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THE EXPORT-IMPORT BANK OF WASHINGTON
ITS ORIGINS, OPERATIONS AND RELATIONSHIPS
WITH OTHER GOVERNMENTAL AGENCIES
1934 . 1950
by
SIDNEY A. TRUNDLE, JR.
MANUFACTURERS TRUST COMPANY
NEW YORK, NEW YORK
Submitted in partial fulfillment of the
requirements of The Graduate School of
Banking conducted by the American Bankers Association at Rutgers University.
New Brunswick, June 1950
CONTENTS
Page
Chapter
I.
II.
III.
IV.
V.
VI.
INTRODUCTION
1
HISTORICAL BACKGROUND
The Reconstruction Finance Corporation
Proposed Russian Trade Bank
Proposed National Foreign Trade Bank
The First Export-Import Bank
The Second Export-Import Bank
12
12
18
20
21
26
OPERATIONS
The First Years 193^-1939
The War Years 19^0-19^5
28
28
33
THE EXPORT-IMPORT BANK ACT OF 19^5
Legislative History
Organization and Management of The Bank
Under the Act
^5
^5
OPERATIONS UNDER THE ACT . . .
Source of Funds
Financial Condition of the Bank
Earnings
Delinquent Loans
Contingent Liabilities
58
58
6l
6l
63
66
POLICY
General
Policy Statement
Policy Problems in 19^5
Policy Problems in 19^6
Private Participations
Private Trade
Domestic Impact
Marine Insurance
Letter of Credit Guaranties
ii
53
68
68
70
77
82
83
8*4Qk
85
86
Chapter
VI.
Page
P0LIC1 (Continued)
Policy Problems in 19^6 (Continued)
Reconstruction Credits
Interest Rates
Imports
Policy Problems in 19^7Policy Problems in 19^8
Policy Problems in 19^9
86
87
88
89
90
91
VII.
LOANS AND COMMITMENTS UNDER THE ACT OF 19^5 * . .
July-December 19^5
January-June 19^6 .
July-December 19^6
January-June 19^7
July-December 19^7
January-June 19^8
July-December 19^8
January-June 19^9
July-December 19^-9
93
93
97
103
106
110
117
121
125
129
VIII.
THE BANK AND ITS RELATIONS WITH OTHER AGENCIES. .
Lend-Lease
National Advisory Council
The Economic Cooperation Administration. . . .
The Point IV Program
The Hoover Commission
139
139
142
1^7
l$k
160
THE BANK AND ITS FUTURE
166
IX.
BIBLIOGRAPHY
219
iii
TABLES
Table
1
2
3
k
Page
AUTHORIZATIONS, DISBURSEMENTS AND REPAYMENTS
FEBRUARY 12, 193^ - JUNE 30, 19^5
^2
CONTINGENT LIABILITY ON LOANS ADVANCED THRU
AGENT BANKS, 1936 - 19^5
^3
SCHEDULE OF EXPENSES, GROSS INCOME AND
NET PROFITS, 1935 - 1 9 ^
.
hk
SCHEDULE OF CAPITAL AND NOTES PAYABLE TO
U. S. TREASURY
60
5
EARNINGS 19^5 - 19^9
62
6
DELINQUENT LOANS
6k
7
STATUS OF DELINQUENT LOANS AS OF
DECEMBER 31, 19^9
65
8
CONTINGENT LIABILITIES
6f
9
SUMMARY OF OPERATIONS 19^5-19^9 TRANSACTIONS . . . .
137
10
SUMMARY OF OPERATIONS 19^5-19^9 BALANCES
138
11
E. C. A. LOAN ALLOTMENTS
151
12
EXPORT-IMPORT BANK GUARANTIES FOR ACCOUNT OF
E.C.A. AS OF DECEMBER 31, 19^9
15^
iv
APPENDICES
Page
Appendix
A
EXCERPTS FROM REFERENCE MANUAL OF GOVERNMENT
CORPORATIONS. . . . . . . . . . . . . . . . .
170
STATEMENT OF COMMITMENTS, CANCELLATIONS,
DISBURSEMENTS, REPAYMENTS AND OUTSTANDING
BY COUNTRY MARCH 12, 1932* to JUNE 30, 19^5- •
175
C
THE EXPORT-IMPORT BANK ACT OF 19^5 AS AMENDED. . .
Yj6
D
STATEMENTS OF CONDITION EXPORT-IMPORT BANK
OF WASHINGTON
B
E
F
- . . 18^-199
STATEMENTS OF INCOME AND EXPENSES EXPORTIMPORT BANK
200-207
EXPORT-IMPORT BANK OPERATIONS BY COUNTRIES
AS OF DECEMBER 31, 19^9
208
G
SCHEDULE OF MATURITIES BY CALENDAR YEARS
210
H
LOANS DISBURSED BY COMMERCIAL BANKS AS AGENTS. . .
211
I
SECTIONS OF THE BRETTON WOODS AGREEMENTS ACT
RELATING TO THE NATIONAL ADVISORY COUNCIL
(AS AMENDED)
SECTION 111(c)(2) OF THE FOREIGN ASSISTANCE
ACT OF 19^8
, . .
212
J
v
217
CHAPTER I
INTRODUCTION
The Export-Import Bank of Washington may perhaps be best described
as the offspring resulting from a marriage of conveniencej on the one
hand from a desire to assist the foreign traders of the United States at
a time when the foreign business of the country was at low ebb, and on
the other from a desire to have an institution available which could
finance the expected trade with the U.S.S.R. which had just been recognized by the American Government.
In the following chapters the operations of the Bank have been
described in some detail with particular attention shown to the ExportImport Bank Act of 19^5 and the functioning of the Bank under that Act.
The Bankrs operations have been described with a minimum of historical
background even though the world events which occurred during its over
fifteen years of existence have had a profound effect upon its size,
policies and operations.
It is the purpose of this introduction to fur-
nish the panorama against which the Bank can be appraised, its influences
evaluated.
Much is heard today of the dollar gap - export surpluses and the
1
2
necessity of narrowing the margin between exports and imports. It has not
always been so. In the infancy of our republic and even until after the
Civil War our imports exceeded our exports in almost every year. While
our country exported some manufactures and raw materials, most of its resources were used in its own growth, and heavy reliance was placed upon
imports from the old world.
These import surpluses were financed partly
by our exports but principally by the private investments of the Dutch,
English, French and German investors which poured into our expanding industries and into the development of our natural resources. From 1870
until 1913 our export surplus grew steadily and in the later year amounted
to over 600 million dollars.
In 191*1- the First World War began and soon the countries of Europe
looked to the west for their supplies and by 1915 the export surplus rose
to over one billion dollars. This huge surplus was financed by the liquidation of foreign holdings of American assets and the floating of large
loans in the private investment market by the British and French Governments.
In 1917 the United States entered the war and extended large loans to its
Allies1 meanwhile, the export surplus was still increasing and by 1919 had
reached a figure of k.5 billion dollars. The United States which, when the
war began in 191**-, was a net debtor of 3*7 billion dollars found itself at
the end of 1919 in the status of a net creditor of the same amountj in five
years it had gained investments of 7 ^ billion dollars.*•
Late in 1918 the war came to an end and, with the end, came a brief
but severe inflationary boom caused by the sudden dropping of wartime con-
"Historical Statistics of the United States 1789-19^5." United States
Bureau of the Census, (Washington, D.C. 19^9), P* 2^3, Series M H-2-55.
3
trols.
The boom was accentuated by a large volume of deferred capital
expenditures, replenishment of inventories, high consumer purchasing power
and the vast needs of a war torn Europe. Then in 1920 came the merchandise
panic.
Imports fell rapidly, followed by a swift fall in exports which
was aggravated by the abrupt termination of the United States loans to its
Allies.
Concurrent with these changes was a steep decline in prices through-
out the world.
The depression was sharp but brief and by 1922 industrial production
in the United States was above the 1920 levels although the price structure
was much lower than that which had prevailed in the immediate post war
period. With improved business in the United States imports began to rise
in late 1921 and exports soon followed suit. The period 1922-1929 was
marked with the world-wide economic expansion and rising incomes. The
supply of dollars expanded with the increase in imports, large tourist expenditures and service remittances. During this period there existed a
high level of foreign loans and other investments abroad.
These sources
provided sufficient funds to finance exports of k to 5 billion dollars per
year and take care of debt service and war loan payments. The United
States had become a lending country and readily satisfied the foreign
demands for American goods and capital. Unfortunately, the United States
was inexperienced in large scale foreign lending and much of the loans went
for expenditures which were not productive and wasteful. The boom lasted
until late in 1929 when there was a drop in industrial production and a
sharp break in the stock market.
Imports dropped, foreign loans dwindled
and raw material prices collapsed and the finishing touch was the upping of
the tariffs in 1930. Exports had reached a peak in late 1928 and quickly
followed imports down. The economic life of the United States was severely
k
affected.
Business was prostrate and the depression was long and punish-
ing. Unemployment jumped from 429,000 in 1929 to 11,842,000 in 1933.2
The curtailment in the supply of dollars available to the world
caused by our reduced imports which dropped from 4.7 billion dollars in
1929 to 1.7 billion dollars in 1933 and the cessation of investment activity called for tremendous readjustments throughout the world.
During the
four years I926-I929 the dollar supply had been between 7-3 billion dollars
and 7«5 billion dollars annually and foreign incomes and spending as well
as the international debt structure had been adjusted to that level. In
the next three years 1930-1932 the dollar supply dropped 5 billion dollars
or 68$ which made necessary vast changes in the foreign use of dollars and
in the foreign economic systems themselves. The problem was aggravated by
the burden of fixed obligations including war debt payments due the United
States of about 900 million dollars per year. To fight and offset the
worldwide deflation, foreign countries took immediate and drastic steps.
Gold standards were abandoned, currencies were depreciated in terms of the
dollar. Defaults occurred in war debts both as to principal and interest.
General tariff increases were made to curtail total imports and to promote
domestic production.
Preferential tariffs and commercial arrangements were
executed between countries to foster mutual trade and to divert trade from
other sources of supply. Direct trade and exchange controls were established
through quotas and licenses to force trade into selected channels and to
restrict the use of foreign exchange to the available supply. This recovery
from the depression abroad was gained on national and bilateral lines which
was of small assistance to the United States economy.
2
United States Bureau of the Census, Historical, etc., op. cit. p 0 65,
Series D 62-76.
5
Some of the European countries such as Great Britain and Germany,
in order to obtain foreign exchange and build up their exports, subsidized their exporters and provided credit insurance. This put the
American exporter at a disadvantage in the world market, particularly in
this period, and agitation mounted for a Government institution in the
United States which would provide similar facilities. Meanwhile, with
the advent of the Roosevelt Democratic Administration in 1933 > consideration was given to the recognition of the U.SoS.R., which could use, it
was felt, huge quantities of our surplus agricultural and industrial
products. Recognition was finally granted but credits were not granted, due
to the feeling of the American people on the subject of the repudiation
of the Czarist obligations outstanding in this country.
In 193^, the
Johnson Act was passed which precluded loans and credits to countries in
default of their war debts and which, therefore, closed the door on many
countries.
In 1932-1933, with the revival of business in foreign countries, world
economic activity began to move upward and after the,revaluation of the
dollar in January 193^> there began a heavy movement of capital into the
United States with an attendant inflow of goldc
Thus in the six years
193^-1939 some 6 billion dollars of foreign capital came Into the country
and net gold imports were almost 10 billion dollars. Large portions of
these funds went into bank balances or stock market issues and not into
the productive system.
In the middle and late 30fs the United States
seemed the most secure place in the world as Europe was wracked with
political crises and the upward surge of nationalism and totalitarianism.3
3
—
— — — -
"The United States in the World Economy" Economic Series #23 United
Staies Department of ComHeTceT^tWashington, D.C. 19^3)> V* 2 ff.
6
The foreign trade of the United States continued to run in low figures
and exports by 19^0 had risen to only k billion dollars. An import surplus
was carried running from 7*1-2 million dollars in 193^ to 3-^ billion in 19^0
which was mostly accounted for by the influx of gold. There was a slight
recession in 1937-1938, but the pressure of the arms boom that started soon
after, coupled with the corrective measures taken by the United States Government, cut short the downward trend.
In 1939> the European War was near
and Japan was engaged in the invasion of China.
19^-0 found World War II in
full swing and for the next six years conflicts covered the globe.
The war period, for convenience, may be divided into three periods.
First, 19^-0-19^1 marked the transition from "cash and carry" neutrality
into the development of the United States as the "Arsenal of Democracy".
While the Lend Lease Act had been approved in March 19^1, lend-lease
transfers did not assume large proportions until the last six months of
the year. During the "cash and carry" stage dollars needed to pay for
rapidly rising exports and advance payments for material and financial
assistance for American manufacturers of munitions were obtained^ first,
by liquidation of foreign assets in this country! second, sales of goldj
third, some advance payment and loans by the United States Government.
The second period covers the period of actual United States participation in the War 19^2-19^4- and the first six months of 19^5- Exports
continued to climb and lend-lease assistance kept pace. Actually exports
for which we received payments during this period were smaller than our
imports, so that foreign countries either increased their dollar balances
or purchased gold.
Exports totalled k billion dollars in 19^0^ 5«1 bil-
lion dollars in 19^1J 8 billion dollars in 19^2; 12.9 billion dollars in
7
19^3J 15.2 billion dollars in 19V* and 9.8 billion dollars in 191*5.
The third period covered the last half of I9I+5 and the transition
from war to post-war. During this period exports and imports declined
and lend-lease was replaced to a degree by U.N.R.R.A. and loans in which
the Export-Import Bank took a part. Because of limitations on our domestic production and exports of civilian goods, some foreign countries continued to build dollar balances and buy gold.
During the war lend-lease
had amoxxnted to almost 50 billion dollars. Thus it will be seen that with
a limit of 700 million dollars in the war years, the Export-Import Bank
played a very modest role.
In 19l*5 with the new Export-Import Bank Act, the Bank was given an
important assignment, namely, to fill the gap between the curtailment of
lend-lease and the activation of the International Bank, In all, the
United States Government in the last half of 191*5 arranged through lendlease credits, the Export-Import Bank, the Anglo-American loan, and its
subscription to the International Bank, for credits of 13 billion dollars.
The countries of Europe and Asia were in urgent need of foreign assistance for the reconstruction of their economies. In some countries
there had been widespread physical damage so that industrial and transportation equipment would have to be replaced in order to bring production up
to prewar levels. Shortages existed in foodstuffs and raw materials. Normal channels of trade had been disrupted and the financing of current requirements was difficult due to the insistence of sellers for dollars or
other hard currencies. Europe, traditionally, had been the supplier to
"International Transactionsof the United States" Economic Series #65
United States Department of Commerce, (Washington, D.C. 19^B), pe 2ff.
8
large areas of manufactured goods and the principal purchaser of raw
materials. As the economies of the European countries were dependent in
large measure upon their international trade, the difficulties of carrying
on normal trade was a problem of great importance. In their attempt to
cope with the problem the European countries made bilateral trade and payment agreements which tended to restrict and limit trade*
The post-war situation tended to increase the balance of payment difficulties of many countries with the United States. The U.S. had for many
years been selling more to Europe than it had bought there and bought more
from Asia than it exported there. The European countries, on the other
hand, imported more from the U.S. then they had sold there and part of
this deficit had been covered by sales to other parts of the world for
dollars.
Other dollars had been supplied by tourism, remittances and
services, such as shipping. To a lesser degree American investments
abroad had financed the deficit.
In the post-war period the current account deficit of foreign countries with the U.S. increased enormously.
In 19^6, the U.S. supplied 15,300
millions of dollars in goods and services to other countries and received
only 7100 millions of dollars in goods and services from them, resulting
in a surplus of 8200 millions of dollars. In 19^7 > our surplus reached
11,300 millions of dollars with total exports of 19,600 millions. This
situation was the result of the favorable economic position in which the
U.S. found itself at the end of the War and the distress caused by the
War in other areas. Our productive capacity had expanded, a high level
of employment raised production and the national income of the U.S. rose
to new high levels. In the period July 1, 19*1-5 - December 31; 19^7 foreign countries received 41,600 millions of dollars of goods and services
9
from the U.S. They paid for this by exports to the U.S. of goods and services to the total of 19,200 millions of dollars. They used gold and
dollar reserves amounting to 5,300 millions of dollars. U.S. foreign aid
programs provided l*f,600 millions of dollars and the balance of 2500 millions came principally from changes in investments and remittances. The
European countries alone had lost reserves of 2800 millions, more than 25$
of their total holdings. The consequences of this decline in gold and
dollar balances was that most countries in 19^8 had inadequate resources
in gold and foreign exchange to maintain working balances in foreign exchange and gold or foreign exchange reserves for their note issues.
A net total 18,200 millions of dollars of U.S. assistance was made
available during the period July 1, 19^5 - December 31, 19^7 on an average
rate of 500 millions per month. December 31> 19^7 found only 3&00 millions
of dollars unutilized.
It was evident that the funds would be exhausted
in 19^8 and some countries had already exhausted the aid allocated to them.
During the first phase of U.S. post-war assistance extending from
July 1, 19^5 to June 30, 19^6 most of the assistance was in the form of
grants, including UNRRA, and military-civilian supplies for ffdisease and
unrest" programs. In the second phase July 1, 19^-6 - March 31, 19^8 the
bulk of the assistance was in the form of loans and property creditsj
these included the British loan, Export-Import Bank loans and property
credits extended by the Office of Foreign Liquidation. Up to December 31,
19^7 slightly more than half of all aid was in the form of loans and property
credits, the rest in the form of grants•
In early 19k8 it became evident that unless the U.S. continued foreign
assistance on a large scale there would be a serious setback in the recovery
of European countries. Concurrent with this had been a worsening in East-
10
West relations and the cold war was on in earnest.
In a special message to the Congress in December 19^7 the President
requested authorization of a program of assistance to Europe and to China.
The European recovery program for the period April 1, 19^8 to June 30, 1952
was expected to require 17 billions of dollars. The President recommended
an appropriation of 6,800 millions for the initial period of 15 months.
The Foreign Assistance Act approved April \ 19^8 authorized appropriations
of ^300 millions and debt transactions of 1 billion for the European recovery program for the period June 30, 19^8 - June 30, 19^9• Interim aid was
appropriated in the amount of 522 millions for France, Italy and Austria.
In 19^8 exports declined to 16,891 millions while imports increased
to 10, W l millions. These changes were the result of continued progress
of recovery and production in foreign countries which enabled them to
supply a larger portion of their own needs and to increase their exports
to the U.S. Also there was an increasing difficulty experienced by foreign
countries in making dollar payments.5
In 19^9 exports declined further to 15,91^ millions of dollars and
imports dropped to 9>831 millions. The deficit of 6100 millions was offset
principally by U.S. aid of 5,7^1 millions.
During the year devaluation was effected in a number of currencies,
including the British. The effects of this devaluation have not yet become
c
clear cut. There will be some effects as the devaluing countries in 19^-8
accounted for 62$ of our exports and 51$ of our imports.
"The Balance of International Payments, 19*1-6-48" United States Department
of Commerce, (Washington, D.C. 1950), p. Iff.
"International Transactions in the Fourth Quarter", Survey of Current
Business (March 1950), United States Department of Commerce, Vol. 30 §3 P.^f.
11
Despite its extent our exports have not been an abnormally large
drain on our resources; only in 19^7 did the value of our exports exceed
5$ of our gross national product.
In the other post-war years the propor-
tion ranged between k.6f> - 5.1$.
While since the war imports have run at high levels both in value and
volume, as a proportion to gross national product they have run smaller
than in the 20's, when the ratio was always over k*f>. In the post-war
period they have always been under 3$«
7
"United States Foreign Trade Since the War", Monthly Review of Credit
and Business Conditions. Federal Reserve Bank of New York, (Nov. 19#9)*
Vol, 31 #11 p. 126ff.
CHAPTER II
HISTORICAL BACKGROUND
The Reconstruction Finance Corporation
The RFC was created a body corporate by the Act of January 22, 1932
(k*7 Stat 3i 15 USC 601).
The Corporation was formed to assist in providing emergency financial facilities to distressed banks and other financial institutions and
to aid in financing agriculture, commerce, industry and the railroads.
Immediately upon its formation agitation developed among the foreign
trade groups to use the facilities of the new corporation to regain the
foreign trade of the United States.
The economic collapse in the United States in 1929 deflated trade
throughout the World.
As a result from 65 Billion in 1929 it had dropped
to 26 Billion in 1932. Our own exports declined from 5 Billion dollars in
"Reference Manual of Government Corporations, General Accounting Office,
as of June 30 > 19^5•" Senate Document $86 79th Congress 1st Session,
United States Government Printing Office, Washington, D.C. 19^5>
pp. 200-201.
12
13
1928 to 1.3 Billion dollars in 1932.
As a result of this contraction,
trade barriers were set up and exchange restrictions were inaugurated and
collections slowed.
Thus, on February 2, 1932 the American Manufacturers
Foreign Credit Exchange held a meeting calling on the Government to regain
its export trade and to assist foreign buyers to get dollar credits and
to assist foreign purchasers to retire slow collections.
u
Within a week Senator Duncan Fletcher of Florida outlined four points
in the "new" RFC which would assist exporters.
L
Would finance export accounts up to 12 months maturity.
2.
Covered only new shipments.
3. Acceptance credits must be covered by domestic American
Collateral.
k.
RFC would handle all drafts on foreign customers and
will assist in exchange problems.H
This announcement provoked much discussion on what would be required
as collateral coverage. Small businesses had little in the way of collateral to offer. Unofficial sources said that mortgages on factories, liens
on machinery and inventory and slow accounts would be acceptable. But
after two years of depression there was little unencumbered assets outside
12
of bank balances.
And so the matter rested, at least publicly, until October Ik,
1932
when announcement was made of the creation of a division in RFC to adminisSnider, Joseph L., "Looking Ahead", Harvard Business Review (January 19^9)
Vol, XXVX No. 1 p. 8.
The New York Times (January 2, 1932), Volo LXXXI.
11
The New York Times (February 7, 1932), Vol. LXXXI.
12
The New York Times (February 1*4-, 1932), Vol* LXXXI.
Ik
ter the section of the law pertaining to loans to exporters in order to
finance the sale of surplus agricultural crops in foreign markets. It
was held that extensive shipments could be made to Europe, South America
and the Orient if funds were available to allow exporters to extend satisfactory credit terms. Tobacco, grains, lard and cotton wfere to be the
chief products involved.
The export community, however, was not content with this action alone
and a Joint Committee on Foreign Exchange Relations on December k, 1932
urged a Five Point Program to remove exchange barriers — unfreeze frozen
assets of American companies abroad and the financing of new exports. It
was claimed that the prevailing extreme economic distress was due to the
paralysis of foreign commerce.
It was proposed to:
1. Appoint a committee to. study the entire question.
2.
Establish credits and advances against frozen assets.
3.
Create exchange to finance new exports (by barter) and
to use funds now tied up<>
k.
To get the U. S. Government to use diplomatic pressure
upon foreign governments to lift exchange restriction.
5. The Government establish a department to study Foreign
Government Institutions for facilitating foreign trade.
Meanwhile there had been no loans by the RFC under the aid to exporters provision. Exporters scored this negative attitude as a result of
which they said that foreign sales had continued to shrink.
It was an-
nounced that the American Foreign Credit Underwriters Inc. had discontinued
°The Hew York Times (October Ik,
1932), Vol. XXXII.
^ h e New York Times (December k, 1932), Vol. LXXXII.
15
credit insurance on exports. It was also announced that the matter had
been given much study and it had been concluded that the U. S. Government
must negotiate modification of exchange regulations in Latin America and
other countries and that financial assistance beyond existing facilities
of commercial banking must be made available to exporters.
Another 5 point recommendation was made:
1. Liberalize foreign trade acceptance facilities.
2.
Have Congress authorize the RFC to accept all forms of
current foreign trade receivables as security for
advances.
3.
Create Government insurance similar to that in some
European countries which guarantees up to 60$ without
recourse to the exporter.
k.
Establishment of arrangements to give intermediate or
long term credits. 5
It was also urged that an Export Finance Corporation with 3-5 billion
dollar capital be formed by big business under Government leadership to
discount for American farmers and manufacturers at low rates of interest
their own notes, secured by the accounts receivable of foreign customers.
The suggested terms to the foreign customers to be up to 2^ months. "
The National Foreign Trade Council sought an amendment to the RFC
Law to authorize the guarantee, without recourse, up to 75$> of bills of
exchange drawn against exports. It pointed out that England, France,
Germany and other countries had given such guarantees for several years
without serious loss.
It held that its adoption by the U. S. Government
would be analogous to the functions of the War Risk Insurance Corporation.
Export credit guarantees were established by the British Government in
'^The New York Times (January 8, 1933), Vol. LXXXII
^ h e New York Times (January 10, 1933h Vol. LXXXII
16
1926.
By 1932 it had grown to the coverage of L15 million (60$ of h2k
million shipments).
As it was then set up, the RFC, it was claimed, covered only agriculture and there was no logical reasons for discrimination against manufactured products. "**«
On March k,
1933 F. D. Roosevelt was inaugurated as President and on
April 28 following Fred E. Kent the Presidential Advisor said that the
fostering of foreign trade would be a first task of President Roosevelt.
1 ft
H e said the chaos h a d b e e n caused b y economic nationalism.
O n M a y Ik,
1 9 3 3 it w a s reported that a responsible official h a d said
that w e should increase o u r exports t o t h e non-manufacturing countries b y
guaranteeing u p t o 5 0 $ "but the Government rates should include a r e s e r v e
19
for l o s s e s .
W i t h t h e a n t i c i p a t e d r e c o g n i t i o n o f the U.S.S.R. h a d come m u c h d i s cussion a s t o its inclusion in o u r export trade a n d w o r k w a s b e g u n o n
U o S . -- S o v i e t trade a g r e e m e n t s .
H o w e v e r , this w o r k received a set b a c k
in J u n e 1 9 3 3 w i t h t h e a n n o u n c e m e n t of a loan o f 50 m i l l i o n dollars t o
China f o r w h e a t , g u a r a n t e e d as t o repayment b y certain t a x e s .
Proponents
f o r R u s s i a n trade h e l d that t h e S o v i e t w a s e n t i t l e d t o several times the
50 m i l l i o n dollars a n d w a s in a b e t t e r p o s i t i o n t o repay.
I t w a s cited
that t h e y w e r e in n e e d o f h e a v y m a c h i n e r y , road b u i l d i n g equipment a n d
railroad e q u i p m e n t .
A b a r t e r p l a n h a d b e e n suggested b u t ruled o u t
^ T h e Hew York Times (January 15, 1933), Vol, LXXXI1.
1 ft
The New York Times (January 28, 1933), Vol. LXXXII.
l9
The New York Times (May ±k,
1933), Vol. LXXXII.
IT
Of)
because of the difficulties of organization and administration,
On June 1*1-, 1933 it was announced that Amtorg sought a loan from the
RFC to purchase 3 million bales of cotton and agricultural machinery.
Before the loan could be made the approval of the White House and the
State Department had to be obtained and there was a question as to what
21
collateral Amtorg would put up.
On July 3, 1933 it was announced that a loan of ^million dollars to
finance the export of cotton to Russia was approved.
This was the first
since the World War (l). The terms were 30$ cash. Remainder for one year
at Jjo secured by notes of the Amtorg Trading Co. and unconditionally guaranteed by the State Bank of the U.S.S.R.
It was also stated that metals and machinery were also sought but the
22
RFC could only finance commodities.
Sellers of the cotton agreed to guar-
antee 25$ of repayment. Jesse Jones, RFC Chairman, emphasized it was not
a loan to the Soviets. Much criticism was heard from some Senators because
the Soviets had repudiated all Czarists debts. 3
On September l6, 1933 the RFC announced that Amtorg sought a credit
of 50 to 75 million dollars but wanted lower rates, longer terms and less
cash payment.
snags.Pk
^
It was doubtful that the RFC could handle because of legal
It was also disclosed that in a pending cotton financing to the
Russians of 18 million dollars over 3 years, a provision would be made
PO
21
The Hew York Times (June 11, 1933), Vol* LXXXII.
The New York Times (June 11, 1933), Vol. LXXXII.
op
The New York Times (July 3, 1933), Vol. LXXXII.
23
The New York Times (July k, 1933), Vol. LXXXII.
2k
The New York Times (September l6, 1933), Vol. LXXXII.
18
prohibiting resalesj also, the permission of the United States Government
would be required before Russian cotton could be sold on the World market.
Proposed Russian Trade Bank
The matter of Russian trade continued to be explored and it was revealed in December 1933 that the establishment of a 200 million dollar
institution for the discounting of Russian trade acceptances was being
considered, by the RFC and other Government agencies concerned, as one of
several proposed plans to facilitate financing of American exports to
Russia.
The discount bank that was to be set up under the plan was to
be financed by the RFC which was to supply 100 million dollars and 100
million dollars was to come from American exporters seeking participation
in the Russian market and by the Russian Government.
As a beginning it was proposed that the Bank be equipped with a 2
million dollar capital, to be increased to 10 million dollars eventually
by payments of exporters of 5$ °f the face amount of business done with
Russia.
In addition to its permanent capitalization of 10 million dollars
the Bank was to have a revolving fund of 90 million dollars of which 50
million dollars was to be supplied by the American exporters through the
retention by the Bank of 25$ of the face amount of the trade acceptances
presented for discount.
With the 60 million dollars thus available it was proposed to increase the amount to 100 million dollars through an agreement with the
Soviets whereby the first ^0 million dollars of Russian exports to the
25
The New York Times (September 26, 1933), Vol, LXXXII.
19
U. S. during the first 2 years would be retained by the bank as a continuing security against all discounted obligations and as additional working
capital.
It was proposed at this point that the RFC would match dollar for
dollar but it was not clear if this 100 million was to be before or after
the other 100 million dollars.
It was contemplated, however, that with the financial structure thus
provided that American exporters could take trade acceptances of either
the U.S.S.R. or Amtorg to the Bank for discounting at 70$ of face value.
The plan also proposed that Russian credits be arranged on a k year
average basis with repayment terms of 50 million dollars per year. Payments during the first 2 years would not exceed 30 million dollars per
year, because of the ^+0 million dollars to be retained by the Bank during
the first 2 years from the proceeds of the Russian sales to the U. S.
From these repayments of 50 million dollars per year it was contemplated under the plan that the contribution of the RFC could be liquidated
during the first 3 years of operations. It was proposed that RFC would
have a preference over all creditors. The Corporation would be secured
for its advances by assignment of the collateral and the endorsement of
the discount bank backed by its capital, surplus and other resources.
Upon maturity the acceptance would be paid and the RFC on liquidation
of its advances, was to release the collateral and at the same time 25$
of the acceptance retained by the Bank would revert to the exporter to be
withdrawn or to provide additional export facilities. ° This was the
first time that a Bank for handling international trade had been mentioned
in the press and while it bore small resemblance to the Export-Import
Bank that came later, it was a step in that direction.
g
^ The
Mew York TimesTTPecember 3, 1933), Vol. LXXXII.
20
On December 29th President Roosevelt held a conference with his
Chief Advisors on foreign affairs and agricultural problems. General
principles regarding an increase of exports and also the problem of coordination of the prospective export enhancement program with the domestic
recovery program were discussed. '
Proposed National Foreign Trade Bank
It was evident that business men were not too impressed with the socalled "Russian Trade Bank" and so on January 21, 193^ it was revealed that
there was under discussion a "National Foreign Trade Bank" to be capitalized at 30 million dollars with resources of about 300 million dollars for
use in financing export and import transactions. It was contained in a
committee proposal representing banking, business, etc.
It would provide facilities for financing long term payments on exports, for administering proposed Government insurance on foreign sales
and for extending to importers the necessary funds for financing foreign
crops.
It was proposed that 5 million dollars of common stock be subscribed
by exporters and 25 million dollars of preferred stock be taken by the
RFC.
It was likewise proposed that amendments be made to the RFC Act and
to the Edge Act to allow for the wide scope of the bank planned^ also, the
passage of a law to insure export credits and to guarantee collections on
foreign sales was asked.
The committee pointed out that much of the 69%
shrinkage which occurred since 1929 was due to the fact that exporters
27
The New York Times (December 29, 1933), Vol. LXXXII,
21
were forced to forego business because of a lack of intermediate credit
facilities. The committee further stated that out of an estimated 12
million unemployed (193*0 over ikfy represented those thrown out of work
by the shrinkage of exports.
The bank was also to handle the 350 million dollars of commercial
credits in blocked accounts in 36 foreign countries.
The committee also suggested that the Bank could act as the agency
through which the U. S. Government could extend commercial credits to
Russia and other countries thereby overcoming diplomatic and other objections to direct loans by the Government to foreign nations.
It was estimated that millions of dollars worth of orders on capital
goods and equipment were pending abroad and would be lost to American interests unless facilities for underwriting the necessary long term credits
were made available to manufacturers here.
It was proposed that the Bank operating under Section 25a of the Federal Reserve Act would extend such facilities.
It was stated that for more than 2 years foreign traders had been
agitating for the formation of an Edge Act bank or similar establishment
which would enable them to finance foreign sales on a basis similar to
that open to competition in other nations. ^
Creation of the First Export Import Bank
It soon became evident that the Government was casting around for
some means to improve the export situation and at a press conference held
on February 3> 193^j President Roosevelt made known his plans for the for_
,
«
The New York Times (January 21, 193*0, Volo LXXXIII.
22
mation of a bank with funds supplied by the RFC for the financing of exports particularly those for the U.S.S.R.
Later, Jesse Jones said, the plan would be extended to other areas -South America and the Balkans. He also mentioned that imports might also
be financed.
Capital details were not disclosed but it was expected to be
around 300 million dollars.
The President explained that there was no idea of granting straight
credits to Russia nor was complete financing of exports contemplated, rather
the shipper would have to bear part of the risk.
Terms of credits were to be 3 to 5 years. It was intended to organize
the bank under the laws of the District of Columbia rather than the Edge
Act because of the limitations of the Act on terms of commercial credits.
Jones said "We are trying to find a way to finance exports and some
imports to the Russians and to some other countries. Whether this will be
all done through one corporation (Bank) or whether we will have corporations
for different countries has not been decided.
It may take the form of a
sort of trading bank, a bank that could extend credit to our exporters and
importers, guarantee bills in a limited way and, in general, share the credit
risk with the exporters, and where necessary, provide a part of the financing.
In all probability it will take on the form of the Commodity Credit Corporation to be operated within the RFC but with a special management.
It is
contemplated the government will own all the stock. The amount of the
stock will be flexible depending on the need.
It will not be an enormous
amount --as regards the amount of the Government risk, we will trade
with the exporters the amount they will need to carry them through their
commitments. But whatever the Government agrees to take will be without
23
recourse to the exporter himself. 9
This announcement was, of course, well received by the export community and the National Foreign Trade Council on February 10, 193^ issued the
following statement,
"Plans advocated in many quarters bring to a head a question that has
stirred foreign traders for many years. Since the War the United States
has lagged behind other countries in the long term credits and financing
facilities available to those engaged in foreign trade.
While there was no great urgency in the years of prosperity the four
years of depression have brought into bolder relief the necessity of providing more favorable credit facilities than those permissible under our
commercial banking laws.
It is estimated that 1,500,000 men are out of
work now due to the drop of 3-5 billions in exports annually."
The state-
ment also cited the British Export Guarantee Plan which had been quite
successful and the advantage it gave the British manufacturers over his
competitor in the United States.3°
On February 13, 193^ it ^&s announced "that an 11 million dollar bank
had been formed to extend credit for trade to 100 million dollars with the
U.S.S.R.
It was formed by Executive Order of the President under the
authority of the National Industrial Recovery Act of June l6, 1933-
The
capital of 11 million dollars was divided into 10 million dollars in Preferred Stock taken by the RFC| One Million dollars in Common Stock subscribed to with emergency funds of the President available in the Public
Works Administration.
29
Although the bank has broad powers it will be lim-
The New York Times (February 3, 193*0, Vol. LXXXIII.
30
The New York Times (February 11, 193*0, Vol. LXXXIII.
2k
ited to the Russian Trade. The first transaction is expected to cover 500
thousand bales of cotton to Amtorg.
