Mr. CARLTON. I think we are. I think we have got the product, and in order to fully meet the competition there should be available, probably, an opportunity to extend more credit and longer terms. Senator BENNETT. Thank you very much. Without objection; we will make your letter of September 18, 1953, giving the answers to our questionnaire, a part of the record. (The material referred to follows:) Senator HOMER E. CAPEHART, CENTRAL NATIONAL BANK OF CLEVELAND, Chairman, Committee on Banking and Currency, DEAR SENATOR CAPEHART: We are very glad to comply with your wishes by answering the questions which you have set forth in your letter of September 10, concerning the Export-Import Bank. We are answereing your questions in the same order that they appear in your letter. (1) We feel that the Export-Import Bank indirectly, at least, has been of assistance to clients of our bank. We have had occasion where good customers of our bank have asked for financial assistance in extending credit to foreign buyers that in our estimation did not come in the category of the loaning facilities of a commercial bank. In such cases, we have suggested that they communicate with the Export-Import Bank where they have received full cooperation even though it might have been impossible for the Export-Import Bank to assist in extending such credit. The overall results of many loans made by the Export-Import Bank into foreign countries have certainly helped develop markets for exporters in our area. (2) We have never had the feeling that the Export-Import Bank has competed with private capital in our area. (3) We feel sure that the Export-Import Bank has never taken any business away from our bank. (4) We feel that we have had a rather close relationship with the Export-Import Bank and have made frequent calls that we may be acquainted with the management and therefore feel that they are fully aware that we are anxious to cooperate with them at all times. At the moment, we know of no way that they could use our services in the future more than they have in the past. (5) In answering this question, we are assuming that you are requesting information regarding term loans for the financing of imports or exports and in no way is my answer based upon our feelings on term loans in general. We have rather freely financed (principally) export transactions for shippers in this area on repayment basis up as high as 30 months and our experience has been excellent. However, we have gone into each transaction very carefully and aside from being fully acquainted with the borrower, have been able to establish pretty definitely that possibilities of continuing payments to eventually liquidate the loan over a period of time on the part of the buyer, have always been good. (6) While we have actually purchased paper from some of our customers without recourse on them, we have had recourse either on a bank abroad ot a credit established by the foreign bank in this country. As you know, it is impossible for a commercial bank to buy such paper without recourse. (7) In the several cases where we have acted for the Export-Import Bank on the operation of credits, we have felt that our compensation has been adequate and we have always taken into consideration the risk factors involved by the Export-Import Bank as a Federal agency. We might add that it has always been a real pleasure to cooperate with them. (8) We have never participated with the Export-Import Bank in any of its loans without their guaranty. (9) We consider that the continuation of the Export-Import Bank's loaning facilities are essential in international trade. We feel that there are loans that can be made by the Export-Import Bank not eligible, according to leading regu lations of commercial banks, that both directly and indirectly benefit the markets for goods manufactured in this area and open sources of raw materials necessary to continue our economy. (10) We believe that the Export-Import Bank has facilitated the expansion of international trade in the past and can more adequately expand its activities in the future if they are given broader powers and if the policy be continued to have this organization manned only by men with complete working knowledge of all of the problems in import and export trade activities. The people with whom we are well acquainted we feel have those qualifications. If we can help further in aiding your committee work, we hope you will feel free to call on us. Very truly yours, O. L. CARLTON, Vice President. Senator BENNETT. Our next witness will be Albert L. Long, vice president of the Republic National Bank of Dallas. You may proceed in your own way, Mr. Long. STATEMENT OF ALBERT L. LONG, VICE PRESIDENT, REPUBLIC NATIONAL BANK OF DALLAS, TEX. Mr. LONG. My name is Albert Long. I am vice president of the Republic National Bank in Dallas. After hearing the testimony this morning I would like the privilege of getting away from those matters. There are several things that have been brought out. First, Senator Capehart has emphasized that you are particularly interested in facts rather than opinions. The facts as regard my bank are outlined in our reply to the questionnaire which I believe is to be part of these proceedings. Senator BENNETT. May I interrupt you there? Mr. Long, is that the reply to the questionnaire of the Advisory Committee? Mr. LONG. Yes, which is intirely favorable. Senator BENNETT. I wanted to be sure that I identified it. There have been two questionnaires. One was by the Advisory Council and one by the committee itself. Mr. LONG. This is to the committee itself. Senator BENNETT. Do you want me to put that material