amendment, I shall take less than 1 minute. It may be that the distinguished chairman of the Foreign Relations Committee [Mr. FULBRIGHT] will not object to the insertion of this amendment in the bill. On the other hand, it can be truthfully stated that the pending bill does not provide military assistance for Generalissimo Franco's Spain. This This amendment pins that prohibition down definitely and simply provides that

No military assistance shall be furnished under this Act to the Government of Spain. No other provision of this Act shall be construed to anthorize the President to waive the provisions of this section. The provisions of this section shall not be construed to prohibit sales to the Government of Spain of defense articles or services under section

507.

I hope the chairman will agree to accept the amendment, and that the

amendment will be adopted.

Mr. FULBRIGHT. Mr. President, I

regret that I cannot accept the amendment. Everyone knows that we have had an agreement with Spain regarding very important base arrangements. Military assistance has been given to Spain

primarily for that purpose in recent years. That was the only reason why we concluded an agreement dealing with the bases.

I could not possibly accept the amendment, much to my regret. I wish I could I wish I could accept it, but I oppose the amendment. If we singled out Spain for this kind of treatment, it would be regarded as an unfriendly act, directly contrary to the reason for the action of our Government in that regard.

Mr. YOUNG of Ohio. I would like to also single out Duvalier's Haiti. I would like to include it in my amendment.

The PRESIDING OFFICER. The question is on agreeing to the amendment of the Senator from Ohio, on page 41, between lines 8 and 9, to the committee amendment, in the nature of a substitute, as amended.

The amendment to the amendment was rejected.

The PRESIDING OFFICER. The committee amendment is open to further amendment.

Mr. HUMPHREY. Mr. President, I send an amendment to the desk. I have discussed it with the chairman of the committee.

The PRESIDING OFFICER. The amendment offered by the Senator from Minnesota to the commitee amendment, in the nature of a substitute, as amended, will be stated.

The LEGISLATIVE CLERK. It is proposed, on page 54, after line 4, to insert the following:

(c) Redesignate present section 109 to be 110 and insert the following new section 109: "SEC. 109. The President may, subject to the restrictions contained in this Act, carry out transactions authorized by this Act without regard to the provisions of any other Act whenever he determines that such transactions are important to (1) the national interest of the United States, and (2) the ability of the United States to carry out effectively the policies and purposes of section 2 of this Act or to meet the requirements

of the common defense.

Mr. SCOTT. Mr. President, reserving the right to object, I heard the phrase "that the President would be empowered to carry out the provisions of this act without regard to the provisions of any other act." That is pretty broad language. Unless it is explained by some legislative history, I shall be constrained to object to it.

Mr. HUMPHREY. I am about to explain it.

The purpose is to make crystal clear that the section of Public Law 480 dealing with the trade expansion features of the bill, as well as the utilization of food, as necessary, for the common defense, is not restricted. The amendment contains language that will make crystal clear that the restrictions that we have written into it with respect to Public Law 480, section 2, referring to general policy dealing with

trade expansion, for example, and to al

leviate famine in the world, are not to be excluded; secondly, that in the common

defense, when food is needed for national interests, it is not to be excluded.

Mr. SCOTT. There are restrictions ments of goods and materials to Comalready in existence pertaining to shipmunist countries.

Mr. HUMPHREY. This relates only to Public Law 480.

Mr. SCOTT. Mr. President, may we have order?

The PRESIDING OFFICER. The Senate will be in order.

Mr. SCOTT. I should like to have some order in the Senate so that I may complete my sentence, at least, for the sheer pleasure of making a complete sentence of what I was about to say. There are other restrictions already in existence pertaining to shipments of goods and materials, that is, limitations on shipments and other dealings, with Communist and Communist-dominated countries. I understand from what the Senator has said that the proposed restriction is limited to Public Law 480.

Mr. HUMPHREY. The Senator is correct.

Mr. SCOTT. Therefore there is no in

tention that the executive department shall be able to avoid any other situation whatever.

Mr. HUMPHREY. The Senator is absolutely correct; so that there will be no doubt at all as to what that section in Public Law 480 means.

Mr. JAVITS. Mr. President, will the Senator yield?