The objective of the bank is stated to be to eliminate the exportable
surplus of American farm products and to produce employment".
Jesse Jones intimated that the bank would not make handouts and "that
each deal would have to stand on its own bottom".^
With this announcement of what was to be known as the Export-Import
Bank of Washington was brought Government assistance to manufacturers and
exporters of industrial goods. There had been a precedent established
during the First World War when the War Finance Corporation was formed by
Act of Congress in early April 1918 with a capital of 500 million dollars all subscribed to by the U. S. Government.
Its purpose was to make short
term loans of 5 years or less duration to American exporters unable to
obtain funds at reasonable terms through regular banking channels. This
agency was put into liquidation January 1> 1925 and in 1938 was still winding up its affairs. While the end purpose of the War Finance was to assist
in the war effort, the end purpose of the new Export-Import Bank was to
fight the depression which began to engulf the United States in 1930. It
was but one of a number of weapons used in the fight; others were the Farm
Credit Administration, the Federal Farm Board and the RFC dating from 1931
or later and while these latter were organized primarily for domestic
financing they all, at one time or other, made loans for financing the
export of agricultural surpluses.^
3:
4he New York Times (February Ik,
193*0, Vol. LXXXIII.
Lewis, Cleona "America?s Stake in International Investments", (The
Brookings Institute. Washington, D.C.1938), p. 19bff.
25
The strategy of the Roosevelt Administration was to attack on all
frontsj hence, the National Industrial Recovery Act for industry, the
Agricultural Adjustment Act for agriculture; and the idea of establishing
a system for providing foreign trade credits was also a phase of the general program of encouraging economic recovery.
A study was made by the Government in which the experience of other
countries with export credits was canvassed and this evidence was used both
as justification and a guide in drawing plans.3 J
At first it was expected that a separate institution or bank would be
created for each of a number of countries whose trade with the United
States would appear to warrant such assistance and in addition it was
planned to have one bank for all other countries. This plan, however, upon
reflection, appeared too ambitious and it had the additional drawback of
possibly offending the national pride of some nations for whom special
banks were not created.
This feeling, however, had not crystallized at
the time of the creation of the first Export-Import Bank.^
it might be
well to recall some of the conditions which were prevailing at that time.
The U.S.S.R. had only been recognized a short time before and extravagant
hopes had been cherished as to the possible magnitude of trade with the
Soviets. At the same time negotiations were proceeding between the U.S.
and Russia for a settlement of claims and debts and the establishment of
the bank could be regarded as a sign of good faith on the part of the
33
"~ ~"
~
~~
Margold, Stella I. "Export Credit Insurance in Europe Today". Senate
Document 22j? 73**d Congress 2nd Session (U.S.Government Printing Office.
Washington, D.C. 193*0 p. Iff*
Ik
J
Whittlesley, Charles R., "Five Years of the Export-Import Bank," The
American Economic Review (September 1939), Vol* XXIX, No, 3> pp. WJ7-503-
26
U* S.'jy
Shortly after it was established, however, the view of a single
bank prevailed.
However, the debt settlement had not been accomplished
and the board of trustees took the position that Soviet trade would not
be financed until a satisfactory settlement could be reached. However,
pending such a settlement and as evidence of our desire to do business,
the credit facilities of the Bank for over one year were reserved solely
for anticipated Soviet trade.
The Second Export-Import Bank
In order to extend certain credits to Cuba the Second Export-Import
Bank was created under District of Columbia Laws on March 12, 193^ "by
Executive Order.
It was soon apparent that similar credit facilities were
needed to finance foreign trade with other countries and as a result the
Second Bank expanded its activities to all countries but the U.S.S*R.
Following the failure of the Soviet debt negotiations in early 1935
the trustees, who were the same for each Bank, authorized the gradual withdrawal from business of the Second Bank and the transfer of its commitments
to the Export-Import Bank. The Second Bank was finally liquidated and went
out of business on June 30, 1936.
Thus, because the first Bank did no business until its absorption of
the Second Bank, we can for all intents, consider these early operations
that of one institution.
The corporate details of the two Banks will be found in appendix A
and it is not the purpose of this paper to examine in tob much detail the
Annual Report of The Export-Import Bank of Washington for Year 1936.
(mimeographed)
"
"
27
early operations except as they indicate new policies or unusual transactions.
CHAPTER III
OPERATIONS
The First Years 193^-1939
The announced object and purposes of the bank was to aid in financing
and to facilitate exports and imports and the exchange of commodities between the United States and any of its territories and insular possessions
and any foreign country or agencies or nationals thereof. (Public Law #1
7^th Congress).
Up to and including 1936 the bank operated in 3 major fields:
1.
90 day credits were extended in connection with the
export of agricultural products, principally cotton
and tobacco. Usually this was done by appointing the
exporters bank as agent to accept and discount foreign purchase drafts.
2.
The Bank gave direct credits to American firms desiring to export industrial products, principally heavy
machinery and railroad equipment. Unemployment had
been high in the durable goods industries and foreign
competition was keen. The bank matched foreign terms
of 1 to 5 years and assumed some portion of the risk
on a non-recourse basis. While most advances were on
a 50$ basis some went to 65$.
3. The Bank made loans to American exporters who held
slow liquidating foreign accounts. However, these
were made only with the guarantee of the foreign
government or a responsible foreign bank or both.
These loans were on a full recourse basis to the
American exporter.
28
29
In addition, the Bank purchased from the RFC and the Grain Stabilization Corporation of the Farm Credit Administration certain notes of the
Republic of China arising from the sale of cotton, wheat and flour in
1931 and 1932.
Likewise, certain judgments against the Republic of Cuba held by the
Bureau of Internal Revenue were assigned to the Bank for collection.
Also, loans were made to Cuba for the purchase of silver bullion and
its minting into pesos. Payment was against delivery in Cuba.^
During this initial period credits were extended to 23 nations with
heavy capital goods, going principally to Mexico, South America and the Far
East, and agricultural products mostly to Europe and China.
In 1935 and in 1936 also, the bank offered exchange assistance to those
exporters with slow collections in Brazil. An agreement was made with
Banco do Brasil and guaranteed by the Brazilian Government to discount dollar notes to a total of $27,750,000. However, because it was done with
recourse to the American exporter and at k°lo, it was not substantially used.37
In the annual report for 1937 the Bank reported that it had continued
to discount installment notes of the Banco do Brasil in settlement of blocked
dollar balances and to January 10, 1938* $1,716,977•^8 of such paper was
negotiated.
Pursuant to the policy of concentrating all foreign commercial obligations owing to various agencies of the Government in one institution, the
bank undertook to collect the notes issued by the Deutsch Getreide Handesgesellschaft guaranteed by the German Government in connection with the
3&Annual Report, etc., Loc. Cit p. 5
37
"^Annual Report, etc., Loc. Cit p, 7
30
purchase of wheat from the Grain Stabilization Corporation in 1931.3B
In 1938 activities were confined to short term agricultural credits
and medium and long term industrial credits. There were no foreign exchange transactions. The only special transaction of note was an agreement to purchase from an American engineering firm up to 5 million dollars
of notes of the Republic of Haiti covering a public works program-
This
loan had a political consideration as a German firm was actually seeking
the job and we did not care to let them into the Caribbean area.
For the first time it was announced that small exporter loans would
be made and 1 million dollars had been earmarked for that purpose. These
loans would run up to 90 days and revolving lines of credit would be established.39
A 25 million dollar loan to the Universal Trading Company, an American
Corporation, but Chinese owned, was made and covered the export of American
goods to China and import of Tung Oil from China.
This was generally interpreted to be official support to the Chinese
Government at war with Japan.
The operations of the Bank received more than usual discussion by the
Congress in 1939*
for while the life of the Bank had been extended several
^"Annual Report of the Export-Import Bank of Washington for Year 1937*
(Mimeographed).
Annual Report of the Export-Import Bank of Washington for Year 1938*
(Mimeographed), p.Iff.
^Commercial and Financial Chronicle (December 17, 1939)> P* 3^90
Hearings Before the Committee on Banking and Currency, United States
House of Representatives, Seventy Sixth Congress, First Session, on
H.R. 329- (United States Government Printing Office Washington, 1939),
p.Iff.
31
times (see Appendix A ) , the action had been more or less perfunctory! however, the second amendment of March k, 1939 not only extended the life of
the Bank to 19^1 but also added a limit of 100 million dollars on loans
and commitments.
This latter provision was an indication of the comparatively modest
sisse of the Bank's undertaking.
It was felt that placing such a limitation
on volume would be a wise precaution at a time when certain groups feared
that the Banks credit might be used indirectly to help belligerents in
ho
carrying on the war.
The Export-Import Bank, however, was overshadowed
by the discussion of the RFC and the Bank only appeared in one section of
the RFC Bill.
During the course of the year a number of commitments were made for
material purchases and projects in the Americas and a cotton credit of
$13,350,000^*3 was given to Spain. Finland received its first loan in the
amount of 10 million dollars. The loan was made to an American corporation,
the Finnish American Trading Company which was owned by interests friendly
to Finland and this credit was guaranteed by the Government of Finland.^
At this point in time, December 1939> the Export-Import Bank had completed what may be called its First five years. During that period the
Bankfs transactions had been small with disbursements of less than 62 million dollars, of which about 35 million dollars had been repaid.
Commitments
Dulles, Eleanor Lansing. "The"Export-Import Bank of Washington, The First
Ten Years." Department of State Bulletin. (Dec. 3, 1 9 ^ 0 , P* 663.
'Statement of Loans and Commitments as of December 31> 19^0* (Mimeographed)
Statement etc., Loc. Cit.
32
had totalled over 200 million dollars. About 50 per cent of the authorizations had been cancelled either because the projects covered by the authorization had been deferred or the funds had been obtained elsewhere. Also
the Bank authorized credits for projects which were still in their preliminary
stages and authorizations often allowed for a margin above the minimum calculated needs.
The transactions in the years immediately after the creation of the
Bank were mainly designed to facilitate the selling of American products in
the world market by extending more flexible and sometimes more liberal terms
than could otherwise be obtained.
Interest rates were lower in some cases,
terms longer in others and in others a big factor was the Bankfs sharing a
portion of the risk.
Of particular interest was the disposal of surplus
commodities and agricultural products. The world-wide and prolonged depression led t6 a desire for orderly marketing to prevent dumping.
The exchange loan to Brazil was significant because of existing monetary
and exchange problems. During the pre-war years of 193^ through 1939 the
large increase in monetary management was accompanied by unstable exchange
conditions and the blocking of foreign accounts. This seriously disturbed
the flow of goods and threatened stability.
However, it was natural in view of our Governments preoccupation with
the depression during these year®, that financing the sale of agricultural
products and heavy goods was the chief concern and development projects
were not emphasized to any degree.
A significant point in policy was emphasized early in the Bank!s history when the use of special devises in the form of a barter arrangement
involving cotton transactions with Germany was urged. These methods were
held to be contrary to this Government's foreign trade policy and it has
often been the subject of conjecture that this discussion influenced all
of the bank's future transactions. As a result of this policy decision,
Mr. George Peek, who had been the Bankfs first President, resigned.
Only one development credit was approved -- the loan to Chile in
1939*
It was the first of many to "Fomentos" in other South American
countries in later years.
A study of the loans shows that they were varied and covered a wide
field. The 1939 amendment which limited total loans outstanding to 100
million dollars underscored the limited significance of the Bank to the
Congress at that time and there was evident little thought of the Bank
taking an aggressive role in the development of backward nations.
The Congressional hearings during these first years developed no
criticism of the Bank's development which was cautious and sound, though
experimental• ^
The War Years 19^-19^5
In early 19^0 the Bank loomed larger in the Congressional eye and it
was the subject of extended discussion. ^
In January 19^0 amendments were
proposed and the questioning focused mainly upon the possible use of the
Export-Import Bank to finance war shipments and the fears of unneutral
transactions. As a result of the evidence presented as to the Bank's
neutrality, its sound standards of doing business, the Act was passed
'Dulles, Qp, Cit. p 0 663ff0
k6
Hearings Before the Committee on Banking and Currency United States
Senate, Seventy Sixth Congress, Third SessTon on Senate 30^97 (United
States Government Printing Office, Washington 19^0), p.lff,"*
3^
which extended the.limit for loans outstanding from 100 million dollars
to 200 million dollars but also was inserted a limit of 20 million dollars
on additional loans which could be outstanding to any one country at any
time.
Also the financing of war material shipments was prohibited. ' Also
prohibited were loans to countries whose governments were in default to
this country on August 13, 193^ (date of the passage of the Johnson Act).
The day after this Act became law (March 3> 19^0) & loan of 20 million
dollars was made to Finland.
A commitment of 10 million dollars was made
to the Government of Norway, 15 million dollars to the Bank of Sweden and
10 million dollars to the Kingdom of Denmark. °
It will be remembered that during the discussion of this bill the undeclared War between Finland and Russia was on and the sympathies of the
American people were on the side of the Finns,
In the Spring and Summer of 19^0 a number of bills were introduced
into the Congress with the object of expanding the scope of operations of
the Bank and to increase its resources. °
H. R* 10361 was passed and on September 26th, 19^0 became Public Law
#792.^° This amended the Export-Import Bank Act to read:
"To assist in the development of the resources, the
stabilization of the economies and the orderly marketing of the products of the countries of the Western
Hemisphere by supplying funds not to exceed 500 million
dollars outstanding at any one time to the Export-Import
¥7
Public LawffitoDSenate Seventy Sixth Congress, Third Session.
Statement etc. Loc, cit»
**9S. 3069 H.B. 8477. 3» ^20*1 and H-R- IO361 Seventy Sixth Congress, Third
Session, 1950.
50
Seventy Sixth Congress, Third Session
35
Bank through loans to or by subscription to the
preferred stock of such Bank to enable such bank
to make loans to any government, their central banks
or any other acceptable banking institution and when
guaranteed by the Government, its central bank or an
acceptable banking institution, to a political subdivision notwithstanding any other provisions of law
insofar as they may restrict or prohibit loans or
other extensions of credit to or transactions with the
governments of the Western Hemisphere/'51
Further "that no such loans shall be made in violation of international law as interpreted by the Department of State
or the Act of April 13th, 193^ (k8 Stat. 57*0 52 or the
Neutrality Act of 1939"Upon the written request of the Federal Loan Administrator, with the approval of the President, the Bank is
authorized, subject to conditions and limitations which
may be imposed by the request or approval, to exercise
the powers and perform the functions herein set forth,
such loans may be made and administered in such manner
and on such terms as the Bank may determine.53
This amendment radically changed the complexion of the Bank and it
truly became a "definite instrument of American foreign policy".5^ From
this time on the orientation of the bank changed.
Other provisions of Public Law 792 extended the life of the Bank to
January 22nd, 19^7. The lending authority was now 700 million dollars,
the 500 million dollar increase being earmarked for the Western Hemisphere.
It also removed the existing limitations on the aggregate amount of loans
^HPublic Law #792, Seventy Sixth Congress, Third Session. 19^0
The Johnson Act.
Public Law #792, Seventy Sixth Congress, Third Session. 19^0
Dulles, etc., 0p» Cit.
36
which could be outstanding to any one country.
55
y
The amendment associated the new half billion dollars with the need
for assistance in the development of the resources of other American
Republics and the importance of strategic materials was emphasized.
In the
foreground was the idea of economic support to our neighboring countries
as an aid to our foreign policy,56
The amendment also affected the criterion used in considering applications for loans and commitments; a new element was to favor loans which would
attempt to speed up production to support those types of enterprises which
would strengthen the economic structure of the South American Countries and
thereby assist in the defense of the Western Hemisphere,57
Commitments were made in substantial figures upon the passage of this
law.
60 million dollars to Argentina for U. S, agricultural and industrial
products.
25 million dollars to Brazil for U. S, agricultural and industrial
products.
5 million dollars to Chile for U. S, agricultural and industrial
products.
10 million dollars to Columbia for U, S. agricultural and industrial
products.
k million dollars to Cuba for U. S. agricultural and industrial
products.
** Report of Senate Banking and Currency Committee on S^20^ Seventy Sixth
Congress, Third Session, Calendar # 2 W , Reportffff005-»PublicLaw #792 ~
Seventy Sixth Congress Third Session, (19^0)
~
' Dulles etc. Op. Cit.
5?Dulles, e t c - OP- Cit.
37
10 million dollars to Peru for U. S. agricultural and industrial
products.
3 million dollars to Venezuela for U. S. agricultural and industrial
products.
7«5 million dollars to Uruguay for U. S* agricultural and industrial
products.^®
But while there was much talk about the Western Hemisphere the big
money was allocated to China.
1. On March 7> 19^0 just prior to the setting up of the Wang-Chingwei regime at Nanking "by the Japanese the Export-Import Bank allocated 20
million dollars to finance exports to China. Repayment was to be made from
profits on tin shipments to the U. S.
2* On September 23, 19^0 the Federal Loan Agency announced that the
Export-Import Bank had authorized credits of 25 million dollars to the
Chinese Government with repayment guaranteed by the Central Bank of China.
At the same time it was announced that the Metals Reserve Company had
agreed to buy from the National Resource Commission of China 30 million
dollars worth of Tungsten from the sale of which the new credit would be
paid.
3- On December 1, 19^0 a further loan of 50 million dollars was
announced,
This was the day after the Wang-Ching-wei regime was formally
recognized by Japan as the National Government of China and a treaty concluded.
It was stipulated that the loan should be repaid from the profits
received by the Chinese National Resource Commission on the sale of tin,
wolfromite and antimony to the Metal Resource Corporation.^9
-^Statement etc. Loc, Cit.
59
American Aid to China Since 1931"•
(April 15, 1 9 ^ h P- 356ff-
Department of State Bulletin.
38
Between December 31st, 19^0 and June 15th, 19^5 the bank made commitments of $613,90^,000 principally to the Latin American countries, included
was:
15 million dollars to Bolivia for material, equipment and services.
Over 38 million dollars to Brazil for a variety of purposes including
railroad and mining equipment, dollar exchange, rolling stock and electrical
equipment.
To Chile 18 million dollars for agricultural and industrial products,
railroad equipment and dollar exchange.
To Columbia 35 million dollars for various materials, equipment and
services and railroad supplies.
To Costa Rica 2 million dollars for construction material and equipment.
To Cuba 25 million dollars for material, equipment and supplies.
To Ecuador !**• million dollars for material, equipment and supplies
including water supply systems.
To El Salvador 1.7 million dollars for construction purposes.
To Haiti 6 million dollars devoted to the development of rubber.
To Honduras 2.7 million dollars for material, equipment and supplies.
To Mexico over 63 million dollars for such projects as steel mills,
highways, gasoline refineries and railroad equipment.
To Nicaragua 2 million dollars for construction equipment.
To Paraguay 3 million dollars for material, equipment and supplies.
To Peru 25 million dollars for agricultural and industrial products.
To Porto Rico ^50 thousand dollars for machinery and equipment.
To Uruguay over 32 million dollars for material, equipment and supplies and printing presses.
39
To Venezuela 38 million dollars for material, equipment, supplies
and construction equipment.
A revolving credit of 50 million dollars was earmarked for banks of
the Western hemisphere to assist in exports from the United States.
j n igkk
a credit of 500 thousand dollars was established for Ethiopia
for United States products and services.
The same year a credit of 750 thousand dollars was announced for the
60
Store Norske Spitzbergen for mining equipment.
During the 19^1-19^5 period there were cancellations of commitments
and expirys of $2*4-2,066,000 with disbursements of $287,004,000 and repayments of $209,739,000.
Thus it will be seen that while large commitments were made during the
period 19*1-0-19^5 many of these were for projects which could not be completed on account of the war with the result that the credits were cancelled or lapsed.
The increase in Latin Americafs outstanding obligations
as direct loans to the Export-Import Bank was only 39 million dollars between December 30th, 19^-0 and December 30th, 1944*
However, many private
loans to Latin America were guaranteed by the Export-Import Bank and presumably would not have bemmade otherwise.
x
Thus it will be seen that while during this period there was the
usual financing of agricultural and industrial products, the Bank adopted
_
—
-•"-'
"Statement of Loans and Commitments of the Export-Import Bank of Washington from Hearings Before the Committee on Banking and Currency. House of
Representatives," Seventy Ninth Congress, First Session on H.R. 3464 and
H.R. 3490 superceded by H.E. 3771 (19^5), P-31*.
61
"International Transactions of the United States During the War 1940-1945",
United States Department of Commerce. (United States Government Printing
Office 1948). po 141.
1*0
itself easily to the conditions of the times and in 19^-0 established substantial credits in favor of several central banks in the Western Hemisphere
to enable their countries to purchase and import important and essential
products from the United States and at the same time assist in stabilizing
the economies of the respective countries.
^^
In 19^1 and 19^2 this trend continued with emphasis upon the development of the resources of this Hemisphere. Loans were made to assist in the
improvement of rail and road transport systems as an integral part of the
plan to accelerate the delivery of strategic materials. In 19^2 the Bank
inaugurated a plan for underwriting the letters of credit of selected and
approved foreign banks which were opened in this country by United States
Banks.
A feature was the provision to make payment against the manufactur-
ers certificate of completion or railroad bill of lading instead of the
ocean shipping documents customarily required.
The Bank assumed the respon-
sibility for delivery of the goods covered, within k months from the date
the goods were ready for shipment. This was a very valuable assist, which
kept open long established trade channels during the war period when transportation both in the United States and on the ocean was overtaxed and
scarce.*3
In l^kk
the plan was amended to guarantee delivery within 90
days.
In l$kk
the Bank began to receive numerous requests for credits to
assist in reconstruction and rehabilitation problems) however, because of
— _ _ . — „ _ — _ _ _ » ™ — _ _ _
Report e t c . Loc. P i t .
go
"The United States a t War." War Records Section, Bureau of the Budget.
H i s t o r i c a l Report on War AdministraHo^^lT^^Unlted Statei^ov^rnment
P r i n t i n g Office, Washington, 1957), p7~33f*
6k
Reports of the Export-Import Bank of Washington for the years 19^1, 19^-2
and I943 (Mimiograp^e^J^^
' ~"~
kl
its limited loaning authority the Bank could do little but did give the
problem intense study. Many requests too were received from the Latin
American countries for much needed transportation facilities and public
utilities.
The Bank met these requests as best it could and granted
credits for hydroelectric, railroad and mining equipment manufactured
in the United States * ?
6
^Report of the Export-Import Bank of Washington for the year 19*A,
(Mimeographed)w
TABLE 1
AUTHORIZATIONS, DISBURSEMENTS AND REPAYMENTS
EXPORT-IMPORT BANK OF WASHINGTON
2/12/34 through 6/30A5
Year
Authorizations
Disbursements
Repayments
193^
11,466,137
3,77^,864
3,774,725
1935
1+5,658,010
10,255,164
5,983,876
1936
55,603,867
21,113,216
7,812,015
1937
21,327,824
7,690,316
7,891,790
1938
74,808,092
18,602,97^
9,772,940
1939
74,731,827
53,743,087
14,701,039
1940
371,173,107
95,298,475
29,509,845
194l
182,924,398
116,835,507
61,736,918
1942
264,056,685
50,410,828
55,040,943
19^3
63,186,114
55,687,885
32,250,352
1944
31,088,132
49,638,280
30,063,950
1945 to 6/30
72,647,876
20,619,350
31,071,913
1,268,684,068
503,729,947
289,610,306
TOTAL
Source - Reports of the Export-Import Bank of Washington
42
TABLE 2
CONTINGENT LIABILITY ON LOANS ADVANCED
THROUGH AGENT BANKS
AS OF DECEMBER 31st
1936
70,95^
1937
1,318,228
1938
713,21*3
1939
25,1*03,829
191*0
1*8,195,461*
19*H
1*6,649,859
191*2
59,423,748
19^3
64,375,61*5
19^^
66,747,742
6/30/1*5
79,180,903
Source - Reports of the Export-Import Bank of Washington
43
TABLE 3
SCHEDULE OF EXPENSES, GROSS INCOME,
AND NET PROFITS
1935 through 1944
Expenses
Gross Income
1935
150,000
Not Available
1936
50,000
659,512
597,258
1937
50,000
905,668
853,910
1938
50,000
1,130,813
1,801,346
1939
56,736
2,M2,29!+
2,344,000
1940
7^,989
3,91^771
3,77^,592
19IH
137,^10
7,^37,253
7,216,129
19^2
188,586
7,737,846
7,544,080
1943
265,882
Not Available
7,784,179
1944
319,532
1945 to 6/30
Not Available
Not Available
11
it
7,518,080
ti
11
Not Available
Source - Reports of the Export-Import Bank of Washington
44
Net Profit
CHAPTER IV
THE EXPORT-IMPORT BANK
ACT OF 19^5
Legislative History
In late 19^2, long before the war ended, the Government indicated its
awareness of the problems that would result in the immediate post war period
because of the vast damaged area of the world, whose needs could be supplied
only by the United States and which could not be financed by the affected
countries from their own resources. Thus, in 19^2, there was established
the office of Foreign Relief and Rehabilitation Operations pending the
creation of an organization of nations to deal with relief and rehabilitation.^"
In July 19^-3 was held the United Nations Relief & Rehabilitation
67
Conference to lay plans for the relief of war devastated countries. ' As
a result UNRRA was established and participation by the United States was
68 The United States was the
approved by the Congress in November 19^3-
'
m
"The United S t a t e s a t War ' e t c . Op, C i t . , p . 1*09
I b i d p . 1+26.
I b i d p . 1*69
k3
h6
largest single contributor to this organization which was to bridge the
gap for countries considered incapable of repaying.
Operations were re-
69
stricted to relief and primary rehabilitation.
To meet the longer
term reconstruction program and to stimulate the economic development of
the backward areas of the world, discussions were held between the United
States and Great Britain on the subjects of exchange stabilization and
international investment. These problems were the subject of the Monetary
and Financial Conference at Bretton Woods in the summer of 19hk.
Agreement
was there reached upon plans for the establishment of an International Bank
for reconstruction and also upon an International Monetary Fund.
In these
actions and others the United States laid the ground work toward American
participation in world affairs and the maintenance of world peace.'°
There was an extended discussion in the press and in the Congress on the
Bretton Woods proposals and in February 19^5 the American Bankers Association made a study of the proposals and included in its recommendations was
one concerning the Export-Import Bank.
It was suggested that the capital
be increased to 2 billion dollars: First, to provide means for meeting,
promptly, deserving credit needs prior to the setting up of the proposed
World Bank; Second, to enable the United States to make loans in which this
country has special interest and which can be made more effective through
a national institution rather than through an international body.'"*-
^"international Transactions in the First Fost-War Year", Federal Reserve
Bulletin (19^6). Board of Governors Federal Reserve System, 1946, Vol. 32
#12 p.l321ff.
7°"The United States at War" Op. Cit. p. k69
71
' Commercial and Financial Chronicle. (February 8, 19^5), Vol. l6l
V7
Prior to this in l$kk
Representative Charles E. Dewey (Republican-
Illinois) had introduced a bill to expand the Export-Import Bank to a 3
billion dollar Institution with a paid in capital of 1 billion dollars.
However, the bill died in committee.
It had been prepared by Representative
Dewey in consultation with Leo Crowley, the Foreign Economic Administrator.^
On June 13, 19^5 Representative Jesse Wolcott (Republican - Michigan)
introduced a bill to expand the Export-Import Bank, and a few days later
the Administration bill was introduced by Representative Brent Spence
(Democrat - Kentucky), Chairman of the House Banking and Currency Committee,
for raising the loaning authority of the Bank. Both of the Congressmen had
been members of the United States delegation to Bretton Woods.'3
The important points of Representative Wolcottfs bill (H 3^6^-) were:
1*
The management of the Bank would be vested in a Board
of Directors. Five in number, appointed by the President, with the advice and consent of the Senate. Of
the five only three could be of one party. The term
would be five years and the directorship would be a
full time job.
2.
The total capital to be 1.1 billion dollars subscribed
to by the Treasury of the United States.
3*
Power given to the Bank to issue debentures of 1.1
billion dollars to Treasury.
h.
Placed a limitation of 2,2 billion dollars on loans
and guarantees of the Bank*
5-
It by^paesed the Johnson Act.
6.
It would require loans to be secured.
Commercial and Financial Chronicle (June 21, 19^5)> Vol, l6l p. 275^ *
^Commercial and Financial Chronicle (June 21, 19^5), Vol. l6l, p. 2T20f.
1*8
Representative Spencefs bill (H 3^90) provided:
1. A capital of 1 billion dollars, the subscription
of which was to be a public debt transaction.
2.
The Bank could issue debentures to the Treasury
up to 2.5 billion dollars.
3. A limitation of 3-5 billion dollars on loans
and guarantees.
k.
The Bank was to report to the Congress on its
activities semi-annually as of June 30th and
December 31st.
5. The repeal of the Act of April 13, 193^ (W$ Stat.
57^ Ch. 112) (Johnson Act)J*
The two bills did not raise serious differences and both parties were
behind the proposition to increase the lending authority of the Bank. Unlike the World Bank, the loans made by the Export-Import Bank would be
considered by a board of directors composed wholly of Americans on which
no borrowers would sit. Moreover the loans which would be made under the
increased authority would be unlike those made under Lend-Lease. There
was a feeling amongst some members of Congress that the Lend-Lease loans
were not too certain of repayment. There was reason to believe, also, that
these bills prevented or delayed the making of some lend-lease loans. The
supporters of the Export-Import Bank expansion saw one advantage in their
plan, in that, there would be a better chance to collect on Export-Import
Bank loans than Lend-Lease loans as the Export-Import Bank loans were less
apt to be confused with war purposes. In discussing the two bills, Mr.
Wolcott said the main difference between them was that this made the Bank
a completely independent agency of the Government with officers confirmed
7^Hearings Before The Committee on Banking and Currency, House of Representatives, Seventy Ninth Congress, First Session on H»R» 3^90> superseded by
H.H. 3771 July 11 and 12, 19*5. p. If.
h9
by the Senate. Both Mr, Wolcott and Mr. Spence commented upon the absence
of organized opposition to the expansion of the Bank's activities. Both
felt the New Export-Import Bank Act was one of a number of steps vital to
the success of the Bretton Woods Fund and International Bank.•5
Hearings were held by the House Banking and Currency Committee on
July 11th and 12th, 19^5* Among those to appear before the Committee was
Leo Crowley, The Foreign Economic Administrator, who pointed out that the
essential changes which were projected were:
1. Raise the limit of the loans and guarantees from
700 million dollars to 3-5 billion dollars.
2.
Remove the prohibition of the Johnson Act.
3. Extend the life of the Bank beyond January 22, 19^7.
k.
Provide for semi-annual reports.
5. Provide for Treasury financing of the Bank.»^
There was also testimony by Dean Acheson on behalf of the State Department and Wo Randolph Burgess as well as Wayne C. Taylor, the President of
the Export-Import Bank.
All spoke in support of the
billTT
and Mr. Burgess
emphasized that conservative principles should continue to guide the Bank^
also, that:
1. The Bank should supplement and encourage and not
replace private enterprise. "Given a favorable
atmosphere, private capital will be ready to do
much of the work that needs to be done in reconstruction and development. The Export-Import Bank
has followed this principle."
'^Commercial and FinancialChronicle (June 21, I9H5), Vol. l6l, p. 2754.
•Hearings, etc. Loc. Cit. p. 8f.
'Hearings, etc. Loc. Cit. p. 8f.
2.
Loans should he good loans with practical assurance of repayment* "This is the principle that
loans should he loans and gifts should be gifts.
The Export-Import Bank is set up as a lending
agency and not an agency for relief and rehabilitation. The Export-Import Bank has followed this
principle and its record is good."
3. Too much credit is as bad as too little credit.
"It is necessary to make sure that the loans of
the Export-Import Bank are made with care and discretion so that they do not add fuel to the inflationary fires. It is not of lasting benefit to
encourage excessive borrowings."78
The House Banking Committee on July 12, 19*4-5 by a vote of 18 to 2
approved legislation which would make the Export-Import Bank an independent
permanent Government Agency with a revised administrative set up which
would drop the Secretary of the Treasury and the Secretary of Commerce from
the Board as well as other members. Under the new set up the Bank would
have five full time directors of which the Chairman of the Federal Economic
Administration would be Chairman and the Secretary of State a member plus
three others appointed by the President with the advice and consent of the
Senate.»°
By a vote of 93 to 9 the House rejected an amendment by Representative
Dirksen (Republican - Illinois) which would have prohibited loans to
countries not adhering to and "faithfully observing" the Atlantic Charter
injunction against aggression and aggrandizement. Both Republican and
Democratic members opposed the amendment declaring that this would mean
"dollar diplomacy" and it would force the President to rule on the political
status of each nation before it could get a loan and it would open the gates
^Commercial and Financial Chronicle (July 19, 19^5), Vol. 162, p. 331.
?9idem.
51
to the pressuring of nations to adopt our political philosophy."^
In its report of the successor Bill #H.R.3771> "the Banking Committee
told the House that the expansion of the Bank was necessary to help American Trade and to enable the war devastated areas to begin the tremendous
task of reconstruction prior to the full functioning of the 9-1 billion
dollar World Bank set up by the Bretton Woods Agreement.
After little debate, except for some criticism by a few Republican
members, the House passed the Bill by 102 to 6 on July 13th, 19^5.°1
Hearings were begun by the Senate Committee on Banking and Currency
on H.R. 3771 on July 17th, 19^5 and were completed on the l8th. The only
officials who testified were Dean Acheson, Assistant Secretary of State
and Leo Crowley, Chairman of the Board of Trustees of the Export-Import
Bank and Administrator of the Federal Economic Administration.
This hear-
ing was brief and other than two points made by Mr. Crowley and, an exchange
with Senator Taft, was routine.
The points were:
1. The Export-Import Bank could not make the loans planned with
the same degree of security that it had in the past because of the uncertain
economic conditions.
2.
Loans would vary in term from 10 to 30 years with most in the
15 to 20 year bracket, and a period of 3 to 5 years would be allowed before
amortization would start.
The exchange with Mr. Taft produced the intimation by Mr. Crowley
that perhaps 1 billion dollars of the 2.8 billion dollars requested might
Bo~
Idem.
On
Commercial and Financial Chronicle. (July 19, 19^5), Vol. 162, p. 331
52
go to Russia. Also, that aid to Britain and to countries in an unsettled
ftp
state like Italy a n d Poland would b e taken care of outside the Bank. u < ^
Subsequently, the Senate passed the House B i l l without amendment and
on August 31st, 19*1-5 the Export-Import Bank A c t of 19*1-5 v a s signed b y
President Truman upon h i s return from Potsdam; on the same d a y he signed
the Bretton Woods Agreement A c t .
O n August 10th, 19^5 negotiations were reported with a number of
liberated countries b y the Bank; included were Norway, Denmark a n d the
Netherlands (for use in the East I n d i e s ) , F r a n c e , a n d Belgium.
While the
U.S.S.R. h a d not made a request, on August 9th M r . Crowley h a d said that
b y declaring w a r on J a p a n , Russia became eligible for 1 billion dollars
in Lend-Lease.
Initial agreements were to set up a line of credit which
could b e drawn on over a considerable part of the reconstruction period.
These were t o cover railroad rolling stock, utilities, equipment for
hydraulic a n d steam projects.
It w a s also announced that the B a n k would place n e w emphasis on loans
spurring the export of American technical a n d management aid as is furnished b y American engineering firms.
T h i s , o f course, would b e principally
for the industrially backward areas of the world."3
O n September 6th L e o Crowley, Federal Economic Administrator, offered
the facilities of the Export-Import B a n k to England t o assist after the
termination of L e n d - L e a s e . w
However the resources of the Bank were
limited and the demands great, so that the British loan made in 19^-7 ^ a s
handled b y the U . S. Treasury.
_
,
Commercial and Financial Chronicle (August 2 , 1 9 ^ 5 ) , V o l , 1 6 2 , p . 5^7
^ c o m m e r c i a l a n d Financial Chronicle (August 1 0 , 1 9 ^ 5 ) , V o l . l 6 2 , p . 7 6 7 .
Oh
Commercial a n d Financial'Chronicle (September 6, 1 9 ^ 5 ) , V o l . 1 6 2 , p.llVf.
53
Organization and Management of the Bank
Prior to the enactment of the Export-Import Act of 19^5 the Bank
was controlled by a board of trustees of eleven members elected annually.
