3. Has it taken business away from your bank and, if so, how and to what degree?

Answer. No.

4. Can the Export-Import Bank use the services of your bank more than in the past and, if so, how?

Answer. The Export-Import Bank has never requested the use of any of our services nor has it asked us to participate in any way whatever in forwarding international trade.

5. What position has your bank taken with respect to term loans, i. e., where repayment exceeds a term of 6 months?

Answer. We do not male foreign term loans where repayment exceeds the term of 6 months.

6. Are you financing, without recourse, shipments to foreign countries payable over term periods?

Answer. We do not finance, without recourse, shipments to foreign countries payable over term periods.

7. In cases where you have acted for the Export-Import Bank in the operation of credits has your compensation been adequate, taking into consideration the risk factors involved, by the Export-Import Bank as a Federal agency?

Answer. We have never acted for the Export-Import Bank in the operation of credits.

8. Have you participated with the bank in any of its loans without the latter's guaranty? If so, was your experience satisfactory?

Answer. We have never participated with the bank in any of its loans.

9. Do you consider continuation of the Export-Import Bank's loaning facilities essential in the interest of international trade?

Answer. No.

10. Has the Export-Import Bank facilitated the expansion of international trade in the past, and, if so, how can it more adequately expand it in the future? Answer. From our study and observation of the activities of the ExportImport Bank we find that it has primarily extended credit in marginal situations where the risk was too heavy for private business. To the extent that foreign trade is encouraged by such means, it is an indirect subsidy to special interests at the taxpayers' expense. Sound foreign trade only, can solve the international trade problem. So long as international trade must rely to a large extent upon governmental aid, gifts, and marginal loans from the United States in order to bolster the economy of economically weak countries, there is little effective encouragement to sound economic policies in such countries. Balancing the international deficit in foreign trade by either direct or indirect reliance on the American taxpayer is, in our opinion, not the sound way to cure the world's international ills over the long run. We feel that such policies were justified only in the chaotic period immediately following the close of World War II as an emergency stopgap. We now are of the opinion that there is no further real need for such emergency policies and that they do more real harm than good in the ultimate solution of the world's international problems.

Yours very truly,

H. F. BOETTLER, Vice President.

Senator BENNETT. We would be happy to have you proceed and tell us in your own words whatever you desire.

Mr. BOETTLER. In regard to the Export-Import Bank, it came into existence to meet an emergency situation in the early 1930's when world trade was at a standstill. At that time there was probably real justification for any aid that could be given for the development of world trade. Since then it seems to me the organization has been largely acting as an agent for governmental agencies.

The recent credit of $300 million they made to Brazil was merely a bailing out of American creditors who had made a mistake in the first instance and then had the Federal Government make their credit, which was frozen, immediately available.

I do not think it is the function of the Federal Government to bail out businessmen who have a frozen loan. If the setup under the credit extended through the Export-Import Bank is correct, they would have gotten their money in 3 years. If that is not true, why, the

Export-Import Bank has been the loser. I do not feel it is good policy for the Federal Government to bail out businessmen who make mistakes.

Senator BUSH. When was that loan made?

Mr. BOETTLER. Some time in the last 9 months. I don't remember the exact date.

Senator BUSH. Do you know any of the firms that were bailed out, as you say?

Mr. BOETTLER. There were various American firms that had sold goods in Brazil and had funds in Brazil, but they could not convert them into dollars. They were anxious to get their dollars out.

Senator BUSH. Are you satisfied that this loan was made for the purpose of bailing them out?

Mr. BOETTLER. I don't know any other purpose it could have been made for.

Senator BUSH. Were they all paid out?

Mr. BOETTLER. I happen to know of several that have been completely paid out.

Senator BUSH. As a result of this Export-Import Bank loan?

Mr. BOETTLER. That is right.

Senator BUSH. How long had their funds been tied up?

Mr. BOETTLER. They had been tied up probably anywhere from 2 to 2%1⁄2 years, maybe more. I wouldn't know when the first of those frozen credits developed.

Senator BUSH. Would you care to give the committee some of the names that you know were bailed out by this loan so we can call them here?

Mr. BOETTLER. The only one that I know of is in St. Louis, the Laclede Christie Co. They sell various firebrick products and had sold those to firms in Brazil. They had funds impounded in cruzeiros. Senator BUSH. That is the only one you know?