Mr. HUMPHREY. I yield.

Mr. JAVITS. The Senate adopted an amendment, proposed by the Senator from Alaska [Mr. GRUENING] and myself, which was expressly designed to deal with Public Law 480, because it is under Public Law 480 that Nasser is getting anything preponderantly. Is it not a fact that this proposal would cancel out the very purpose of that amendment, because it leaves the discretion to the President?

Mr. HUMPHREY. The Senator is correct.

Mr. JAVITS. He can suspend it if he wishes to do so in the national interest. Is that correct?

Mr. HUMPHREY. If it is in the national interest or in the common defense.

Mr. JAVITS. That is what we argued against. Nearly everything Nasser is getting he is getting under Public Law 480.

Mr. HUMPHREY. This does not relate alone to Nasser. It makes sure that if food supplies are needed in the southern command of NATO, or food supplies are needed anywhere else, the provision of Public Law 480 will be applicable, and not limited by anything we have done in this act or any other act.

Mr. JAVITS. By legislating with a broadsword we take in everything. It will take in Mr. Nasser, as well as the southern defense command to which the Senator refers. Therefore, Mr. PresiIt will vitiate what the Senate did in the Gruening-Javits amendment. I ask for the yeas and nays.

dent, I oppose the amendment.

The yeas and nays were ordered. Mr. MORSE. Mr. President, will the Senator yield?

Mr. HUMPHREY. I yield.

Mr. MORSE. I came into the Chamber rather late. I wish to ask the Senator to explain the purpose of his amendment. From what I have heard, I am sure it calls for a major debate in the Senate. If what I have heard is true, I completely agree with the Senator from New York, that it seeks to vitiate much of what we have done during the course of the debate. I do not propose to have that done.

I hope the Senator will explain his amendment.

Mr. HUMPHREY. I have explained it. Mr. MORSE. I did not hear the Senator's explanation.

Mr. HUMPHREY. The amendment is designed to do two things; first, to make it crystal clear that the reservations that have been placed in the bill, namely, the pending foreign aid bill, insofar as those reservations are concerned with respect to Public Law 480, shall not be applicable to what we call the common defense or to the national interests of the Nation, when the President in his judgment determines that the national interest is at stake.

Mr. MORSE. I will speak in my own right later.

caused unquestioned confusion in respect to the pending bill if his amendment had been adopted. It would ride across everything we have fought and bled for, and some of us almost died for, on the floor.

I should like to have the attention of the chairman of the committee, the Senator in charge of the bill, and the Senator from Ohio [Mr. LAUSCHE], in order to see if we can do something to help with a very trying section of the bill, and perhaps avoid the need for amending it.

I call attention to page 34, lines 16 to 18, which read:

(3) In paragraph (2) strike out "fraud or misconduct" in the second proviso and substitute "fraud, misconduct, or negligence".

It will be noted that it is proposed in the bill to establish additional bases for enabling the United States to defend against claims under the all-risk guarantees which are provided for by the act. The all-risk guarantees could now be vitiated if the person having the benefit of the guarantee were guilty of fraud or misconduct for which that person or corporation was responsible.

The words of the statute are clear. They state:

Provided, further

This is section 221(b) (2) of the Foreign Aid Act

Provided, further, That no payment may be made under this paragraph 2 for any loss arising out of fraud or misconduct for which the investor is responsible.

The part of the bill to which I refer proposes to include negligence, so that the new bases of defense would be fraud, misconduct, or negligence.

I am advised-and this is borne out by communications to the committee and to me that the purpose of the allrisk guarantee is likely to be vitiated, because the investors who have been investing will not invest if negligence becomes a defense. I will give the reasons for that. The all-risk guarantee which is covered by the law provides for $180 million in guarantees, with certain limi

tations on the individual.

The all-risk guarantee has mainly been used for housing projects in Latin America, certainly a most important and constructive aspect of the act.

A good deal of this investment has been in housing projects in South America. It is somewhat analogous to our housing agencies or housing authorities. The underwriters of these security issues, the makers of these investments, are mainly banking firms in this country, which have communicated with me as well as the committee. I will tell the whole story to the Senate. If these downtown Wall Street banking firms do not invest, that business will not be done unless the United States puts up its own

I lay the question directly before the Senate. They say that if we add the defense of negligence, they are concerned that they will not be able to be responsible for such loose standards as to third parties; namely, the housing authorities or building and loan and other organizations with which they might be dealing in Latin America.