The bylaws provided for an executive committee composed of six trustees,
who were authorized to exercise the powers of the board in the interim
between meetings of the full board.
These trustees represented the various agencies and departments interested in domestic and foreign commerce. Thus the composition of the board
during the fiscal year ending June 30> 19^5 included:
Leo T. Crowley, Chairman
Administrator Foreign Economic
Administration
Jesse H. Jones (to 3/21A5)
Secretary of Commerce
Warren Lee Pierson (to 3/31A5)
President Export-Import Bank
Henry A. Wallace (from 1^/12/^5)
Secretary of Commerce
Wayne C. Taylor (from V 1 2 A 5 )
President Export-Import Bank
Charles B* Henderson
Chairman R„F,C.
H. A. Mulligan
Director & Treasurer R.F.C.
Leslie A. Wheeler
Director Foreign Agricultural
Relations - Department of
Agriculture.
Harry Do White
Assistant to Secretary and
Director of Monetary Research
Treasury Department
Emilio G. Collado
Chief Division of Financial
and Monetary Affairs - Department of State
W. D. Whittemore
Vice President Export-Import
Bank
Eugene Le Baron (1/8/1*5 to 10-5A5)
Vice President Export-Import
Bank
5^
Henry W. Riley (from 10- 2 A5)
Vice President Export-Import
Bank - also Deputy Director of
Foreign Economic Administration.
Represented then was F.E.A., R.F.C., State, Treasury, Commerce and Agriculture as well as the Bank. 5 jt might be mentioned, inter alia, that
during the period 193^ to 19*40 the bank did not loom large in the governmental picture and after George Peek had been overruled on his barter plans
and had left the Bank, the guiding force was its President, Warren Lee
Pierson, of whom it was said "He is the Bank". Tfce Bank always was tied
closely to R.F.C. as it was the source of its funds. Reorganization Plan #1
effective July 1st, 1939 put the Bank into the Federal Loan Agency where it
was one of a number of lending agencies; later it was shunted to the Department of Commerce, then to the Office of Economic Warfare and finally to
the Foreign Economic Administration under whose supervision it was when
the Export-Import Act of 19^5 ^as approved. ° Having had a number of
supervisors to whom it was just another agency, it was subject to the
vagaries of the moment and the man. The management of the bank, however,
steadfastly kept its basic aims always in mind and discharged its duties
in such a manner as always to merit the approval of the Congress.
The Export-Import Bank Act of 19^5 provided that the management of
the Bank should be vested in a board of directors consisting of the Secretary of State, ex officio, and four full time members appointed hy the
President of the United States with the advice and consent of the Senate,
B5
Report on Audit of the Export-Import Bank of Washington for the Fiscal
Year ending June 30> 19^5 House Document #248 Eightieth Congress First
Session." (United States Government Printing Office Washington 19^7), p.3*
.Report Q n Audit of the Export-Import Bank of Washington for the Fiscal
Year ended June 30> 19^-6> Eightieth Congress First Session, House Document
#2^9,(United States Government Printing Office, Washington 19^7), P° 5f.
55
one of whom was to be designated chairman. Not more than three members of
the board may be members of any one political party.^'
Provision was also made for an Advisory board consisting of the Chairman of the Board of Directors of the Export-Import Bank (Chairman), the
Secretary of State, the Secretary of the Treasury, the Secretary of Commerce,
and the Chairman of the Board of Governors of the Federal Reserve System.
The Act provides that the Advisory Board may make such recommendations to
the Board of Directors as it deems advisable, and the Board of Directors
shall consult the Advisory Board on major questions of policy.""
The composition of this Advisory Board is the same as that of the
National Advisory Council on International Monetary and Financial Problems
and the Bank's relationship with this Council will be discussed in some
detail in a later chapter.
The members of the first Board of Directors appointed under the 19^5
Act with terms expiring June 30> 1950 were?
Date of
Appointment
Date of
Oath
Political
Office
Salary
11/26/1*5
12/3/1*5
Democrat
$15,000*
Herbert E. Gaston, Vice Chairman 11/23/1*5
12/3/1*5
Democrat
12,000
Lynn U. Stambaugh
12/15A 5
12/2j/k5 Republican
Clarence Gauss
12/20/1*5
William McMartin, Chairman
James F. Byrnes
Ex officio
^Annual salary of $15,000 as President.89
1/2/1*6
12,000
Republican
12,000
Democrat
None
The first meeting of the Board of Directors was held on December 19,
19l*5. Section (3) of the Export-Import Bank Act of 191*5 provided: "Until
**? Idem.
88
Idem.
89
Idem.
56
October 31 j 19^5 or until at least two of the members of the Board of
Directors to be appointed have qualified as such directors, whichever is
the earlier, the affairs of the Bank shall continue to be managed by the
existing Board of Trustees."
The assumption of the management of the Bank by the newly constituted Board of Directors was consequently later than the date specified.^0
Some delay had been encountered in obtaining a Chairman as there was some
reluctance to assume the post because of the unknown nature of the relationship with the National Advisory Council. As a result of this delay, over
a billion dollars of commitments were approved by the holdover trustees.
The executive officers of the Bank elected by the Board of Directors
were as follows;
William Mc. Martin, President
Annual Salary
$15,000
Hawthorne Arey, Vice President & General Counsel
9>800
Wilfred D. Wittemore, Vice President & Treasurer
9>800
August Maffrey, Vice President & Economic Advisor
9,800
Sidney Sherwood, Secretary
9.80091
The Board and Executive Officers represented a wide experience. Mr.
Martin had been President of the New York Stock Exchange; Messrs. Arey and
Whittemore had been long time officers of the Bank and Mr. Maffrey had
considerable experience in the Government and was at one time Chief of the
International Economics and Statistics Unit of the Bureau of Foreign and
Domestic Commerce of the Department of Commerce.
To June 30> 19^9 there had been several changes in the Board of Directors and Officers. Mr. Martin was appointed Assistant Secretary of the
90 Idem
91
Idem
57
Treasury and was succeeded as Chairman by Mr. Herbert E. Gaston. Mr.
Q2
Hawthorne Arey was appointed Vice Chairman to fill the vacancy.^
In June 19^+5 there were sixty employees on the Bank's payroll, one
hundred and four in June 19k6,
one hundred and eighteen in June 19^7 and
one hundred and twenty-five in June 19^8.93
The organization is composed of eight functional groups:
1. Board of Directors and President's Office.
2. Office of the Secretary including Administrative
Budgetary and "Housekeeping" functions.
3*
Office of the General Counsel.
k.
Economic Division.
5. Engineering Division.
6. Loan Examination and Servicing Division.
7. Private Capital Participation Division.
8. Office of the Vice President and Treasurer including
Accounting functions.9^
The functions performed by the various divisions are self-explanatory.
The
Directors manage the Bank. The Secretary is the administrative officer.
The General Counsel, in addition to internal banking tasks, prepares loans,
agreements, etc. The economic and engineering divisions are concerned
primarily with preparing studies in their specialty covering loan applications for the use of the directors. The loan examination and servicing
divisions coordinates the preliminary work on loan applications and servicing loans after approval.
^Eighth Semi-Annual Report of the Export-Import Bank of Washington for
the Period January-June 19^9- (Washington 19^9) P° ii.
9^
Reports on Audits of the Export-Import Bank of Washington for the Fiscal
Years 19^^-1946-19^7-19^> (United States Government Printing Office,
Washington.)
^Report on Audit of the Export-Import Bank of Washington for the Fiscal
#139> Eighty-First Congress First Session.
Printing Office, Washington 19^9), p. 6
Year 19^8. House Document
http://fraser.stlouisfed.org/ (United StatesGovernment
Federal Reserve Bank of St. Louis
CHAPTER V
INTERNAL OPERATIONS UNDER THE ACT
Source of Funds
The Bank prior to the enactment of the 19^5 Act obtained its funds
from the Reconstruction Finance Corporation,
Common stock in the amount
of 1 million dollars was held by the United States Treasury, Preferred
stock in the amount of 17^ million dollars was held by the Reconstruction
Finance Corporation, giving total capital funds of 175 million dollars.
In addition, the Act of January 31, 1935 (^9 Stat.1*-) as amended (15 U.S.C.
713"b) provided that in addition to the sale of stock, the funds required
could be borrowed from the Reconstruction Finance Corporation.
Later in 19*1-3 Section 3(a) of Executive Order 936l dated July 15, 19^3
provided that, until the Congress provided other means of financing, the
Secretary of Commerce and the Reconstruction Finance Corporation were
authorized and directed to supply the necessary funds to the Bank through
loans, using all the borrowing powers of the Reconstruction Finance Corporation and its unobligated funds.95
95see Appendix #A
porations.
Excerpts from the Reference Manual of Government Cor~
58
59
The Act of 19^5 provided that the Bank!s financing he done directly
with the Treasury. Under the provisions of the Act the Bank was given an
authorized capital of 1 billion dollars, subscribed by the United States,
and was further authorized to issue its notes, debentures, bonds or other
obligations to the Secretary of the Treasury in an aggregate amount, not
to exceed two and one-half times its capital, and it was further authorized
to use all its assets, including its capital and earnings and funds borrowed
in the exercise of its functions as an agency of the United States. 96
Under agency agreements with commercial banks of the United States,
the latter make advances on which the Export-Import Bank has both the
obligation on demand to redeem and a voluntary option to purchase at any
time the evidences of indebtedness held by the agent banks. These advances
which are shown on the statements of condition of the Bank as contingent
liabilities are included when computing the balance of lending authority
uncommitted.
TABLE 4
SCHEDULE OF CAPITAL AND NOTES PAYABLE TO UNITED STATES TREASURY ADVANCES
AS OF
CAPITAL
NOTES PAYABLE
BY AGENT BANKS
12/31/45
175,000,000
0
102,889,739
6/30/46
675,000,000
0
125,923,481
12/31/46
1,000,000,000
26,500,000
182,193,165
6/30A7
1,000,000,000
516,200,000
192,835,479
12/31/47
1,000,000,000
728,350,000
186,932,184
1/30/48
1,000,000,000
970,600,000
175,087,614
12/31/48
1,000,000,000
907,800,000
122,363,661
6/30/49
1,000,000,000
913,900,000
119,623,141
12/31/49
1,000,000,000
917,000,000
100,479,742
Source - Semi-Annual Reports of the Export-Import Bank of Washington
60
61
The Financial Condition of the Bank
The "balance sheets of the Bank are published semi-annually in the reports which are submitted to the Congress pursuant to the provisions of
the Act of 19*4-5.
The figures require little in the way of explanation or comment. Cash
assets are usually moderate and the major item is, of course, the loan account. Fixed assets are nominal.
For statements of Condition as of June 30th and December 31st for the
years 19^5 through 19^9, see Appendices D and E.
Earnings
In the early years of the Bank's existence the volume of loans was
modest and while in 19^0 its limit on loans was increased to 700 million
dollars it was never fully in use, as a result the net earnings were, from
193^ to June 30, 19^5, only $23,490,099-
With.the passage of the Act of
19^5, which permitted loans to 3.5 billion dollars, the major part of
which was immediately committed and as the loans mounted, the earnings
were correspondingly larger as is shown by this table:^7
^'See also the comments given on earned surplus and net earnings with
the statements of condition and statements of income and expenses in
Appendices D and E.
TABLE 5
EARNINGS 19U5-1949
6 Months
Ending
12/31A5
$
3,399,560
6/30 A6
l,57^,7l5(a)
12/31A6
12,019,259^^
6/30AT
30,008,975^)
12/31A7
21,212,042^
6/30/W
44,931,174(e)
12/31A8
23,692,106^
6/30A9
24,130,907^
12/31A9
2^,203,858(h)
(a) after provision for losses on loans $4,422,675
(b)
"
282,761
(c) "
272,898
(d)
"
"
"
(e) "
"
30,377 and recovery of $30,275
"
30,377 and recovery of $38,623
(f) "
"
"
"
0
and recovery of $ 4,808
(g) "
"
"
"
0
and recovery of $ 6,394
(h) "
"
"
"
0
and recovery of $ 4,977
Source: Reports of the Export-Import Bank of Washington.
63
Delinquent Loans
From the inception of the Bank on February 12, 193^ to December 31>
192+9, disbursements of the Bank totalled $3,030,525,02^ of which
$2,705,331,^70 was from the funds of the Export-Import Bank and $325,193,553
from the funds of the agent commercial banks. Of these advances a total
of $850,939,761 had been repaid by December 31, 19^9- As of this date,
six loans aggregating $250,678, including accrued interest, were in default
and fully reserved.
These loans are as follows;
a.
American Brazilian Corporation, Loan #233, made to
assist in importing tropical products. Credit authorized
June 12, 1939 in the amount of $1,117,0^9$ disbursed
$l,117,0^9j repaid $97^,069; due $1^2,980 plus interest
at %.
In default since 19^0. Recovery of $15,000 expected. 98
b.
Talleres Graficos Sur S. A. (Uruguay), Loan #333- Purpose to purchase printing press. Authorized April 22,
19^2 in the amount of $85,000 of which $6,125 cancelled.
$78,875 disbursed of which $36,592 repaid. Due $1+2,282
plus interest at 1$. In default since November 1, 19^5Small payments being received on account.99
c. Polish Cotton Mills (Poland), Loan #lUl„ Purpose to
purchase cotton. Authorized October 21, 1936 in the
amount of $166,7^3 which was fully disbursed. $163,251
was repaid. Still due $3,^92 plus interest at 5$« In
default since 1939* Partly secured by blocked Dutch
bonds and Reichmarks. Recovery uncertain. 0<^
d.
Charles B. McDaniel, Jr. (Portuguese West Africa) Loan
#319 Purpose of loan to purchase materials and equipment. Authorized March 6, 19^2 in the amount of $300,000
of which $235,000 cancelled. Disbursed $65,000. Repaid
$33^95. Due $31,505 plus interest at k<f>.L6l
°°Reports on Audit of the Export-Import Bank of Washington for the Fiscal
Years of 19^5-19^-19^7-19^8
99 idem.
100 x ,
Idem.
Idem.
e & f. Special Importer Exporter Credits. John F.
Fitzgerald, Jr. for the importation of merchandise. Approved 1946 in the amount of $32,852 all
of which disbursed. Repaid $2,936j due $29,9l6
plus interest at 6$. In default since 19^7Doubtful of recovery.102 gome Plan Corporation.
Export of merchandise. Approved prior to 19^5
in the amount of $23,840. All disbursed. Repaid
$22,622. Due $1,181. In I9U5 $11.80 was written
off leaving $1„00 due for record purposes. No
recovery.103
Over the years of the Bank's operations, occasionally borrowers became overdue on payment of principal and interest as is evidenced by the
following table.
TABLE 6
DELINQUENT LOANS
Date
Past Due
(default)
Principal
Past Due
(collectible]
12/31A5
$217,000
$197,000
6/30/46
217,000
490,000
12/31A6
283,000
6/30A7
272,898
12/31A7
273,000
1,138,808
6/30/48
264,651
173,665
12/31/48
259,842
732,841
6/30A9
255,105
1,394,51^
12/30/1+9
250,637
2,369,663
Source:
102Idem.
103
Idem.
Fully Reserved
Reports of the Export-Import Bank of Washington
65
The loans classified as of December 31, 19^9 as past due but collectible amounted to $2,369,6631 by March 1, 1950, $^12,56.1 had been collected
as is shown in the table below,
TABLE T
STATUS OF DELINQUENT LOANS 12/3lA9
Past Due
As of 12/31/50
Nicaragua
$
Paraguay
Paid on account
of Past Due as of 3A/50
lW,802+
$100,000
590,590
2^+9,321
S & S Construction Company
de Venezuela
l,011,6l6
Gov. of China
Total
622,653
l63,2lf0
$2,369,663
$^12,561
Source: Ninth Semi-Annual Report of the Export-Import Bank of Washington
1950 p. 21f.
The entire earned surplus of the Bank is reserved against future
losses.
On December 31> 19^9 the earned surplus amounted to 178.6 millions
of dollars. It is not possible to even conjecture upon what losses may be
sustained in the future although the losses to the present have been small.
Appendix F shows the balance of outstanding loans by country and Appendix G
gives the schedule of maturities.
It will be noted that loans to China on December 31> 19^9 totalled
$36,980,000; what the future of these loans will be in view of the recent
Communistic victories it is impossible to foresee. A similar situation
exists in the case of Poland which is a member of the Soviet bloc.
66
Contingent Liabilities10^"
The Bank employs commercial banks to act as agents of the ExportImport Bank under agency agreements.
(See Appendix H).
By the terms of
these agreements the Bank has an obligation to purchase, upon demand, the
evidences of indebtedness held by the agent banks and conversely may, at
its option, purchase the evidences of indebtedness at any time. Likewise,
the Bank will, at the request of the borrower, guarantee letters of credit
opened through private United States commercial banks. In each of these
instances the Bank has a contingent liability.
This contingent liability
is shown upon the bank's statements; in the case of the agent bank loans
as contra items and the guaranteed letters of credit as memorandum figures
in the liabilities but, of course, neither figure is included in the total
assets or liabilities. While not a true contingent liability, the Bank
at all times has open unused commitments which reduce the amount available
for new commitments. Below is a schedule of the contingent liabilities
and undisbursed credits taken from the semi-annual reports of the Bank.
1Q
^Semi-Annual Reports of the Export-Import Bank of Washington December
31, 1943 through December 31, 19^97 Also see- Reports of Audit of the
19^9.
67
TABLE 8
CONTINGENT LIABILITIES
Date
Agent Bank
Loans
Guaranteed
L e t t e r s of Credit
Undisbursed
Credits
12/31A5
102,889,739
6/30 A 6
125,923,481
—
1,953,172,020
12/31/46
182,193,165
46,078,271
1,339,445,167
6/30/V7
192,835,480
50,650,012
938,635,816
12/31/U7
186,932,185
22,620,743
1,032,019,221
6/30 A 8
175,087,614
15,944,047
642,677,559
12/30 A 8
122,363,661
21,437,435
394,489,379
6/30A9
119,623,141
19,309,679
381,557,584
12/30A9
100,479,742
32,084,958
431,214,575
1,307,545,935
^Includes balances unused under guaranteed letters of credit.
Sources Semi-Annual Reports of the Bank,
CHAPTER VI
POLICY
General
As has been stated, the purpose of the Bank when it was created in
193^ w &s "to aid in financing and to facilitate exports and imports and
the exchange of commodities between the United States and other nations
or their agencies or nationals. °? By virtue of Section 9 of the Act of
January 3i> 1935 (^9 Stat, k),
the Bank was authorized and empowered in
addition to its charter powers, to discount notes, drafts and bills of
exchange for the purpose of aiding the foreign trade of not only the
United States but also any of its territories and insular possessions.
By the Act of September 26, 19^0 ($k Stat. 961, 15 U.S.C. 606b), the
scope of activities of the Bank was widened to include assistance in the
development of the resources, the stabilization of the economies and the
orderly marketing of the products of the countries of the Western Hemisphere.
This latter provision was the result of the beginning of World
^Certificate of Incorporation Export-Import Bank of Washington District
of Columbia #22430 Par. I
68
69
War II which had "been the cause of a deep cut in Western Hemisphere exports
to the European markets. Not only was it the policy of the United States
Government to foster hemisphere solidarity "but it was of vital importance
that the economies of the Latin American countries should be healthy. It
was foreseen too that in view of the global scale of the war that the
other countries of the Western Hemisphere would be the source of important
natural resources necessary to the war effort.
It was under these principles that the bank was operated from 193^ to
the mid-year of 19*+5 and to which the management adhered closely and conscientiously. -^^
In 19^5> as the result of the anticipated end of the war and with the
problems of rehabilitation and reconstruction in the fore front of Congressional consideration, the Act of 19^5 was enacted.
During the hearings
that preceded the passage of the Act in the committees of the House and
Senate, there was considerable discussion as to the policy of the Bank and
its role, particularly as concurrently there was and previously there had
been, detailed consideration of the International Bank as conceived at
Bretton Woods. As one of the major points in the Export-Import bill was
the increase in its lending powers, there was a strong feeling that the
Bank would, with the end of the War, compete with and perhaps cripple the
106ln the Audit Reporton the Export-Import Bank for the Fiscal Year 19^5
made by the Comptroller General of the United States, (House Document #248
Eightieth Congress, First Session, United States Government Printing Office
Washington 19^7 > p.^) it was noted that in the course of the audit the open
loans had been examined and, in their opinion, the Bank had taken a somewhat wider view'than previously on applications for loans during the war
period, and they mentioned, specifically, credits for the development of
sources of supply for strategic materials, such as iron ore, tin and tungsten and, for the purpose of facilitating the construction of the InterAmerican Highway.
foreign business of private industry. Mr* Randolph Burgess then President
of the American Bankers Association, appeared before the committees and
through his efforts and those of Representative Jess Wolcott, Republican Michigan, the bill as introduced was amended so as to include a paragraph
which stated "that it was the intent of the Congress that the Bank should
supplement and encourage and not compete with private capital and that
loans insofar as consistent with the major objectives, should generally
be for specific purposes and in the judgment of the Board of Directors
offer reasonable assurance of repayment."1^7
The Act of 19^5 also removed the prohibition on loans by the Bank to
governments in default on their obligations to the United States Government
and so far as participations with the Export-Import Bank were concerned,
the prohibitions of the so-called Johnson Act on loans by private persons
to such defaulting governments. ®®
Policy Statement
In late 19^5 the Bank issued a general policy statement (revised
August 1, 19^7)^
the purpose of which was to provide the public with
general information on the facilities of the Bank and on the policies
which guide its operations.
In this statement the Bank outlined the basic principles which were
followed in its lending operations.
ction 2b Public Law 173 Seventy-Ninth Congress First Session Chapter
3*H~(House Rep, 3771*)
IQopuhlic Law 173 Section 10 and 11 Seventy-Minth Congress, First Session,
Chapter 3»1. (H.R. 37717:
1Q
9"General Policy Statement". Revised 8/l/Vf Export-Import Bank of Washington, p 0 l f.
71
1. The Bank makes only loans and issues guarantees for
purposes that serve to promote the export and import
trade of the United States. It does this in two ways:
Directly, by financing specific export and import transactions. Indirectly, by financing exports in connection
with productive developments and thereby assists in
building up the economies and raising the income levels
of borrowing countries which thereby become better
markets for American products and better suppliers of
imports needed in the United States.
2.
The Bank makes loans generally only for specific purposes. Disbursements under a commitment are made only
when evidence, satisfactory to the Bank, is presented
showing that the purposes of the loan are being carried
out by the borrower. The Bank does not make lump sum
advances but rather, extends credits only for approved
purposes.
3-
The Bank makes only those loans which offer reasonable
assurance of repayment. When considering loan applications, the Bank tries generally to grant only those which
are most likely to improve the economic and international
position of the borrowing countries. Loan applications
are carefully analyzed and considered by the various
sections of the Bank, economic, financial, engineering,
and legal, and in this study by the staff, assistance,
if required, is given by the other departments and
agencies of the government. The completed study is
then reviewed by the Board of Directors who approve,
or reject, or defer.
k.
In the great majority of cases the Bank extends credit
only to finance purchases of materials and equipment
produced or manufactured in the United States and of
the technical services of American firms and individuals
as distinguished from expenditures for goods, labor and
services in the borrowing country or purchases in a
third country.
5. The Bank does not compete with private capital but does
encourage and supplement it. Therefore, the bank deals,
primarily, with risks either beyond the scope of private
capital or those which private capital will not assume
without governmental assistance.
The Bank will not do a number of things, thus, it will not extend
credit where it is available privately in adequate amounts on reasonable
terms, nor will it assume any obligation or responsibility for the issuance
by any agency of the United States Government of any priority, allocation,
72
permit or license which the law may require for the procurement and export
of any commodity it may finance. The Bank by law is not permitted to purchase stock in any corporation; thus it may not engage in equity financing
and it requires evidence that any project financed has an adequate equity
interest behind it. The Bank is not authorized to finance trade between
the United States and its territories or insular possessions. The Bank
will not select supplies for projects it finances but does require competent
engineering and other technical direction of the projects; also, it will
finance contracts for payment for United States technical services.
°
The facilities of the Export-Import Bank are available to any United
States exporter of goods or technical services to United States importers,
to foreign governments or their agencies, foreign banks and foreign enterIll
prises. X-L
The Policy statement outlines the suggested procedure to be followed
in applying for Export-Import Bank assistance.
The United States exporter
may apply directly to the Bank in Washington or preferably through his own
bank.
The application should give a description of the goods or services
to be financed.
In the case of a development project there should be in-
cluded engineering and economic surveys and pro forma balance sheets and
income statement. Also, to be given is the name of the foreign country and
the name of the foreign purchaser; also, a statement as to how the use of
the goods may be expected to affect the foreign exchange position of the
borrowing country.
The terms of sale must be given and include total con-
tract price, amount of cash down payment, amount of credit to be extended
Idem p.7
111
Idem p.o
73
purchaser, the amount of credit requested of the Export-Import Bank, and
the proposed schedule of repayments. As the bank usually requires the
exporters to carry part of the risk, the percentage of the risk which the
Bank will take, without recourse, depends upon the circumstances of the
individual case and is applied to the portion of the transaction which
remains after the allowance for cash down payments and for notes maturing
before delivery of the goods.
The exporter must also present evidence that the transaction cannot
be financed without the assistance of the Export-Import Bank.
Required
is credit information and references on the purchaser with statements and
other financial data. A statement must be made as to whether the guarantee
of a foreign bank, or government, or grantor will be offered and, if so,
some evidence that it will be given.
Some assurance that the necessary dollars will be made available by
the monetary authorities of the country to meet payments as they fall due,
in the absence of the unconditional guarantee of the government of the
country concerned is required.
The exporter must also give a brief history of himself with bank and
trade references and financial information covering the past three years. 1'
Foreign Governments or their agencies may apply directly to the Bank
or may begin discussions through the United States diplomatic mission in
their country or through their own diplomatic mission in Washington.
A considerable amount of information is required from the prospective
borrower.
1. Justification for seeking the help of the ExportImport Bank and the absence of private credit must
be supported by evidence.
Idem p. 9f.
7^
2.
Purpose for which credit would be used including
lists of goods and services to be purchased in the
United States and when development projects are
considered engineering, and economic surveys must
be submitted.
3. Amount of credit desired and proposed terms of repayment .
k.
Statement of the external assets of the country in
the form of gold and foreign exchange with official
holdings segregated from private holdings and dollar
holdings separate from holdings of other currencies.
5. The countries current and prospective rate of gold
production.
6.
A statement of the international investment position
of the country at long and short term, including major
commitments pending or contemplated. Also an estimate
of the amounts of interest and amortization due annually over the life of the loan on external fixedservice obligations and a statement of priorities in
loan service.
7.
A summary of the record of the country on paying its
external debts and a statement of the default status
of external obligations if any.
8.
An analysis of the capacity of the country to repay on
the basis of its current and prospective balance of
payments.
9.
A statement of the expected impact of the project upon
the country's foreign exchange position.
10.
If the application is made on behalf of a borrower
other than the government, there must be submitted
evidence that the guarantee of the government will
be given and that dollars will be made available by
the proper agency to meet the payments of principal
and interest as they fall due. ^3
Applications will be accepted from foreign applicants other than governments but the support of their government will be required before con-
Idem p. lOf.
75
sideration.
The information required follows along the lines of the domes-
tic application plus the pertinent information as to the government's guarantee and exchange availability agreement.
llJ+
The Bank will also make commitments to enable United States exporters
to submit bids for foreign business.
Where more than one United States ex-
porter is interested in a given order the Bank will indicate identical or
similar terms to all qualified bidders so that the successful bidder if a
United States exporter will be determined upon the sole basis of price,
quality and delivery schedule rather than the advantage of credit terms
created by the Bank.
The Bank suggests that exporters consult with the
Bank prior to the making of terms.
115
At the request of foreign borrowers the Bank will guarantee reimbursement to commercial banks in the United States for payments made under approved letters of credit arranged by the borrower to finance exports under
established lines of credit of the Export-Import Bank.
±0
Maturities and Interest Hates;
The maturities of credits are arranged in accordance with the circumstances of the case.
Consumer goods are rarely financed but if under-
taken will be done on short terms as will the financing of raw materials.
Machinery and equipment terms are extended over longer periods and maturities are placed upon a quarterly or semi-annual basis.
A discussion of
interest rates will be found in another paragraph. 1 '
Relations with Agent Commercial Banks:
The Bank does not compete with private capital.
Idem p. llf
115
Idem p. 12f
116
Idem p. 13
117
Idem po 13
The Bank prefers
76.
to receive applications for loans from private firms and individuals through
their own banks and seeks to obtain the maximum participation by exporters
and commercial banks in credits to which it is a party.
The Bank, also,
under special circumstances, uses the facilities of commercial banks for
making funds available under lines of credit, receiving payments of principal and interest, and handling other matters in connection with the extension and collection of credit,.118
These agent banks, as they are called, operate under agency agreements
in cases where the loan transactions are better handled through customary
private trade channels than by direct advances of the Bank. A separate
agreement is executed with each bank under each loan involving the use of
agent banks and generally provides:
1. The agent bank shall make disbursements under the
loan negotiated by the Export-Import Bank from the
agents own funds.
2.
The agent bank shall receive directly the payments
of interest and principal made by the borrower.
3. The interest received under the loan shall be divided
between the agent bank and the Export-Import Bank on
a fixed basis.
k.
118
Idem p.
The Export-Import Bank shall at any time on demand by
the agent bank, and may at any time voluntarily, reimburse the agent bank for advances made and interest
earned, thereby succeeding to all right, title, and
interest in and to the obligation held by the agent
bank under the loan. ^9
ikt.
119
Audit of the Export-Import Bank of Washington for the Fiscal Year 19^8
(United States Government Printing Office, Washington 19^9)« House Document #6^1, Eightieth Congress Second Session, p.9
77
Policy Problems 19^5
The Bank was confronted with a number of policy questions immediately
after the enactment of the 19^5 Act. The first question was the rate to be
charged on the Bankfs long term loans to foreign governments. The question
was referred to the National Advisory Council on International Monetary and
Financial Problems. This agency is charged with the coordination of policies
and operations of agencies engaged in making foreign loans. The Council
considered several factors in reaching a decision: the legislative background1
of the Export-Import Bank; the possible rates of interest to be charged by
the International Bank; the present and prospective rates in the private
capital market, and the interest rate structure of the public debt. Also
considered were the reserve policy and administrative expenses of the ExportImport Bank; the relation of interest rates on Export-Import Bank loans to
the prospect of repayment; the possibility of resale by the Export-Import
Bank of the foreign obligations to the commercial banks and private investors,
and the benefit that the United States would gain through worldwide reconstruction. The real basis of the final decision was based upon the consideration that the interest charged by the Export-Import Bank should cover
their costs to the United States Government. Three elements go into the
cost:
First, the cost of money to the United States Treasury; Second, the
operating expenses of the Bank; Third, the accumulation of reserves by the
Bank sufficient to cover losses. The cost of money, in the last half of
19^5* "to the government was on the average a shade under 2$. This is the
average cost to the Treasury of all its borrowed funds with the spread in
-^Hearings Senate Banking and Currency Committee,
also
Hearings House Banking and Currency Committee.
78
maturities in existence at the time. The cost of making loans was arbitrarily set at 1$. The actual administration expenses of the Bank in 19^5
were far less than this figure hut it provided a margin which could he used
to "build up a reserve against possible future losses. Then too, the 1$
margin corresponded to the minimum commission which may be charged by the
International Bank during its first ten years.
The Council
recommended that "the Banks general rate of interest on twenty to thirty
year loans to foreign governments for reconstruction and development should
be 3$ during the next period.
ments.
This rate shall be uniform for all govern-
In the case of loans with serial maturities, the average rate should
be 3$. The approximate rates or rate should be reviewed from time to time
as relevant factors change.
In financing the export of goods for which
requisitions have been filed by foreign governments under Lend-Lease and
accepted by this government prior to VJ Day the Bank's interest rate should
be 2-3/8$ for thirty year loans, i.e., the same as in Lend-Lease 3C Agreements."-"^" Prior to the establishment of this policy, the average rate
on the Bank's outstanding loans was kfy, and this rate was continued on
other than government loans.
The Bank was questioned on the propriety of its loans to governments
in default on their obligations to private United States citizens.' The
Bank management pointed out that it encourages the foreign governments to
make Reasonable settlements with private United States holders of defaulted
obligations and to make payments of principal and interest to bondholders
on agreed terms. And the Bank in considering applications for new loans
gives appropriate weight to defaults when determining the credit standing
irst Semi-Annual Report of the Export-Import Bank of Washington for
the Period July-December 19^5 - Export-Import Bank of Washington 19^6
P. 27
^
19
of the government and the "reasonable assurance of repayment". Rarely,
however, has the Bank made the service of dollar obligations a condition
precedent to loans. The Bank justifies this position on several grounds:
First, it has been the general policy of the United States Government not
to intervene officially in settlements between foreign debtors and United
States creditors. Second, the Bank's statutory purpose is to aid in
financing and facilitating the exports and imports of the United States.
This is the prime consideration and the Bank must give this first consideration. Third, the Bank feels that in loans of reconstruction and development the assistance given the borrowing country may reasonably be expected
to strengthen the economy and thus improve the position of holders of defaulted obligations and to improve the possibility of resumption of repayment to the bondholders.
Another issue raised was the making of loans for dollar requirements
only. The Bank finances only what must be obtained in the United States.
It does not, except in extraordinary circumstances, finance outlays in the
borrowers own currency; nor will the bank, except in an unusual case,
finance purchases in another foreign country.
This policy is based upon
several reasons: First, the Bank's loans are foreign loans and ultimately
the borrower must repay in dollars. If used internally the funds would, in
repayment, involve a drain upon the borrower's gold and dollar holdings or
impair its current receipts from exports. Second, it would burden unnecessarily
the borrowing countries external obligations and add to the Bank's
risk of loss because of transfer difficulties.
In 19^5 the question of export credit and transfer again was raised.
In previous chapters this subject was discussed and it is a question that
reoccurs quite frequently.
The Bank over a long period of years has studied
80
the question and has gone far to meet the need for such a system so far
as medium term credits are concerned.
It finances specific exports up to
a given percentage without recourse to the exporter and thus, to the extent of its participation, relieves the exporter of both credit and transfer
risk. The Bank has held itself ready to expand this type of credit and would
also enter into general arrangements for the financing of a stipulated volume of business that could be handled through the Bank without recourse. The
question was also raised as to whether the Bank should undertake a broader
stand upon short term and medium term credits along the lines of the British
and Canadian systems. In June 19^-5 the Bank sent to Senator Claude Pepper
(Democrat- Florida), Chairman of the Senate Subcommittee on Foreign Trade
122
for Small Business, a letter which outlined its position.
The Bank was
against following the British example of a specially created government
agency to offer both short and medium term credit insurance against nonpayment by the foreign buyer for any cause. The basis of this recommendation was:
1. The distinction between inability to pay because of
transfer difficulties and inability because of credit
difficulties.
2.
The demand for short term export guarantees is too small.
3.
If really needed short term guarantees could be satisfied
by private action.
a. Establishment of private credit guaranty organizations.
b.
Pooling of credit information by groups of
exporters.
c. Development of private export credit information services.
i op
~"
Idem p . 31.
L e t t e r dated June 23, 19^5•
k.
d.
Use of the credit facilities of estahlished
export houses.
e.
Improvement of credit management in individual
firms.
The principal need is more adequate facilities to enable
exporters of capital goods to sell abroad on reasonably
extended terms and to obtain the credits or the credit
and transfer guarantees required for this purpose. The
resources of the Export-Import Bank should be reserved
largely for assistance of this character rather than be
tied up in commitments to exporters of consumer goods
which are sold on short terms with a minimum of risk and
which can usually be financed without difficulty through
commercial banking channels.
The Bank then recommended certain steps be taken to assure meeting
the need for medium term facilities:
1.
Subject to an increase in its lending authority, the
Bank agreed under appropriate conditions, with respect
to individual export transactions involving terms of
one to five years, to guarantee exchange up to 100$
on exports to countries, members of the International
Monetary Fund and up to 50$ - 75$ of risk of non-payment
for all other causes.
2.
