The policies of the bank appear to favor a very heavy percentage of the loans to foreign governments for the purpose of entering private industry in direct competition to their own nationals and the nationals of the balance of the world, including the United States. This is in direct opposition to the official policies of the United States with regard to private enterprise. Presumably we are more interested in the nationals of a foreign country than in their governments. In many cases, if the governments which are so desirous of borrowing money to perpetuate a form of socialist state were induced to alter their laws governing private capital, whether local or foreign, it would be found that adequate private capital was available which could be augmented by Export-Import Bank loans to accomplish the desired objective. The bank could and should demand a guaranty from the Government for a permanent political climate which would permit their industry the opportunity to prosper. Public works, such as highways, public buildings, schools, experimental farms, etc., would naturally be financed by loans to governments. However, the exploration and exploitation of natural resources, regardless of whether it is crops, minerals, petroleum, or electric power, should be accomplished by private individuals or corporations, and the United States should not be placed in the position of supporting financially this trend toward socialism in foreign countries while pursuing the opposi e policy domestically. Except for unfavorable political climates, it is believed that a large percentage of the loans made to foreign governments could have been made to private corporations. While these countries are discriminating against United States private capital, we should not finance their socialistic government corporations. example: Chile (government corporation). An This is a flagrant example. Loans to Government for industrial purposes versus loans for governmental purposes is completely out of proportion and regardless of the accepted reasons for such laons, the fact remains that each successive loan further stifles private enterprise. The nationals of Chile, or any other country, can only hope to prosper in direct proportion to their expansion of private industry. Mexico, as well as Chile, prospered under private enterprise, but now, in accordance with the socialistic trend, borrows money as a government to finance: Electric power projects. Sugar mills.. Ammonium sulfate plants. Panama borrows to build a hotel. Venezuela borrows for: Diesel-electric generator units.. $37, 000, 000 5, 000, 030 6, 000, 000 8, 600, 000 4, 000, 000 1,950, 000 4, 000, 000 Belgium, on the other hand, borrows $138 million, none of which is for purposes in competition to private enterprise, while Italy borrows $106,645,500 most of which is for purposes competitive to private enterprise. A comparison of the living standards of the people in these two countries should be sufficient to prove the case for private enterprise. It is time for us to inquire whether the United States Government has the right under its constitutional trusteeship of United States tax funds to finance foreign governments to go into competition with their own and our nationals, The attitude of the average American is one of extending the helping hand to other nationals, but that does not necessarily mean their government, expecially when that government is not functioning for what we believe to be the best interest of their people. The above criticism is not a condemnation of the bank nor the administrators, It is intended to present a new viewpoint which may enable the bank to improve in the future on the benefits which it has recorded in the past. I am thoroughly in accord with the intended functions as expressed by the Congress of the United States, and have always been impressed with the general high caliber of the administrative officers. In the event you consider it advantageous to your purposes for me to appear in person before the committee, I am at your command. Respectifully yours. A. ROBERT LEAS. FRED LEIGHTON, INC., Hon. HOMER CAPEHART, New York 3, N. Y., September 17, 1953. Chairman, Committee on Banking and Currency, United States Senate, Washington, D. C. DEAR SENATOR CAPEHART: I have your letter of recent date asking me various questions about my experience with and my opinion about the Export-Import Bank of Washington, pursuant to a study you are conducting under direction of Senate Resolution 25. Your are correct in the understanding that my firm has had contact with the Export-Import Bank since it has been a client of the bank for over 10 years. We are a small importing business dealing in handicraft products of Mexico, Latin America, and the West Indies. We do both a wholesale business selling to department stores, gift shops and specialty stores and, also a retail business by mail and though several small shops of our own, one at 1514 Wisconsin Avenue, Washington, D. C. Our total annual volume of business is between one-quarter and one-half million dollars in all divisions. Since much of our merchandise is bulky (pottery, baskets, glassware and peasant furniture), our operations result in increased American employment, not only through our own wholesale and retail employees, advertising, etc., but also through ocean shipping, railroad, wharf, and trucking labor, etc. To answer your questions specifically: 1. The purpose of our contract with the bank was to obtain suitable financing for the importation of handicraft articles from Mexico and Latin America. 2. Correspondence with the bank has always been promptly and courteously answered. 3. We have applied several times to the bank for additional credits following the initial grant of a revolving credit. 4. Several times the reply was favorable; on other occasions unfavorable. On all occasions our applications have been handled in a courteous and efficient manner. 5. The revolving credit authorized us has been administered efficiently; the details being handled through the National City Bank of New York, which has excellent facilities for handling international transactions. 6. As mentioned above most of the details of our relations with the bank have been handled through the National City Bank. Both banks have been meticulously exact and at the same time have shown an appreciation of the fluctuating needs of our business situation. Due to the formalities required in going through two banks sudden or unexpected needs for additional credit have not been as readily available as they frequently are where banking relations have a more personal character, which relations would normally exist if this type of credit could be authorized by commercial banks alone, without Export-Import Bank guaranty. 