As everyone knows, negligence relates to the standard of care of a reasonable man. Numerous juries are required to determine that question in the United States. Hence, the feeling is that if we add to the other definitions; namely, fraud or misconduct, where there has been something willful, something overt, the standard of negligence, we will create a situation in which the terms will become so ambiguous that businessmen will neither invest nor underwrite. Also, there is grave doubt that the paper which they hold as notes or mortgages will be negotiable on the same ground as to be a defense against the holder.

I have discussed this question with the drafter of the amendment, the Senator from Ohio [Mr. LAUSCHE]. I gather that he is willing to make certain definitions with regard to this subject. I shall ask him two questions which we have agreed upon, so that the Senate may be fully advised. Naturally, I am interested in saving the amendment of any of our colleagues who feel in deep good faith that what they propose is desirable. If the committee has adopted the amendment, and if it is possible to save it, I am happy to try to do so. Naturally, it is not at all certain that the Senate would not take a different position upon argument, debate, and amendment. The questions which I shall ask the Senator from Ohio to answer will be helpful, I feel, but I cannot assume that they will be conclusive either upon me or upon the underwriters. The committee of conference will then have to decide as a practical question what it wants to do.

If the Senator from Ohio is willing to answer the questions, I think his responses will be helpful and may prove to dispel the difficulties. I think it is worth trying. I do not wish to question the Senator under false pretenses.

The first question is: Is it a fact, as a matter of legislative history, that the fraud, misconduct, and negligence which are here referred to, in order to be a defense to an all-risk guarantee must be fraud, misconduct, or negligence of the employees, officers, or duly constituted agents of the investor?

Mr. LAUSCHE. That is the understanding I had in submitting the amendment. That is my conviction, and that is the understanding under which the amendment was approved in committee.

Mr. JAVITS. Second, in the administration of this section-and we would hope that the courts, too, would be guided by this standard-is it the legislative intent of the amendment that the burden of proof shall be upon the Government to assert its defense against an all-risk guarantee?

Mr. LAUSCHE. It is my understanding of the general law, stated many times in the jurisprudence of evidence, that the burden of establishing negligence, fraud, or misconduct would be upon the guarantor-the U.S. Government. ment. That is the understanding and intention of the committee.

Mr. JAVITS. That is exactly correct. That is the important point. I may say to the Senator-and I shall ask him no further questions-that what he has last said is so important, because most of those things we would hope that, like a good insurer, the Government would pay honorable and legitimate claims. Therefore, what the Senator has said is, in my view, far more important to government administration than to the courts. We cannot control the courts, but we certainly can have rulings on the way in which a provision like this shall be administered. I am grateful to the Senator from Ohio for saying what he said.

Mr. President, may we have from the chairman of the committee some confirmation of the statements by the Senator from Ohio?

Mr. FULBRIGHT. The understanding of the Senator from Ohio is also my understanding. The negligence referred to is negligence of some person who is in no way under the control of the borrower, as described by the Senator from New York. He is not an employee or agent or third person, over whom the borrower would not exercise control, or for whom he is not responsible. It seems to me that that would be unfair and, in my opinion, was not the intention of the committee.

Mr. JAVITS. As to the latter question, does the chairman agree as to the question of burden of proof throughout, as to the administration of this question and its effect on the question of judicial interpretation? That is my

Mr. opinion.

FULBRIGHT.

Mr. LAUSCHE. It is not my intention, as the proponent of the amendment, or

of the committee, to require the aggrieved party to prove that he was not guilty of fraud, not guilty of misconduct, and not guilty of negligence. The agby showing loss, and the burden of proof grieved party would have made his case would then fall upon the U.S. Government to show that the loss occurred through the misconduct, fraud, or negligence of the agent, official, or servant of the aggrieved person.

Mr. JAVITS. I should like to ask the Senator from Ohio one further question, which he may or may not answer, as he chooses. May we have some idea as to why the Senator felt that the amendment as to negligence was important?