That the Bank would accomplish this as in the past by
non-recourse loans to exporters or by giving its contingent guarantee against non-payment because of inability to transfer dollars (up to 100$) or for other
causes (up to 75$)-
3. That the contingent guarantee of the bank, against transfer
and credit risks, be made available on a fee basis to:
a.
Individual exporters.
b. Banks.
c. Export guaranty organizations, the terms to be
arranged so that it would be no less costly for
exporters to take advantage of the Bank's guarantee
directly rather than through their banks or through
private guaranty organizations.
k.
12
The Bank concluded with the statement that this arrangement could be handled without any expansion in its
organization or personnel except as might be necessary
by an overall expansion in operations.3
3idem p. 32.
82
In making reconstruction loans the Bank was guided at'all times by
the desire to restore foreign trade to private channels as rapidly as
possible.
Sixty days after VJ Day (November 2, 19^5) United States
Government procurement facilities were closed to foreign governments who
then had to buy in the open market. However, because of internal difficulties in the foreign countries, they were forced to continue to use
their own purchasing commissions rather than permit the trade to be
handled by their own nationals in the import business. It was felt, however, that this procedure would be necessary only during the transitional
period between war and peace, and to a great extent this has proved true
and most purchases are now transactions between private importers and
private exporters. There is still, however, widespread controls, priorities, etc.
Policy Problems in 19^6
The all important policy issue confronting the Export-Import Bank in
the first half of 19^6 was the effective use of its reconstruction credits
in restoring United States foreign trade to a peacetime basis while still
maintaining the Bank's traditional forms of assistance to American exporters
and importers and to foreign countries seeking development loans. Other
policy problems were:
1. Private participation in the Bank's loans.
2.
The position of the Bank in financing through
private channels only.
3-
The Bank's general policy of financing dollar
requirements only.
k.
Proposals for a general system of export credit
and transfer guarantees to be administered by
the Bank.
83
5. Question of the Rate of Interest on other than
reconstruction loans.
6. The problem of the impact of the Bankfs credits
on the domestic supply situation.
7. The question of marine insurance on export shipments financed by the Bank.
8. The guaranty by the Bank of commercial letters
of credit.
Private Participation
Early in 19^6 the Bank created a Private Capital Participation
Division.
This division handles the participation of private lending
institutions. In some credits commercial banks take part of the credit
on a non-recourse basis. The Bank also, in so-called exporter credits
requires the exporter to carry a reasonable portion of the risk.
It has
been the policy of the Bank to extend credit whereYer reasonable by means
of exporter credits in preference to government to government credits in
which domestic suppliers do not participate. The Bank also maintains
close contact with financial markets and will give information regarding
its portfolio so that its commercially bankable paper may be made available
to private investors, within the limitation of the regulations of the Securities and Exchange Commission. And borrowers must agree, upon request
of the Bank, to take steps that are necessary to register their obligations
to the Bank under the Securities Act of 1933-
As of June 30, ±9k6 approx-
imately 125 million dollars of the 72T million dollar loans outstanding
were held by commercial banks pursuant to agreements whereby the commercial
banks had made disbursements to borrowers against lines established by the
Bank which agreed to reimburse them on demand.
The Export-Import Bank
has a contingent liability for loans disbursed by agent banks under these
&b
agreements and the whole amount of loans outstanding applies against the
statutory limitation on loans and guarantees of the Export-Import Bank
although the use of public funds is avoided. Most of the agent bank
loans were disbursed prior to the Act of 19^5-
Since the enactment of
the Act which directs the Bank to obtain its funds from the Treasury,
the Bank has confined the use of commercial banks to situations in which
they give special commercial bank services in connection with the dis-j oh
bursements.x
Private Trade
Substantial progress was made in returning trade to private channels,
which was aided by the State Department which informed the foreign countries
that purchasing missions should be terminated as soon as possible. 2?
Domestic Impact
The Bank was concerned with the effect of the reconstruction loans upon
the domestic economy. A number of factors affected the timing and importance of the impact. The delays in utilization of these credits meant that
their effects were spread over a period of months
(heavy equipment).
and, in some cases, years
Also, export allocations by the United States and the
controls which accompanied them tended to minimize the effect on the domestic
economy. Further, with prices officially controlled, the effect of the
125
'
Second Semi-Annual Report of the Export-Import Bank of Washington for
the period December-June 19^6. Export-Import Bank of Washington 19bb p. yyf.
125
"Tress Release #303 (May b> 19b6)
Department of State.
85
foreign demand extended time for delivery rather than raise prices.
In addition to the above safeguards, the Bank, with the assistance
of the Department of Commerce, followed a policy of restricting or denying
the use of its credits for the purchase of commodities in scarce supply
and encouraged their use for the purchase of commodities in long supply,
such as cotton and tobacco and many types of capital goods. This minimized
inflationary consequences of the Bank loans under existing conditions and,
at the same time, eased the problems of deconversion of industries which
had been expanded during the war.
Marine Insurance
Upon the granting of the reconstruction loans and Lend-Lease credits,
it was alleged that the government to government loans was resulting in
the diversion of marine insurance business from normal channels. It was
contended that the borrowing governments were tending to place marine insurance in their own national markets or in third country markets where
dollars were not required.
Under normal private, commercial trade, a large
percentage of United States exports are quoted and shipped on a C.I.F.
basis with the American exporter making the insurance arrangements and
placing a large part of the business in American markets. As a result,
the Bank in March 19*4-6 adopted a policy of requiring that goods financed
under the Bank credits be insured by contracts of insurance payable in
United States dollars. The Bank, however, has considered waivers and
Second Semi-Annual Report of the Export-Import Bank of Washington for
the period December-June 19^6. Export-Import Bank of Washington, 19^6.
wns
86
modification in cases where the borrower self insures,, i.e., assumes all
or part of the risk of loss without insurance.
127
Letter of Credit Guaranties
At the request of foreign government borrowers and United States
exporters, the Bank undertook to guarantee, on instructions from the
"borrowers, reimbursement for payments made under commercial letters of
credit arranged by them in anticipation of the financing of exports by
the use of Bank credits. The guarantees made possible the procurement of
goods in the United States with complete assurance to American suppliers
and banks that payment would be received out of Export-Import Bank funds,
which are specifically earmarked against each guaranteed letter of credit.
Also, they served to maintain and restore commercial trade practices. 2 ^
In the last half of 19^-6 the position of the Bank on further reconstruction credits was clarified.
guarantees was raised again.
The question of export credit and transfer
Interest rates were reconsidered and the Bank
examined its policy on imports.
Reconstruction Credits
The Act of 19^+5 was intended chiefly to enable the Bank to extend
emergency reconstruction credits during the period until the International
Bank should open for business. The Act increased the lending authority
by 2.8 billion dollars and the Bank at once began to authorize credits,
12T
Idem p. 39
Idem p. 39
87
mostly long term, and for a wide variety of projects. As of May 30; 19^6
the Bank had authorized approximately 2.1 "billion dollars of commitments
and had ear-marked 500 million dollars for China which left 200 million
dollars of the increase uncommitted.
In June 19^+6 the International Bank
announced it was open for business and ready to receive applications from
its members for loans. Under the circumstances, the Bank decided that it
must bring to an end its program of emergency reconstruction credits, particularly to those countries with access to the facilities of the International Bank.
The Bank will continue to consider within its powers and
policies, credits to finance trade with countries undergoing reconstruction,
as well as other countries.
Credits authorized must be for specific pro-
jects, must contribute in the most direct manner to a balanced long range
expansion of foreign trade and be on appropriate terms.
'
Interest Rates
After considerable study the question of interest rates was referred
to the National Advisory Council for its recommendation on loans other
than to governments.
In July 19^6 the Council recommended and the Bank
adopted a revised policy on interest rates for new loans.
1. An average or effective rate of 3-l/2# on long
term loans other than those to governments,
agencies of governments and private firms carrying the guarantee of foreign governments.
2.
Higher rates on loans to private borrowers not
guaranteed by foreign governments, if justified
by the risk factor.
3. Rates on short term loans at the discretion of
the Bank.
Third Semi-Annual Report of the Export-Import Bank of Washington for
the period July-December 19^6. Export-Import Bank of Washington 19^7 >
p. 26f"
88
This recommendation was "based upon a number of considerations. The 3-l/2$>
rate was figured to cover the cost of the money to the United States plus
an allowance for risk and Bank overhead. Also, it was considered high
enough to attract domestic participation as compared to the domestic securities return, and, at the same time, not bear too heavily on the borrower.
It reduced the existing Bank rate and thus passed on the lower cost of
money.
At the time, it was believed to be in conformity with the rate
which would be charged by the International Bank on loans of comparable
maturity.1™
Imports
The large post-war credits to foreign countries highlighted the growing creditor position of the United States and it became evident to the
Bank that useful and desirable imports into the United States should be
stimulated so as to enable the foreign countries to import more American
goods and to ease the problem of the foreign countries in repaying interest
and principal on their dollar loans. The Bank felt it could do a constructive job in this connection.
It had always considered that the balance of
payment position of the applicant was important and in the future would be
given even heavier weight. All loans would be examined with particular
emphasis on the end use and all must either result directly in foreign
exchange for the borrower or set up conditions which will create foreign
exchange, either by supplying goods for which foreign exchange had been
previously required, or to supply goods for which an export demand existed.131
13
°Idem p. 27
131
Idem p. 28
See also: "The Foreign Loan Policy of the United States" The Federal
Reserve Bulletin (March 19^6) Federal Reserve Board Washington, D.C. 19^6
Vol. 32 #3, P. 227f.
Policy Problems in 19^7
In I9U7 relatively few questions of policy were presented.
The ef-
forts of the Bank were largely devoted to the expanding volume of work in
administering loans on its books. Also, of prime concern were the problems
of transition from the emergency program of large reconstruction loans of
general character to a selective program, specifically designed to contribute, over a period of time, towards a better balance of two way trade.
In introducing this change in emphasis of the Bankfs program, it was necessary to proceed slowly project by project. Several credits, authorized
during the year, illustrate this change in policy.
On Italian credits the
Bank agreed to consider the extension of individual credits totalling 100
million dollars, for the specific purpose of assisting certain segments of
Italian industry to restore and expand their export markets. Credits of
the same type were approved for Finland, and a credit to Brazil for the
construction of an Alkali plant will permit Brazil to divert to other purposes the foreign exchange formerly required for purchases of soda ash
and caustic soda.
In the same category was a credit granted to the Royal
Dutch Airlines (KLM) for the purchase of aircraft which will produce a
high proportion of dollar revenue. Credits were extended to Turkey for
the conversion of vessels from which the earnings will be substantial and
which will aid Turkey's balance of payments. In the adoption of this
policy i^he management of the Bank felt the stimulation of exports from
the borrowing countries would contribute to a better balance of the exports and imports of the United States and would thus facilitate a continuation of foreign trade on a sound basis.
During the year 19^7 the Bank received a large volume of applications
90
from private traders and foreign governments -which, had they all "been
approved, would have required considerably more funds than the Bank had
uncommitted.
The management of the Bank felt that prudent management
required that it maintain a margin of uncommitted funds available to meet
contingencies which might arise in the field in which the Congress intended that the Bank should operate. 3^
Policy Problems in 19^8
In 19^-8 operations of the Bank were overshadowed by the Marshall Plan
or European Recovery Program and the large sums appropriated for implementing the Economic Cooperation Act of 19^8. In view of the substantial funds
which would flow to Europe the Bank felt that the Export-Import credits
should not be authorized to the participating European countries except in
extraordinary circumstances. Most of the credits approved were for Latin
American countries. Exceptions were foreign exchange producing credits
for Norway, Sweden, Finland and Canada, The Bank restated its essential
criteria in passing on all applications. All loans must promote the interest of the United States through aiding its foreign trade. The efficacy
of the loans in promoting trade along sound lines, the sufficiency of the
supporting investment and the adequacy of assurance of repayment were the
main points considered.
The Bank found of increasing value its freedom to
encourage private investment and the sale of American goods through loans
in which the guarantees of foreign governments were not required. 33
^3gFourth and Fifth Semi-Annual Reports to Congress of the Export-Import
Bank of Washington for the period January-December 19*J7^ Export-Import
Bank of Washington.
133
^ Sixth and Seventh Semi-Annual Report to Congress of the Export-Import
Bank of Washington for the period January-December 19^8. Export-Import
Bank of Washington.
91
In April of 19*4-8 the President requested the Congress to increase the lending authority of the Bank by 500 million dollars. The Presidential message
gave as the primary purpose of the increase required, the placing of the
Bank in a position to assist in meeting essential requirements for the
financing of economic development in Latin America. Senate Bill 25*4-9
which provided for the increase was passed by the Senate but was not reported out of Committee in the House of Representatives. ^
Oxl April 3, 19*4-8 the Foreign Assistance Act of 19^8 was approved and
under its provisions the Bank was authorized to extend assistance to participating countries on credit terms and to administer the credit on terms
specified by the Administrator in consultation with the National Advisory
Council.
In June the Bank was authorized by the Administration to make
the first loan135
and by the end of December of 19*4-8 a total of 837-3 million
dollars had been authorized.
Also one guarantee authorized under the
Assistance Act had been issued. 3" In another chapter the relations of
the Bank and Economic Cooperation Administration are discussed fully.
Policy Problems in 19*4-9
In 19*4-9 the problems which confronted the Bank in its effort to facilitate the international trade of the United States was acute. Demand for
United States products continued to exceed the ability of most foreign
^•3^sixth Semi-Annual Report to the Congress of the Export-Import Bank of
Washington for the period January-June 19^8. Export-Import Bank of Washington19^8~p.2f.
135
Idem p.3.
1^6
Seventh Semi-Annual Report to the Congress of the Export-Import Bank of
Washington for the period July-December 19^8> Export-Import Bank of Washington 19*4-9, p. 12.
92
countries to obtain the dollars necessary to pay for them.
The Bank
avoided indiscriminate financing of American goods. It endeavored to
direct its credits towards the financing of goods which would build up the
productive capacity of the borrowing country and provide for an exportable
surplus.
It has aimed to facilitate private investment in productive enter-
prises abroad by sharing credit risks with United States investors and it
facilitated the export of American skills and experience by requiring and
financing such services in connection with projects it financed. 37 Development credits accounted for most of the assistance approved during the
year.
Included were credits to the Middle East, Latin
America, Africa and
the Far East.^o
In January 19^9 the President outlined his Point k Program for the
economic development of the underdeveloped areas of the world.
In another
chapter will be found a full discussion of this program under which the
Bank is to be an important factor. *'
137
Eighth Semi-Annual Report to the Congress of the Export-Import Bank
of Washington for the period January-June 19^9 * Export-Import Bank of
Washington 19^9, P-2.
3*%jnth Semi-Annual Report to the Congress of the Export-Import Bank of
Washington for the period July-December 19^9- Export-Import Bank of
Washington, 1950 > p.l.
Ibid p.2.
CHAPTER VII
LOAN AND COMMITMENTS OPERATIONS UNDER THE ACT
July - December 19^5
The commitments-**^ made by the Bank in the last half of 19^5 were
principally to the liberated and war shattered countries of Europe and
were for reconstruction purposes. This was in accordance with the program
outlined in the course of the hearings on the Export-import Bank Act of
19^-5 and as foreseen by the President in his message to Congress of June k,
19^5 on the subject of lend-lease for the fiscal year 19^-6. Of new
authorizations of 10^0 million dollars, reconstruction loans to Europe
totalled 9^0 million dollars. The reconstruction
loans were of two types,
lend-lease credits and reconstruction credits. Both were used for purchases
in the United States of food, raw materials and machinery and equipment.
Their purpose was to assist in restoring the economies of the borrowing
oan authorizations or commitments refer to the approval, in principle,
by the Board of Directors of the Bank of credits on specified terms.
Authorizations must be formalized in loan agreements before disbursements
or advances can be made. Authorizations may lapse because formal loan
agreements are not signed or may be cancelled or expire after agreements
have been signed.
93
9h
countries and thereby revive the peacetime markets for United States
products and sources for United States imports.
Lend-lease credits of 55 million dollars were extended Belgium, 550
million dollars to France and 50 million dollars to the Netherlands. Because of the sudden end of the war the drain on the Bank for this purpose
was heavier than anticipated.
The lend-lease credits used funds which the
Bank had believed would be available for other purposes.
Other reconstruction credits approved in the last half of 19^-5 were
for the purchase in the United States of a broad variety of agricultural and
manufactured products. These credits were k$ million dollars to Belgium,
20 million dollars to Denmark, 50 million dollars to the Netherlands and
50 million dollars to Norway, for a total of 165 million dollars. They
were available to late 19^8. Advances were against notes maturing in 1950
and 1951 with a rate of 2-l/2$. At maturity the borrowers may tender new
notes in renewal maturing in thirty equal semi-annual installments. For
the first five years the rate will be 2-l/2$», the second five years 3$>
and the last five years 3-l/2$.
This rate of interest agrees with a
recommendation of the National Advisory Council.
In October 19^5 the Bank set up a credit line of 100 million dollars
for the specific purpose of financing exports of raw cotton to European
countries. The full line, if utilized, covered 800,000 bales of cotton.
The terms of the credit were a maturity of 15 months and a rate of 2-l/2$.
The American cotton shippers and their commercial banks participated in
the credits up to the time of acceptance of the relevant drafts by the
foreign banks. In the period July - December 19^5 only one credit was
established in the amount of 5 million dollars for Finland and covered
MS,000 bales of cotton.
95
Authorization for Latin America totalled 106 million dollars. Brazil
secured 38 million dollars for the purchase of fourteen ocean going cargo
steamers to be built in the United States. Repayment over ten years and
at a rate of kfo per annum.
Chile was extended credits of 36.2 million dollars of which 33 million
dollars went to the Chilean "Formento?f to finance the purchase in the
United States of equipment, material and services in connection with the
construction of an integrated iron and steel plant. In addition to the
Export-Import Bank funds, the Chilean government put up about 25 million
dollars. This credit was fully guaranteed by the Republic of Chile. It is
repayable over twenty years with a rate of 4$. A portion of the credit,
5 million dollars, was earmarked for hydroelectric facilities and this
credit had a maturity of five years repayable in semi-annual installments
at a rate of ktf>. 3-2 million dollars in credits were in favor of the
Chilean State Railways for electrical equipment and locomotives, the former
to be repaid over seven years in quarterly installments and the latter in
not over six years also quarterly. The rate in each case was k<f>9
A commitment of 1 million dollars was made to the Republic of Ecuador
for the purchase of American engineering and other technical services in
connection with the preparation of a broad program of economic development.
Commitments of 30-2 million dollars were established for Mexico. Of
this, 10 million dollars increased an existing line of credit in favor of
the Government of Mexico covering highway construction but, unlike the
previous commitment, was exclusively for the purchase of United States
equipment and services. The existing credit could be used for local labor
and materials. Repayment is over ten years in installments and interest
at k$) per annum.
Another credit of 20 million dollars was granted to assist in the
financing in the United States of equipment, materials and services in
connection with a large electrification program.
Repayment in semi-annual
installments over twenty years at kf interest. Advances under this credit
are secured "by the assignment of revenues derived from specified taxes on
the consumption of electrical energy in Mexico and is unconditionally guaranteed hy the Government of Mexico.
Lastly, 150,000 dollars was allocated for a small importer to assist
in financing the importation of Mexican handicraft into the United States,
Peru was granted a credit of 350,000 dollars upon the application of
a United States supplier of electrical equipment. Repayment over ten years
with a rate of k$.
Among other credits approved was one of 5 million dollars to the
Kingdom of Saudi Arabia for the purchase of equipment in the United States
for certain public works.
Also a credit of 3«1 million dollars was approved upon the application
of United States suppliers to finance the sale of airport equipment to the
Turkish State Airways. Repayment quarterly over five years at a rate of
-First Semi-Annual Report, etc., loc.cit., p* 15f.
"Report on Audit, etc., loc.cit. p c 7^*
91
Operations
January - June 19^6
During the first half of 19*4-6 the Bank continued its assistance to
the liberated and war devastated countries for reconstruction purposes and
thus carried forward the program proposed by the President in June 19^5
and which had been made possible by the enactment by Congress of the
Export-Import Act of 19*4-5. Reconstruction credits of 11*4-2 million dollars
were approved out of a total of 1157 million dollars. Through the reconstruction credits, the Bank was filling a gap in the facilities for providing
dollar credits until the International Bank could get into operation. They
were granted to meet the most urgent needs of the war stricken countries.
They may be considered as emergency credits,
China was the beneficiary of six credits during this period which
totalled almost 67 million dollars.
The first credit was a credit line of 33 million dollars to the Bank
of China, covering the export of raw cotton to the extent of 275,000 to
300,000 bales mostly short staple. The term of this credit was 2k months
after arrival in China as compared with 15 months to European countries.
The added time was permitted because of the difficulties of inland transportation and processing.
The credit was guaranteed by the Chinese Govern-
ment and the rate was 2-l/2$. The cotton was moved through private trade
channels in the United States to both government and private consumers in
China. The use of the credit was open to all qualified cotton export firms
in the United States through their United States commercial banks. After
the approval of the commitment, it was found that because of the lack of
dollar exchange and conditions resulting from the war, there was on consign-
98
ment in China large quantities of United States cotton which was unsold*
This cotton- and other cotton that had been shipped on a cash on arrival
basis was declared eligible for financing under the credit.
The five other credits approved included k.2 million dollars for ten
coastal cargo vessels; 2.6 million dollars for l6 cargo vessels; l6.5 million dollars for railway repair equipment; 8.8 million dollars for ten
auxiliary steam power plants and 1*5 million dollars for coal mining equipment.
Credit terms varied.
The credit for the coastal cargo ships covered
75$ of the purchase price, the remainder being paid for in cash by the
Chinese Government. The loan matures in 20 years, rate 3-l/2$. These
terms were similar to those established by the Merchant Ship Sales Act of
19*1-6, The other cargo ships were purchased on terms of 15 years with repayment beginning in the sixth year at a rate of 3-l/2$.
The railroad
and power equipment loans carried a rate of 3$ repaid over 25 years beginning 5 years from the date of advance of funds. The coal mining equipment was y/o repayable in 20 years with payments beginning in the sixth year.
In addition to the above, the Bank, following President Truman's statement of December 15th, 19^+5 on the subject of our policy towards China,
ear-marked 500 million dollars for possible additional credits on a project
by project basis. The credit was to expire by June 30, 19^7In May 19^6 Czechoslovakia was extended a 20 million dollar cotton
credit through the Prague Credit Bank. This was allocated under the 100
million dollar cotton credit for Europe established in October 19^5- The
credit which was guaranteed by the Czechoslovakian Government was sufficient
to cover 130,000 bales of cotton from the United States. This was more
than 50$ of the average annual pre-war imports of cotton from the United
99
States and was estimated at about two-thirds of the annual cotton requirements of the countryo
The rate was 2-l/2$ and drafts maturing in 26 months
were permitted, thus taking into consideration not only inland transportation but also production and marketing difficulties encountered in cotton
textiles in Czechoslovakia.
A line of credit of 35 million dollars was extended to Finland for
the purchase of supplies, services, material and equipment in the United
States. Also, in the loan agreement was a provision for the refunding of
outstanding loans made by the Bank in 1939 and 19^-0 to the Finnish American
Trading Corporation with the guarantee of the Republic of Finland. The
principal and interest on this loan on January 1, 19^-6 was approximately
25 million dollars. The new credit line was to be available to June 30,
19^8.
Advances under the new credit were under notes due March 15, 1950
with a rate of 2-l/2$. The refunded notes were of the same tenor. At the
maturity in 1951 they may be exchanged for three series of new notes. The
first series totalling 20 million dollars will be repayable in semi-annual
installments until I956 at 2-l/2$>. The second series of 20 million dollars
will mature I956 - 1961 at a rate of yf>. The third series of 20 million
dollars will mature in instalments during the years of 1961 - 1966 at
3-1/2$.
Also extended was a cotton credit of 5 million dollars covering approximately MS,000 bales of United States cotton. Terms 15 month drafts at a
rate of 2-l/2$.
A credit of 65O million dollars to France was authorized by the Bank
for the reconstruction and modernization of French industry. This brought
French credits to 1.200 million dollars; more than one-third of the statutory
lending authority of the Bank. The credit of 650 million dollars was ar
100
ranged as a result of an agreement by the United States and France covering
the settlement of lend-lease, reciprocal aid and other war accounts, the
purchase of United States surplus property located in France and overseas
French territories, the projected purchase of ships owned by the United
States and mutual undertakings in connection with international commercial
policy.
The terms were similar to other reconstruction credits^ in install-
ments over 20 years beginning on January 1, 1952 at yfc.
A credit of 25 million dollars was approved for Greece for the purchase
in the United States of material required for the restoration of productive
facilities.
It was granted to supplement U.N.R.R,A. assistance in the re-
placement of capital goods. The Government of Greece issued notes maturing
on March 31, 1951 with interest at 2-l/2$. These will be exchanged for
three series of notes. The first series of 7-5 million dollars will be
payable over ten years at a rate of 2-l/2$ beginning in 1951-
The second
of 12.5 million over ten years beginning 1961 at a rate of 3$ and the remainder over 5 years beginning in 1971 at a rate of 3-l/2$.
Italian commercial banks received a cotton credit of 25 million dollars
sufficient to purchase 200,000 bales of cotton.
Terms 15 months at 2-l/2#
guaranteed by the Italian Government.
The Kingdom of the Netherlands was the recipient of a 200 million dollar
commitment and, in contrast to the two credits of 50 million dollars each
approved in October 19^5, the new credit was repayable one half in one year
and the remainder within two years of the date of advance at a rate of
2-l/ty.
The Bank gave United States commercial banks the opportunity to participate to the extent of 100 million dollars, without guarantee or recourse
on the Export-Import Bank.
Approximately 93 million dollars of the credit
101
was taken by the commercial banks.
These credits were granted to take care of the most urgent requirements of the Netherlands for dollar financing, pending the functioning of
the International Bank or until funds were available in the private capital
market. A cotton credit of 10 million dollars was also allocated, making
a total of 310 million dollars of credits approved for the Netherlands by
the Bank since June 30, 19^5*
The Netherland Indies also received a commitment of 100 million dollars
to finance the purchase in the United States of material for the reconstruction of the Islands. It carried the guarantee of the Kingdom of the Netherlands.
The formalizing of the loan agreement under this commitment was de-
ferred until the political status of the Indies was settled.
^
Poland was allocated a credit of ^0 million dollars granted to its
Provisional Government in April 19^6 to cover the purchase of American
locomotives and coal cars for use on the Polish State Railways. This
credit was designed to assist in Polish rehabilitation and, even more important, to provide a means of carrying Polish coal to other countries of
Europe in dire need of coal. Repayment will begin in 1951 over 20 years
at 3foo
The credit of 5 million dollars to Saudi Arabia authorized in 19*4-5
was superceded "by a new commitment of 25 million dollars; 20 million dollars
for financing of essential imports and 5 million dollars for services and
equipment from the United States for public works.
l^The New York Times of February 11, 1950, announced that the formal loan
agreement had been signed. Indonesia became an independent nation on
December 2J, 19^9• The loans, taken under the commitment, will mature
over 20 years, with repayment beginning after five years. Interest rate
will be 3i^ per annum.
102
Two Brazilian credits were approved, 1,9 million dollars to the
National Department of Railways for 75$ of the contract price of locomotives. Repayment is over 5 years at k^o per annum.
3 million dollars was
allocated to Penair do Brasil for 80$ of the cost of seven aircraft and
spare parts manufactured in the United States. Advances mature in three to
five years at k^o.
A United States commercial hank participated in the
credit to the extent of 2% •
Chile upon the application of an American supplier of electrical equipment received a commitment of 800,000 dollars to cover the increased cost
of equipment covered by a 2 million dollar credit extended in July 19^5 •
The credit covered JOrfo of the contract price repayable over 7 years at k$
per annum.
A supplier of railroad equipment applied for a credit of 517 million
dollars to enable the Ferrocarril de Antioquia to purchase locomotives. This
credit was guaranteed by three Colombian commercial banks and the Banco de
la Republica and covered 75$ of the purchase price. Repayment is over 3-1/2
years at a rate of k<f0 per annum. The Bank also increased a l$kk
credit to
the National Railways by 3 million dollars, to finance railroad supplies
and equipment, to mature within eight years at a rate of k<f> per annum.
A highway credit extended in 19^2 to Ecuador in the amount of 1,2
million dollars was increased to 1.980 million dollars to assist in the
completion of a section of the Pan American Highway from Guamote to Tambo.
This increase brought to 5-7 million dollars the credit assistance by the
Bank for the Ecuadorian section of the Highway. Loans will mature over 12
years from date of payout at a rate of i$.
Aeronautical Radio de Mexico was given a commitment of 3 million dollars to finance up to 90$ of the cost of equipment, etc. required for the
103
construction and operation of an airway meteorological and communication
system in Mexico. Advances are repayable over 7 years at k<f0 per annum.
To date this credit has not been used.
An increase of 100,000 dollars in a line of credit to the Compania
Peruana del Santa of Peru was granted upon application of a United States
supplier of Electrical equipment. Repayment is over a ten year period at
a rate of kfy guaranteed by the Government of Peru.
A short term credit was extended in February 19*1-6 to TACA Airways
in the amount of 2 million dollars to finance 80$ of the purchase price of
air transportation equipment purchased in the United States for use in the
TACA system which served a number of Latin American Countries. The loan
granted by the Export-Import Bank made a loan possible to the company by
a United States commercial bank and was in anticipation of the flotation
of a sale of stock in the United States. The loan was repaid and ktf> interest was charged.
*• ^
Operations
July - December 19^6
Credits authorized by the Bank in the period July through December
19^6 amounted to only 53-7 million dollars but brought the total authorization approved since July 1, 19^5 to almost 2250 million dollars or only
550 million dollars under the 2800 million dollar increase in loaning
authority granted under the Act of 19^5• The large reconstruction credits
had been approved in previous periods and the only one authorized in the
cond Semi-Annual Report, loc. cit. p. 15f.
Report on Audit, etc., loc. cit. p. 15f.
104
last half of 19^6 was one for 3 million dollars to Ethiopia, which was
critically short of dollar exchange. The credit was granted to finance
the purchase in the United States of capital equipment needed in the rehabilitation of the country.
Included in the approved items to he purchased
were automobiles, trucks, parts, tires, and tools. Advances were to be repaid over six years with a rate of yf>.
There were no lend-lease termination credits approved.
These had been
approved in 19^5 and by the end of 19^+6 disbursements had been completed
on these credits.
Exporter and export trade development credits occupied the Bank in
this period. Upon the application of the Moore-McCormack Lines, it was
granted a credit of 193 > 000 dollars to finance kyjo of the cost of barges
for the shipping company use in Argentina. Disbursements under this credit
will mature over a ten year period, approximately one year from the date
of shipment of the barges. Interest is kfy and principal is guaranteed by
the parent company.
A similar credit in the amount of 106,000 dollars was granted to finance
the purchase of barges for the Brazilian subsidiary.
Also, upon the application of an American supplier of railroad equipment, a commitment of $3*02^,000 was approved to finance the sale of rolling
stock to the Paulista Railroad Company of Brazil. This credit was granted
so as to enable the United States Supplier to bid for the sale of flat cars.
The terms were on advance of 80$ of the C.I.F. invoice price of the cars,
without recourse to the exporter. The notes of the Railroad Company would
be accepted, providing the Brazilian exchange control authorities would
agree to the availability of exchange for principal and interest. Terms
repayment over six years and rate *i~l/2$ per annum.
105
A credit of $5,700,000 was approved to assist in financing the
sale to a Canadian Company of American machinery, equipment and services
in connection with the building of a staple fiber rayon mill and a spinning
mill.
Advances were to be on an 80$ of cost basis secured by a first lien
on the Canadian Companyfs assets, rate k^ per annum repayable over five
years.
The Chilean State Railroad under a guarantee by the Chilean Government
was given a credit of 5 million dollars to finance the purchase of railroad
equipment. Repayment over five years. Rate 3-l/2$.
The Chilean "Formento" also received an additional credit of $5,350,000
to finance the purchase in the United States of a variety of equipment.
$800,000 for a hydroelectric plant, $3,200,000 for agricultural equipment,
$800,000 for a copper wire plant, and $550,000 for a cement plant. Repayable over 10-1/2 years at 3-l/2$. The credit is fully guaranteed by the
Chilean Government. This "Formento" was first financed in 1939 and over the
intervening years total credits of 66 million dollars were approved, with
disbursements of 27 millions and repayments of 13 million dollars.
A k million dollar increase was approved in a credit to Hacional
Financiera S.A. of Mexico (semi-Governmental) to purchase United States
Railway equipment for use on the Mexican State owned railroads. Simultaneously a previously authorized credit of kO million dollars was reduced
to 36 million dollars. This latter credit was for the construction of
highways. Under the new credit, advances were to be repaid over a period
of ten years with a rate of kfy.
The credit will be guaranteed by the Mex-
ican Government.
The Bank earmarked 25 million for its participation in credits to
be extended on applications of United States suppliers to assist in exports
to Turkey. The first credit approved was for $4,905/000 covering the sale
of locomotives for the Turkish State Railroad.
This is an 80$ advance
after a cash down payment. Advances are to be repaid within the period
April 1, 19^7 - December 1, 1953 at an interest rate of 3-l/2ff>.
The
credits are guaranteed by the Turkish Government.
Under the Commodity Export phase of the Bank's operation, a credit of
2 million dollars was made available to the Prague Credit Bank for tobacco,
with the guarantee of the Czechoslovakian Government. Letters of credit
were opened by United States commercial banks under the protection of the
Export-Import Bank and negotiations under the credits will be repayable on
or before 26 months after the negotiations at 2-l/2$. per annum. The credit
expired June 15, 1 9 ^ 7 - 1 ^ " 1 ^
Operations
January - June 19^7
During the period January through June 19^-7 the Bank approved commitments of 225 million dollars over half of which were so-called emergency
reconstruction credits. These went to two countries.
Finland requested and was granted three credits, 5-5 million dollars,
1^.5 million dollars and 10 million dollars, to complete its emergency reconstruction financing.
It had estimated that with an additional 30 million
dollars the country could thereafter finance its imports with its own exports.
The 10 million dollar credit was for food and was a short term
credit repayable in November and December 19*4-7 at a rate of 2-l/2$. The
ll4 6
" Third Semi-Annual Report, loc. cit. p. 7f.
1^7
Report on Audit, etc., loc. cit., p.l.
10?
credit for 5*5 million was for coal and petroleum, repayable in two installments in 195^ at a rate of 3-l/2#-
The 1^.5 million dollar credit
was for machinery and metals and is repayable in 1955 through 1958 at a
rate of 3-l/2#.
The other country was Italy and the Bank agreed to consider credits
during I9V7 to an aggregate of 100 million dollars, with appropriate
maturities for the purpose of assisting specific industries in Italy rebuild their export trade. These credits were contingent upon the stability
of conditions in Italy and its ability to provide for other imports essential to its economy.
To this end in May and June 19^7 the Bank sent two
representatives to Italy to survey industrial conditions.
The earmarked funds for China of 500 million dollars were not used
and the reservation of these funds expired on June 30, 19^7Exporter and Export Trade Development credits continued to increase.
The credit for the purchase of barges for the Argentine subsidiary of
Moore-McCormack lines was increased by $17,000.
The Bolivian Development Corporation was granted a 3 million dollar
increase in an outstanding credit for the purchase of oil drilling, pipe
line and oil refining equipment. Repayment will be over a period of twelve
years.
Interest rate is **•$>.
United States suppliers applied for a credit of 6.65 million dollars
on behalf of the Sorocabana Railways of Brazil covering the necessary
equipment for the second section of the roads electrification program.
advance is guaranteed by the State of Sao Paula.
The
Interest k-l/&f> and it
will be repaid by 195^. The United States suppliers participated in this
financing at their own risk.
An American locomotive builder applied for financing of 1.5 million
108
dollars for the same railroad on the same guarantee to cover the purchase
of Diesel-electric locomotives. Rate l+-l/2$ and the loan will mature over
a five year period.
In this loan, the supplier also participated at his
own risk.
In these Brazilian credits was included a condition that "when found
to he in the national interest by the Brazilian exchange control authorities
the latter will accord specific registry to the prospective requirements of
exchange for their service and allow such requirements a priority corresponding to that status."
