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BOARD OF GOVERNORS
OF

THE

FEDERAL RESERVE SYSTEM

Office Correspondence
To

Chairman Eccles

Pram Mr* Knapp

Date

April 15 > 1947

Subject! Bill to reincorporate Export•
Import Bank

The Senate Banking and Currency Committee is about to open hearings on a bill (S*993) providing for the reincorperation of the Export-Import
Bank as a Federal corporation and for certain other amendments to the ExportImport Bank Act of 1945* T M s bill is of a routine nature, bub I think you
should know of its existence*
The Export-Import Bank is now a Government corporation incorporated
under the laws of the District of Colnabia. For technical reasons, it is now
thought desirable to change it into a Federal corporation to continue through
June 30* 1953^ Its lif© oould be further extended by Congressional action,
and the bill specifically states that the Bank may acquire obligations or
assume liabilities maturing after June 3®t 1953*
You will recall that the Bank's capital consists of 1 billion dollars in capital stock held by the Secretary of the Treasury, plus additional
sums up to the amount of its total lending authority to be provided by the
Treasury against the Bank f s obligations* At the present time the Treasury
charges 1 per cent per annum on funds advanced against such obligations (the
same rate as charged to other Government corporations, e*g* the fi*F»C«)« The
new bill provides that in the future the rate of interest shall be fixed by
the Secretary of the Treasury ^taking into consideration the ^/the*^ current
average rate on outstanding marketable obligations of the United States19 (at
present 1.85 per cent). This change makes no significant difference, except
that the Bank f s earned surplus will not grow as fast as it would have otherwise*
The bill also provides that the net earnings of the Bank after
"reasonable provision for possible losses" should be used to pay dividends
on the 1 billion dollars of capital stock* At present the Bank is not required to make dividend payments and in practice it has been accumulating
all of its net earnings in earned surplus (now amounting to 44 million dollars)* The Bank does not much like the new provision, which was inserted at
the request of the General Accounting Office, since it is so difficult to
determine what is a "reasonable provision for possible losses** For the
present at least, I understand that the Bask will simply continue allocating all net earnings to earned surplus*