Mr. LAUSCHE. Under the present law, the U.S. Government, in guaranteeing the loss incurred in a housing project or a business, was relieved of responsibility if and when it was able to show that the loss resulted from fraud or misconduct on the part of the agents, officials, or servants of the borrowing company.

I added the word "negligence" because I did not believe that the Government should be responsible, when it could prove that the loss resulted from the negligence of the borrower. Unless we include the word "negligence," there is practically ironclad responsibility devolving upon the U.S. Government. I did not think that should be.

Mr. JAVITS. One other question, if the Senator from Ohio will bear with me, because it should prove to be helpful. What the underwriters and investors are deeply concerned about is, Where is the line drawn between negligence and bad judgment in a particular matter? Perhaps A might claim inadequate administration of a particular department, because of the fact that particular people who are put on the job were not so bright as they should be, although they acted in complete good faith and were perfectly legitimate employees of substance and capacity. In other words, who is to determine the line between negligence and bad business judgment or bad discretion, used in making a certain decision? That, I think, is what is worrying those people. If we could spell out some standard, it would be helpful.

Mr. LAUSCHE. The word "misconduct" is a word of art. "Fraud" has a distinct definition. The definition of "negligence" is known by every lawyer. If we can logically and understandably include the words "fraud" and "misconduct," it follows as a matter of logic that no impediment arises when we include the word "negligence." If a trial were to be had, the court would define what "fraud" meant; what "misconduct" meant; and what "negligence" means.

My understanding is that "negligence" means that a person has failed to do what a reasonably prudent person would have done, or has done what a reasonably prudent person would not have done under the circumstances. That is my understanding of the definition of "negligence."

Mr. JAVITS. Does the Senator believe that an underwriter would dare to underwrite or would dare to make a loan with that as the standard in the law, in view of the fact that that is a defense which could be invoked by the United States against anybody? It takes a trial and a jury decision in order to prove it; and the jury decision could go either way.

May I give the Senator an example? Suppose I wish to invest in a housing loan. Suppose I send some operatives to investigate, and they fail to look at some bookkeeping analysis or some particular title analysis, and I say, "That is not negligence. My people looked at some other piece of paper, that told them the same thing, or they took the word of a person operating a particular savings and loan association."

But the U.S. Government replies, "We are sorry, sir, but we do not pay. That is negligence. It has to go to trial, and the jury may decide 'Yes' or 'No'."

Is it not a fact that an underwriter who follows the established standard or

rule in regard to negligence in connection with torts will not be inhibited at all from going into these risk guarantees?

Mr.LAUSCHE. The term "negligence" is applicable to business operations just as it is to tort actions. The director of a corporation can become liable on two bases: one, because of violation of a trust obligation; the other, because of the perpetration of negligence.

Mr. JAVITS. He can because of gross negligence. A corporate officer or director cannot be held for other than gross negligence.

Mr. LAUSCHE. That may be the law of New York, but it is not the law of Ohio. There is a Federal law on the subject.

However, from the standpoint of trials or practicality, what difference is there between proving fraud or misconduct or negligence? In any case it becomes an issue, and must be proved.

Mr. JAVITS. I think fraud is dishonesty. Misconduct is generally considered a violation of some ethical or legal obligation. The word "misconduct" is rather loosely construed, but apparently the underwriting community has accepted this definition. But negligence as we learn from the decisions of juries every day-can be interpreted in one way or the other; and after the jury has decided, no one can argue about it.

Let me ask this question of the Senator from Ohio: Should it develop, as a practical matter, that the concept the Senator from Ohio has of the law on this question is not quite in accord with the legal situation, would he then give consideration to adding the words "gross negligence" or some other phrase or clause which would help-although it would not necessarily be considered here, because we cannot do research work on it here? I am referring only to the situation based upon checking back on the Senator's views as to the law.

Mr. LAUSCHE. I regret to say this; but if we allow the bankers to determine what will be included in the bill, nothing will be in it, for they want to receive the interest, and they want the Government to assume the obligation. But I do

not think the Government should assume the obligation in cases in which the loss resulted from fraud, misconduct, or negligence.