A credit of 2.06 million dollars to finance Diesel-electric locomotives
for the Central Railroad of Brazil, guaranteed by the Banco do Brasil, was
authorized for another
United States locomotive maker. Repayment is over
five years and the rate 3-l/2$-
In this credit, not only the supplier but
several American commercial banks participated at their own risk.
The National Alkali Corporation of Brazil, with the guarantee of the
Banco do Brasil, was granted a credit of 7°5 million dollars to finance
in the United States, the purchase of the necessary materials, etc. to construct a plant for the manufacture of caustic soda and soda ash. These
products were in short supply and the establishment of this industry would
conserve Brazil's foreign exchange for other purposes. The advances will
be repayable over the years 19^9 - 1959 at a rate of 3-l/2$.
The Bank also made a commitment to extend an additional credit of
7-5 million dollars to the Companhia Vale do Rio Doce guaranteed by the
Brazilian Government for the financing of purchases in the United States
necessary for the reconstruction
of the railroad and mine development
109
program started under previous credits. A condition in the credit was
that the Brazilian Government would furnish the company the equivalent of
12 million dollars in local funds. This project will, upon completion,
provide facilities for the export of iron ore which will be of benefit to
the foreign exchange position of Brazil.
The Bank earmarked 50 million dollars for specific projects in Mexico
which would improve its balance of payment position and representatives
were sent to Mexico in June 19^7 to make a survey to that end.
The Bank authorized a credit of 600,000 dollars to the S & S Construction Company of Venezuela to finance the purchase of American construction equipment and services required to construct a breakwater in the
harbor of La Guaira. Repayment was monthly over one year at a rate of 1$.
A revolving credit of 750,000 dollars was authorized to Hypotheken
und Credit Institute of Vienna, Austria, upon the joint application of an
American commercial bank and an exporter-importer, to help in the financing
of exports and imports to and from Austria, The sponsors agreed to additional credits at their own risk. Advances were repayable in one year and
the rate k^.
A number of individual credits aggregating 5 million dollars were
approved for Finland.
These credits covered tires, tubes and trucks in
which credits, part was carried by the exporters at their own risk. Also,
included, were credits covering the purchase of machinery in the United
States, which would be used to modernize the production facilities of
Finnish plants engaged in exporting,
in all the credits repayment terms
run up to five years and carry a rate of kfy.
The Lockheed Aircraft Corporation applied for a credit of approximately
3.2 million dollars to assist in financing the sale of 9 Constellation
110
Transport Aircraft to the KLM (Royal Dutch Airlines).
The obligations were
guaranteed by the Kingdom of the Netherlands. The obligations mature over
four years and bear 3$ interest. Additional credits were extended by a
United States commercial bank and Lockheed.
The planes will earn dollars
and thus assist the foreign exchange position of the Netherlands.
Seven allocations were approved from the Turkish credit of 25 million
dollars. These aggregated 9-680 million dollars. The material covered
included steam locomotives for the State Railroad, two small power plants,
equipment for coal and lignite mines, power equipment for a paper mill at
Ismit, hydroelectrical equipment to replace coal as a source of power for
the Malatya Textile Mills and equipment for chrome and copper ore concentration.
A tobacco credit of 5 million dollars was granted Italy and cotton
credits were given Finland in the amount of 2 million dollars and Hungary
in the amount of 7 million dollars.
^
y
Operations
July - December 19^7
Over 388 million dollars of new commitments were approved during this
period, all of which were classified as general export trade credits.
The Republic of Austria was the recipient of a credit of $500,000
to be used in the repair, preparation and shipment of products procured
by Austria from the War Assets Administration.
This commitment was to
expire on December 31* 19^-8. Advances are repayable over a period of
Idem, p. 6
150
Report on Audit, etc., loc.cit. p 0 Iff.
Ill
five years commencing two years after the date of advance with interest
at 3-l/2$. Also authorized for Austria were credits aggregating $1,305*000
in favor of the Laenderbank Wien AG and the Credit Anstalt - Bankverein
guaranteed by the Republic of Austria. These credits covered the purchase
of both American capital goods and raw materials for use by ten Austrian
companies or groups of companies. Austria and the banks agreed to require
the use of the materials and equipment and sales of the manufactured
products be directed to the end that they will assure exports, to the
extent necessary to obtain the necessary dollars to repay the Export-Import
Bank obligations and to provide for the purchase of replacement materials
and equipment.
Covered were alloy steel, electrical machinery and apparatus,
non-ferrous metals, chemicals and equipment. Terms for the capital equipment were repayment in sixteen installments over 39 months at 3 l/2$ per
annum and on the raw materials 12 quarterly installments beginning 12
months from the date of advance at 3$In November 19^7> Belgium was granted a short term credit of 50 million
dollars to finance specific raw materials and equipment in the United States.
Repayment is over five years.
The largest credit of the period was approved for Canada, in the sum
of 300 million dollars, to enable the continuance of purchases of raw materials and essential equipment in the United States. Advances under the
agreement are to be repaid at the end of the third, fourth and fifth year
from the date of advance. Rate 2-l/2$ per annum plus a commitment charge
of if 2$ per annum on all unused portions of the credit. The credit expired
on December 31, 19^8.
Upon the application of an American firm, a credit of $l,Vj8,000 was
approved, to assist in financing the sale to the Republic of Columbia of a
112
seagoing hopper dredge to be built in the United States. The Bank's advance covered 56$ °f the cost of the dredge. The dredge was purchased for
the purpose of clearing the channel at Barranquilla and to thereby expedite
the handling of incoming and outgoing cargo. Repayable over a period ending December 1, 1953 at k<fo per annum.
A credit of $2,720,000 was extended the Republic of Ecuador to aid in
financing the completion of the Quevedo-Manta highway.
Simultaneously,
an unused credit of One million dollars provided in July 19^5 was cancelled.
Ecuador agreed to provide $7^0,000 from other sources to help in building
the road.
Terms were, repayment over 15 years with quarterly installments
at a rate of 3-l/2$ P®*" annum.
A credit of 5 million dollars was authorized to the Fertilizer and
Chemical Industries of Egypt for the purchase of United States goods and
services required for the construction of a nitrogenous fertilizer plant
near Suez. Egypt, which has been a major consumer of commercial fertilizers
for many years, encountered severe handicaps during the war and post war
period in agricultural production, because of the lack of nitrogenous fertilizers. The anticipated production of the new plant will equal 38$ of
Egypt's pre-war consumption and 25$ of its current requirements. Private
sources in Egypt will supply an additional 1^ million dollars which, however, will be spent in Egypt and the United Kingdom.
Repayment is over a
period of six years beginning July 1, 1950 at a rate of 3-l/2# per annum.
The availability of dollars to service the loan is guaranteed by the
Egyptian Government.
During this period the Bank entered into twenty separate credit agreements with the Instituto Mobiliare Italiano which provided for the allocation of 97.3 million dollars out of the 100 million dollars ear-marked for
113
Italy in early 19^7- The credits are guaranteed by the Republic of Italy.
Each agreement provided credit for a designated firm or group of firms which
are important to the export trade of Italy. Terms of repayment vary, but
run over four to ten years from March 15, 1950 with a rate on all loans at
3-l/2$.
In settling the terms consideration was given to the overall re-
quirements of the Italian economy. It was agreed that the products of
these companies which received the funds were to be exported in quantities
sufficient to repay the dollars required.
Each of the 20 project agreements
provided for the purchase of specific raw materials and equipment in stipulated amounts, based upon estimated requirements sufficient materially to
assist and speed up the Italian - import - production - export cycle. All
materials, except petroleum, were required to be purchased in the United
States and that could be obtained "off shore" from American companies. Industries assisted included automobiles, rubber, chemicals, shipyards, iron
and steel works, electromechanical and metallurgical. The number of companies assisted was at least seventy-five.
An additional credit of $k,625,000 was authorized to the Instituto
Mobiliare Italiano guaranteed by the Republic of Italy for the purpose of
assisting the Italian handicraft industry which is composed of about
1,500,000 workers. Handicraft exports are an important source of dollar
exchange to Italy. Repayment is over five years with interest at 3-l/2$>
J
per annum.151
Six allocations were approved under the 50 million dollar Mexican
credit authorized on March 15, 19^7- Each allocation was in the form of
a commitment in favor of the Nacional Financiera S.A., a financial agency
151Foreign Commerce Weekly (December 27, 19*1-8) Vol. XXXIII, #13, p.8f
Ill*
of the Mexican Government which guarantees repayment. Up to 3-5 million
dollars was allocated to finance the purchase in the United States of the
necessary materials, equipment and services to complete a new 5^*000
kilowatt hydroelectric station at Guadalajara and to service some 70
communities in Central Mexico. Repayment is over ten years with interest
at 3~l/2$ per annum. Up to 5 million dollars, to finance exports of United
States agricultural equipment for sale to farmers, in the central zones of
Mexico, where there had been an extensive loss of draft animals. The Bank's
advances financed 6 ^ of the sales price. Repayment is over five years
with interest at 3-l/2$ per annum.
Up to One million dollars for the purchase in the United States of
materials, equipment and services required for the establishment of a number
of meat-canning plants in northern Mexico. The United States Department of
Agriculture had offered to purchase substantial quantities of canned meat
from cattle growers in that area. Additional facilities were required. The
credit was restricted to those canneries with which the Commodity Credit
Corporation contracted.
Repayment was over one year at 2-l/2$ per annum.
Up to 7 million dollars, to finance the purchase in the United States
of materials and equipment for the Mexican National Railways. Terms of
repayment, over a ten year period at 3-l/2$ per annum.
Up to 5 million dollars, to finance one half of the cost of equipment
purchased in the United States for two sugar mills. Domestic consumption
had been increasing and the mills will expand production to keep pace. Also
repayable over ten years at 3-l/2$ per annum.
Up to 12 million dollars, to assist in financing completion of the
Nogales-Guardalajara highway.
The credit was limited to 25$ of the total
amount expended by the Mexican Government.
Contracts for the construction
115
of the highway was competitive and open to both Mexican and United States
coiitractors. The purpose of the highway was to provide access to the
markets of central Mexico and to open up the new and rapidly developing
irrigated agricultural region of Mexico's west coast. Repayment is over
ten years at 3-l/2$ Ver
annum.
In May 19^6, the Bank authorized a credit of 200 million dollars to
the Netherlands, which was repayable in installments due one and two years
after the date of advance with interest at 2-l/2$.
Commercial banks par-
ticipated in the credit without recourse or guarantee of the Bank to the
extent of 100 million dollars.
In August 19^7 > the Netherlands applied for an extension of its obligations to the Bank, due in 19^-8 and 19^9• The extension was granted and
repayment was permitted in 1-950> 1951 and 1952. The extension was granted
on two conditions:
1.
Interest was increased to yjo from 2-l/2$.
2.
The Netherlands agreed to liquidate dollar assets
held by its nationals in amounts sufficient to
pay the obligations, held by commercial banks
and the obligation, as extended, to be given
Export-Import Bank and, further, agreed that if
voluntary methods of liquidation should fail to
produce sufficient proceeds for the purpose, the
Netherlands Government will take steps to vest
the assets in the Netherlands and to liquidate
sufficient thereof to pay the loan.
Two allocations were made under the Turkish credit of 25 million
dollars authorized in July 19^-6. One allocation was for $117,000, to
finance the purchase in the United States of a second steam boiler and
power plant equipment for a paper mill at Izmet. The other was in the
amount of 3 million dollars, to finance the sale of cigarette-making and
packing machines to the Turkish State Monopolies. Repayment in each case
116
is over five years and interest at 3-l/2$ per annum.
A new credit of 8 million dollars was authorized for the Republic
of Turkey to finance the cost of conversion, in United States shipyards,
of six vessels purchased by Turkey from the United States Maritime Commission. The earnings of these vessels will help improve the Turkish
balance of international payments. Repayment will be over eight years
at 3-1/256 per annum.
An unusual credit was established in the amount of 2.5 million dollars
in favor of the U.S.. Scientific Export Association, whose members are manufacturers and exporters of scientific laboratory equipment. The credit
was established to assist the manufacturers, acting through the association,
in extending credits to foreign purchasers. The agreement limits the
amounts and terms and countries to which the credits could be granted. A
reserve fund was to be established to serve as collateral for the Bank's
credit and protect the manufacturers against individual losses. Members
could not withdraw funds from the reserve account until it exceeded onethird of the credit outstanding or $500,000, whichever was greater.
Two allocations were made under the 100 million dollar cotton credit
authorized in October 19^5-
One of 5 million dollars to Finland and one
of 19 million dollars in favor of the American Cotton Supply Corporation
to finance the shipment of cotton (and waste) into the United States/
United Kingdom zones of Germany. Payment was guaranteed by J.E.I.A. (United
States/United Kingdom) a bizonal agency of the United States/United
Kingdom Military Government.1^2-153
X 2
5 Fifth Semi-Annual Report, loc.cit. p. ltff.
153
Report on Audit 191*8, loc.cit. p. 6f.
117
Operations
January - June 19^8
Credits approved during the period totalled 77 million dollars of
which over 30 million dollars were so-called advance commitments, issued
to permit United States manufacturers to hid on foreign business and 30
million dollars were for commodity credits.
The Baldwin Locomotive Works applied for an advance commitment of
$8,330,000 to assist in financing the sale of 130 steam locomotives to
the Departments Nacional de Estrada de Ferro of Brazil• This was to permit
American manufacturers to put in bids and was available to any qualified
United States manufacturer of locomotives, who wanted to submit a bid*
The
locomotives were to be used on the meter guage railways of the Brazilian
Government, whose lines were in urgent need of rehabilitation, due to the
heavy traffic of the war years. Terms of the commitment: Repayment over
five years at a rate of not less than k°/o with the guarantee of the Brazilian
Government or the Banco do Brasil and participation by the manufacturer at
his own risk.
This credit was not used.
An allocation of $1,566,000 was made to the Yungli Chemical Industries
of China under the terms of a credit to that firm approved in March 19^5*
This allocation was made to finance the purchase in the United States of
the equipment, etc. required to rehabilitate and expand the firm's ammonium
sulphate plant near Nanking, China. Repayment is over seven years at a rate
of k% per annum and carries the guarantee of the Bank of China and the
Republic of China.
Immediately after civil disturbance in Columbia of April 9th to 12th,
the Columbian Government was granted a credit of 10 million dollars, to
118
purchase in the United States the necessary materials, equipment and services required for reconstruction and repair. During the riots of that
period many of the government and private buildings were destroyed in
Bogota and other major cities of Columbia. Repayment terms run over ten
years at a rate of 3-l/2$.
An existing credit to the Fertilizer and Chemical Industries of Egypt
was increased by 1.5 million dollars. The original credit was granted to
build a fertilizer plant near Suez and under its terms certain equipment
was to be purchased with non-dollar funds. It was found, however, that
the United States was the only country that could deliver the equipment
within a reasonable period.
Terms on the increase were the same as on
15U
the original.
At the request of the General Motors Corporation a credit of $675*000
was authorized to assist in the sale of trucks and other automotive equipment to the Republic of Finland.
Advances are repayable over the period
August 1, 19^9 to May 1, 1951 with interest at 3-l/2#.
General Motors
Corporation extended additional credits at its own risk.
On a similar credit of 5 million dollars authorized in 19^7 > "the
Bank, on the application of the Ford Motor Company, allocated $1,950,000
to finance the sale by Ford to Finland of tractors, plows, mowers and
agricultural equipment spare parts. Also, under the same credit, was
allocated $716,000 to finance the sale of tires, tubes and accessories.
These credits were repayable over three years at 3-l/2$. All of the exporters involved carried part of the contract price on their own risk.
An allocation of 6 million dollars was made under the credit of 50
-^American Banker, (August 2k, 19^8)
119
million dollars authorized to Mexico on April 30> 19^7> to finance the
purchase of United States materials, etc. required for the construction
of a nitrogenous fertilizer plant near Mexico City. The credit was to
Nacional Financiera S.A., who advanced to Guanosy Fertilzantes de Mexico
S.A., a Government owned corporation which operates fertilizer facilities
in Mexico. It utilized natural gas piped in from the Poza Rica field on
the Gulf Coast. It was estimated by the United States firm, that was
handling the construction of the plant, that it will be an efficient and
comparatively low cost operation. The Government of Mexico guarantees
the credit which is repayable over ten years at a rate of 3-l/2$ per annum.
At the request of the International Standard Electric Corporation, the
Bank authorized a credit of $250,000 in favor of the Standard Telefon og
Kabelfabrik of Oslo, Norway, one of its subsidiaries, to assist in financing
the sale of United States equipment for a cable manufacturing plant in Oslo.
The credit was guaranteed by a Norwegian commercial bank, the Christiania
Bank og Kreditkasse. Repayment is over three years at a rate of 3-l/2$ per
annum.
The Bank of Norway guarantees the availability of the dollar ex-
change for repayment. Additional credit was extended by the International
Standard at its own risk.
Upon the application of the Douglas Aircraft Corporation, the Bank
authorized a credit of $2,155/000 to assist in financing the sale of six
DC-6 transport planes to two Swedish air lines. The loan is guaranteed
by the Sveriges Riksbank and is repayable over four years at a rate of
3-l/2# per annum.
The Douglas Aircraft extended additional credit at its
own risk.
The Bank allocated, out of a previous authorization to Turkey,
$1,130,000 to finance the shipment to Turkey of 88 locomotives purchased
120
in the United States and partially financed under the same credit. The
obligation of the Turkish State Railways are guaranteed by the Turkish
Government maturing over five years at a rate of 3-l/2$ per annum.
An additional credit of $500*000 was granted the S & S Construction
Company of Venezuela which was constructing a breakwater at LaGuaira. This
new advance was repayable over 1*1 months at kff>. Simultaneously with the
new credit authorization, the obligations under the original credit were
extended one year.
A credit of 25 million dollars was authorized for the construction of
hotels in Latin America in 19*4*5 and, at the request of the Tamanaco Hotel
Company of Venezuela through its agent, the Intercontinental Hotels Corporation of New York, the Bank allocated $2,337*000 for the purchase, in
the United States, of equipment for a hotel in Caracas, Venezuela. The
total cost of the hotel is estimated at better than 5-6 million dollars
and the other funds were supplied by the hotel company itself. Repayment
is over twenty years, interest kfy and the loan is guaranteed by the Government of Venezuela.
An advance commitment was authorized on the request of the Lockheed
Aircraft Corporation in the amount of not over 22.5 million dollars to
assist in financing the prospective sale of twenty Constellation Aircraft
and parts and engines to the British Overseas Airways. The terms of the
commitment required that the manufacturers and commercial banks extend
additional credit on their own risk and that the obligation of B0AC be
guaranteed unconditionally by the United Kingdom and be repaid within
five years.
(This commitment expired August 15, 19^8 and was not used.)
Upon the application of the Department of the Army, acting on behalf
of the Supreme Commander of the Allied Powers in Japan, the Bank authorized
121
a credit of not more than 29 million dollars in favor of the Japan ExportImport Revolving Fund to finance the purchase in the United States of U.S.
cotton, cotton linters and waste. The Bank in this credit participated
with a group of commercial banks in extending a revolving line of credit
totalling 60 million dollars. Advances mature within 30 days to 10 months.
Rates, vary between 2-3 A $ to 3-l/2^.155-156
Operations
July - December 19^8
In the six month period ending December 31> 19^8, the Bank approved
new credits, totalling 6l.2 million dollars. Most of the credits were for
projects in Latin America. Because of the large operation of the Economic
Cooperation Administration, the Bank refrained from considering applications
from E.R.P. countries.
Of the 6l.2 million dollars of new credits, 33 million dollars was for
the development of industry and agriculture, 10 million dollars was for the
expansion of export industries of the borrowing countries, 15 million dollars
provided for essential facilities and services and 3 million dollars were
for the increases in outstanding credits.
The Bolivian "Fomento" was granted a credit of $320,000 for the purpose of financing highway construction repayable over twelve years at a rate
o f k*f>.
Credits aggregating 11.9 million dollars were authorized for Brazil.
Three credits, totalling $3,655>000, were approved for three transport com-
1
55giXth Semi-Annual Report, etc, loc.cit. p.
^^Report on Audit, etc., loc.cit. p. 9f-
kf.
122
panies to expand transportation facilities in the industrial and densely
populated areas of Brazil. These credits which were on a participation
basis with the Twin Coach Company, the manufacturer, covered 200 buses.
Rate ^-l/2$ repayable up to three years.
A loan, of 8.3 million dollars, was authorized for 12 privately operated Brazilian companies, all subsidiaries of American and Foreign Power
Company. These subsidiaries serve 333 communities in ten Brazilian states
with a population of about 6 million. Twenty-five million dollars have
been invested by these companies over the past few years in expanding their
facilities.
The Bank!s credit was granted to aid the subsidiaries to ac-
quire United States equipment to further expand the generators and distribution of electric power. Repayable over ten years from March 1, 1950 at a
rate of
k-l/Zft.1^
A credit of 5 million dollars was approved in favor of the Steep Rock
Iron Mines of Ontario, Canada, a high grade ore mine located north of the
Mesabi range in Minnesota.
The Reconstruction Finance Corporation had, in
19*1-2, assisted the mines in order to meet the war demands of the United
States steel mills for iron ore. The demand for ore continued high and
the Bank acted in collaboration with the Reconstruction Finance Corporation
and, on co$dition that private capital be injected into the Company. This
loan which was used to buy United States equipment enabled the mines to
export over 3 million tons of ore annually to the United States. The loan
is repayable in installments by i960 with interest at
k-l/2cjo.^&
^Foreign Commerce Weekly (May 23, 19^9), Vol. XXXV, #8, p. k6. also seeWall Street Journal (December 2k, 191*8).
^ Foreign Commerce Weekly (January 10, 191*9), Vol. XXXIV. #2 p. 31, also
see New York World Telegram (December 3> 19^8).
123
Credits of $21,575 were approved for projects in Chile. An authorization of 1.2 million dollars was allocated to Fabrica Victoria de Puento
Alto g.A. to enable it to purchase in the United States the necessaryequipment to complete a rayon and staple fibre factory. The credit is
repayable over six and one-half years with an interest rate of lj~l/2#.^59
A credit of $375,000 was granted a Chilean metal working plant, Manufactura de Metals S.A., to product tools, machinery, and spare parts which
had previously been imported. Repayment is over 3-l/2 years from January
k, 19h9 with interest at
k-l/2$.
The Corporacion de Fomento of Chile was granted a credit of 20 million
dollars to complete the construction of an integrated steel plant in Chile
with United States equipment and services. This brought the total investment in the plant to 83 million dollars of which the Bank has financed kQ
million dollars. When the plant goes into production in 1950 it is expected
to reduce Chilean imports by as much as 1 3 A million dollars a year. This
will enable Chile to broaden its purchases in the United States. Repayment
is over twenty years, beginning June 15, 1951, with interest at h<$ per
annum.
x
A loan of 10 million dollars was made to the Bank of Finland, to enable
Finnish woodworking industries to procure United States machinery and raw
materials with which to expand their exports of scarce paper, pulp and wood
products especially to the Western Hemisphere and Western Europe. The aid
from the Bank was expected to increase Finnish exports to these areas by
New York Herald Tribune (February 7, 19^9)> also see - Wall Street
Journal, (January 3, 19^9 and February 8, 19^9)•
121*
50 million dollars in 19*4-9 over the 328 million dollars exported in I9U8.
The loan is repayable over six years, beginning December 31, 1952 at a
rate of 3-i/2$-162
A credit of k million dollars was extended to Haiti to help carry out
a program of agricultural development. The credit was to finance the purchase of United States equipment and services to increase the Haitian
agricultural production and to raise the level of living of a portion of
Haitifs preponderantly rural population. The loan is repayable over fifteen
years from 1952 at a rate of 4$. 3
A credit of 1.5 million dollars was opened in favor of Nacional
Financiera S.A. — La Consolidada S.A., to supplement the financing arranged
by the United States owners and operators of this steel mill to increase the
Mexican output of essential steel products. The rate on the loan is *i--l/2$
and is repayable over five and one-half years guaranteed by the Mexican
Government.
A credit of 2 million dollars was granted the Inter-American Hotel Corporation to assist in the construction of a hotel in Panama City, Panama.
The loan, guaranteed by the Republic of Panama, is repayable over 23 years
at a rate of k%.
A commitment of $1^2,000 was authorized for Industria Papelera Urugaya
S.A. of Uruguay, on a participation basis with the United States equipment
manufacturer, to increase the paper manufacturing capacity of its plant
by 36OO tons a year.
Hew York World Telegram, (November k, 19*4-8) - also see Wall Street Journal,
(November 5, 19^8).
The New York Times (December 30* 19^8) - also see American Banker
(January 8, 19^9)
125
A credit of $1,950*000 vas granted La Electricidad de Caracas S.A.
of Venezuela, a power company serving the Federal District which had been
suffering a shortage of power. The company initiated a long term project
and the Bank financed the purchase of American generating equipment, needed
to ease the shortage pending the completion of the long term project. The
loan which is guaranteed by the Venezuelan "Fomento" is repayable over
eight years; interest rate is k<f0.
Operations
January - June 19^-9
During the six months ending June 30, 19^9> the Bank authorized new
credits, aggregating 112,6 million dollars and, in addition, allocations in
the amount of 13.1 million dollars were made under lines of credit established prior to January 1, 19^9-
^
Early in 19^9 "the Bank earmarked 100 million dollars for the establishment of credits to assist the new Government of Israel 1 " i n financing projects forming a portion of a comprehensive program for balanced economic
development, with the objective of creating a self-sustaining economy. '
The program will require substantial funds, and the major part of the investment is expected to come from local savings, private foreign contribu-
I5II
Seventh Semi-Annual Report, etc., loc.cit. p. Iff.
165
Eighth Semi-Annual Report, etc., loc. cit. p. 3^f*
166
The American Banker (October 13, 19^8, October 25, 191*8, September 13,
The New York Times (January 10, 191*9) Vol. XCVIII
The Hew York Herald Tribune (January 20, 19^9)*
^Foreign Commerce Weekly, (February Ik,
19l*9), Vol. XXXIV #7.
126
tions, particularly from the Jewry of the United States and private foreign capital. Credits mature in fifteen years and bear interest at 3-l/2$
per annum.
Of the funds earmarked, the first approved credit was for 35 million
dollars, to finance, in part, an agricultural program for the establishment
and equipment of 8,000 new farms, the rehabilitation of some 16,000 old
farms and 6,000 citrus groves, and for irrigation works needed to furnish
water to ^2,000 acres of new farm land. The Bankfs advance represented
about one-third of the total cost of the projects and was used in the
United States to purchase the necessary equipment, supplies and services.
Israel is dependent, in a substantial degree, on overseas sources for its
food supplies, and citrus fruit looms large in its exports.
168
A second credit of 6 million dollars was allocated, under the earmarked
funds, for motor transports to be purchased in the United States. There
are few railroads in Israel, and the credit was expected to increase by
20$ the facilities so essential for the movement of passengers and goods.
Another credit, of 5 million dollars, was allocated for the purchase
of United States structural steel and other construction supplies, to be
used in housing developments of 15,000 units, to relieve the crowded conditions in Haifa and Tel Aviv.
l69
A fourth credit, of 5 million dollars, was to assist in purchasing
part of the American equipment required for a telecommunications program.
The advances covered kO^o of the foreign exchange requirements of the program
and 18$ of the cost. The remainder was financed by foreign capital and
_g
The American Banker, (December 17, 19^8)
The Wall Street Journal (March 19, 19^9) Vol. CXXXIII #65
127
local resources.
In April, a credit of k million dollars was approved for the Liberia
Mining Company, Ltd. of Liberia, for the development of a deposit of over
20 million tons of high grade iron ore in the Bomi Hills located about
^5 miles from the capital and port of Monrovia. Financed was the mine,
a railroad from the mine to the port and ore handling facilities at the
port.
The credit bears interest of k-$/kff> and is repayable over ten
years from December 31> 1951- The total cost of the project will be 8
million dollars, of which 1 million dollars of private United States capital was invested prior to the loan, the remaining 3 million dollars was
invested by the Republic Steel Company, who has executed a long term iron
ore purchase agreement for a substantial portion of the total annual output, which is expected to reach 1 million tons a year by 1951* The project
will not only earn more than necessary to cover repayment of the Bank loans
but will be a source of dollars to Liberia, as well as yielding commensurate
profits on the capital invested.
A revolving credit of 3 million dollars was authorized in favor of
Amertool Services, Inc. This organization is an export financing company
established by a group of eleven non-competing American manufacturers of
machine tools. The credit approved provided for financing individual
sales on short terms using a revolving fund. The exporters are required
to maintain a cash reserve fund equal to 33-l/3$ of the total credits at
any time outstanding.
The Bank has recourse against the reserve fund to
the full extent of any default. Also in the terms is a limitation of
^^oreign Commerce Weekly, (July h, 19^9) Vol. XXXVI #1 p. Ik - also see
The American Banker (May 4, 19^9)
128
$100,000 to any one customer with a cash down payment of 25$ required with
the order, the remainder repayable over a period of not over 18 months.
A previously authorized credit to the Republic of Columbia, covering
a seagoing hopper dredge, was increased by $500,000 to assure completion.
By mutual consent, an open credit of 10 million dollars to Columbia was
reduced to 9»5 million dollars.
A credit to the Republic of Ecuador granted to assist in constructing
the Guamote-Tambo highway was increased by $331>000 in order to complete
the last link in the highway.
Ecuador agreed to use $250,000 of its own
funds for the same purpose.
The Chilean "Fomento" was given an additional credit of 1.35 million
dollars to permit the completion of certain generating and transmission
projects.
An allocation of 3 million dollars was made to the Hotel San Diego
S.A. in Bogota, Columbia. The hotel will cost approximately $6,^58,000
and local funds of $3,^00,000 were raised to defray the remainder of the
cost. This allocation came from the 25 million dollars earmarked for
financing the construction and equipping of hotels in Central and South
America for the Intercontinental Hotels Corporation, a subsidiary of Pan
American Airways. 7 1
Under a commitment of 50 million dollars made to Mexico in April
I9V79 &n allotment of 1.5 million dollars was made to the Nacional Financiera S.A. to procure the necessary equipment, etc. for the water supply
and distribution systems of Tanjpico and Ciudad, Madero,
^Foreign Commerce Weekly, (July 11, 191*9) Vol. XXXVI, #2, p. 11 - also
see New York Sun, (May 13, 19^9)•
129
Four separate allocations, totalling 8.5 million dollars, were made
under the credit to Turkey approved in July 19^6. These covered purchases
in the United States of mining machinery for lignite, rails, structural
steel, ties for the railways, machine tools and a floating drydock and
crane for Turkish seaways and harbors.
Operations
July - December 19*J-9
During this period the Bank approved new credits of 128.k million
dollars and allocated kl.J
million dollars out of previously established
lines of credit. These credits were for the most part so-called "economic
development" credits, and were granted to assist in the financing of purchases in the United States of equipment, material and services required
in the construction of new productive facilities or the improvement of
existing ones.
New credits approved included:
172
One to the Royal Government of Afghanistan in the sum of 21
million dollars. The purpose of the credit was to assist in financing
the construction of the Kajakai Dam and the Boghra Canal in the Arghandab
Yalley.
While the funds will be spent, in large measure in the United
States, permission was granted to purchase fuel oils and lubricants elsewhere .
This country which, until after the war, was completely undeveloped,
has no railroad and only recently built an all weather road to connect with
the rail head near its Pakistan border. The irrigation works, which will
llinth Semi-Annual Report, etc., loc.cit. p* 8f.
130
be financed by this credit, will give an adequate water supply to 280,000
acres, now partly cultivated, and will allow the cultivation of 159*000
acres additionally.
Not only will this permit the improvement of the
countryfs food supply, but also, add to the exportable surpluses of a
number of crops which go to India and Pakistan. Advances under the credit
will be repayable over 15 years at the rate 3-l/2$ per annum.
A credit line of l6 million dollars was granted to Bolivia, to finance
not more than two-thirds of the cost of completing the Cochabamba-Santa Cruz
highway.
This highway construction was begun in 19^2, at which time the
Bank allocated 10 million dollars. The road is a major engineering and
construction job, crossing 300 miles of unsurveyed territory and several
main ranges of the Andes. The remaining work will be done by United States
engineering and construction firms.
Completion of the highway will be the first land transportation link
between the centers of population in the highlands and the sparsely developed
areas of Eastern Bolivia. At present, the majority of Boliviafs food supply
is imported and the road will make possible the agricultural development of
the Santa Cruz area as a source of food products. This development should
improve Boliviafs balance of international payment position and relieve the
countryfs present dependence on the production and export of tin. Terms
of repayment are 17 years from March 31* 195^ at a rate of 3-l/2$ per annum.
In October 19^9 a credit of 3-8 million dollars was approved to assist
in the sale by Higgins Inc. to Empreza Internacional de Transportes Ltda.,
Sao Paula, Brazil, of four converted LSTS, four passenger ferries and four
car ferries. Three of the LSTS will be used in coastal shipping and will
carry coal mined in the State of Santa Catarina to Santos & Rio de Janeiro.
The fourth will carry iron and steel products and ore to Argentina and Uruguay.
131
The ferries will be used to carry commuters between Rio de Janeiro and
its suburb, Niteroi, across the bay. Advances will be repaid over 9 years
at a rate of *l--l/2$ per annum.
The Bank granted another credit of 25 million dollars to the Chilean
Government to assist in financing the 19^9 requirements of United States
materials, etc. for the Chilean economic development program.
Over the
last ten years more than 125 million dollars of credits have been approved
for this program of which 75 million dollars has been utilized and 30 million dollars has been repaid.
The final objective of the Chilean program
is the diversification of its economy and a more productive utilization of
its resources. In addition to the Export-Import Bank credits both the
Chilean Government and private investors have invested heavily. The
program, to date, has accomplished large increases in electric power generating capacity and improvement in the rail system. An integrated steel
mill is nearing completion and the expansion of textile, metal working and
agricultural production is under way. Until the inauguration of this program, Chile was almost totally dependent upon the world market demand for
its two commodities, copper and nitrates, and as these fluctuated so rose
and fell the Chilean economy, and as a result, in the world depression of
the early thirties, the country was in a very difficult position. With the
completion of the program, its situation will be in a better balance with
domestic resources contributing a large share of the required food and manufactures .
The 25 million dollar credit was approved to meet the conditions resulting from the drop in the price of copper in the mid-year of 19^9* with
its accompanying drop in dollar exchange. The credit was designed to supplement the dollar position of Chile and to permit the continuation of produc-
132
tion and to prevent mass unemployment.
The Chilean Government took immediate steps to stabilize its economy.
The peso was devalued and a single rate was established replacing a multiple system.
Advances under the credit are to be repaid over the period
April 30, 1952 through October 31, 19^9 at a rate of S-l/^o.1^3
A credit of $2,750,000 was also opened in favor of the Chilean nFomentoM
to assist in financing the exploitation of the Romeral iron ore deposit,
owned by the Bethlehem Chile Iron Mining Company, a subsidiary of the Bethlehem Steel Company.
The project provided for the necessary installations to
permit the production and shipment of one million tons of ore per year. The
ore has a 60$ iron content. This is a joint venture of the Bethlehem Company
and the Compania de Acero del Pacifico; the latter company is constructing
an integrated steel mill which is partly financed by the Export-Import Bank.
The total cost is expected to be near $8,250,000 exclusive of the ore deposit.
All funds advanced by the Bank will be spent in the United States. Approximately one-third of the mine production will be used by the mill, the rest
will be exported to the United States by Bethlehem Steel. The advances will
be repaid over 12 years, from January 31 > 1953y interest at a rate of k$> per
annum.
Ecuador received a credit of 7 million dollars to assist in financing
in the United States, equipment, etc. necessary for reconstruction in the
area devastated by the earthquake of August 19^9- Damage was sustained in
a 700 square mile area by railroads, roads, factories, power plants, etc.
Of the credit, 1.5 million dollars is earmarked for road repair and 1.5
million dollars for the purchase of railroad equipment. Repayment over
1 7 3 F o r e i g n commerce Weekly, (November 21, 191*9) Vol. XXXVII #8, p, 21
133
20 years with interest at 3-l/2$ per annum.