Mr. BOETTLER. There are others. I could find out. I happened to be a director of that company and I know that.

Senator BUSH. Would you mind sending us a list of some of the companies you know of?

Mr. BOETTLER. I will be glad to find out those instances.

Senator BENNETT. Mr. Arey, of the Export-Import Bank gave us a list in his testimony this week of all the loans that had been made. That list was not dated, was it?

Mr. HOLTHUSEN. That was as of June.

Senator BENNETT. Loan No. 541 to the Bank of Brazil was for dollar exchange of $300 million.

Mr. BOETTLER. That is the one.

Senator BENNETT. That is the one to which you refer?

Mr. BOETTLER. That is right.

Senator BENNETT. It is on page 134. I am sure we can get details on that loan from the Export-Import Bank.

Mr. BOETTLER. You can get all that information directly from them, I am sure.

Senator BENNETT. That is February 21, 1953; repayment terms, Sept. 30, 1954, to Aug. 31, 1956. Do you know of other loans that you feel are of doubtful purpose?

Mr. BOETTLER. I was just looking over their loans for the 6 months ending last March. It showed a total of $347 million of loans, of

which $300 million was for the Brazilian credit. Of the balance of the $49.9 million, $35 million were for strategic materials purchases under our defense program. I don't think that the United States Government in its purchases of strategic materials needs the assistance of the Export-Import Bank. I think their credit is so good that they could have handled the financing of that through any one of a dozen private agencies. So that leaves in that period only $12.9 million of other loans handled by them. Whether some of those were directly or indirectly for governmental agencies, for the State Department, for ECA or MSA, I cannot tell directly. That seems to be a pitifully small contribution to world trade in that 6 months' period. Senator BENNETT. Will you identify the period again? I missed it. Mr. BOETTLER. The six months' period ending March 31, 1953. Senator BENNETT. That is, then, from October 1, 1952, to March 31, 1953?

Mr. BOETTLER. Yes. As I see it, out of that there were just $12.9 million that probably could be called assistance to general international trade. I am not sure all of it was 100 percent for general international trade.

Senator BENNETT. Of course, Mr. Boettler, the $35 million you have identified as loans affecting the stockpiling of strategic materials I am sure we will find were not loans for the direct purchase of that material. They may have been loans to provide facilities by which the material could be mined in the South American countries.

Mr. BOETTLER. That is probably correct.

Senator BENNETT. We do not know. We can get the information. Mr. BOETTLER. It seems to me that if the United States Government needed those materials and needed to aid the people in that area in some way, and gave them a firm order to purchase the raw materials, there would not be too much difficulty in having that financed under firm commitments either of the ECA, MSA, or the State Department. Senator BENNETT. This may well turn out to have been the financing of a private mining company.

Mr. BOETTLER. Even if it were, it could have been handled another

way.

Senator BENNETT. The Government may have wanted to finance it through this process.

Mr. BOETTLER. It is a handy process to use, but I don't think this was the original intent of the Export-Import Bank.

Senator BENNETT. If we can identify the term

Mr. BOETTLER. For the term ending June 30, the total was $387 million and that $300 million again appears in there.

Senator BENNETT. You are talking about an overlapping period? Mr. BOETTLER. Yes, because the latest report I have is the one that was issued last July, which was for the period ended June 30. Of this $87 million, $40 million was for the Bank of Japan for cotton purchases. That was probably part of our world problem, and is at the present time. The United States Government owns plenty of cotton. If they had wanted to make cotton available to the Japanese, it could have been done out of the stockpile that is owned by the Government.

Senator BENNETT. On the other hand, I do not think the Government wants to sell its cotton in competition with cotton produced in the current crop. That takes us out into the field of agricultural economics.

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Mr. BOETTLER. I am just bringing that up. There was another $12 million for Spanish commercial banks, which was probably part of our wooing of Spain recently. So we opened up assistance for Spanish banks.

There was $30 million for various mining companies. That was probably in connection with our purchase of strategic materials, either to develop facilities or do other things. So out of the total, the interest to the Federal Government, it seems to me, accounts for the major portion of the activities. The Export-Import Bank, as I see it, is largely an agent of the United States Government, which may be the ideal way to handle it.

Senator BUSH. Of course, Mr. Chairman, it is generally considered that the Export-Import Bank is an arm of the United States foreign policy. Do you disapprove of that?