Mr. JAVITS. Yes; but we want the bankers to invest

Mr. LAUSCHE. But they are saying, "We will not invest unless you do as we say." But that does not mean to me that we are obligated to follow the course they request.

ble the next time this subject comes before us. In short, many U.S. citizens of Yugoslav ancestry have claims against the Yugoslav Government, but the Yugoslav Government has disregarded them or has paid no attention to them. My amendment contemplates requiring a showing by the Yugoslav Government in the future, if it wishes to receive our help, that it has made a legitimate effort to settle these claims. At this time I shall not call up my amendment; but I shall call it up next year or the following year, if some favorable action is not taken by the Yugoslav Government on these The PRESIDING OFFICER. If there be no further amendment to be proposed to the committee amendment, as amended, the question is on agreeing to the committee amendment, as amended, in the nature of a substitute.

claims.

The amendment, as amended, was agreed to.

The PRESIDING OFFICER. The question now is on the engrossment of the amendment and the third reading of the bill.

The amendment was ordered to be engrossed and the bill to be read a third time.

The

The bill was read the third time. The PRESIDING OFFICER. question now is, Shall the bill pass? Mr. MORSE. Mr. President, on this question, I ask for the yeas and nays.

The yeas and nays were ordered.

Mr. MILLER. Mr. President, I shall vote for this foreign aid bill. I believe it is a much sounder bill now than it was as it came out of the Foreign Relations Committee.

May I say that I am glad that the bill was not referred back to the committee for further revision. Instead, the Senate has been operating as a de facto Committee of the Whole for the past 3 weeks. This has enabled each of us to become much better informed about this important piece of legislation and also about the entire foreign aid program. And this is a very good thing. One of the unfortunate dispositions into which

the Senate has fallen is the tendency to take too much for granted the judgment of its committees. I believe that great weight should be given to the collective judgment of the members of the committees, because by and large the staffs and the members of the committees have devoted considerably more time to the legislation before them than have other Members of the Senate. But there are many Members of the Senate not members of a committee whose back

Mr. JAVITS. I thank the Senator from Ohio. I think we have opened up the subject.

The PRESIDING OFFICER. If there be no further amendment to be proposed, the question is on agreeing to the committee amendment, as amended.

Mr. LAUSCHE. Mr. President, I have an amendment, although I shall not call it up now. But it may become applica

some of the problems considered by a committee are superior to the knowledge possessed by some of the members of the committee; and and these Members should be given greater consideration when they speak out on these problems and, particularly, when when they offer amendments to the bills which have been processed by the committees.

For too long now the Foreign Relations Committee has been operating in a

world of its own. I do not say this in criticism of the committee. I say it in criticism of the Senate itself. Too many Members have been disposed to regard matters of foreign relations and foreign trade as matters beyond the understanding and appreciation of the average Member of the Senate who is not a member of the committee. This disposition has, I fear, lulled us into a false sense of well-being over legislation affecting our foreign affairs, and particularly the foreign aid authorization bills into which policy changes, entirely within the proper purview of the Congress, might heretofore have wisely been written.

The result has been an increasing awareness on the part of the taxpayers, who are paying the bill, that Congress has not been doing as good a job as it should. Thanks to the free press and the alertness of some of our Members, the abuses, waste, and unsound practices which have inexcusably occurred in the conduct of the foreign aid programs have been brought home to the people who sent us here to represent them. Sooner or later, the pressure had to build up to a breaking point, and the breaking point has occurred this year over this bill.

I do not say that we now have a perfect bill. But I do say that we have a much better bill than we had 3 weeks ago. And I trust that when it is taken to conference, the Senate conferees will stand very firm on the amendments which have been made. Actually, my estimate is that the House conferees will be most happy to accept most of the amendments. And I wish to sound a warning that the conferees had better bring back a conference report which contains most of these hard-considered amendments if it wishes to have the conference report agreed to by the Senate. The people we represent recognize that we have been giving voice to their concerns and their desires through the adoption of these amendments, and I do not believe that they will be satisfied at all if the opposition to them by nonelected officials of the State Department prevails. It is these officials who are working for the taxpayers-not vice

versa.