A credit of $250,000 was established for the Dahican American Lumber
Company to assist in the installation of a saw mill and other equipment
required for the rehabilitation of a lumber concession, owned by Dahican on
the Island of Luzon In the Philippines.
This concession was, before the war,
the source of substantial quantities of Philippine mahogany0
The project
will, cost about $750,000 of which $400,000 was provided by equity financing,
$250,000 by the Export-Import Bank and $100,000 by the Peoples Bank and
Trust Company of Manila, P.I.
It is expected 6of0 of the lumber produced
will be exported to the United States and the remainder marketed in the
Philippines and Far East. Advances over 2-1/2 years from October 1, 1950
at a rate of Jjo.
In November 19^9 & credit of k million dollars was granted to the Al
Hasa Cement Company of Saudi Arabia, to assist in financing the purchase in
the United States, of the necessary equipment to erect a 700,000 barrel a
year cement plant near Dhahran, Saudi Arabia. Total cost of the plant is
estimated at 8 million dollars, of which half will be supplied by the Al
Haza Company, to be organized with a k million dollar capital^ which will be
privately United States-Arabian owned.
It is estimated that cement can be
produced under the delivered price for imported material, and the entire
output can be taken by Saudi Arabia and surrounding countries.
A credit of $5*158,000 was established In favor of the Compania Anonima
La Electricidad de Caracas (Venezuela) to finance 50$ of the cost of electric
generating and distributing equipment, to be purchased from the International
General Electric Company.
This public utility company has, for 50 years,
supplied electric power to Caracas and the surrounding area. In recent
years Caracas has grown both in population and industrial activity and, at
13^
times, power had to be rationed.
The construction financed by this credit
will increase the power output from 65,000 KWA to 90,000 KWA. The company
is increasing its capital and plans for additional facilities. Advances
which are guaranteed by the Venezuelean Fomento are repayable over five
years from August 1, 1953 at a rate of h$>.
Yugoslavia was granted a line of credit of 20 million dollars to
finance the purchase of United States equipment and supplies required for
the maintenance of production in its non-ferrous metal mines. In 19^7, the
Yugoslav Government initiated a 5 year plan of reconstruction and development.
To this end, a series of trade agreements were concluded with other countries
of Eastern Europe and the U.S.S.R. whereby, in exchange for Yugoslav agricultural products, timber and metals, they were to get back essential industrial
equipment and raw materials. In 19^8, deliveries by the other countries
were suspended and the Yugoslav Government turned from the East and looked
to the West for its necessities. In line with the Bank's development policy,
it established a line of 20 million dollarsj 12 million dollars was allocated
to finance the purchase of equipment required by a group of twenty-one mines
which produced copper, lead, zinc antimony, quick silver, pyrites, chromite
and bauxite1 3 million dollars was allocated for coal mining machinery and
railroad equipment. The remaining 5 million dollars was allocated to finance
the purchase of industrial raw materials for essential industries. Repayment over 10 years, from July 31> 1951* at a rate of 3-l/2$ per annum.-^
Several allocations were made under previously authorized credits, of
the k-9 million dollars remaining under the line of credit earmarked for the
State of Israel; of the allocations made, one of 2.4 million dollars was
1T
Toreign Commerce Weekly, (September 26, 19^9) Vol. XXVI. #13. P* 25
135
for expanding the capacity of several Israeli ports including Haifa. The
necessary equipment, etc. will be purchased in the United States. '5 A
second allocation, under this line, was for 20 million dollars to defray
the cost of United States equipment and materials for a number of new industrial projects, included were food processing, textiles, chemical and
pharmaceuticals, metals and building materials production. Repayment is
over 12 years, beginning 3 years after the date of the agreements, at a
rate of 3-l/2$ per annum.
Two allocations were made under the open line of credit for Mexico.
The first, in the amount of 12.9 million dollars, was to assist the National Eailways of Mexico in financing the purchase of United States diesel
locomotives, freight cars, rail and supplies needed to improve the service
on the road. Another allocation was, in the amount of 5 million dollars,
to assist the Southern Pacific Railroad of Mexico, a subsidiary of the
Southern Pacific of the United States, in obtaining the necessary rails
and equipment required in connection with its five year program of rehabilitation of the Mexican system.
The National Railways, owned by the
Government, has trackage of 7300 miles throughout the country, while the
Southern Pacific of Mexico connects the Southern Pacific at Nogales on the
United States-Mexican border with the National systems at Guadalajara in
Central Mexico. It thus serves the important West Coast of Mexico.
The credits were in favor of the Nacional Financiera S.A., a Government financial agency for the use of the two rail systems. Advances are
x
^ I d e m . p . 21
'Foreign Commerce Weekly (January. 10, 19^9) Vol, XXXIV #2, p. 35 - also
Foreign Commerce Weekly (August 22, 191*9) Vol. XXXVI. #8, p. 33
136
repayable over ten years, from June 30, 1951, at a rate of 3-l/2$. The
credits are guaranteed by the Mexican Government. »'
Several allotments were made under the Turkish line of credit. The
first of $500,000 was for financing the purchase of earth moving equipment
in the United States by the Eti Bank for the expansion of the Agacli Lignite
Mines.
Lignite is widely used in Turkey for household and industrial fuel.
By increasing the supply of lignite, Turkey will be enabled to increase the
exports of its bituminous coal production. Repayment is over five years,
from October 15, 1951, at a rate of 3-l/2$ per annum. Notes of Eti Bank
are guaranteed by the Turkish Government.
One million dollars of the credit was allocated to assist the Turkish
State Railways in purchasing United States rail and accessories, required
in the rebuilding of several narrow gauge railroads in Eastern Turkey. Repayable over five years, from September 30, 1951* at a rate of 3-l/2$ per
annum.
The New York Times (August 5, 19^9)
TABLE 9
SUMMARY OF OPERATIONS UNDER THE EXPORT-IMPORT BANK ACT OF 19^5
(in millions of dollars)
TRANSACTIONS DURING PERIOD
Period
New Credits
Cancellations
Disbursement s
Repayments
7/I-I2/31A5
1039.7
9.9
58.7
20.7
1/1-6/30A6
1157.3
12.6
1*99.0
17.0
53-7
110.1
537-5
23.1
1/1-6/30A7
225.5
h.9
547.9
38.7
7/1-12/31A7
388.6
18.6
276.6
56.8
1/1-6/30 A 8
77-1
126 .h
321.9
63.2
7/1-12/31A8
61.2
199.5
106.9
197-9
1/1-6/30/^9
112.7
18.1
107.5
81.2
7/1-12/31A9
128 A
1.3
77 A
62.5
7/1-12/31A6
Source- Semi-Annual Reports of the Export-Import Bank.
137
TABLE 10
SUMMARY OF OPERATIONS UNDER THE ACT OF 1945
(in millions of dollars)
BALANCES AT CLOSE OF PERIOD
Date
Loans
Undisbursed
Authorizations
Total Credit
Outstanding
Uncommitted
Lending Authority
156.4*
6/30A5
207.3
336.3
543.6
12/31A5
245-3
1307.5
1552.8
1947.2
6/30A6
72T.2
1953.2
2680.4
819.6
12/31/U6
1241.7
1339 A
2581.1
918.9
6/30AT
1750.9
938.6
2689.5
810.5
12/31A7
1970.7
1032.0
3002.7
497-3
6/30 A 8
2229.4
642.7
2872.1
627.9
12/31A8
2138.5
394.5
2533.0
967.O
6/30A9
2164.7
381.6
2546.3
953-7
12/31A9
2179.6
431.2
2610.8
889.2
*
In June 19^5 the maximum lending authority of the Bank was TOO million
dollars.
Source - Semi-Annual Reports of the Export-Import Bank of Washington.
138
CHAPTER VIII
RELATIONS WITH OTHER GOVERNMENTAL AGENCIES
The Bank and Lend-Lease Operations
"'I
•
'•
I'
•
On the 11th of March 19^1 President Roosevelt approved the much debated
Lend-Lease Law.
To the majority of the people and to the majority of
the Congress the Act offered a way in which the United States could aid
the countries fighting the totalitarian states and still stay out of the
War.
While it did not keep the United States out of the War, it was
of incalculable aid to our Allies, who were thus enabled to exert their
maximum effort on the fighting line as America became the arsenal of
Democracy.
The total of goods and services delivered under lend-lease
amounted to the astronomical figure of 39.5 billion dollars in goods and
8.5 "billion dollars of services from March 11, 19^1 through December 31> 19^5-
^
lr
55 Stat. 31
f9»The United States a t War", e t c . , l o c . c i t . p , 1*6.
i An
"The International Transactions of the United States during the War, etc."
loc. cit. p. 6.
Idem, p. 20
139
Under the provisions of the Lend-Lease Act the United States entered
into so-called master agreements with the United Kingdom, China, the UoS.S.R.
and a number of other countries. The agreements contained a provision that
settlement for lend-lease should be deferred "until the extent of such
defense aid is known and until the progress of events makes clearer the
final terms and conditions and benefits which will be in the mutual interests of the United States and (the other country) and will promote the
establishment and maintenance of world peace."
182
It was indicated by this and later statements that the settlements
would not be in proportion to the aid given and that settlements should
not burden future commercial relationships between the United States and
the recipient of the aid.
Ninety three percent of the 38-8 billion dollars of goods made available prior to VJ Day was transferred under agreements which deferred
final settlement until after the War.
In the final lend-lease settlements
concluded since that time all lend-lease material consumed during the War
was written off as part of the United States cost of defeating the Axis
Powers. Following VJ Day, the United States gave notice that with certain minor exceptions lend-lease on a free basis would be discontinued immediately. However, because the War ended sooner than had been anticipated,
there was on requisition in the United States some 1.2 billion dollars of
lend-lease goods. These were destined for countries which had been dependent on lend-lease to meet substantial requirements of their civilian
population.
In addition, a large portion was goods built to specification
or to meet foreign requirements for which there was almost no domestic
market. An added consideration was the difficulties which would "be caused
the United States producers by a sudden stoppage.
Foreign Governments were, therefore, given an opportunity to purchase
for credit or cash all such civilian material. The credit terms offered
were repayments over a thirty-year period and an interest rate of 2-3/896.
This situation had been foreseen, at least partially, by the President
and in his message to the Congress on June 4th, 19^5 on the lend-lease
appropriation for the fiscal year 19^6 President Truman stated: "Our
recent lend-lease agreements with France, Belgium and the Netherlands
will be carried out by lend-lease funds to the fullest extent consistent
with changed War conditions and the basic War time purposes of lend-lease
aid. Beyond this I propose that these Allies be assisted in financing
necessary equipment and supplies by the Export-Import Bank.
Such assistance is consistent with the enlarged role which the Bank
should be given in providing certain types of industrial equipment and
supplies which other nations may wish to obtain from us for reconstruction.
Some aspects of reconstruction are of particular interest to this nation
-1 Q J,
and can most appropriately be financed by our own instrumentality.nXO
Subsequently, lend-lease credits were extended by the Export-Import
Bank to Belgium, France and the Netherlands.
183
Belgium
France
Netherlands
$ 55,000,000
5 50,000,000
50,000,000
Total
$655,000,000
Idem. p.21ff
184
First Semi-Annual Report, etc., loc. cit. p.o
These credits were to finance the purchase of goods and services, for
which requisitions had been filed and approved "before VJ Day, under the
terms of the lend-lease 3(e) agreements1^ with the countries concerned,
but which had not been contracted for as of VJ Day,
The lend-lease credits extended by the Export-Import Bank should not
be confused with the lend-lease
"pipe line* credits applying to articles
for which orders had been placed prior to VJ Day. These articles in
the lend-lease "pipe line" were financed with lend-lease funds and the
funds of the Export-Import Bank were in no way involved. However, the
same terms were granted by the Bank as the lend-lease administrator under
the provisions of Section 3(c) of the Act, viz., 30 years from July 1,
19^6 at 2-3/80.l86
The Bank and its Relations with the
National Advisory Council
on International Monetary and Financial Problems
The National Advisory Council on International Monetary and Financial
Problems was established by the Congress in the Bretton Woods Agreement
Act-'-"' approved July 31, 19^5-
The statute directed the Council to coordinate
the policies and operations of the representatives of the United States on
the International Monetary Fund and the International Bank for Reconstruction
and Development, the Export-Import Bank of Washington, and all other agencies
.
The Lend-Lease Agreements were entered into under the terms of Section
3(c) of the Lend Lease Act.
186
First oemi-Annual Report, etc., loc.cit. p. 16
l87
59 Stat, 512, 22 UoS.C. 286 b.
11*3
of the Government "to the extent that they make or participate in the
making of foreign loans or engage in foreign financial, exchange or.monetary transactions.ftJ-°° The Congress provided that the membership of the
Council should consist of the Secretary of the Treasury as Chairman, the
Secretary of State, the Secretary of Commerce, the Chairman of the Federal
Reserve Board and the Chairman of the Export-Import Bank of Washington."^"9
On August 9; 19^5> the Secretary of the Treasury submitted, for the approval
of the President, a proposal as to the manner in which the National Advisory
Council should proceed in discharging the duties assigned it. The essence
of the proposal is contained in the following excerpt from the letter of
the Secretary of the Treasury to the President: "As you can see from the
attached memorandum, the United States Government is now extending financial
assistance to foreign governments through a large number of programs, administered by different departments and agencies, and with different procedures for inter-agency consultation.
In order for the Council to carry
out the functions assigned to it, it seems to me necessary that the Council
should have a picture of the overall program of financial transactions
which it is proposed to carry out in the next period.
On such a "basis we
can make decisions in a rational way, strike the "best "bargains with foreign
countries and save money for the taxpayer.
iaa
°°
Ibld.
^Section 106 of the Foreign Assistance Act of 19^8, 162 Chap. l6<?; 22
U.S.C. 286 b(a) approved April 2, 19^8j included the Administrator for
Economic Cooperation as a member of the Council for the duration of this
office.
^ Quoted "by the President of the United States in a message to the Congress transmitting a statement of the Foreign Loan Policy of the United
States Government. House Document #lj-8l Seventy-Ninth Congress Second
Session, p.l.
Ikk
On August 10, 19** 5 , the President approved the proposal and directed
the Council to proceed along the lines indicated.
Soon after the Council
completed its organization and began functioning.
On February 21, 19*4-6
the Council sent the President a statement of the Foreign Loan Policy of
the United States Government by the National Advisory Council on International Monetary and Financial Problems.^91 in submitting the statement
to the President the Council stated: "At an early date the Council undertook to consider proposals and applications for foreign loans and to study
the problems and broad implications of foreign lending. The statement
which is now submitted to you is an outgrowth of these activities of the
Council and represents our present views 0f|192 ^
e
statement of Foreign
Loan Policy discusses the problems of transition from war to peace, and
their impact not only upon the American economy but upon the economies of
the nations of the world.
of surplus property.
Discussed also were U.N»R«R.A, and the disposal
Considerable space was devoted to the International
Bank which, at that time, had not begun active business. It was stated
that with its membership as then constituted the Bank would be able to
lend up to about 7-5 billion dollars, the bulk of which would be raised
in the private capital markets of the world.
Also discussed at length was
the proposed loan to Great Britain, which was later approved by the Congress
in the amount of $3,750,000,000.^3
This loan was put through by the United
States Treasury and as such may be considered unique. The Export-Import
iflational Advisory Council Document #7^A
essage of the President on Foreign Loan Policy etc., loc.cit. p*2.
193
Report of Activities of the national Advisory Council for the period
October 1, 19^7-March 31, 19*18. House Document #737 Eightieth Congress
Second Session, pc 2ff.
1*5
Bank had no funds available to handle a loan of this size, its own authority
being limited to 3-5 billion dollars and while it has never been so stated,
it might well be that it could not be fitted within the conservative policies
of the Export-Import Bank, for contrary to the general rules of the Bank,
the loan was drawn down in large installments which were not tied in with
any specific project and the funds so obtained were used in part for consumer
goods which the Bank has been reluctant to finance- ™
The Council covered
the activities of the Export-Import Bank in detail pointing out that of the
2.8 billion dollar increase in the lending authority carried in the ExportImport Bank Act of 19^5, over 1 billion dollars had been committed in the
last half of 19^5> leaving only 1.9 billion dollars for additional commitments.
The Council stated that it had been the policy of the Government to
limit loans through the Export-Import Bank for reconstruction and development
to the immediate minimum needs of the borrower and that applications were
closely scrutinized taking into consideration:
1. Urgency of the need.
2.
Borrower's resources.
3. Possibility of loans from other sources.
k.
Ability to make effective use of funds,
5. Capacity of borrower to repay.
6.
Effect of loan on domestic economy.
It was further stated that, pending the establishment and operation of the
International Bank, this Government could meet only a small proportion of
the needs of foreign countries for credits for reconstruction and development
19k
See
"The British Loan". Department: of State Publication j2k&5 (19^6), also
"The British Loan, What It Means to UsT" Department of State Publication
# 2 ^ (19^6).
Ik6
and that an additional one and one quarter billion dollars would be
needed.^5
The Council in the statement argued that a foreign lending
program, adequate to meet the minimum needs of foreign countries, would
bolster production and sustain employment in the United States and that
any sacrifice would be temporary and small compared with the long range
advantages to the United States. The question of repayment and service of
the loans was discussed and it was felt that when the debtors economies were
fully reconstructed they would be able to increase their national income
sufficiently to repay, providing an undue part was not diverted to military
expenditures.
A high level of world trade was considered necessary and,
in the final analysis, a great deal depends upon the size of American imports, personal remittances, travel expenditures and new investments abroad,
and, finally, the world's gold production.
It was also stated that the
interest and amortization payments under the (then) projected foreign loan
program would be less than 1 billion dollars per year. ^
The major matter referred to the Council in the period October igkj
-
March 19*4-8, other than loan reviews, was the request made in March 19^-8
by the Export-Import Bank and the State Department for consideration of an
increase of 500 million dollars in the lending authority of the Bank. The
increase was proposed primarily because of the pressing need of Latin
American countries for financial assistance in carrying forward their
economic development. The Bank and State Department, in support, pointed
out that neither private capital nor the International Bank could meet the
entire need and that it would be in the national interest to develop nearby
195
This increase was recommended by the President but was not approved by
the Congress.
^ National Advisory Council Document #70A.
1A7
sources of raw material, which were scarce in our own economy.
The Bank
did not want to exclude other areas in order to finance Latin America and
felt that prudence demanded a margin of uncommitted funds. The Council
supported the proposal but it was not granted by the Congress. 97 During
the period April - September 19*4-8 various loans were reviewed for the Bank
by the Council without incident.
In early 19^8 proposals were made for the
creation of an Inter-American Bank which were studied by the Council*
It
felt that existing financial institutions such as the Export-Import Bank
and the International Bank were equipped to handle both short and long term
credit applications for the Latin American countries. However, the Council
took notice of the relatively small uncommitted funds of the Export-Import
Bank and supported the introduction into Congress of legislation to increase
the Bank's lending by 500 million dollars. Hearings were held but legislation was not enacted, ^o
The Bank
and
The Economic Cooperation Administration
On April 3* 19^8, President Truman signed the Foreign Assistance Act
of 19*1-8 (Public Law #^72 80th Congress). 1 ^
This brought into existence
the Economic Cooperation Administration, for the purpose of translating
into action the so-called "Marshall Plan" for the economic recovery of
•^Report of the National Advisory Council (19^7-19^8) loccit. p. Ik
-^^Semi-Annual Report of the National Advisory Council for the period
April 1, 19^8-September 30. 1 9 ^ 7 (Washington 19^8) p. 25
199
62 Stat. 137
Europe, outlined by the then Secretary of State, George C. Marshall in
an address at Harvard University on June 5, 19^7•
On June 28, 1 9 W a total of $6,030,710,228 was appropriated for foreign assistance*
POT
Of this, k billion dollars was appropriated to carry
out the provisions of the Economic Cooperation Administration Act and, in
addition, there was made available the sum of 1 billion dollars, to be
provided out of public debt transactions, for the purpose of making loans
and guaranties, of which a maximum of 300 million dollars could be used
for guaranties.
It was stipulated that the k billion dollars could be used for either
grants or loans as the Administrator of the Economic Cooperation Administration deemed appropriate, acting in consultation with the National
Advisory Council on Monetary and Financial Problems0
The Act spelled out
the guide for determining whether the assistance should be in the form of
grants or loans.
"shall depend upon the character and purpose of the
assistance and upon whether there is reasonable assurance of repayment, considering the capacity of such
country to make such payments, without jeopardizing
the accomplishments of the purposes of this title."202
200
Address of Secretary of State Marshall at Harvard University, June 5,
19^7. Department of State Bulletin (June 1$, 191*7) Vol, XVI # 1 3 .
901
62 Stat.^12, 22 U.S.C.A.1501
2Q2
62 Stat. 1 0 ^
Also see- Statement of the Secretary of the Treasury before the Senate
Committee on Foreign Relations on January 14, 19^8, quoted in the Report "
of the National Advisory Council, House Document #737 j Eightieth Congress,
Second Session. (United States Government Printing Office, Washington,
19W) p. 19.
Also see - Semi-Annual Report of the National Advisory Council to the
Congress for the period April 1, 19^8-September 19^B. (United States
Government Printing Office 19^9) P« 17-
li*9
After discussion with the National Advisory Council and, in view of
the reluctance of some of the European countries to take loans, it was
decided that the h billion dollars would be used for grants and
$972,300,000 of the billion for loans and guaranties would be apportioned
to loans. The remainder, $27,700,000 was allocated to investment guaranties. 2 ^
Section 111 (e) (2) of the Foreign Assistance Act of 19^8
specified
that the Export-Import Bank would be the lending agency for loans made
under the Act, and on May 21, 19*4-8, the Administrator of the Economic
Cooperation Administration and the Chairman of the Export-Import Bank of
Washington executed a memorandum agreement, defining their respective tasks
in connection with the extension of credits to the participating countries.
1,
Credits authorized by the Economic Cooperation Administration will be es-
tablished by the Bank on basic terms specified by the Administrator. The
disbursement procedures will be those customarily followed by the Bank.
The Bank, acting as agent for Economic Cooperation Administration, will
also issue guarantees of convertibility of American investments abroad,
in its name, on terms specified by the Administrator*
^
The terms specified by the Administrator after consultation with the
National Advisory Council were as follows 5
203
Third Report to the Congress of the Economic Cooperation Administration
for Quarter ended December 31 J 19^8. (United States Government Printing)
62 Stat.137
^First Report to Congress of the Economic Cooperation Administration for
the Quarter ended June 30, 19^8. (United States Government PrintingOffice,
19*8) p. 43.
150
Interest Rate 2-l/2$ per annum.
Interest payments waived up to 1952*
Principal - Repayable in 35 years through semi-annual
payments starting in June 1956.
There was one exception in the case of Indonesia where repayment is spread
over 25 years.
The first loan made was to Iceland with an interest rate of yf> repayable over 7 years. Considerable opposition was encountered with other
countries on the rate and terms and as a result the formula, mentioned
above, was arrived at and the Iceland credit terms were revised accordingly.
Loan agreements contain so-called "escape" clauses, which permit the
discussion of postponement of payments and for alteration of terms, in
the event of "adverse economic conditions or for any other reasons". The
deferment clause in the agreements with Denmark, Norway
and Turkey provide
for payment in local currency in the event of mutual agreement to postpone
or modify repayment terms.
°
The Administrator authorized the following allotments for credits,
all of which by March 19^9 had been set up on the books of the ExportImport Bank*
Eighth Semi-Annual Report of the Export-Import Bank of Washington,
loc.cit. p. 13.
TABLE 11
ECA LOAN ALLOTMENTS
Country
207
As of 12/31/U9
Undisbursed
Disbursed
Amount
$
8,155,000
Belgium
$ 56,000,000
Denmark
31,000,000
31,000,000
172,000,000
172,000,000
France
$ 1+7,81+5,000
Iceland
2,300,000
303,000
1,996,000
Ireland
86,300,000
1+8,300,000
38,000,000
Italy
67,000,000
Luxembourg
3,500,000
Netherlands
67,000,000
1+1+5,000
129,500,000
129,500,000
Indonesia
17,200,000
Norway
35,000,000
Sweden
20,1+00,000
20,1+00,000
Turkey
38,000,000
38,000,000
United Kingdom
Total
2,200,000
1,500,000
35,000,000
313,000,000
313,000,000
$971,200,000
3,055,000
$117,803,000
$853,396,000
207
Ninth Semi-Annual Report of the Export-Import Bank of Washington.
loc.cit. p. 70f.
151
152
On June 30, 19^9 of this total authorization $191,303,000 had not been
disbursed and $781,997,000 was the principal on outstanding loans. 208
The Bank, as noted above, also acts as agent for, and upon terms
specified by the Administrator, in issuing transfer guarantees of approved
American investments, extended under the authority of Section 111 (b) (3)
of Tital I of the Foreign Assistance Act of 19^8.
In the 6th Report of the Economic Cooperation Administration covering the quarter July 1, 19*1-9 to September 30, 19^9
> it was reported
that guarantees to a total of $*l-,M*7>5002-L0 had been authorized.
Included
were:
Watch & Clock Plant - United Kingdom
$1,000,000
Carbon Black Plant - United Kingdom
850,000
Drill Chuck Plant - United Kingdom
J+00,000
Instrument Plant - United Kingdom
300,000
Soluble Coffee Plant - United Kingdom
75,000
Metal Spraying Equipment Plant - United Kingdom
^5,000
Stone Cutting Yard - Italy
20,000
Transportation Equipment - Italy
60,000
208
Eighth Semi-Annual Report of the Export-Import Bank of Washington.
loc.cit. pp. 55-56. See also- Third Report of the Economic Cooperation
Administration, loc.cit. p„ 30.
20
%nited States Government Printing Office, Washington, (1950), p, 136.
210
This figure includes both investment guarantees issued through the
Export-Import Bank of Washington and informational guaranties issued
by the Administrator. (National Advisory Council Report period October
1, 19^8-March 31, 19^9) p. 19.
153
By June 30, 19^+9, all of the above, with the exception of the $60,000
transportation equipment company investment in Italy, had been issued by
the Export -Import Bank.
^
Originally, $300,000,000 had been placed as a statutory limit on
guarantees but was reduced to $150,000,000 by PI. V7 8lst Congress. During
its first year the Economic Cooperation Administration allocated $27,700,000
to the guarantee program,
xc
~ but actual guarantees authorized were only in
the amount of $3,587,8l4.213
The guarantee program as regards to investments has been disappointing.
American companies of standing have not been too eager to invest abroad
and, while there have been numbers of applications, extensive investigations
21^
and negotiations are required.
This may have discouraged prospective
investors. The original basis for these guarantees were quite restrictive,
which was an added deterrent^ however, recently (early 1950) this has been
liberalized.
21
-**Eighth Semi-Annual Report of the Export-Import Bank, etc., loc. cit. p. 15.
212
Increased by $122,300,000 to $150,000,000 on October 6, 19^9- (Sixth
Report of the Economic Cooperation Administration) p. 3^-.
211
^National Advisory Council Report - period October 19^8 - March 19^9loc.cit. p. 19.
Second Report of the Economic Cooperation Administration.
Government Printing Office, Washington, 1<W3) pp. 5758.
(United States
15^
TABLE 12
EXPORT-IMPORT BANK GUARANTIES OUTSTANDING
FOR ACCOUNT OF ECA AS OF 12/31A9
Country
Maximum Liability
French
Italy
United Kingdom
282,000
80,000
3,^73,000
$3,835,000
Source: 9th Semi Annual Report of the Export-Import Bank of Washington
for the period July-December 19^9 P* 72.
The Export-Import Bank
and
The Point IV Program
On January 20, 19*1-9, President Truman, in his inaugural address discussed the foreign policy of the United States. A portion of this discussion was directed to the economic development of the underdeveloped
areas of the world. This subject, which was designated as the fourth
point of four, has since become widely known as the Point IV Program.
The President said, in part, "We must embark on a bold new program for
making the benefits of our scientific advances and industrial progress
available for the improvement and growth of underdeveloped areas. We
should make available to peace-loving peoples the benefits of our store
of technical knowledge in order to help them realize their aspirations
for a better life, and in cooperation with other nations, we should foster
capital investment in areas needing development.
Our aim should be to
help the free peoples of the world, through their own efforts to produce
more food, more clothing, more materials for housing and more mechanical
power to lighten their burdens.
^
On June 2U, 19*4-9 the President sent a message to the Congress, in
which he outlined a program whereby the United States proposed to assist
in the economic development of the backward countries. While the President
emphasized that the people of the underdeveloped areas themselves would
necessarily be required to make the major effort, he stated that the
United States should be prepared to extend two types of assistance! viz,
technical knowledge and capital.
Specific measures proposed included:
1. An enlarged program of technical assistance to be
conducted, under the direction of the President,
by the Department of State and other existing agencies of the Government with the cooperation of
inter-governmental and private organizations.
2.
An experimental program by the Export-Import Bank
to encourage the investment of private capital
abroad, by guaranteeing such investments against
certain risks peculiar to foreign investment.
3. An accelerated effort to negotiate treaties with
foreign countries, which would improve and stabilize
the climate of foreign investment.
k.
Loans by the Export-Import Bank for the economic
development of underdeveloped areas.
The President concluded his message with the recommendation that legislation be enacted which would authorize the technical assistance and
guaranty programs. ^
21
No new legislation was required for the other
^The New York Times (January 21, 19^9)
2l6
Ninth Semi-Annual Report of Export-Import Bank, etc., loc.cit. p. 3
156
two proposals, as the State Department is empowered to negotiate treaties,
and the Export-Import Bank has for years made loans for economic development.
Subsequently, Senator Maybank (Democrat-South Carolina), on July
6, 1914-9, introduced a Bill (S. 2197) to amend the Export-Import Bank Act
of 19^5 as amended, to vest in the Export-Import Bank of Washington the
power to guarantee United States investments abroad.
"Be it enacted, etc.
that it is the policy of the United States, in the interest of its people,
as well as that of other people, to promote the development of economically
underdeveloped areas of the world.
It is the objective of this Act to
further this policy by encouraging productive investment in such areas.
To this end Section 2(a) of the Export-Import Bank Act of 19^5 as amended
(59 Stat. 526, 666; 6l Stat, 130) is hereby amended by inserting after the
words "to borrow and to lend money" the words "to guarantee United States
private capital invested abroad which contribute to economic development
in foreign countries against risks peculiar to such investments."2^«
This
«
bill was referred to the Committee on Banking and Currency, which held
public hearings on August 9 and 10, 19^9. Secretary of the Treasury
Snyder, Under Secretary of State Webb, and Chairman Gaston of the ExportImport Bank of Washington, testified in support of the bill. Mr, Winthrop
Aldrich appeared in his capacity as Chairman of the Presidents Committee
for Financing Foreign Trade and supported the bill and its approach to
the problem.
Also, testifying were Mr. Norman N. Littell representing the
American Bar Association and Mr. Roy W. Gifford who appeared for the Detroit
Board of Commerce, both of whom supported the general purposes of the bill.
At the same time S. 2197 ^as introduced by Senator Maybank, S.256121^ was
'Calendar #1111 S 2197. Report #1101 Eighty-First Congress, First Session.
S 2561 Eighty-First Congress First Session.
157
introduced by Senator Saltonstall (Republican-Massachusetts), this bill
entitled "A Bill to Establish a Program of Foreign Economic Assistance"
was referred to the Senate Committee on Foreign Relations. Senator Saltonstall fs bill has for its objective the providing of the technical assistance
requirements of the Point IV Program as well as financial assistance. The
bill would set up a Foreign Economic Development Administration and a system of requirements for participating countries. These conditions are
designed to create a favorable "climate" for investment and provide some
degree of control over funds spent by the United States Government. A
feature, also, is a provision that after two years unless a country fulfilled the conditions set forth, it would not be eligible-for Export-Import
Bank loans.
On October 7, 19^9 this bill (S.256I) was offered in the form of an
amendment as a substitute for S.2197Meanwhile on September 29th Senator Maybank offered an amendment to
his bill (S.2197) which would strike out the words "against risks peculiar
to such investments" and insert "by assuring either or both (l) the conversion into United States dollars of foreign currency derived from an
investment and (2) compensation in United States dollars for loss resulting from expropriation, confiscation, or seizure/1
The companion bill,
reported with amendments by the House Committee on Banking and Currency
H.R. 559^,
is the same as S.2197 with the Maybank amendment, plus the
addition of the words "by action of public authority" after "seizure". A
complementary bill on technical assistance H.R. 5615 was referred to the
House Committee on Foreign Affairs.
In his testimony before the Senate Banking and Currency Committee on
S. 2197j Secretary Snyder emphasized the experimental nature of the guar-
158
antee program. He pointed out that there had been almost no experience
with programs of this kind and thus it was impossible to anticipate the
types of risks which should be covered, the effectiveness of guarantees
in stimulating investments or the possibility of loss to the United States
under the program.
He felt it essential, under the circumstances, that
the authority of the Export-Import Bank be flexible and broad. He felt
that only after careful study and with experience could the full potentialities of guarantees be realized.
He stated that the actual adminis-
tration of the plan would have to be worked out by the Export-Import Bank
in consultation with the National Advisory Council.219
Assistant Secretary
Webb discussed treaties of friendship, commerce and navigation, the execution of which would be a condition precedent to the issuance of guarantees.
°
Chairman Gaston in his testimony held that it was quite appropriate
that the Export-Import Bank be the agency of the Government vested with
the authority to undertake the guarantee program.
He pointed out that the
function of guarantee is closely allied to, and is but a logical expansion
of, the functions which the Bank has been and is exercising.
It has had
limited experience with guarantees as agent of the Economic Cooperation
Administration.
He stated the program was experimental but that the Export-
Import Bank could handle it within the framework of its present organization
and that no additional funds would be required during the preliminary stages.221
It is not the purpose of this paper to explore the soundness or unsoundness of a guarantee program but rather to discuss it as a possible
21
%earings before the Senate Banking and Currency Committee United States
Senate Eighty-First Congress, First Session on S.2197. (United States
Government Printing Office Washington, 19^9) P* 5
PPO
Idem p« l8f
Idem, p. 35f
159
field for the Bank's employment. The topic is one which has attracted
wide interest and the opponents are perhaps as numerous as the proponents.
22
There has been some criticism of the selection of the Export-
Import Bank as the vehicle to carry out the guarantee program, because of
what was described as an inconsistency between making loans with a reasonable degree of risk, and the issuing of guarantees on investments, with
all of the risks peculiar to foreign investment, such as inconvertibility
of exchange, expropriation and physical destruction in the event of war,
riot or revolution, and lastly the risk of government interference by law,
ordinance regulation, decree or administrative action, preventing the
transaction for which the guaranty was issued.
Other critics felt that the conservatism of the Bank would not be in
keeping with the broad sweep of a bold new program. 2 3
"^For a full discussion of the Point IV Program see - Hazlitt, Henry
"Illusions of Point IV." Foundation for Economic Education, Irvingtonon-the Hudson, 1950 *
Hazlitt, Henry "Will Dollars Save the World?" Foundation for Economic
Education, Irvington-on-the-Hudson, 19^7«
"Point IV" Fortune (November 19^9) Vol* XL #5, p, 95ff.
Perkins, Milo, "What We Can Do Under Point IV." Harpers (December 19^9)
#1195 P* 52 ff.
Abbott, "Economic Defense of the United States* Harvard Business Review
(September 19^9) Vol. XXVI #5 p. 613 ff.
Banking, (January 10, 19^9) Vol. XXVI, p, 130
Gaston, Herbert E., Chairman Export-Import Bank of Washington, "Point
IV and The Export-Import Bank", Journal of Commerce (November 2, 19*4-9)
New York.
Gaston, Herbert E.,"The Role of the Export-Import Bank in World Development". (December 2, 19^9)• (Mimeographed).
Arey, Hawthorne, Vice-Chairman Export-Import Bank of Washington "The
Role of the Export-Import Bank in Our Foreign Trade". Address before the
International Finance Session, Thirty-Sixth National Foreign Trade Convention, October 31, 19*19 > Hew York, N.Y.
223
Hearings before Senate Committee on Banking and Currency on S.2197> etc.,
Loc.cit. p. 99f.
