.)
pointed out that the Bank ir;as free to choose its customers and could consider such factors cs the type and\ stability of -V foreign governrnunt before
granting a loan.
Rep. Hr.ys (D. Ark.)> Rep* Tallo (R. Iowa), r.nd Rep. Thorn (D. Ohio)
inquired about specific loans. Mr. Taylor explained that tho loan to Pan
American Airv/ays was for th<, purpose of financing hotel construction in
various Caribbean countries. To the cost of these projects local capital
would contribute 50 per cent. Loan No. 349 was granted to aid in the purchase of certain German firms in Brazil. Mr. Taylor described how the
Export-Import Bank supervised the use of its loan funds.

—' 5 ~
Rep, Buffett (R. Nebr.) felt that since Latin American countries
nov; have gold and dollar holdings as large as they have ever had, they
should be able to attract private capital. He could not understand how
one could justify dollar loans by the Bank to foreign countries to make
-purchases in the United States of equipment which United States, firms are
unable to buy. He also felt that all Export-Import Bank loans have political implications and that the fact a loan is granted to a foreign government strengthens that government's position.
Dean Acheson, Assistant Secretary of State, then inserted a brief
statement in the record which he summarized for the Committee. He stressed
the need for expedition in the passage of the bill under consideration and
the need for loans supplied by the Export-Import Bank in the interim betwoen the cessation of Lend-Lease aid and the commencement of operations
by the International Bank. Mr. Acheson explained in sonie detail why it will
be two years or more before the International Bank will be able tq make
loans in any volume. According to the Articles of Agreement of the Bank,
it will be two years $fter ttie Byank is organized before 20 per cent, of the
Bank's capital is paid in. It will probably take more than two years to
educate private capital:to enter into loans guaranteed by'the Bank and to
buy the obligations of the.Bank.
Mr, Acheson agreed with' Chair man Spence (D. Ky.) that he kne\? of
no substantial opposition to the present bill. He was in accord with Rep.
Wolcott's interpretation that rehabilitation loans of the Bank would be for
the purpose of helping other countries get on their feet and provide employment for their peoples. Ho pointed out., that reconstruction and development loans "by the Bank would* be essential in the transition period and
also as a supplement to loans by the International Bank.4' Although the
Export^Import Bank may make stabilization loans, Mr. Acheson pointed out
that none of its credits for that purpose have been so used. Rep. Wclcott
wondered if it might not be necessary to reactivate the stabilization fund
of the Treasury so that it would not-go out of existence before the Bretton
Woods enabling legislation is, passed. Chairman Spence said he hoped Bretton
Woods would be passed in the coining week so that,such action would not be
Rep. Gamble (Ri N.Y.) Was assured by Mr. Acheson that, other countries have•institutions•with functions similar to those of the Export-Import
Bank. Rep. Monroney (D. Okla.) went back to his doubt'concerning the wisdom
of repeal of the Johnson Act. Mr. Acheson explained that the Johnson Act
did not protect United States investors against unsound foreign issues but
merely penalized countries in default on their World War I debts. He pointed
out that the Johnson Act in any event does-not prevent private foreign companies from floating issues in this market. In his opinion, the SEC regulations are adequate protection for United States investors. At present it
is-the purpose to encourage v/ise private investment rather than to discourage
it. Any necessary regulation can be legislated after the revival of investment has taken place.
Mr. Acheson attempted to interprettfor Rep. Sumner (R. 111.) a
quotation dealing with the capacity of countries in certain stages of economic development to absorb capital. He then rehearsed for Rep. Sumner the
reasons why it would take two years or more for the International Bank to