7. Insofar as our experience is concerned the Export-Import Bank has certainly aided not only us, in the financing of a marginal type of import, but has made possible, through us, considerable benefits to natives in Mexico and Latin America who otherwise would not have been able to get their products adequately financed for export. 8. Insofar as our own operations are concerned, the between one and two million dollars in the aggregate which we have borrowed and paid back to the National City Bank (guaranteed by the Export-Import Bank) have gone directly toward raising the standard of living in relatively backward native communities and to numerous small-town industries in Mexico and Latin America, thereby enabling these suppliers to buy more food, clothing, and manufactured articles. Many of the potters, for example, who supply us with piggy banks have been able to install American radios in their homes; the sandal makers to buy American automobiles, and the basketweavers and silversmiths to build better homes and purchase more manufactured goods including imports from the United States. 9. I believe that the type of import-credit which has been made available to us could, with great benefit to small producers abroad, and to individual importers here, be expanded as a policy tool to help increase the international exchange of the products of the small manual and semimanual industries which help to stabilize the social structure of relatively underdeveloped countries; and thereby could aid in the betterment of our foreign relations with other countries. 10. The Export-Import Bank, as I understand its export activities, has been of great assistance to American manufacturers and exporters, providing them with prompt and sure payment for their merchandise; this has enabled many foreign countries to modernize their economies and has provided for an orderly manner of repayment over a longer time and under more certain conditions than private American industry could have arranged. The above remarks deal with exports of which I have had no personal experience in connection with the bank. On the import side of the picture the bank has not functioned, to my knowledge, to any great extent so far, our firm, we understand, being one of its relatively few import clients. Yet there is a continuing need for the United States to find more ways to "close the dollar gap" between exports and imports without injuring American industry. One way to do this is to encourage the small industries of underdeveloped countries, especially the handicraft and semihandicraft industries. The producers of the goods, especially in Latin America, Africa and the Far East have no funds to hold stocks or to promote export sales; their governments are in general more concerned with financing new roads, dams and other basic industries. This merchandise is relatively uncompetitive in the American market, due partly to its national and native characteristics; but there is greater risk involved than in importing standard products. Therefore, we believe that Export-Import Bank financing, or guaranteeing, the imports of marginal consumers' goods from underdeveloped areas is a logical and important future development of the functions of the bank. A carefully planned expansion program in this field would result not only in more "earned" dollars available abroad but in an increase of native goodwill toward the United States quite out of proportion to the relatively insignificant dollar risks involved. Supplementing my answers to the last four questions. and following your suggestion, I wish to make the following points: Foreign producers of handicraft and semihandicraft consumers goods do not in general, have the financial standing to enable them to secure local credit or financing of an adequate character. They are obliged, therefore, to ask for cash advances from people who give them export orders; and to be paid in full at time of local delivery. They are not in a position to accumulate stocks from which a buyer can draw, and in many cases this is desirable because local taste could not be depended upon to accumulate items that would appeal in the United States market. The type of financing which we have received through the Export-Import Bank has, in effect, enabled us to put stocks of handicrafts into a New York warehouse, where they are immediately available to buyers, enabling the foreign craftsman, through us, to meet the American buyer on his own ground. Though this financing technically has been of Fred Leighton, Inc., actually it has been of the small foreign producer who, through us, has been able to present his wares to the American shop owner and individual buyer. Our credit arrangement, which was originally worked out under the direction of Mr. Warren Lee Pierson, as President of the Export-Import Bank, provides for a total credit of a certain amount to be made available, per our directions and orders, to specified foreign producers through National City Bank letters of credit, upon the presentation of suitable shipping documents. Shipping charges and United States duties were similarly financed for each shipment, the merchandise being released to us on trust receipts after arrival in New York. As the merchandise is sold the trust receipts are released upon payment by us of the corresponding notes and the amount released becomes available for new credits abroad up to the limit of our credit. This being a continuous process does not require or permit of a complete liquidation of indebtedness once a year and is therefore, we understand, an arrangement which the National City Bank could not make on its own account without the guaranty of the Export-Import Bank. During the period that we have been clients of the Export-Import Bank the total of loans made and repaid under this revolving-credit arrangement has been between 1 and 2 million dollars. The Export-Import Bank has shared the interest charges with the National City Bank so that both the Government and the National City Bank have received a steady income on all our loans. I believe that this system of revolving import credits, as it has operated for us, is worthy of study and expansion as a means of encouraging useful and relatively noncompetitive imports into the United States; and that the Export-Import Bank appears to be the logical vehicle for this type of foreign-trade expansion. Should you wish me to appear in person before your committee I will be glad to do so, unless unavoidably out of the country at that time. Sincerely yours, Reference: Senate Resolution 25. Senator HOMER E. CAPEHART, FRED LEIGHTON, President. MAGOR CAR EXPORT CORP., New York, N. Y., October 26, 1953. Chairman, Committee on Banking and Currency, United States Senate, Washington, D. C. DEAR SENATOR CAPEHART: Further in reply to your letter of September 3, we have now completed a review of our files relating to railroad freight cars which we have built since World War II for foreign countries under Export-Import Bank financing. During this period we have received