The Bank and the Commission on the Organization
of the Executive Branch of the Government
The Commission on the Organization of the Executive Branch of the
Government, perhaps "better known as the Hoover Commission after its
Chairman, ex-President Herbert Hoover, was created by the provisions of
Public Law l62 80th Congress, to study the Executive Branch of the Government to the end that the necessary legislation could be introduced in the
Congress to eliminate waste, duplication and to reorganize those agencies,
bureaus, and departments operating on an inefficient basis.
The Committee was bipartisan with a membership of twelve. The membership included besides Mr. Hoover, Dean Acheson as Vice Chairman, A. S.
Flemming, James Forrestal, G. H. Mead, G. D. Aiken, Joseph P. Kennedy,
J. Lo McClellan, Joseph K. Pollock, Clarence J* Brown, Carter Manasco and
James H. Rowe, Jr.
The Commission was aided by a number of specialists in the various
fields organized as task forces, whose findings assisted the Commission in
the preparation of their recommendations.
During the course of their study the commission issued 19 reports
and 17 task force reports as separate appendices.
^
One of these reports covered the Treasury Department and was transmitted to the Congress on March 5, 19^9Among the recommendations contained in this report was Number Three
which reads:^Progress on Hoover Commission Recommendation" Reprint #1158. Committee
on Expenditures in the Executive Departments, House of Representatives,
Eighty-First Congress First Session. (United States Government Printing
Office, Washington 19^9) P- 379f.
"We recommend, therefore, that the supervision of the
R.F.C., the F.D.I.C. and the Export-Import Bank he
vested in the Secretary of the Treasury. T,225
The "basis of argument used by the Commission was that these were
independent agencies reporting directly to the President, who could not
give the time necessary for their supervision and, therefore, as a practical matter, they were accountable to nobody. With respect to the
Export-Import Bank, it was pointed out that the Treasury Department now
has certain responsibilities in the foreign field; mentioning the Stabilization Fund, which had a loan to Mexico and the British Loan made by the
Treasury and administered by it. Also, the Secretary of the Treasury is
the Chairman of the National Advisory Council, the major policy body in
the foreign loan field.
It was, therefore, felt that he should also have
general supervision over the Bank. "*
sented on this recommendation.
Certain of the Commissioners dis-
Dean Acheson wrote that while he felt it
desirable to place the Bank in an Executive Department, he was not convinced that the subject had been sufficiently explored to justify the
recommendation. ^
Commissioners Aiken, Pollack and Rowe also dissented.
They felt the Bank should be in the Department of Commerce, basing their
argument upon the premise that the Department of Commerce had as its
"major purpose" the promotion of both foreign and domestic commerce and
trade.
They stated that the Bank's principal function was assisting
22
5"f£ reasur y Department - A Report to the Congress by the Commission on
the Organization of the Executive Branch of Government." (United States
Government Printing Office, Washington, 19^9), p.12.
Idem, pp. 10 and 12
Idem. p. 11
162
in the financing of foreign trade. Further that, while it carried on
this function in two ways only, a relatively small part of the Bank's current business involved direct assistance to American exporters and importers
who were unable to finance their own operations. Rather the larger part
was loans to foreign governments for economic development or general balance of payment purposes. They went on to point out that while the loans
were justified on an economic basis, they had a very heavy foreign policy
aspect; and as the Department of Commerce was clearly the agency of primary
interest in the promotion of foreign trade, the Export-Import Bank should
be there.228
After this report on the Treasury was received by the Congress, the
Senate Committee on Expenditures invited comments from the interested
parties.229
In reply, the Treasury Department stated with reference to the ExportImport Bank, R. F. C. and F. D. I. C o
pendent status of these agencies.
"There is much to be said for the inde-
The policies of these agencies are in
many cases governmental policies set after consultation with the President
and other Cabinet Members and they can, therefore, function independently."230
The Department of Commerce in its comments agreed with the dissenting
Commissioners and with their reasoning in support of the dissent.
Department went further and offered these points •
22{5
Idem, pp. 29-30
"~
229
Progress on Hoover Commission, etc., loc.cit. p.l
23
°Idem. p. 239
The
163
1. The Bank was established "to aid in financing and
to facilitate exports and imports and the exchange
of commodities" between the United States and the
other countries of the world.
2.
Throughout its 15 years of existence, the Bank has
considered this its fundamental objective.
3*
This objective is patently embraced within the
broader functions of the Department of Commerce
as prescribed by statute.
k.
It is not the "lending function" of the Bank that
should determine where it should be placed but the
"purpose" should be the determining factor.
5. The "purpose"of the Bank is the same as that of
the Department of Commerce, namely, trade — b e it
domestic or foreign. 3 1
As might be expected the Directors of the Bank diametrically opposed
recommendation #3"It is the considered opinion of the Directors of the Export-Import
Bank that to place the bank under the supervision of the head of any executive department would contribute nothing to the efficient conduct of the
Government, but would on the contrary, through destroying a very effective
plan of operation, set up in the Export-Import Bank Act of 19^-5 and the
Bretton Woods Agreement Act, incur the risk of creating confusion and of
interfering with the efficient performance of the bank's functions. The
first of these acts places the management of the Bank in the hands of a
Board of five Directors, not more than three of whom may be members of
any one political party.
The Secretary of State is a director ex officio,
the other four are appointed by the President0
In practice this means
that the President appoints two persons of his own party and two of another
party or parties. The directors are appointed for definite terms and if
231
Idem. p. 2^2
16k
there should be a change in the administration, a change in the majority
of the Board would be accomplished merely by the succession of a new
Secretary of State to membershipa
"The Board is a management board having responsibility which rests
upon all members, individually and collectively, for the prudent management
of very large revolving loan funds obtained as public debt transactions
and not as appropriations.
If the Directors were to be relieved of this
responsibility by making their actions in this respect subject, in any
degree, to direction by any Cabinet Officer, it would seem that the principles not only of political bipartisanship but of personal responsibility
also, would be seriously impaired.
' "The records of the Congress will show that the method of management
of the greatly enlarged funds committed to the Bank by the Act of 19^5
was most carefully considered.
"The Bank is not unsupervised.
The Secretary of State is a member
of the Board of Directors and, in practice, no loans are made unless they
have been endorsed by the Secretary of State as conforming with the foreign
policy of the United States. In addition, the Secretary of State, through
his staff and representatives abroad, supplies advice and information as to
particular loans and loan applications. The Bank enjoys, of course, the
usual fiscal supervision by the Bureau of the Budget and the General Accounting Office.
In addition, however, It benefits in an important way from
policy supervision and advice through the National Advisory Council on
International Financial and Monetary Problems of which, the Secretary of
the Treasury is Chairman and of which, the Secretary of State and Secretary
of Commerce, the Chairman of the Federal Reserve Board and the Administrator
of the Economic Cooperation Administration as well as the Chairman of the
165
Export-Import Bank are members. This is a plan of integration with
other fiscal and lending authorities of the Government, well considered
by the executive as well as the legislature branch before its enactment,
which in our opinion has worked well and smoothly in practice.
32
The proposal has been the cause of considerable discussion both pro
and con. There is considerable weight to the argument advanced by the
Directors of the Bank.
The manner of its management has not just evolved
over a period of time but was evolved after considerable study and debate
in 19^5- Then too there is a considerable reluctance on the part of the
Congress to concentrate more power in the hands of the Treasury or other
Departments. The Export-Import Bank has always fared well with the Congress and its management over a period of years has been conservative in
its approach, which has always been the subject of favorable Congressional
remarks.
232
Idem. p. 214-3 ff
CHAPTER IX
THE BANK AID ITS FUTURE
At this point in time, March 1950, it is difficult to foresee with
any degree of certainty what the future of the Bank will be. Too many
forces are at work in the world today, any one of which might affect the
Bank's operations.
In 19*J-7> the Bank was reincorporated as a government corporation and
its life extended to June ?>0, 1952. It is highly improbable that its
life will not be extended at that time. As of December 31; 19^9 there
were outstanding on its books loans of over 2,177 million dollars which
with interest added totalled 2,838 million dollars, of this sum only *K)0
million dollars was due prior to 1952. Its loans do not call for full
repayment until 1976 so, that even if no new loans were authorized after
1952, the Bank would require at least 2k years to liquidate.
The Point IV program, if carried out as proposed, would employ the
Bank and this program cannot be measured in years but rather in decades.
The Marshall Plan aid is scheduled to end in 1952 and from all accounts the job at that time will be far from completed.
166
Indeed, President
167
Truman in a letter to Representative John Kee, Chairman of the House
Foreign Affairs Committee reported in the New York Times of March 26, 1950*
called the Economic Cooperation Administration "the keystone of peace in
the age of atomic weapons" and, in the same issue of the New York Times,
Senator Vanderiberg's (Republican-Michigan) letter to Paul G. Hoffman,
Administrator of the Economic Cooperation Administration, appealed for
the creation of an unpartisan commission to recommend a long-range United
States economic and political peace policy. Who can say but that the Bank
may he chosen as the instrument which might he charged with world economic
aid?
It is true that we have the International Bank hut that institution's
resources are limited and its management international in scope. It is
fairly certain that if tremendous sums are to he spent the people of the
United States will insist that they be spent through an agency of the
United States. The same objections may he offered to the United Nations
and its offices.
From time to time the question of export insurance has heen raised and
over the years the Export-Import Bank has given the subject much study,
perhaps this may be added to its duties in the future.
The enactment of the proposals of the so-called Hoover Commission
might have a profound effect upon the Bank as it would lose its independent
status and be incorporated into either the Treasury or Commerce Department.
The Bank has been well run and no serious criticism has ever heen offered
of its management. As an "arm of American foreign policy" some of its
loans have had political implications and some of its loans have had, at
least, as a secondary purpose, the containment of communistic influences,
but in all loans the Bank has conscientiously attempted to reconcile its
directives| namely, not to compete with private husiness and to make only
those loans which offer a reasonable assurance of repayment. In so doing
it has taken calculated risks and in the case of reconstruction loans has
assumed that a revival of world trade on a multilateral "basis would take
place. Perhaps the best exposition of what the Bank intends to do in the
future may he given in the words of William M. Martin, then Chairman and
President of the Export-Import Bank, testifying at a hearing on S 993 held
by the House Committee on Banking and Currency on May 8 and 12, 19*47 • "It
is the policy of the Bank that the credits which it authorizes shall be
for specific purposes, shall contribute in the most direct manner to a
balanced long term expansion of foreign trade, and shall be on terms appropriate to the circumstances in each case. I cannot emphasize too strongly
that the Export-Import Bank has never undertaken to finance exports for
their own sake. The Bank does not believe that the position of the United
States in international trade justifies the use of public funds merely for
providing a stimulus to exports. This explains why the Export-Import Bank
has always been primarily interested in what it finances and the long run
effects of what it finances.
It explains why the Bank is more likely to
finance the export of raw materials, such as cotton and of capital goods,
than of finished consumers goods. The fundamental basis of the Bank's
attitude in this regard is that the real problem of the United States
foreign trade at the present time is to maintain a high volume of imports
in order to provide foreigners with the means of buying United States
products in large quantities and at the same time repay their debts to
this country. The Bank has directed its operations over the past thirteen
years towards the solution of this fundamental problem.
Its credits have
served chiefly to promote the export of goods which serve to increase the
productive capacity of foreign countries and their capacity to export
those products which are desired in the United States and elsewhere. In
this way the Bank helps to create a steadily growing market for American
products of all kinds and at the same time to facilitate the repayment of
foreign debts to it and other American creditors. 33
233
Hearings Before the Committee on Banking and Currency on S.993j House
of Representatives, Eightieth Congress, First Session. (United States
Government Printing Office, Washington), p. 5ff.
APPENDIX
A
EXCERPTS FROM
REFERENCE MANUAL OF
GOVERNMENT CORPORATIONS
6/30A5
EXPORT-IMPORT BANK OF WASHINGTON
Statutes
The National Industrial Recovery Act of June l6, 1933, is
cited by Executive Order No. 6581, dated February 2, 193^> as the authority for directing creation of the bank under title 5> chapter 9>
section 26l of the Code of the District of Columbia. Section 2 (a) of
title I of that act (kQ Stat.195) authorized the President to establish
such agencies as he might find necessary to effectuate the policy of title
I.
Section 2 (c) of title I provided that any agencies established under
such title should cease to exist at the expiration of 2 years after the
date of enactment of the act. (See, also, 15 U.S.C., note to 701-712).
However, the bank was continued as an agency of the United
States to June 16, 1931, ^Y the act of January 31, 1935 (^9 Stat, k) to
June 30, 1939, hy the act of January 26, 1937 (50 Stat. 5)j to June 30,
19^1, by the act of March k, 1939 (53 Stat. 510); and to January 22, 19*1-7,
170
by the act of September 26, 19^0 ($k Stat. 962; 15 U.S.C. 713"b).
(The
charter, as amended January 10, 19^1, provides that the bank!s term of existence shall be 20 years from the date of its incorporation,)
Executive orders and reorganization plans
The President, by Executive Order No. 6581, dated February 2,
193^j directed the Secretary of State and the Secretary of Commerce to
cause the organization of a District of Columbia banking corporation under
the name of Export-Import Bank of Washington, pursuant to title 5> chapter
9, section 26l of the Code of the District of Columbia.
By Reorganization Plan No. I, effective July 1, 1939, the bank
was grouped with other lending agencies to form the Federal Loan Agency,
to be supervised by the Federal Loan Administrator (53 Stat. 1V30; 5 U.S.C.
note to 133t).
By Executive Order No. 9071, dated February 2k,
19^2 (50 U.S.C.
appendix, supp. IV, note to 601), all functions, powers, and duties of the
Federal Loan Agency and of the Federal Loan Administrator which related to
the Export-Import Bank of Washington were transferred to the Department of
Commerce, to be administered under the direction of the Secretary of Commerce .
By Executive Order No. 936l, dated July 15, 19^3, the ExportImport Bank of Washington and its functions, powers, and duties, together
with the functions, powers, and duties of the Reconstruction Finance Corporation and of the Secretary of Commerce with respect to the bank, were
transferred to the Office of Economic Warfare, which Office was established thereby to succeed the Board of Economic Warfare.
By Executive Order No. 9380, dated September 25, I9V3, the Office
of Economic Warfare, together with the corporations (which included the
Export-Import Bank of Washington), agencies, and functions transferred
172
thereto by Executive Order No. 936l, dated July 15, 19^3> v&s transferred
to the Foreign Economic Administration established by said Executive Order
No. 9380 in t^he Office for Emergency Management of the Executive Office
of the President. (Texts of Executive Orders 93^1 and 9380 are likewise
carried in the note to sec. 601, 50 U.S.C. App., Supp, IV.)
Charter
The bank was incorporated under the laws of the District of
Columbia pursuant to title 5, chapter 9, section 26l of the Code of the
District of Columbia.
Ownership, Organization, and Management
The bank is owned by the United States. The charter provides
that the stock, property, and concerns of the Corporation shall be managed
by a board of 11 trustees elected annually by the stockholders. With the
approval of the President of the United States, the board of trustees may
be increased to not more than 15 members or decreased to not less than 5
members without amending the articles of incorporation.
Section 2 of the Executive Order No. 936l, dated July 15, 19^3, provides that the Director of the Office of Economic Warfare may reconstitute
the Board of Directors of the bank and take such other action as he deems
necessary in respect of them to carry out the purposes of that order.
Section 3 of the Executive Order No. 9380, dated September 25, 19*K3,
provides that the Administrator of the Foreign Economic Administration
may establish such offices, bureaus, or divisions in the Administration
as may be necessary to carry out the provisions of that order and may
assign to them such of the functions and duties of the offices, agencies,
and corporations consolidated thereby as he may deem desirable in the
interest of efficient administration.
Purpose and scope of activities
Prior to dissolution of the Second Export-Import Bank of Washington, a District of Columbia corporation organized pursuant to Executive Order Wo. 6638, dated March 9> 193*+> and dissolved pursuant to Executive Order No. 7365, dated May 7j 1936, all of the existing commitments of such Second Export-Import Bank were sold and transferred to the
Export-Import Bank of Washington.
The latter order directed that the
records of the Second Export-Import Bank should be transferred to and
preserved by the Export-Import Bank of Washington.
(See 15 U.S.C.,
note to 713b).
The act of September 26, 19^0 {^k Stat.961; 15 U.S.C. 606b),
enlarged the activities of the Export-Import Bank to include assistance
in the development of the resources, the stabilization of the economies,
and the orderly marketing of the products of the countries of the Western Hemisphere.
The bank may not have outstanding at any one time loans or
other obligations to it in excess of $700,000,000 (15 U.S.C. 713b).
Source of funds
Allocations
Pursuant to the provisions of Defense Aid Supplemental Appropriation Acts, 19^1 and 19^2, approved March 27 and October 28, 19-^1 and
March 5, 19^2 (55 Stat. 53. 55 Stat. 7^5, and 56 Stat. 130), respectively, and in accordance with letter of the Lend-Lease Administrator to the
Secretary of the Treasury, dated January h, 19^3 (Defense Aid Allocation
No. 106l), the sum of $2,000,000 has been allocated and transferred to
the Export-Import Bank of Washington for necessary services and expenses
for carrying out the provisions of the act of March 11, 19^1 (55 Stat.
31), entitled "An act to promote the defense of the United States."
Capital stock
The capital stock of the bank consists of $1,000,000 of common
stock and $17^,000,000 of preferred.
For the purpose of subscribing for the common stock of the bank,
the President, by Executive Order No. 6581, dated February 2, 193^, set
aside the sum of $1,000,000 out of the appropriation of $3,300,000,000
authorized by section 220 of the National Industrial Recovery Act (^8
Stat. 210), and made by the Fourth Deficiency Act, fiscal year 1933 (^8
Stat. 275). All of the common stock is held for the use and benefit of
the United States. All common shares, except 11 shares in the respective
names of the trustees, stood in the names of the Secretary of State and
the Secretary of Commerce, jointly, and were voted by such person or
persons as the Secretary of State and the Secretary of Commerce appointed as their joint agent or agents for that purpose. As of June 30, 19^5,
the preferred stock of $17^,000,000 was held by the Reconstruction Finance
Corporation.
175
APPENDIX B
000 omitted
STATEMENT OF COMMITMENTS, CANCELLATIONS, DISBURSEMENTS,
REPAYMENTS AND OUTSTANDING BY COUNTRY 3/12/3** to 6/30/1+5
Country
L a t i n America
Argentina
Bolivia
Brazil
Chile
Colombia
Costa Rica
Cuba
Dominican Republic
Ecuador
El Salvador
Haiti
Eonduras
Jamaica
Mexico
Nicaragua
Panama
ParaguayPeru
P o r t o Rico
Uruguay
Venezuela
Virgin Islands
S p e c i a l C r e d i t Lines i n
favor of Banking I n s t i t u t i o n s i n Western
Hemisphere
Canada
China
Other Asia
Ethiopia
Portuguese West A f r i c a
Finland
Italy
Norway
Poland
Portugal
Spain
Sweden
Other Europe
Cancellat i o n s and
Expirations
Balance
Not D i s bursed
93,090
1+8
7^,931
6,688
390
2,129
94,31+8
22,1+67
22,1+25
7,17^
^5,678
3,283
5,1+05
900
10,320
895
-11,995
i+,l+00
2,1+87
5,335
__
^3,585
in,951
250
26,888
16
75
-2,570
_25
1,383
585
2,012
1,600
12,000
__
11,506
l+,806
—
—
15,000
29,7^5
13,250
23,1+58
100
17,800
—
10,301+
826
1+60
1,805
-53,31^
250
—
'865
25,000
-25,01+3
32,000
250
50,000
—
1+6,1+81
3,518
3,M+5
59,265
151+,91+3
M+,230
500
300
35,000
16,917
10,750
12,906
5,500
15,072
15,000
30,866
21,850
i+,526
^3,767
-__
-3,5l+l
__
9,359
l+,229
1,391
10,889
29,1+66
37,^15
118,001
37,^15"
69,1+00
Authorization
9 3 , WO
17,678
199,025
1+2,1+06
1*6,725
8,723
90,366
3,300
15,785
1,726
13,350
2,700
25
66,692
5,235
!<-, 500
7,800
37,000
1+50
81+1
1,1+1+8
«—
.
32,1+15
—
—
235
8,788
—
10,523
—
---—
Amount
Amount
Disbursed Repaid
1+50
7,035
5,ll+l+
--
Outstanding
—
390
-2,129
39,211+. 55,13^
8,638 13,828
12,011 10,1+13
27I+
6,900
1+2,960
2,718
622
2,66l
521
4,883
11+
885
1,806
8,513
—
895
--.l+,96o
7,031+
2,868
1,531
-2,1+87
i+,787
537
--10
1+1+0
8
7,026
3,080
2,063
---
1+62
1+62
500
65
26,211
13,376
226
3,5V7
1,270
13,681
i+,111
1,399
250
-2,31+1
13,376
226
21+6
1,270
13,681
i+,111
1,399
72
——
1+8,600
__
250
65
23,869
-«
-3,300
-•
-•.--
SOURCE: Hearings "before the Committee on Banking and Currency, House of Representatives, T9th Congress, 1st Session on H.R. 3 ^ and H.R. 3*4-90 superseded by H.R. 3771,
July 11 and 12, 19^5, Page 3^-
APPENDIX
C
EXPORT-IMPORT BANK ACT OF 19^5 AS AMENDED
Be it enacted "by the Senate and House of Representatives of the
United States of America in Congress assembled, "That this Act may be
cited as the "Export-Import Bank Act of 19^5."
Sec. 2(a) There is hereby created a corporation with the name
Export-Import Bank of Washington, which shall be an agency of the United
States of America. The objects and purposes of the Bank shall be to aid
in financing and to facilitate exports and imports and the exchange of
commodities between the United States or any of its Territories or insular possessions and any foreign country or the agencies or nationals
thereof. In connection with and in furtherance of its objects and purposes, the Bank is authorized and empowered to do a general banking business except that of circulation; to receive deposits; to purchase, discount, rediscount, sell, and negotiate, with or without its endorsement
or guaranty, and to guarantee notes, drafts, checks, "bills of exchange,
acceptances, including bankers' acceptances, cable transfers, and other
evidences of indebtedness; to purchase, sell, and guarantee securities
but not to purchase with its funds any stock in any other corporation
except that it may acquire any such stock through the enforcement of any
176
lien or pledge or otherwise to satisfy a previously contracted indebtedness to it; to accept bills and drafts drawn upon it; to issue letters of
credit; to purchase and sell coin, bullion, and exchange; to borrow and
to lend money; to perform any act herein authorized in participation with
any other person, including any individual, partnership, corporation, or
association; to adopt, alter and use a corporate seal, which shall be judicially noticed; to sue and to be sued; to complain and to defend in any
court of competent jurisdiction; and the enumeration of the foregoing
powers shall not be deemed to exclude other powers necessary to the
achievement of the objects and purposes of the Bank. The Bank shall be
entitled to the use of the United States mails in the same manner and upon the same conditions as the executive departments of the Government,
The Bank is hereby authorized to use all of its assets and all moneys
which have been or may hereafter be allocated to or borrowed by it in the
exercise of its functions. Net earnings of the Bank after reasonable provision for possible losses shall be used for payment of dividends on capital stock. Any such dividends shall be deposited into the Treasury as
miscellaneous receipts.
(b) It is the policy of the Congress that the Bank in
the exercise of its functions shall supplement and encourage and not compete with private capital, and that loans, so far as possible consistently
with carrying out the purposes of subsection (a), shall generally be for
specific purposes, and, in the judgment of the Board of Directors, offer
reasonable assurance of repayment.
Sec. 3 (a) (l) The management of the Export-Import Bank of
Washington shall be vested in a Board of Directors consisting of the Administrator of the Foreign Economic Administration, who shall serve as
Chairman, the Secretary of State, and three persons appointed by the
President of the United States by and with the advice and consent of the
Senate. The Secretary of State, to such extent as he deems it advisable,
may designate to act for him in the discharge of his duties as a member of
the Board of Directors any officer of the Department of State who shall
have been appointed by and with the advice and consent of the Senate.
(2) If the Foreign Economic Administration ceases
to exist in the Office for Emergency Management in the Executive Office
of the President, the President of the United States shall appoint, by
and with the advice and consent of the Senate, another member of the
Board of Directors. The member so appointed shall serve for the remainder of the existing terms of the other three appointed members, but successors shall be appointed for terms of 5 years. After the Foreign
Economic Administrator ceases to be a member of the Board of Directors
the President of the United States shall, from time to time, designate one
of the members of the Board to serve as Chairman.
(3) Of the five members of the Board, not more than
three shall be members of any one political party. Each of the appointed
directors shall devote his time not otherwise required by the business of
the United States principally to the business of the Bank. Before entering upon his duties each of the directors so appointed and each officer of
the Bank shall take an oath faithfully to discharge the duties of his office.
The terms of the appointed directors shall be 5 years, except that
the terms of the directors first appointed shall run from the date of appointment until June 30, 1950. Whenever a vacancy occurs among the directors so appointed, the person appointed to fill such vacancy shall hold
office for the unexpired portion of the term of the director whose place
he is selected to fill.
Each of the appointed directors shall receive a
salary at the rate of $12,000 per annum, unless he is an officer of the
Bank, in which event he may elect to receive the salary of such officer.
No director, officer, attorney, agent or employee of the Bank, shall in
any manner, directly or indirectly, participate in the deliberation upon
or the determination of any question affecting his personal interests, or
the interests of any corporation, partnership, or association in which he
is directly or indirectly personally interested.
(b) A majority of the Board of Directors shall constitute a quorum.
(c) The Board of Directors shall adopt such by-laws as
are necessary for the proper management and functioning of the ExportImport Bank of Washington, and may amend the same.
(d) There shall be an Advisory Board consisting of the
Chairman of the Export-Import Bank of Washington, who shall serve as
Chairman, the Secretary of State, the Secretary of the Treasury, the
Secretary of Commerce, and the Chairman of the Board of Governors of the
Federal Reserve System, which shall meet at the call of the Chairman.
The Advisory Board may make such recommendations to the Board of Directors as it deems advisable, and the Board of Directors shall consult the
Advisory Board on major questions of policy.
(e) Until October 31 > 19^-5> or until at least two of
the members of the Board of Directors to be appointed have qualified as
such directors, whichever is the earlier, the affairs of the Bank shall
continue to be managed by the existing Board of Trustees.
(f) The Export-Import Bank of Washington shall constitute an independent agency of the United States and neither the Bank
nor any of its functions, powers, or duties shall be transferred to or
consolidated with any other department, agency, or corporation of the
Government unless the Congress shall otherwise by law provide.
Sec. k
The Export-Import Bank of Washington shall have a cap-
ital stock of $1,000,000,000 subscribed by the United States. Payment
for $1,000,000 of such capital stock shall be made by the surrender to
the Bank for cancellation of the common stock heretofore issued by the
Bank and purchased by the United States. Payment for $17^,000,000 of
such capital stock shall be made by the surrender to the Bank for cancellation of the preferred stock heretofore issued by the Bank and purchased by the Reconstruction Finance Corporation.
Payment for the
$825,000,000 balance of such capital stock shall be subject to call at
any time in whole or in part by the Board of Directors of the Bank. For
the purpose of making payments of such balance, the Secretary of the
Treasury is authorized to use as a public-debt transaction the proceeds
of any securities hereafter issued under the Second Liberty Bond Act, as
amended, and the purposes for which securities may be issued under the
Act are extended to include such purpose. Payment under this section of
the subscription of the United States to the Bank and repayments thereof
shall be treated as public-debt transactions of the United States. Certificates evidencing stock ownership of the United States shall be issued by the Bank to the President of the United States, or to such other
person or persons as he may designate from time to time, to the extent of
the common and preferred stock surrendered and other payments made for
the capital stock of the Bank under this section.
Sec. 5 (&) The Secretary of the Treasury shall pay to the Reconstruction Finance Corporation the par value of the Preferred stock upon its surrender to the Bank for cancellation. For the purpose of making
such payments to the Reconstruction Finance Corporation the Secretary of
the Treasury is authorized to use as a public-debt transaction the proceeds of any securities hereafter issued under the Second Liberty Bond
Act, as amended, and the purposes for which securities may be issued un«
der that Act are extended to include such purpose. Payment under this
subsection to the Reconstruction Finance Corporation shall be treated as
public-debt transactions of the United States.
(b) Any dividends on the preferred stock accumulated
and unpaid to the date of its surrender for cancellation shall be paid to
the Reconstruction Finance Corporation by the Bank.
Sec. 6.
The Export-Import Bank of Washington is authorized to
issue from time to time for purchase by the Secretary of the Treasury its
notes, debentures, bonds, or other obligations; but the aggregate amount
of such obligations outstanding at any one time shall not exceed two and
one-half times the authorized capital stock of the Bank.
Such obliga-
tions shall be redeemable at the option of the Bank before maturity in
such manner as may be stipulated in such obligations and shall have such
maturity as may be determined by the Board of Directors of the Bank with
the approval of the Secretary of the Treasury. Each such obligation
shall bear interest at a rate determined by the Secretary of the Treasury, taking into consideration the current average rate on outstanding
marketable obligations of the United States as of the last day of the
month preceding the issuance of the obligation of the Bank. The Secretary of the Treasury is hereby authorized and directed to purchase any
obligations of the Bank issued hereunder and for such purpose the Secretary of the Treasury is authorized to use as a public-debt transaction
the proceeds of any securities hereafter issued under the Second Liberty
Bond Act, as amended, and the purposes for which securities may be issued under that Act are extended to include such purpose.
Payment under
this section of the purchase price of such obligations of the Bank and
repayments thereof by the Bank shall be treated as public-debt trans-
actions of the United States.
Sec. 7-
The Export-Import Bank of Washington shall not have
outstanding at any one time loans and guaranties in an aggregate amount
in excess of three and one-half times the authorized capital stock of
the Bank.
Sec. 8. Export-Import Bank of Washington shall continue to exercise its functions in connection with and in furtherance of its objects
and purposes until the close of business on June 30, 1953> "but the provisions of this section shall not be construed as preventing the Bank
from acquiring obligations prior to such date which mature subsequent to
such date or from assuming prior to such date liability as guarantor, endorser, or acceptor of obligations which mature subsequent to such date
or from issuing, either prior or subsequent to such date, for purchase by
the Secretary of the Treasury, its notes, debentures, bonds, or other obligations which mature subsequent to such date or from continuing as a
corporate agency of the United States and exercising any of its functions
subsequent to such date for purposes of orderly liquidation, including
the administration of its assets and the collection of any obligations
held by the Bank.
Sec. 9.
The Export-Import Bank of Washington shall transmit
to the Congress semi-annually a complete and detailed report of its operations.
The report shall be as of the close of business on June 30 and
December 31 of each year.
Sec. 10 Section 9 of the Act of January 31, 1935 (^9 Stat. k.
ch. 2 ) , as amended, is repealed.
Sec. 11 Notwithstanding the provisions of the Act of April 13,
193^ (I4.8 Stat., ch. 112, p. 57*0 > any person including any individual,
partnership, corporation, or association, may act for or participate
with the Export-Import Bank of Washington in any operation or transaction,
or may acquire any obligation issued in connection with any operator or
transaction, engaged in by the Bank.
Sec. 12. The Export-Import Bank of Washington created hereby
shall by virtue of this Act succeed to all of the rights and assume all
of the liabilities of Export-Import Bank of Washington, a District of
Columbia corporation, and any outstanding capital stock of the District
of Columbia corporation shall be deemed to have been issued by and shall
be capital stock of the corporation created by this Act and all of the
personnel, property, records, funds (including all unexpended balances
of appropriations, allocations, or other funds now available), assets,
contracts, obligations, and liabilities of the District of Columbia corporation are hereby transferred to, accepted, and assumed by the corporation created by this Act, without the necessity of any act or acts on the
part of the corporation created by this Act or of the District of Columbia corporation, their officers, employees, or agents or of any other department or agency of the United States to carry out the purposes hereof
and it shall be unnecessary to take any further action to effect the dissolution or liquidation of Export-Import Bank of Washington, a District
of Columbia corporation. The members of the Board of Directors of the
District of Columbia corporation, appointed pursuant to the provisions
of the Export-Import Bank Act of 19^5> shall, during the unexpired portion of the terms for which they were appointed, continue in office as
members of the Board of Directors of the corporation created by this Act.
(59 Stat. 526, 666; 6l Stat. 130.)
SOURCE: Senate Document #86 79th Congress 1st Session Page 55 ft•
APPENDIX D
STATEMENT OF CONDITION OF EXPORT-IMPORT BANK
AS OF DECEMBER 31, 19^5
ASSETS
Cash
$
Cash deposit with Reconstruction
Finance Corporation available
on demand
Loans:
Direct from Export-Import Bank
funds
From deposits "by participants
in loans without recourse on
Export-Import Bank (contra)
From advances "by private banks
under agency agreements with
Export-Import Bank (contra)
Total loans
55,156,260.27
$
11*2,38^,03^.15
6,981,223.77
102,889,739-66
252,254,997-58
Accrued interest
1,890,641.55
Other assets
1,276,197.03
155,039»89
Total assets
$310,733,136.32
181*
STATEMENT OF CONDITION OF EXPORT-IMPORT BANK
AS OF DECEMBER 31, 19^5 (continued)
LIABILITIES
Accounts payable
$
23,768.19
Collateral held for account of
borrowers
580,826,18
Loan advances by private banks
under agency agreements with
Export-Import Bank (contra)
102,889,739-66
Deposits by participants in loans
without recourse on Export-Import
Bank
6,981,223.77
Unallocated receipts from
participants
Capital stock:
Authorized
Less 2 to be issued to United
States Treasury
18,776.23
$1,000,000,000.00
825,000,000.00
Issued and outstanding
Undivided profits held as reserve
against future contingencies
Total liabilities
175,000,000.00
25,238,802.29
$310,733,136-32
NOTE.-- The undisbursed commitments (i.e., unutilized lines of credit
established under loan agreements) of the Export-Import Bank at the end
of 19^5 were $1,307,5^5,935.83.
SOURCE:
1st Report as of December 31, 19^5-
APPENDIX D
STATEMENT OF CONDITION OF EXPORT-IMPORT BANK
AS OF JUNE 30, 1946
ASSETS
Cash
$101,989,168.74
Loans:
Direct from Export-Import
Bank funds
Advances by private banks under
agency agreements with ExportImport Bank (contra)
$
608,275,821.40
125,923,481.93
Total loans
734,199,303-33
Deduct:
Deposits by
Participants
$7,000,000.00
Reserve for loss® 26,738,421,37
33,738,421.37
700,460,881.96
Accrued interest
4,073,566.28
Other assets
74,713.51
Total assets
$806,598,328.49
LIABILITIES
Accounts payable
$
Collateral held for account of
borrowers
333,712.87
Loan advances by private banks under
agency agreements with ExportImport Bank (contra)
Capital stock:
Authorized
Less: To be issued to United
States Treasury
125,923,481.93
$1,000,000,000.00
325,000,000.00
675,000,000.00
Issued and outstanding
Undivided profits
59,013.94
5,282,119.75
Total liabilities
$806,598,328.49
186
STATEMENT OF CONDITION OF EXPORT-IMPORT BANK
AS OF JUNE 30, 19^6 (continued)
NOTE.—The undisbursed commitments (i.e., unutilized lines of credit
established under loan agreements) of the Export-Import Bank at June 30,
19*16, were $1,953,172,019.61
Deposits by participants, disbursed without recourse to the Bank, were
shown under liabilities in the semi-annual report for the period ending
December 31, 19^5The reserve for losses on loans has been adjusted to a figure which,
in the opinion of the Board, reflects a satisfactory provision to June
30, 19^6. Thereafter, provision for losses will be charged against
operations semi-monthly at the rate of 2 percent per annum on outstanding loan balances.
SOURCE:
2nd Semi-Annual Report as of June 30, 19*4-6.