- 6 get into effective operation. Rep. Stunner then questioned Mr* Acheson
regarding the accuracy of certain estimates of the sunount of dollars the
Monetary Fund and International Bank could make available to foreign
countries. Rep. Sumner thought the strong sentiment in favor of increasing the lending authority of the Export-Import Bank might be based
on the assumption that the Fund and Bank could only make $6 billion available to foreign countries.
Rep. Folger (D. N.G.) expressed doubts similar to those of Rep.
Monroney on the wisdom of repealing the Johnson Act and did not seem too
assured after Mr.. Acheson1s explanation of the operations of the SEC since
%he Cominission does hot 'approve securities but only certifies that the
.information'concerning the issuing firm and the prospectus are complete
and correct. For Rep. Talle (R.;Iowa) Mr.: Acheson outlined briefly the
loan procedure of the Export-Import Bonk< :.,Rep. Buffett (R. Nebr.) -returned to his references regarding the. .need for loans'to Latin America
in view of the large dollar balances of these countries. "He'also reiterated
his faith in the need for sound fiscal policies1and the necessity to investigate such policies of prospective borrowers.
At the close of Mr. Acheson1s testimony, • Mr. Crowiey, Chairman
of ,the. Board of Trustees, presented a proposal to the''Committee regarding
changes in the management of the Export-Import Bank. According to his
proposal the Export-Itnport Bank would be under the supervision of the
Foreign Economic Administrator, with the Administrator having supervision
over the Bank similar to that exercised by the Federal Loan Administrator
over the Reconstruction Finance Corporation. To manage the operations of
the Bank there would be a board of directors of five members \vith the
Foreign Economic Administrator and Secretary of State as automatic members,
the Administrator acting as chairman. The other three members would be
full time directors appointed by the President of the United States and
confirmed by the Seno.te. The board of directors would be non-partisan
with not more than three directors being members of any one party. To act
in an advisory capacity to thp Bank there would be an advisory board of
the same membership as the National Advisory Council set up by the Bretton
Woods enabling legislation to coordinate the policies of the Fund and
Bank and other institutions making foreign loans. The Foreign Economic
Administrator would act as chairman of this advisory board. Mr. Crowiey
suggested this proposal be worked out in conjunction with the legislative
counsel of the Committee. He also said there would be no objection to
revising downward the maximum lending authority of the Bank.

July 12, 191+5 ~ 10:30 A.M.
At the beginning of the session .the clerk of the Committee read
a letter addressed to Chairman Spence by Ronald Ransom, Vice Chairman of
the Board of Governors of the Federal Reserve System. This letter stated
that since the activities of the Export-Import Bank are closely related
to the responsibilities which would be placed upon the National Advisory
Council by the Bretton Woods legislatlbn and since it is most important
that thD financial, ppl.ioies which govern United States participation in
the Monetary Fund and Ini&rnatioml:Bank should also govern the operations
of tho Export-Import Bank, the Boarr4 felt, that the''members of the board
of trustees of the Export-Import Bank should be the same officials who
comprise the National Advisory Council. In the Boardfs opinion the same
result would not be accpmplished if the officials on the-National Advisory-'
Council acted merely in an advisory capacity to the management '6f tho Bank.
ThQ Board accordingly recommended 'that tho legislation- include a provision
that tho members of the board of of *the Bank the Secretary of
State, the Secretary, of tfie Treasury,.the 'Secretary of Commerce, tho Chairman of the Board of. Governors of.the Federal Reserve Sy^tem^and a fifth
member to be. appointed by the- President of the Unit£d States with thSadvice and'consQUt of the Senate who would be chairman ^of.-thie/board bf*
trustees of tho Bank*
Following the reading of this letter*, which was;incorporated in
the' rWord,, W. Randolph' -Burgess;•• President of the American Bankers*"
Association, testified t>efor& the- Committee. He rpre&£ntedv a letter from
W, "L;\Hemingway, a past "president of..-tho American Bankers Association, in
which'Mi*. Hemingway urged^an increase in the capital fimds of the Ba'nk«*
In M s prepared statement Mr .'Burgess stated tKat the-Association favors
a prompt- increase in the lending- authority of the Export-Import Bank.
The'Association in its report- on. "Practical' International...Finanbfai
Organizations" published February 1, 191+5» took the -position that the
Batik* s capital; funds* be increased to $2 billion* Such an increase would
be for the-purpose* of meeting 'credit..needs prior to the setting up of
t*tie Internationa^ Bp/nk 'and' -for imking lpans in" which the United States
has a 'special interest and which..cpuld be'made mofe effectively through
a national than through an. tinternational body-.. The principles
which 'should goyQrii the'brganizatipn ^ri4 operations of the Bank are, in
the Association!s .opinion* th4t.?.(l) * the-Bank'should-supplempnt'and enCourage but. not^ replace private capital,* (2) rits'loans should, be"soiincl
loans witKipra/ctioal asqUrand'ef'of-re.pajrment, (j) the. amount of the Bahkfs
loan^ td any one country should not be oxces's'ivo and in granting loans
the iBank should take into"consideration the'amount of gold and dollars
held by tho bo^rrowing' c6untfy.:: .-Mr ...Bur^es^'oh'behalf of the American
Bankers Association siVggosted.:that the Bili provide ftpr the following:
(l) a statement ^as.^t'O the relation ..between the activities of the ExportImport Bank -and private leiiding ago3p.cios such ec-s in .contained in the articles of agreement of the International JBarik, especially a condition that
the* borrower ds'unable lto^obtain the.'fundd elsewhere under reasonable conditions; (2) a definition o£ thp ^tanclards which; the management of the Bank
should observe as follows, that: lpan,s should generally be for specific purposes, that they must offer•practical assurance-of repayment, that reconstruction and development loans .should be coftfinod to the cost of imported