in the record? Mr. LONG. Yes. Senator BENNETT. Without objection, and at this point we will put into the record the reply of the Republic National Bank of Texas over the signature of Mr. Long, dated September 21, 1953. (The material referred to follows:) Hon. HOMER E. CAPEHART, REPUBLIC NATIONAL BANK OF DALLAS, Chairman, Committee on Banking and Currency, United States Senate, Washington, D. C. DEAR SIR: It is my pleasure to reply to your recent favor which is in the form of a questionnaire regarding certain features of the operation of the Export-Import Bank of Washington. Our answers to your questions should, in my opinion, be as follows: 1. "Has the Export-Import Bank been of assistance to clients of your bank?" The Export-Import Bank has been of assistance to clients of our bank by making loans abroad which permitted the exportation of agricultural products, especially cotton, and gave our customers the opportunity to sell the commodities. 2. "Has it competed with private capital in your area?" To the best of our knowledge, it has not competed with private capital in our area. 3. "Has it taken business away from your bank and, if so, how and to what degree?" We know of no business they have taken away from our bank, as the loans the Export-Import Bank have made were not in direct competition with our loans. 4. "Can the Export-Import Bank use the services of your bank more than in the past and, if so, how?" We have always had close cooperation between the Export-Import Bank and ourselves and believe that in the future the opportunity may arise when they can open more of their letters of credit direct with the interior banks such as ourselves, than they have in the past. 5. "What position has your bank taken with respect to term loans, i. e., where repayment exceeds a term of 6 months?" We take it that by "term loans" you mean term loans to borrowers outside of the United States. We have entered into one or two of these term loans over 6 months with borrowers in Mexico, but we have not solicited this type of loan in the past. 6. "Are you financing, without recourse, shipments to foreign countries payable over term periods?" We are financing, without recourse, shipments of goods to foreign countries, payable over a period of time up to 6 months, where a letter of credit is opened and we have the direct obligation of the foreign bank. 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?" Where we have acted for the Export-Import Bank in the operation of credits, our main consideration has been to facilitate the movement of Texas commodities and goods rather than proper compensation. Therefore, we have not carefully analyzed the compensation to see if it was adequate in comparison with other services. 8. "Have you participated with the Export-Import Bank in any of its loans without the latter's guaranty? If so, was your experience satisfactory?" We have not participated with the Export-Import Bank in any of its loans without the latter's guaranty. 9. "Do you consider continuation of the Export-Import Bank's loaning facilities essential in the interest of international trade?" Certain Export-Import Bank loans such as the ones outstanding to and now in consideration for Japan move cotton by making purchase dollars available. If these dollars cannot be made available by the foreign buyers through other banking facilities, it is my opinion that a continuation of the Export-Import's loaning facilities would be essential in the interest of international trade. 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?" Many other commodities such as cotton, mentioned in the answer to No. 9, no doubt have been financed by Export-Import Bank facilities and tend to expand international trade. We trust that these answers will assist you in arriving at your conclusion. However, as this is a controversial subject, we wish to give you this information in confidence as mentioned in your letter. Assuring you that we are willing to cooperate with you in every respect, we are, Very truly yours, ALBERT L. LONG, Vice President. Mr. LONG. You will note from that reply that the principal exports we are interested in are commodities, especially cotton, which is now in surplus supply, a problem that you in Congress have before you at the present. I would like just to make a few remarks that may be construed as opinions and, if they are, please pardon the expression of them. To begin with, I would like to bring two facts forward against the Export-Import Bank. One is its slowness in moving in certain instances. Particularly on February 12 when in a meeting with Secretary Benson we recommended that war-risk insurance abroad be passed. The Senate passed the law. It is my understanding that it is not working yet. That is nearly a year. The delay in the Spanish loan cost the Spanish buyers considerable money because the cotton market had gone up in that time. The other side of the ledger is strictly in favor of the Export-Import Bank. General Edgerton in his statement to you of January 27 reported losses of about one one-hundredth of 1 percent charged against reserves. I have seen the figures and believe he will bear me out when I say that cotton loans have not lost 1 cent. That is to show you that the Export-Import Bank has made good loans. I would also like to stop here at this time and bring up for discussion the selling of credit. I believe you will find that the cotton shippers to England last year shipped over $100 million of cotton, 10 days to cash on arrival, which gave a month's additional credit. I think you will find Belgium and Holland, where the bank's acceptance, as Mr. Carlton mentioned, bought