188
APPENDIX D
STATEMENT OF CONDITION OF EXPORT-IMPORT BANK OF WASHINGTON
AS OF DECEMBER 31, 19^6
ASSETS
Cash:
In United States Treasury
In hanks and on hand
Due from borrowers (without provision
for possible future losses on loans
currently in good standing):
Loans:
Reconstruction loans to foreign
governments
Other loans to finance exports
and imports (less $7,000,000
participation)
Total loans
Less loans advanced through
agent banks
Balance of loans made with
Export-Import Bank funds
Accrued interest on loans
Other amounts receivable
from borrowers
Less reserve for possible
losses on delinquent loans
Accounts receivable
Furniture and equipment, less
reserve for depreciation
Total assets
$
2,631,011.59
14^0,268.77
$
3,071,280.36
895,95^,697-00
3^5,705,352-11
1,2^1,660,0^9.11
182,193,165-37
1,059,^66.883.7^
8,558,930.55
51,890.93
1,068,077,705.22
282,761.97
1,067^79^,9^3.25
1,105.91
31,033-23
$1,070,898,362.75
STATEMENT OF CONDITION OF EXPORT-IMPORT BANK OF WASHINGTON
AS OF DECEMBER 31, 19^6 (continued)
LIABILITIES
Accounts payable:
To departments and agencies
of the United States Government
To others
$
32,812.59
12,525.36
Deposits by borrowers subject to
refund or application on loans
$
^5,337-95
313,776.79
Contingent liabilities%
Loans advanced through agent
banks $182,193,165-37
Unused balances of guaranteed
letters of credit outstanding
$^6,078,270.77
Notes payable
Capital and surplus:
Capital stock authorized and
subscribed by the United States
Government
Earned surplus reserved for
future contingencies
Total liabilities
26,500,000.00
1,000,000,000.00
^,039,2^8.01
1,0^,039,2^8.01
$1,070,898,362.75
NOTE.--The undisbursed authorization (i.e., unutilized lines of credit
established under loan agreements of the Export-Import Bank at December
31, 19^6), were $1,339,^5,167.0^.
APPENDIX D
STATEMENT OF CONDITION OF EXPORT-IMPORT BANK
AS OF JUNE 30,19^7
ASSETS
Cash:
In United States Treasury
In banks and on hand
Due from borrowers (without provision for possible future losses
on loans currently in good
standing):
Loans s
Reconstruction loans to
foreign governments
Other loans to finance
exports and imports (less
$7,000,000 participation)
Total loans
Less loans advanced through
agent banks
Balance of loans made with
Export-Import Bank funds
Accrued interest on loans
Other amounts receivable from
borrowers
Less reserve for possible
losses on delinquent loans
Accounts receivable
Furniture and equipment, less
reserve for depreciation
Total assets
$
5,778,^36.75
178,566.21
$
5.957,002.96
l,37^j366,699.55
376,5^3,789.11
1,750,910,1+88.66
192,835,^79>75
1,558,075,008.91
1^,6*4-9,912.10
79,531*^
1,572,804, JJ-52.1J-5
272,898.09
1,572,531,55^-36
8,689.58
^7,525.35
$1,578,5^,772.25
STATEMENT OF CONDITION OF EXPORT-IMPORT BANK
AS OF JUNE 30, 19^7 (continued)
LIABILITIES
Accounts payable:
To departments and agencies
of the U.S. Government
To others
$
32,339-^9
35,313-15
Deposits by borrowers subject to
refund or application on loans
Contingent liabilities:
Loans advanced through agent
banks $192,835,^79-75
Unused balance of guaranteed
letters of., credit outstanding
$50,650,012.86
Notes payable
Capital and surplus:
Capital stock authorized and
subscribed by the U.S.
Government
Earned surplus reserved for
future contingencies
Total liabilities
$
67,652.61*
2^8,238.53
516,200,000.00
1,000,000,000.00
62,028,881.08
1,062,028,881.08
$1,578,5^,772.25
NOTE.--Credits authorized by the Bank including unused balances of
guaranteed letters of credit, which had not been disbursed at June 30,
19^7 - $938,635,816.07.
192
APPENDIX D
STATEMENT OF CONDITION OF EXPORT-IMPORT BANK
AS OF DECEMBER 31, 19^7
ASSETS
Cash:
In United States Treasury
In "banks and on hand
Due from borrowers ("without provision
for possible future losses on loans
currently in good standing):
Loans:
Reconstruction loans to foreign
governments
Other loans to finance exports
and imports (less $7,000,000
participation)
Total loans
Less loans advanced through
agent banks
Balance of loans made with
Export-Import Bank funds
Accrued interest on loans
Other amounts receivable
from borrowers
Less reserve for possible losses
on delinquent loans
Accounts receivable
Furniture and equipment, less
reserve for depreciation
Total assets
$
8, iVf, 597-09
321,2^^1 $
8,^68,8^2.50
1, 5^5,7^0,566«kl
k0k,991: ,866.62
1,970,738,1*33.03
186,932;,184.62
1,783,806,2^8.kl
19,678,010.90
25,978.36
1,803,510,237.67
273,000-05
1,803,237,237.62
3,137-15
W>,666.28
$1,811,755,883.55
STATEMENT OF CONDITION OF EXPORT-IMPORT BANK
AS OF DECEMBER 31, 19^7 (continued)
LIABILITIES
Accounts payables
To Departments and agencies
of the U.S. Government
To others
$
1*2,81*8.76
21,gl0A8
Deposits by borrowers subject to
refund or application on loans
$
6k,359-2^
100,600.52
Contingent liabilities:
Loans advanced through agent
banks $186,932,18*K 62
Unused balance of guaranteed
letters of credit outstanding
$22,620,7^3.61
Notes payable
Capital and surplus:
Capital stock authorized and
subscribed by the U.S» Government
Earned surplus reserved for
future contingencies
Total liabilities
728,350,000.00
1,000,000,000.00
83,21*0,923*79
1,083,2^0,923-79
$1,811,755,883-55
NOTE.--Credits authorized by the Bank including unused balances of guaranteed letters of credit, which had not been disbursed to Dec. 31, 19^7,
$1,032,019,221.21.
19^
APPENDIX D
STATEMENT OF CONDITION OF EXPORT-IMPORT BANK
AS OF JUNE 30, I9U8
ASSETS
Cash:
In United States Treasury
In banks and on hand
$
116,877.82
120,557.36 $
237,^35-18
Due from borrowers (without provision for possible future losses
on loans currently in good
standing)'.
Loans:
Reconstruction loans to
foreign governments
Other loans to finance exports
and imports (less $7,000,000
participation)
Total loans
Less loans advanced through
agent banks
Balance of loans made with
Export-Import Bank funds
Accrued interest on loans
Other amounts receivable from
borrowers
Less reserve for possible losses
on delinquent loans
1,638,226,4^5.18
591,172,525-31
2,229,398,970.^9
175,087,614.00
2,05^,311,356.k9
23,325,582.27
659 »70
2,077,637,598.46
264,651.84
2,077,372,9^6.62
Accounts receivable
87,009.25
Furniture and equipment, less
reserve for depreciation
52,864.12
Total assets
$2,077,750,255.17
STATEMENT OF CONDITION OF EXPORT-IMPORT BANK
AS OF JUNE 30, 19^8 (continued)
LIABILITIES
Accounts payable:
To departments and agencies
of the U.S. Government
To others
$
3^,358.70
13,112-36
Deposits by borrowers subject to
refund or application on loans
$
V7,V71.06
1*4-2,728.85
Contingent liabilities:
Loans advanced through agent
banks $175,087,61^.00
Unused balances of guaranteed
letters of credit outstanding
$15,9^,01*7.57
Notes payable
Capital and surplus:
Capital stock authorized and
subscribed by the U.S.
Government
Earned surplus reserved for
future contingencies
Total liabilities
970,600,000.00
1,000,000,000.00
106,960,055-26
1,106,960,055-26
$2,077,750,255-17
NOTE: Credits authorized by the Bank, including unused balances of
guaranteed letters of credit, which had not been disbursed to June 30,
1 9 W , amounted to $61+2,677,558.81,
196
APPENDIX D
STATEMENT OF CONDITION OF EXPORT-IMPORT BANK
AS OF DECEMBER 31, 19^8
ASSETS
Cash:
In United States Treasury
In hanks and on hand
$
331,68*^59
126,021.69
$
k51,106.28
Due from borrowers (without provision for possible future losses
on loans currently in good
standing):
Loansi
Reconstruction loans to foreign
governments
Other loans to finance exports
and imports (less $7,000,000
participation)
Total loans
Less loans advanced through
agent banks
Balance of loans made with
Export-Import Bank funds
Accrued interest on loans
Other amounts receivable
from borrowers
Less reserve for possible
losses on delinquent loans
Accounts receivable
Furniture and equipment, less
reserve for depreciation
Total assets
1,652,372,079-90
^86,101,529-53
2,138,^73,609-^3
122,363,66l<,26
2,0l6,109,9^8.17
22,253,293.24
533-12
2,038,363,77^.53
259,8^2.98
2,038,103,931.55
8,316.33
5^>679,09
$2,038,62iv,633.25
STATEMENT OF CONDITION OF EXPORT-IMPORT BANK
AS OF DECEMBER 31, 19^8 (continued)
LIABILITIES
Accounts payable:
To departments and agencies
of the U.S. Government
To others
$
57,528.1*2
2,661.83
Deposits by borrowers subject to
refund or application on loans
$
60,190.25
115,^OM-.36
Contingent liabilities:
Loans advanced through agent
banks, $122,363,661.26
Unused balance of guaranteed
letters of credit outstanding,
$21,1*37,^35^9
Notes payable
Capital and surplus:
Capital stock authorized and
subscribed to by the U.S.
Government
Earned surplus reserved for
future contingencies
Total liabilities
907,800,000.00
1,000,000,000.00
130,6^9,038.6^
1,130,6^9,038.6^
2,038,62^,633.25
NOTE.—Credits authorized by the bank, including unused balances of
guaranteed letters of credit, which had not been disbursed to December
31, 19^8, amounted to $39M89,379.25-
APPENDIX D
STATEMENT OF CONDITION OF EXPORT-IMPORT BANK
AS OF DECEMBER 31, 19^9
ASSETS
Cash:
In United States Treasury
In banks and on hand
$
531,300.90
26k,752.kQ
$
796,053-38
Due from borrowers (without provision for possible future losses
on loans currently in good
standing)i
Loans;
Reconstruction loans to
foreign governments
Other loans to finance exports and imports (less
* 17,000,000 participation)
Total loans
Less loans advanced through
agent banks
Balance of loans made with
Export-Import Bank funds
Disbursements to borrowers
for account of ExportImport Bank by commercial
banks, in transit
Accrued interest on loans
1,638,230,092.30
5^1,355,l8l»22
2,179.585,273.52
100,1*79,7^1.87
2,079,105,531-65
11,077,802.68
22,5^-9,038.38
2,112,732,372-71
Less reserve for possible
losses on delinquent loans
Accounts receivable
Furniture and equipment, less
reserve for depreciation
Total assets
250,637-50
2,112,kQl,735-21
823.25
38,611.03
$2,113,317,222.87
STATEMENT OF CONDITION OF EXPORT-IMPORT BANK
AS OF DECEMBER 31, 19^9 (continued)
LIABILITIES
Accounts payable:
To departments and agencies of
the U.S. Government
To others
$
36,397-83
21,718-7^ $
58,116-57
Deposits by borrowers subject to
refund or application on loans
275,7^-15
Accrued interest payable to U.S.
Treasury
6,113,06l.79
Liability to commercial banks for
advances to borrowers, in transit
11,077*802.68
Contingent liabilities;
(i)
Loans advanced through agent banks
Guaranteed letters of credit
Reserve for employeesf accrued
annual leave
Investment of the U.S. Government:
Notes payable to U*S. Treasury
Capital stock held by U.S.Treasury
Earned surplus reserved for future
contingencies^
100,479,7^1.87
32,08*4-,958.77
1^6,712.^1
917,000,000.00
1,000,000,000.00
178,6^5,785-27
Total liabilities
2,095,6^5,785-27
$2,113,317,222,87
(1) Credits authorized by the Bank, including guaranteed letters of
credit, which had not been disbursed to December 31, 19^9 amounted to
$1*31,211*, 575.36.
(2) Had the Bank paid interest and dividends, since its formation in
193*}-, on all public funds used by it, both in the form of borrowings and
capital stock, at a rate representing the average cost of those funds to
the U.S. Treasury, surplus earned on behalf of the U.S. Government as a
whole would have amounted to $105,065,009 millions as of December 31,
191*9.
SOURCE: 9th Semi-Annual Report as of December 31, 19^9-
APPENDIX E
STATEMENT OF INCOME AND EXPENSES OF EXPORT-IMPORT BANK
DURING 6 MONTHS ENDED DECEMBER 31, 19^5
Income:
Interest received on loans made direct
from Export-Import Bank funds
Export-Import Bank share of interest
received on loans made by private
banks under agency agreements with
Export-Import Bank
Interest on deposits, commissions, etc.
$1,989,56^7
1,2*4-0,810.06
3^,828.59
(Dc
''$3,575,203.12
l
Total income
Operating expenses:
Salaries and services
Office rent
Other administrative and office expense
Depreciation on furniture and fixtures
l60,05lAl
10,7*4-8.kO
^,209.12
63^.08
Total operating expenses
Net gain transferred to undivided profits held
as a reserve against future contingencies
(2; 175,643.01
$3,399,560.11
(1)
This figure, which represents interest actually received during the
period, differs from the"Collection of Interest," shown in Appendix I,
which Includes interest accrued prior to July 1, 19^5, amounting to
$575,^88.
(2)
'This figure, which represents expenses actually paid during the
period, differs from "Administrative Expenses," shown in Appendix I,
which Includes also obligations incurred during the period.NOTE.--The net gain shown in the statement does not reflect the cost of
the public funds used by the Export-Import Bank. The average rate of interest on the United States public debt is slightly under 2 percent per
annum. The bank paid this rate during the period between July 1, 19*4-5,
and September 30, 19^5, in the form of a dividend on its preferred stock
held by the Reconstruction Finance Corporation. The amount so paid was
$870,000, or 2 percent on $171*,000,000 for ninety days. If a similar
allowance were made for the funds used by the bank during the last three
months of the year in the form of capital stock subscribed by the
Treasury, the total approximate cost of public funds used during the
last half of 19^5 would be $1,7*4-5,000. If this cost of public funds
had been reflected in the statement, there would have been shown a net
gain of $1,65^,560.11 remaining to be held as a reserve against future
contingencies. This amount represents an annual return of nearly 1„5
percent on the average volume of loans outstanding during the period.
SOURCE:
1st Semi-Annual Report as of December 31, 19^5200
201
APPENDIX E
STATEMENT OF INCOME AND EXPENSES OF EXPORT-IMPORT BANK
DURING 6 MONTHS ENDED JUNE 30, 19^6
Income:
Interest received on loans made direct
from Export-Import Bank funds
Share of Interest received on loans
made by private banks under agency
agreements with Export-Import Bank
Commissions, etc.
Total income
$lf, 873,0^3-76
1,^05,78^.36
15,112.9*1
$6,293,9^-1.06
Less: Operating expenses - Administrative
expenses
(l) 296,551*19
Operating profit
Less: Other deductions - Provision for
losses on loans
Net profit carried to undivided
profits
5,997,389-87
(2)
k,k22,6'jk.I'$
$1,57^715.7^
' 'This figure, which represents expenses actually paid during the
period, differs from "Administrative expenses," shown in appendix K,
which includes also obligations incurred during the period.
(o)
K
'Reserve of $6,738,^21.37 was established as of June 30, 19^6, for
the entire fiscal year, of which $2,315,7^7.24 was applicable to the
semi-annual period ended December 31* 19^5.
APPENDIX E
STATEMENT OF INCOME AND EXPENSES OF EXPORT-IMPORT BANK
DURING 12 MONTHS ENDED JUNE 30, 19^7
Income:
Interest on loans(including
commissions):
Loans made with Export-Import
Bank funds
Loans advanced through agent banks
$28,691,939-98
3>6l7,087-51
Total income
Lesss Operating expenses:
Administrative expenses
Interest paid on notes issued to
U.S. Treasury
Total operating expenses
Operating profit
Less: Other deductions - Provision for
possible losses on delinquent loans
Net profit transferred to earned
surplus reserved for future
contingenc ies
$32,309,027.^9
726,682.40
l,300,V71.2li
2,027,153-6*130,281,873.85
272,898.09
$30,008,975-76
APPENDIX E
STATEMENT OF INCOME AND EXPENSES OF EXPORT-IMPORT BANK
DURING 6 MONTHS ENDED DECEMBER 31, 19^6
Incomes
Interest on loans made direct from
Export-Import Bank funds
$10,901,857-32
Share of interest on loans made by
private banks under agency agreements
with Export-Import Bank
1,719,684083
Commissions, etc.
19,7^3«8l
Total income
Less: Operating expenses:
Administrative expenses
Interest paid on notes issued to
United States Treasury
Total operating expenses
Operating profit
Less: Other deductions - Provision for possible losses on delinquent loans
Net profit carried to earned surplus
reserved for future contingencies
$12,641,285.96
338,530.47
733-70
339,264.17
12,302,021.79
282,761.87
$12,019,259.92
APPENDIX E
STATEMENT OF INCOME AND EXPENSES OF EXPORT-IMPORT BANK
DURING 6 MONTHS ENDED DECEMBER 31, 19^7
Income:
Interest on loans (including
commissions):
Loans made with Export-Import
$22, 9^3,28*K 68
Bank funds
Loans advanced through agent hanks
1,836,223*30
Total income
Less: Operating expenses:
Administrative expenses
Interest paid on notes issued to
U.S. Treasury
Total operating expenses
Operating profit
Add: Other income:
Recovery of principal and interest
on loans in default
Less: Other deductions:
Provision for possible losses on
delinquent loans
Net profit transferred to earned surplus
reserved for future contingencies
$2^,779,507.98
367,52^.15
3,199,839-16
3,567,363*31
21,212, iV*-. 67
30,275.40
21 ,242,420.07
30,377.36
$21,212,0^2.71
APPENDIX E
STATEMENT OF INCOME AND EXPENSES OF EXPORT-IMPORT BANK
DURING 12 MONTHS ENDED JUNE 30, 19^8
Income:
Interest on loans (including
commissions):
Loans made with Export-Import
Bank funds
Loans advanced through agent banks
$50,993,5^0.52
3,^25,313.25
Total income
Less: Operating expenses:
Administrative expenses
Nonadministrative expenses
Interest paid on notes to U.S. Treasury
Total operating expenses
Operating profit
Add: Other income:
Recovery of principal and interest on
loans in default
Less: Other deductions:
Provision for possible losses on
delinquent loans
Net profit transferred to earned
surplus reserved for future
contingencies
$5^,^18,853-77
7^-8,299.90
*S791.60
8,7^2,831*-.3^
9^95,925-8^
Ml,922,927.93
38,623.61
44,961,551.5^
30,377.36
$kk,931,17^.18
APPENDIX E
STATEMENT OF INCOME AND EXPENSES OF EXPORT-IMPORT BANK
DURING 6 MONTHS ENDED DECEMBER 31, 19^8
Income:
Interest on loans (including
commissions):
Loans made with Export-Import
.Bank funds
$29,069,393.23
Loans advanced through agent banks
1,1^1,77Q * 17
Total income
$30,211,163^0
Less: Operating expenses:
Administrative expenses
^3^-^007.87
Nonadministrative expenses
121.88
Interest paid on notes to U.S. Treasury 6,089,736,k%
Total operating expenses
Operating profit
Add: Other income:
Recovery of principal and interest
on loans in default
Net profit transferred to earned surplus
reserved for future contingencies
6,$23,866.18
23,687,297.22
*J-,8o8.86
23,692,106.08
APPENDIX E
COMPARATIVE STATEMENT OF INCOME AND EXPENSES OF EXPORT-IMPORT BANK
FOR THE 6-MONTH PERIOD ENDED DECEMBER 31, 19^9
Income*
Interest on loans (including
commissions):
Loans made with Export-Import
Bank funds
Loans advanced through agent banks
$29,816,136.93
990,105-?8
Total income
Less: Operating expenses:
Administrative expenses
Nonadministrative expenses
Interest paid on notes to U.S. Treasury
$30,806,2^2.71
413,3^1•05
35^-86
6,193,788.69
Total operating expenses
Operating profit
Add: Other income:
Recovery of principal and interest on
loans in default
Profit on sale of equipment
Net profit transferred to earned surplus
reserved for future contingencies'1'
6,607,WK6O
21+, 198,758.11
k,977.1^
122.85
2^,203,858.10
^ Net earnings are computed after deducting operating expenses and
The actual amount of interest paid on funds borrowed from the U.S.
Treasury and represent net earnings as shown on the books of the Bank.
No dividends are being paid on capital stock, since all net earnings
are being reserved for future contingencies. Had the Bank paid interest
and dividends to the Treasury on all funds advanced by the Treasury,
both in the form of borrowings and capital stock at a rate representing
the average cost of those funds to the Treasury, net earnings of the
Bank, on behalf of the U.S. Government as a whole, would have amounted
to $13,637^83.10 for the 6 months ended December 31, 19^9•
SOURCE:
9th Semi-Annual Report as of December 31, 19^9.
APPENDIX F
EXPORT-IMPORT BANK OPERATIONS, BY COUNTRIES
(In thousands of dollars)
Country
Total credits
authorized
from Feb.
12,1934, to
Dec. 31,
19^9
Balances outstanding as of
December 31, 1949
Undisbursed
authorizations
Outstanding
loans
LATIN AMERICA
Argentina
Bolivia
Brazil
Chile
Colombia
Costa Rica
Cuba
Dominican Republic
Ecuador
Haiti
Honduras
Mexico
Nicaragua
Panama
Paraguay
Peru
Salvador
Uruguay
Venezuela
Various
Total Latin America
174
93,690
36,998
287,502
l4l,631
65,280
8,723
90,367
3,300
27,617
17,350
2,700
155,693
5,235
6,500
7,800
37,450
1,726
43,726
52>97
118,983
7,495
19,605
1,20^,768
160,086
21,000
221,737
16,000
21,000
16,070
9,147
43,654
17,431
18,654
100,283
56,497
22,303
6,577
10,567
13,202
4,000
10,833
4,938
28,399
77,721
1,522
1,124
4,044
354
323
876
306
971
207
13,570
3,730
334,491
ASIA
Afghanistan
China
India
Iran
Iraq
Israel
Japan
Netherlands Indies
Philippine Islands
Saudi Arabia
Turkey
100,000
51,445
100,000
25,850
34,000
46,328
13,266
8,000
17,360
Total Asia
617,590
167,706
74,54l
15,391
36,980
92,691
7,309
4,892
1,130
100
208
21,108
250
4,000
EXPORT-IMPORT BANK OPERATIONS, BY COUNTRIES (continued)
Country
(in thousands of dollars)
Balances outstanding as of
Total credits
authorized
December 31, 1949
from Feb.
12, 1934, to
Undisbursed
Dec. 31,
authorizaOutstanding
tions
loans
19^9
EUROPE
Austria
Belgium
C ze choslovakia
Denmark
Finland
France
Germany
Greece
Hungary
Iceland
Italy
Latvia
Netherlands
Norway
Poland
Portugal
Rumania
Spain
Sweden
United Kingdom
Yugoslavia
Cotton credit unallocated
Total Europe
14,255
132,000
23,729
30,000
135,105
1,200,000
7,603
25,000
2,375
1,000
151,181
1,903
209,878
61,000
52,907
5,500
12,342
112,092
5,124
20,000
98,378
1,140,235
14,563
22,644
84,181
186,814
48,611
43,301
50
15,073
17,155
22,500
20,518
38,444
20,000
38,444
2,167,176
86,212
1,616
1,762,133
OTHER COUNTRIES
Australia
Canada
Egypt
Ethiopia
Jamaica
Liberia
Portuguese West Africa
Puerto Rico
Virgin Islands
Total other countries
Various
Grand Total
1,400
369,965
4,325
675
7,100
181
6,919
3,500
25
2,250
750
4,000
4,000
300
450
250
32
386,990
10,756
8,376
15,026
6,455
45
4393,550
431,215
SOURCE: 9th Semi-Annual Report as of December 31> 19^9•
2,179,586
APPENDIX G
SCHEDULE OF MATTOITIES
(In thousands of dollars)
Calendar year
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
i960
1961
1962
1963
196k
1965
1966
1967
1968
1969
1970
1971
1972
1973
197'+
1975
1976
Principal
$ 135,715
133,908
161,631
123,370
114,251
106,035
103,238
97,93^
9^,539
86,5*1-6
83,561
8o,U6o
80,656
81,509
82,620
81,802
69,663
67,296
73,169
71,019
70,2^6
68,53J+
23,4o4
23,4o4
23,404
23,404
$2,177,643
16,323
Interest
$
63,311
60,487
56,729
50,952
47,041
^3,595
40,294
37,116
33,921
31,082
29,5^6
26,072
23,6-!+l
21,220
IQ/J&h
16,279
13,910
11,93?
10,025
8,066
6,092
Hli3
2,544
.1,970
1,401
833
279
$661,240
Total
$
199,026
194,395
218,360
17k,322
161,292
149,630
143,532
135,050
128,460
117,628
113,107
106,532
104,297
102,729
101,404
98,081
83,573
79,235
83,194
79,085
76,338
72,647
25,9^8
25,37^
24,805
24,237
16,602
$2,838,883
Exclusive of delinquent loans totaling $1,692,000.00 and loans fully
reserved of $250,175-70.
SOURCE:
9th Semi-Annual Report as of December 31, 191*9.
210
APPENDIX H
,OMS DISBURSED BY COMMERCIAL BANKS AS AGENTS
Balance
Outstanding
(in thousands
of dollars)
Bank:
American Security and Trust Co., Washington
Bank of America, San Francisco
Bank of the Manhattan Co., New York
Bank of New York, New York
Brown Bros., Harriman & Co., New York
California Bank, Los Angeles
Central Hanover Bank & Trust Co., New York
Central National Bank, Cleveland
Chase National Bank, New York
Chemical Bank & Trust Co., New York
Commercial National Bank & Trust Co„, New York
Continental Illinois National Bank & Trust Co., Chicago
Corn Exchange National Bank & Trust Co., Philadelphia
Farmers & Merchants National Bank, Los Angeles
First National Bank of Boston
First National Bank of Chicago
First National Bank of Mobile
Grace National Bank, New York
Guaranty Trust Co., New York
Hibernia National Bank, New Orleans
Industrial Trust Co., Providence
Irving Trust Co,, New York
Manufacturers & Traders Trust Co., Buffalo
Manufacturers Trust Co., New York
Mercantile-Commerce Bank & Trust Co., St. Louis
Morgan 8c Co., Inc., J.P., New York
National City Bank, Cleveland
National City Bank, New York
National Shawmut Bank, Boston
Pacific National Bank, Seattle
Pan American Trust Co., New York
Peoples First National Bank & Trust Co., Pittsburgh
Philadelphia National Bank, Philadelphia
Schroder Banking Corp., New York
Seattle First National Bank, Seattle
State-Planters Bank & ^rust Co., Richmond
Wells Fargo Bank & Union Trust Co., San Francisco
Whitney National Bank, New Orleans
6
10,142
4o
60
2,770
100
3,221
100
600
1,955
23,009
1*0
1+0
100
1,133
2,248
157
156
I.36
156
204
100,480
Grand total
SOURCE:
235
296
5,517
2,000
1,000
196
682
2,051
15,9^0
13A59
100
3;,269
1.,018
48
5,549
2,61*7
200
9th Semi-Annual Report as of December 31, 19^9•
211
APPENDIX
I
SECTIONS OF THE BRETTON WOODS AGREEMENTS ACT RELATING
TO THE
NATIONAL ADVISORY COUNCIL
(59 Stat. 512; 22 U. S. C.286b)
AS AMENDED
NATIONAL ADVISORY COUNCIL
ON
INTERNATIONAL MONETARY AND FINANCIAL PROBLEMS
Sec. k (a) In order to coordinate the policies and operations of
the representatives of the United States on the Fund and the Bank and
of all agencies of the Government which make or participate in making
foreign loans or which engage in foreign financial, exchange or monetary transactions, there is hereby established the National Advisory
Council on International Monetary and Financial Problems (hereinafter
referred to as the "Council"), consisting of the Secretary of the
Treasury, as Chairman., the Secretary of State, the Secretary of Commerce, the Chairman of the Board of Governors of the Federal Reserve
System, and the Chairman of the Board of Directors of the Export-Import
Bank of Washington.
212
(b) (1) The Council, after consultation with the representatives of the United States on the Fund and the Bank, shall recommend to
the President general policy directives for the guidance of the representatives of the United States on the Fund and the Bank.
(2) The Council shall advise and consult with the President and the representatives of the United States on the Fund and the
Bank on major problems arising in the administration of the Fund and the
Bank.
(3) The Council shall coordinate, by consultation or
otherwise, so far as is practicable, the policies and operations of the
representatives of the United States on the Fund and the Bank, the
Export-Import Bank of Washington and all other agencies of the Government to the extent that they make or participate in the making of foreign loans or engage in foreign financial, exchange or monetary transactions.
(k)
Whenever, under the Articles of Agreement of the
Fund or the Articles of Agreement of the Bank, the approval, consent or
agreement of the United States is required before an act may be done by
the respective institutions, the decision as to whether such approval,
consent, or agreement shall be given or refused shall (to the extent
such decision is not prohibited by section 5 of this Act) be made by
the Council under the general direction of the President. No governor,
executive, director, or alternate representing the United States shall
vote in favor of any waiver of condition under article V, section k, or
in favor of any declaration of the United States dollar as a scarce currency under article VII, section 3> of the Articles of Agreement of the
Fund, without prior approval of the Council.
(5) The Council from time to time, but not less frequent-
ly than every six months, shall transmit to the President and to the
Congress a report with respect to the participation of the United States
in the Fund and the Bank.
(6) The Council shall also transmit to the President
and to the Congress special reports on the operations and policies of
the Fund and the Bank, as provided in this paragraph. The first report
shall be made not later than two years after the establishment of the
Fund and the Bank, and a report shall be made every two years after the
making of the first report. Each such report shall cover and include:
The extent to which the Fund and the Bank have achieved the purposes for
which they were established; the extent to which the operations and policies of the Fund and the Bank have adhered to, or departed from, the
general policy directives formulated by the Council, and the Council's
recommendations in connection herewith; the extent to which the operations and policies of the Fund and the Bank have been coordinated, and
the Council's recommendations in connection therewith; recommendations
on whether the resources of the Fund and the Bank should be increased or
decreased; recommendations as to how the Fund and the Bank may be made
more effective; recommendations on any other necessary or desirable
changes in the Articles of Agreement of the Fund and of the Bank or in
this Act; and an over-all appraisal of the extent to which the operations and policies of the Fund and the Bank have served, and in the future may be expected to serve, the interests of the United States and
the world in promoting sound international economic cooperation and
furthering world security.
(7) The Council shall make such reports and recommendations to the President as he may from time to time request, or as the
council may consider necessary to more effectively or efficiently
accomplish the purposes of this Act or the purposes for which the
Council is created.
(c) The representatives of the United States on the Fund
and the Bank, and the Export-Import Bank of Washington (and all other
agencies of the Government to the extent that they make or participate
in the making of foreign loans or engage in foreign financial, exchange
or monetary transactions) shall keep the Council fully informed of
their activities and shall provide the Council with such further information or data in their possession as the Council may deem necessary to
the appropriate discharge of its responsibilities under this Act.
FURTHER PROMOTION OF INTERNATIONAL ECONOMIC RELATIONS
Sec. Ik.
In the realization that additional measures of interna-
tional economic cooperation are necessary to.facilitate the expansion
and balanced growth of international trade and render most effective the
operations of the Fund and the Bank, it is hereby declared to be the policy of the United States to seek to bring about further agreement and
cooperation among nations and international bodies, as soon as possible,
on ways and means which will best reduce obstacles to and restrictions
upon international trade, eliminate unfair trade practices, promote mutually advantageous commercial relations, and otherwise facilitate the
expansion and balanced growth of international trade and promote the
stability of international economic relations. In considering the policies of the United States in foreign lending and the policies of the
Fund and the Bank, particularly in conducting exchange transactions, the
Council and the United States representatives on the Fund and the Bank
shall give careful .consideration to the progress which has been made in
achieving such agreement and cooperation.
FOREIGN ASSISTANCE ACT OF 19^8
(62 Stat. 169J 22 U.S.C. 286b (a). 1509, 1513)
Sec. 106. Section k (a) of the Bretton Woods Agreements Act (59
Stat. 512, 513) is hereby amended to read as follows:
"Sec. k.
(a) In order to coordinate the policies and operations of
the representatives of the United States on the Fund and the Bank and of
all agencies of the Government which make or participate in making foreign loans or which engage in foreign financial, exchange or monetary
transactions, there is hereby established the National Advisory Council
on International Monetary and Financial Problems (hereinafter referred
to as the "Council11), consisting of the Secretary of the Treasury, as
Chairman, the Secretary of State, the Secretary of Commerce, the Chairman of the Board of Governors of the Federal Reserve System, the Chairman of the Board of Directors of the Export-Import Bank of Washington,
and during such period as the Economic Cooperation Administration shall
continue to exist, the Administrator for Economic Cooperation.'1
APPENDIX
J
Section 111 (c) (2) of Foreign Assistance Act of 19^8,
62 Stat. 137
(2) When it is determined that assistance should be extended under
the provisions of this title on credit terms, the Administrator shall
allocate funds for the purpose to the Export-Import Bank of Washington,
which shall, notwithstanding the provisions of the Export-Import Bank
Act of 19^5 (59 Stat.526), as> amended, make and administer the credit
on terms specified by the Adiiiinistrator in consultation with the National Advisory Council on International Monetary and Financial Problems.
The Administrator is authorized to issue notes from time to time for purchase by the Secretary of the Treasury in an amount not exceeding in the
aggregate $1,000,000,000 (i) for the purpose of allocating funds to the
Export-Import Bank of Washington under this paragraph during the period
of one year following the date of enactment of this Act and (ii) for the
purpose of carrying out the provisions of paragraph (3) of subsection (b)
of this section until all liabilities arising under guaranties made pursuant to such paragraph (3) have expired or have been discharged.
Such
notes shall be redeemable at the option of the Administrator before maturity in such manner as may be stipulated in such notes and shall have
such maturity as may be determined by the Administrator with the approval
217
218
of the Secretary of the Treasury. Each such note shall "bear interest at
a rate determined by the Secretary of the Treasury, taking into consideration the current average rate on outstanding marketable obligations of
the United States as of the last day of the month preceding the issuance
of the note. Payment under this paragraph of the purchase price of such
notes and re-payments thereof by the Administrator shall be treated as
public-debt transactions of the United States. In allocating funds to
the Export-Import Bank of Washington under this paragraph, the Administrator shall first utilize such funds realized from the sale of notes
authorized by this paragraph as he determines to be available for this
purpose, and when such funds are exhausted, or after the end of one year
from the date of enactment of this Act, whichever is earlier, he shall
utilize any funds appropriated under this title. The Administrator
shall make advances to, or reimburse, the Export-Import Bank of Washington for necessary administrative expenses in connection with such
credits.
Credits made by the Export-Import Bank of Washington with
funds so allocated to it by the Administrator shall not be considered
in determining whether the Bank has outstanding at any one time loans
and guaranties to the extent of the limitation imposed by section 7 of
the Export-Import Bank Act of 19^5 (59 Stat. 526) as amended.
Amounts
received in repayment of principal and interest on any credits made under this paragraph shall be deposited into miscellaneous receipts of the
Treasury:
Provided, That to the extent required for such purpose,
amounts received in repayment of principal and interest on any credits
made out of funds realized from the sale of notes authorized under this
paragraph shall be deposited into the Treasury for the purpose of the
retirement of such notes.
BIBLIOGRAPHY
Books
Borton - Dominick - Lamberton. Private Trade in Foreign Aid.
Michie Co. Washington, D. C. 19^8.
Buchanan, Norman S. and Lutz, Frederick A. Rebuilding the World
Economy. The Twentieth Century Fund. New York. 19^7Campbell, John C. and others. The United States in World Affairs.
lykj-kj;
19^7-48; 19^8-^9- Council on Foreign Relations. Harper and
Bros. New York.
Chandler, Lester V. The Economics of Money and Banking.
and Bros. New York. 19^8.
Harper
Fairchild, Furniss and Buck. Economics. The Macmillan Co. New
York. 19W.
Faulkner, Harold U.
New York. I9I43.
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@FedFRASER