- 8 materials and should not cover the cost of local labor and materials. Mr*
Burgess explained that the second standard was offered in place of the
requirement in ,the Wolcott bill that loans be "adequately secured." In
his opinion, Export-Import Bank loans because of their nature could not
be secured by collateral* Mr* Burgess thought the last standard mentioned
should be qualified to permit the financing of local expenditures by the
Bank in special circumstances• The third suggestion of the Association
was with regard to the ma'nagement of the Bank, that there be* a small,
full-time boafri.i of directors with adequate salaries to manage the Bankfs
operations and; that this board be responsible as to broad policies to the
National Advisory Council set up in the enabling legislation for Bretton
Woods* The fourth proposal was that the term of life aQd capital of the
Bank be kept within the range of ffnearby expectancies" and be reviewed by
Congress from time to time*
Mr* Burgess assured the Committee that he was speaking for the
American Bankers Association* He explained to Rep* Gamble (R. N*Y#) that
the purpose oif suggesting as a standard for Export-Import Bank loans that
they offer assurances of repayment was to buttress the management of the
Bank in refusing a loan* He favored cutting the extension of the life of
the Bank as provided in the bill but felt that in order to preserve continuity in the. Bankfs operations it's life should be -extended for at least
five years*
Mr* Burgess did not agree with Rep* S^mner (R*:
that the Export-Import Bank would compete for loans with private capital
if the mamgemeht of the Bank -contiiiued the past policies of the Bank *
He did.not qiijace Rept Suiftnerfs fear that the United States taxpayer wpuld
lose /because of tha Bank's operations* He expressed the hope that the
Bank wduld not \xa6 all its $3 •? Million lending authority for direct
loans 4.but would continue to'use private capital through its take-out
arrangements•• There followed a discussion between Rep* Sumner and Mr*
Burgess*in whichthe terms "lending authority" and "capital" of. the Bank,
were confused*. Mr* Burgess ^filially pointed out that-the Bank's lending
authority of $3*5.billion represents loans and guarantees of
the Bank which niay be outstanding* at any one time* 'Mr* ^Burgess. fel.t that
there would be pressure oh the Bank to make loans at too low rates of
interest, wh^ch would make" hhe Bank competitive- with private lending in-*
stitutions and tho International B ank* Be believed that the rate, charged
by the Export-Import Batik should bo similar to the minimum rate of ij. to
k"g per cent which may be charged by the International Bank> Rep* Sumner
then asked tho witness if it were not true that the Bank was. free to use
its -capital, at it's discretion, that it cbuld charge any .interest rate,
that its losses would be made good by the Treasury, and that it would compete with private capital* Mr* Burgess replied that the first two points
were a question of management, that he did not agree on the third point
and that the danger of the fourth was nebulous and would be nonexistent
if the principles suggested by tho -:Association were adopted*
Rep# Buffett (R# Nobr*) expressed the fear that the United
States Government will soon dominate foreign lending* Mr* Burgess
seemed apprehensive of a similar development but pointed out that if.

9there is to be adequate foreign investment, the government must enter the
field since the risks of such lending are too great for private institutions to carry• Although private banks now have a large amount of funds
which might be used to make foreign loans, their previous experience
deters them* During the war, however, private banks have done considerable foreign financing* Mr. Burgess did not agree with Rep. Buffett that
the Export-Import Bank should have an interest in or influence over the
policies of a foreign governmont borrower similar to those of a commercial
bank in the management of a domestic corporate borrower. He pointed out
that the Bank has refrained from attempting to influence the policies or
politics of borrowing governments. The testimony of Mr. Burgess concluded
the hearings on the Export-Import Bank bill.

Board of Governors
of the Federal Reserve System
Division of Research and Statistics
July 13,