Mr. BOETTLER. No, I do not disapprove of it. That is exactly what they want. But I do not believe we need a separate agency to carry that on.

I think where the United States Government is interested, and if the bank makes commitments, it could have been handled without having the right hand pass it over to the left hand, to do the thing the right hand could have done directly.

Senator BUSH. You, as a banker, know very well you have to have investigation and very careful planning for the making of these loans. They have to be carefully examined. There has to be an agency of some sort that specializes in that kind of work; is that not true? Mr. BOETTLER. There are many private agencies that do that. There are American banks that are well-equipped to do that sort of thing all over the world.

Senator BUSH. That proves further what I am trying to say, that it does require an organization and planning and scrutiny. Mr. BOETTLER. That is right.

Senator BUSH. If the Government is going to step in and make loans to foreign countries when private agencies will not make them— that is the precept of the Export-Import Bank policy, as you knowthen do you think it is unreasonable that the Government should have an organization expertly set up for that kind of work?

Mr. BOETTLER. No; I do not think it is unreasonable, but unfortunately when it is handled that way sometimes things are done for political purposes, as we saw in the RFC, rather than for the real

intent.

Senator BUSH. That is a very interesting point. We are talking about the Export-Import Bank and not about the RFC. But if you have any evidence

Mr. BOETTLER. I have no evidence of that.

Senator BUSH. You just referred to the RFC.

Mr. BOETTLER. The reason I make the point is that Federal agencies often do come under that control. The Federal Government had worked out-take during the war, they used regulation B. They needed careful credit studies and analyses made of credit, but they did not necessarily have to set up a special Government agency to do that. They ran it through the banks and did it successfully.

Senator BUSH. I am sure, if the chairman will agree, that if you have any evidence of any malfeasance as to the officials in the bank, anything of that kind which can in any way be compared to the RFC,

which you referred to, you owe it to this committee to submit such evidence.

Mr. BOETTLER. I was only saying that often happens where you have governmentally controlled agencies.

Senator BENNETT. Do you have any further comments, Mr. Boettler?

Mr. BOETTLER. No, sir.

Senator BENNETT. Thank you very much. We appreciate your taking the time to come down here and give us this point of view. It is very valuable.

Because Senator Bush has another appointment and is particularly anxious to hear two witnesses, unless there is objection I would like to call now Mr. Frank P. Shepard, vice president of the Bankers Trust Co. of New York City. Mr. Shepard, you have a short prepared statement, do you not?

Mr. SHEPARD. I do, sir.

Senator BENNETT. We will be happy to have you present it to us in any way you please.

STATEMENT OF FRANK P. SHEPARD, VICE PRESIDENT,

BANKERS TRUST CO., NEW YORK CITY, N. Y.

Mr. SHEPARD. My name is Frank P. Shepard. My position is that of vice president of the Bankers Trust Co. of New York, where I am in charge of the foreign division.

Our experience with the Export-Import Bank of Washington extends back to April 1939, when we first initiated a business relationship with that institution. A list of Export-Import Bank loans in which Bankers Trust Co. took part is attached for the record. It may be helpful if I describe very briefly the nature of our business with the Export-Import Bank, and then proffer a few conclusions drawn from the observations of the past 15 years.

In the first few years, our main participation was in agency arrangements under which Bankers Trust handled documents and advanced funds on behalf of the Export-Import Bank to borrowers of the latter institution. We obtained a share in this business through soliciting it from the Export-Import Bank. Our compensation was initially 14 percent on advances made; later the rate was raised fractionally from time to time, and presently stands at 2% percent.

The understanding was that the Export-Import Bank would repay, upon demand, the sums advanced by us on its behalf, but we continued the policy of carrying such advances until the autumn of 1948, when the demand for loans from our regular domestic customers led us to employ our funds elsewhere. At that time, the amount of our advances on behalf of the Export-Import Bank was above $26 million. Another activity, which has increased considerably in the postwar period, involves the issuance of letters of credit by Bankers Trust Co. under commitments made by the Export-Import Bank. Foreign borrowers from the Export-Import Bank employ the proceeds of their loans for purchases of goods in the United States. The general practice is to make payment for these purchases by way of a letter of credit of an American bank in favor of the United States exporter. Thus, we obtain a share of this business, which is guaranteed by the Export-Import Bank, as a result of requests from the borrowers