orders for railroad freight cars from state-operated railroads in Chile, Bolivia, Brazil, Yugoslavia, and Mozambique under Export-Import Bank financing. However, as our dealings in all these instances were with state-operated railways, credit negotiations were conducted directly between the Export-Import Bank and the concerned foreign-government officials (with one exception) rather than between ourselves (as the manufacturer) and the Export-Import Bank. This 1 exception was an order for 960 cars in the amount of approximately $2,730,000 for the Chilean State Railways in 1946. In this single instance we carried 20 percent of the paper and the Export-Import Bank carried the remainder. All other orders were financed 100 percent by the Export-Import Bank and cars shipped against irrevocable letter of credit established in New York banks. The export freight-car market is of vital interest to our company-more vital to us than to any other American car builder. For example, between World Wars I and II our company manufactured approximately 40 percent of all freight cars exported from the United States (as determined from our production records and sales statistics of our competitors as reported in the trade magazine Railway Age). At the present time over 20 percent of our manufacturing backlog is Export-Import Bank financed and for the past year and a half we have also been negotiating with the state-operated Santos Jundiai Railroad, in Brazil, to supply cars under a $6 million Export-Import Bank loan granted over 16 months ago. The placing of the Santos Jundiai order has been delayed for a number of reasons among which is the possibility that the World Bank will take over this loan. Should this occur, it is unlikely, under present conditions, that the required cars will be bought from an American car builder, but instead will probably be purchased in Europe. As a result of our large volume of sales through the years to foreign railroads, our production and engineering staffs have accumulated valuable know-how and experience necessary for the design and manufacture of all types of special cars required by foreign railroads. Our engineering and manufacturing knowledge in this field has been of considerable assistance to our Armed Forces during World War II and in the present hot and cold wars. During World War II practically our entire production facilities were allocated for the production of special cars for use by the United States Army in many foreign countries, and we are now completing order for 1,765 cars required by the United States Army Transportation Corps, some of which we understand are destined for use in Korea. For these reasons it is our feeling that any factors which will in the future directly or indirectly affect the United States export freight-car marketsuch as United States Government loan policy-will also directly affect our export freight-car sales to state-owned foreign railroads, and, therefore, indirectly to a degree affect our Nation's war potential because of the engineering and production know-how required for the design and manufacture of foreign-type equipment needed by our Army and our allies in wartime. The Export-Import Bank has become increasingly important in our field during the past few years for the following reasons: (1) A typical freight-car inquiry from state-operated foreign railroads amounts to $1 million to $3 million covering approximately 200 to 600 cars. (2) Due to shortage of dollars practically all foreign state-owned railroads cannot at the present time purchase United States manufactured equipment unless export-import credit is made available to them for the reason that regular credit channels in the United States will not undertake the credit risk primarily because of(a) Unsettled foreign political conditions, thereby resulting in too many unknown long-term factors. (b) Large dollar volume tied up in a single risk. Due to the above reasons, our company, over 6 years ago, adopted a policy regarding inquiries received from foreign state-owned railroads whereby we do not undertake any sales or engineering expense on a given inquiry until we have determined that the state-owned railroad in question has either received an Export-Import Bank loan for the cars needed or intends shortly to apply for an Export-Import Bank loan to cover the cars purchased; or, in a very few instances, has sufficient dollars to finance the purchase themselves. We found it necessary to adopt this policy as our sales and engineering development prior to the placing of an order sometimes extends over a period of years-working out operating and design details with the railroad's operating and engineering departments. This, of course, involves considerable expense on our part, and we cannot assume this heavy expense unless we are certain that dollars have been made available for the ultimate car purchase by the Export-Import Bank or will shortly be applied for through the Export-Import Bank. With the above as background information, we are pleased to advise as follows with regard to the 10 questions outlined in your letter of September 3: (1) Covered above. (2) Yes. (7) Our knowledge is limited to our own field; and we feel very strongly that the Export-Import Bank has greatly aided our business since World War ÏÏ. (8) Yes. (9) Covered below. (10) Covered below. It is difficult to answer questions 9 and 10 without taking into account press dispatches which have appeared in the newspapers in the past few months pointing out the possibility that certain functions of the Export-Import Bank might in the future be taken over by the World Bank. Of course, we can only express an opinion on this matter based upon experience limited to our own field. However, we feel that should lending power in the future be centralized in a world bank, this centralization of power will tend to result in increasing inefficiency of operation due primarily to the possibility of decisions being reached on the basis of worldwide political expediency. We would prefer to rely upon a decentralized program responsible to the law of supply and demand and moral law with a minimum of United States or United Nations government regulation. A decentralized program somewhat along the lines as proposed by Senator Murrayapplicable to short- and long-term credits-wherein foreign loans would be insured by the Export-Import Bank has considerable merit because it will help to decentralize rather than centralize loan policy and operation; With regard to purchase of equipment in the United States under World Bank loans, we would suggest that you consider means whereby the recipients of World Bank loans would be required to place orders on an industry basis in the United States in proportion to the funds supplied the World Bank by the United States. For example, assuming that the United States is responsible for 50 percent of the 42493-54-pt. 2- -21 |