The authorization limit has been reduced to some $3.8 billion—a substantial reduction from the $4.2 billion brought out by the Foreign Relations Committee and a very substantial reduction over the $4.9 billion requested by the President in his so-called "frugal budget" presented early this year in the amount of $98.8 billion. It is still some $300 million over the House bill, but only $100 million under the amount appropriated for the last fiscal year. I see no reason why anyone should be concerned over the reduction made by the Senate. In fact, even with this figure I must say I am not entirely satisfied, because I am greatly concerned over the committed and unexpended funds currently in the foreign aid program pipeline. Many taxpayers do not know about this, and I believe they should be made fully aware of it.

According to the Agency for International Development, as of June 30, 1963,

the

total unliquidated commitments amounted to more than $6.3 billion, including nearly $4 billion earmarked for economic assistance programs, $2.3 billion for military assistance, and some $153 million in the special reserve and revolving funds-table A. It should be noted that of the $4 billion for economic assistance, there is the sum of $358 million for supporting assistance. Ninetyfour countries are listed in this committed but unexpended fund pipelinemitted but unexpended fund pipelinetable B.

I can readily see why there must be some funds in that pipeline: We should and must take care of our obligations. It is my understanding that if the agreed provisions under which an activity is undertaken are not met, if the conditions which generated U.S. undertaking of an activity change materially, or if the final cost of a project is less than originally provided for, funds may be deobligated and used for some other purpose. I understand that in fiscal year 1963, about $30 million in economic assistance funds were deobligated and used in the program; this is less than one-half of 1 percent of the total economic assistance pipeline. I have been told that about $50 million additional funds were also deobligated, but not used, and as a result, will either revert to the Treasury or be reappropriated by the Congress to meet the needs of the fiscal year 1964 program.

AID says that it does not believe that a substantial amount of fiscal year 1964 funds will remain unobligated at the end of the fiscal year 1964-and if the Congress continues to cut the foreign aid program, this could be true. But outside of that, AID has cited three central reasons why there might be some funds left unobligated and I believe these reasons are pertinent to the discussions going on now on the Senate floor:

1. We hope that it would not be necessary to use all of the contingency funds. We will be able to return $117 million of the $250 million appropriated for the fiscal year 1963 contingency fund.

last fiscal year, then the $175 million we If this much is to be returned for the have authorized by amendment for this have authorized by amendment for this fund would still be excessive.

2. The foreign aid program utilizes many hundreds of accounts. By law, none of these accounts may be overdrawn. Prudent management requires that we plan to leave small balances in each of these accounts. The sum of these small balances is a significant

amount.

3. We will not obligate funds unless re

cipient countries undertake self-help and reform measures, and successfully meet the vision of U.S. assistance is based. We may conditions of other criteria upon which proearmark funds for use in a certain activity, contingent on whether the recipient effectively takes agreed upon steps. If some progress is made, but at the end of the fiscal year the recipient is not able to successfully complete the necessary steps, we will not obligate the funds for that activity, and there will not be sufficient time to prudently undertake another activity. Thus these funds will not be obligated.

That last reason brings us to the meat of the problem: How long are we to leave these funds in the pipeline?

In examining the AID's country-bycountry report on the "status of loan agreements," as of June 30, 1963, I find that there were a total of 127 loan agreements into which we had entered into during or before 1960 and of which there still remained unliquidated balances. It seems that those funds should be moving, especially when some go back as far as 1953. On February 6, 1953, we entered into a loan agreement with the Instituto De Acueductos y Alcantarillados Nacionales of Panama for financing a water supply supply and sewerage system. The amount of loan agreement was $6 million. To date, not one cent of that loan has been made to that Panama institution.

What is the reason for this and for the others? If conditions have not been met, then those funds should be released for other activities. Or are these socalled "small" loans to be piled up indefinitely?

Mr. President, I ask unanimous consent that tables A and B, and a table C setting forth examples of old loan agreements and amounts disbursed thereunder be placed in the RECORD.

There being no objection, the tables were ordered to be printed in the RECORD, as follows:

TABLE A.-Foreign assistance program (mutual security), preliminary June 30, 1963, unliquidated commitments

[In thousands of dollars]

ECONOMIC ASSISTANCE