around $10 million worth of cotton without the Export-Import Bank guaranty; that we believe some of the foreign banks are good for 6 months' time. I just bring this in to let you know that the American cotton shippers are extending credit. They are paying interest on it and extend the 'credit through the banks in the usual manner. The limitation to that is that we do not want in each individual bank to go beyond a certain amount. As Mr. Carlton said, to one Belgian bank we gave $1 million for 90 days and $150,000 for 180 days. Anything above that we would suggest, in agreement with Mr. Carlton, the Export-Import Bank guarantee those transactions. The American cotton shipper and his banks are willing to go along to a certain extent and give credit, and are doing so at the present time. Senator BENNETT. May I interrupt you at that point? Do I understand you then to say that, depending on the buyer and the strength of his own credit, that you are pointing out the American shipper is extending credit himself now and that you would like some kind of continuous negotiation, that varying it in different countries or banks you would carry the limits that you carry without recourse, and then you would like to ask the bank to come in? Mr. LONG. I would certainly limit it and let the Export-Import Bank say how far they would go above that. Senator BENNETT. Would you set up a permanent or fixed limit across the board, or would you want to set a special limit for each country? Mr. LONG. I believe it would have to be on each country and almost on each transaction. Senator BENNETT. I was going to say each transaction would have to be negotiated. Mr. LONG. That is right. In other words, the American cotton shippers to move their cotton are extending credit. We have foreign banks that we believe have good credit. We extend credit to them and let them police their own importers over there. During this same period the Export-Import Bank has been making loans, all good, we have been granting dollar aid. Whether we like it or not it was to help ourselves, especially to move some unwieldy surpluses. Again, whether or not we like it, and talking about individual initiative, business and banks, we will never see the day that free trade is enforced. It is now too complicated and the Government will have to have something to say in it. My own fear is that we may keep the Government in the position where it will control and not assist. It is my personal belief that the Congress should grant the ExportImport Bank the right to make loans and permit the bank to take How certain calculated risks on these loans that are to our interest. ever, these powers should be outside the use of funds of the ExportImport Bank, being especially appropriated but in no manner creating such a difference as to have two complete standards of risk loans within Export-Import Bank and International Bank financing. In other words, gentlemen, let us have loans instead of grants, and that is an opinion. I apologize and assure you that we will cooperate in every way consistent with good banking, and await your pleasure. Senator BENNETT. Do not apologize. The important thing is that this committee has in the record the point of view that is in your mind and the benefit of your experience. I have been interested in one impression that I get from your testimony. I think it is axiomatic in business that you can have a credit policy that is too strict and therefore you can have a loss ratio that is too low for sound business. I wondered if your testimony would indicate that you thought this loss ratio of one-one hundredths of 1 percent represents a credit policy that is too strict for the achievement of the purpose of the bank? Mr. LONG. I would like to qualify that and say it would if the Export-Import Bank was not a well-run bank. It is a well-run bank; therefore, the loss ratio is in line. The other thing is that it is not high erough if they had used their facilities to promote exports and take exchange risks and convertibilities, and things like that, which go with these loans. Senator BENNETT. You feel probably at the moment that in order to move more of our surplus commodites they should be prepared to take more of these risks? Mr. LONG. If, again qualifying it, we are not giving it away at the same time. My contention is that if they take the risk we may have a small loss but that small loss will not be the same as a grant. Senator BENNETT. I am glad to get that part of your testimony clearly in my own mind. I have nothing further. I thank much. Our next witness is Mr. Henry Schneider, of the Union Bank of Commerce, Cleveland, Ohio. you very STATEMENT OF HEINZ SCHNEIDER, VICE PRESIDENT, UNION BANK OF COMMERCE, CLEVELAND, OHIO Mr. SCHNEIDER. May I ask you, first of all, to correct your records as to my name. My name is H-e-i-n-z Schneider. Senator BENNETT. It is listed as Henry on my schedule. I apologize. Mr. SCHNEIDER. Not at all, Senator. Senator BENNETT. It is correctly listed on the copy of the material that I suppose you are about to read to the committee. Mr. SCHNEIDER. Mr. Chairman, I believe that the Export-Import Bank of Washington can play an important role within the framework of a sound foreign economic policy of the United States. So, in view of this, it is my opinion that the Export-Import Bank of Washington should be continued as a Federal agency for the purposes outlined in the Export-Import Bank Act of 1945. My opinion is based on the following considerations: Generally speaking, under prevailing political and credit conditions, loans made in most foreign countries on an intermediate or long-term 42493-54-pt. 1-18 |