Reconstruction and Development, you are seeking answers to certain questions which are set forth in your letter of September 10. It is indeed a privilege to have the opportunity to provide the information requested as it is our sincere desire to give your committee all possible assistance for the attainment of your extremely worthy objective. The following are our considered and frank replies to the specific questions propounded in your letter:

1. The Export-Import Bank has been of inestimable assistance to many of our clients.

2. To the best of our knowledge and belief it has not competed with private capital in our area.

3. As far as we know, it has not taken any business from our bank.

4. We would be happy to have a larger share in the temporary financing and facilitating of exports and imports between the United States and other countries 5. Term loans have been extended by us to certain foreign governments and central banks for periods ranging from 2 to 5 years. We have not made such loans to our domestic or overseas clients for the purpose of financing foreign trade. 6. We have financed a few wheat shipments to Brazil without recourse to 1 customer for periods slightly exceeding 6 months.

7. Inasmuch as the Export-Import Bank is a Federal agency the rate of compensation could be considered adequate.

8. No participations with the Export-Import Bank have been entered into by us without their responsibility.

9. We are wholeheartedly in favor of the continuation of the Export-Import Bank's loaning facilities, as they are a very worthwhile factor in the extension and expansion of international trade.

10. The Export-Import Bank in our opinion has very definitely facilitated the expansion of world trade. As to the future, we feel that continuance of its prudent policies augmented by a wider use of its guaranty in connection with medium-term financing of exports would be of considerable help in expansion of international trade.

It is our hope that this résumé of our experience with the Export-Import Bank will be of some assistance in vour study of its operations and that the conclusions of your distinguished committee will be favorable to its continuation.

Sincerely yours,

CURTISS C. GROVE, Vice President

The CHAIRMAN. I do not believe I have any questions. Senator Payne, do you have any questions?

Senator PAYNE. No.

The CHAIRMAN. You have been listening to the questions?
Mr. GROVE. I think it has been covered very well.

The CHAIRMAN. Do you have any comments on any other colloquy that has gone on here today?

Mr. GROVE. No, I think not, in the main. I think your own views have been very sound.

The CHAIRMAN. Do you agree with me that the problem is one of credit and terms?

Mr. GROVE. Yes, I think I do.

The CHAIRMAN. At least, that is the biggest job in holding up the standard of living of the peoples of the world?

Mr. GROVE. That is right.

The CHAIRMAN. That is the way we did in the United States and are doing today. I do not know how we can expect the other fellow to do it on a cash basis when we do not do it.

Mr. GROVE. Of course, the American exporter is getting more and more competition from exporters of other countries who have government backing. That was covered this morning.

The CHAIRMAN. Thank you very much for your statement. We may want to call you back later.

Our next and last witness will be Mr. Frey, and then I want to call Mr. Maffry back for one more question. Mr. Frey, suppose you proceed in your own way.

STATEMENT OF HENRY A. FREY, JR., ASSISTANT VICE PRESIDENT, PHILADELPHIA NATIONAL BANK, PHILADELPHIA, PA.

Mr. FREY. Mr. Chairman, the Philadelphia National Bank takes a vital interest in all matters relating to the expansion of international trade. The operations of the Export-Import Bank have, therefore, always been followed with great interest, and we are glad to have the opportunity to appear before your committee.

At the outset, we wish to state that we believe the original concept of the Export-Import Bank to have been a good one and that there is a continuing need for such a Government agency. It is our opinion. that the bank has made possible a large volume of business which was in the best interests of the United States and friendly foreign countries which would not have been consummated had their financing depended on the facilities of the commercial banks.

Our own experience with the bank has been entirely satisfactory. We have participated in loans granted by the bank both with and without their guaranty and have issued letters of credit under the bank's guaranty. We feel that our compensation has been adequate and would welcome further similar opportunities.

Many of our customers have directly benefited from the operations of the bank. We refer, in particular, to the loans granted to Argentine banks in 1950, and to the Banco do Brasil in 1953, which liquidated seriously frozen positions of many exporters.

We have read with interest suggestions that the bank become more active in offering its guaranty to American banks covering loans made by them to finance exports. It is not the desire of our bank to seek such guaranties because of the credit risk in such transactions, but rather, the risk involved in many countries that the proceeds of an export when paid will not be convertible to United States dollars.

It has been our observation that a considerable volume of exports is turned down because of this risk, which, in our opinion, is not a proper one for commercial banks. We believe the bank could fill a very real need by offering such guaranties.

The CHAIRMAN. We have a letter from your bank dated September 17, 1953. Do you want to place that in the record?

Mr. FREY. Yes. I believe our answer was dated the 17th.

The CHAIRMAN. Without objection, the letter will be made a part of the record.

(The material referred to follows:)

Hon. HOMER E. CAPEHART,

THE PHILADELPHIA NATIONAL BANK,
Philadelphia, Pa., September 17, 1953.

Chairman, Committee on Banking and Currency,

United States Senate, Washington, D. C.

DEAR SIR: We acknowledge receipt of your letter of September 10 relating to the study which your committee is making of the operations of the ExportImport Bank of Washington and the International Bank for Reconstruction and Development.

In accordance with your request, it is a pleasure for us to answer to the best of our ability the questions asked in your letter.

1. The Export-Import Bank has unquestionably been of assistance to clients

of our bank. We refer, in particular, to the $125 million loan made by the bank to a consortium of Argentine banks in 1950 and the $300 million loan granted by the bank in 1953 to the Banco do Brasil, S. A., Rio de Janeiro.

2. No.

3. No.

4. We have had the pleasure in the past of participating in loans granted by the Export-Import Bank, and on several occa. ions have issued letters of credit under the guaranty of the bank. We are interested in considering any other transactions of this type or others which the bank might offer to us.

5. With regard to term loans where repayment exceeds a term of 6 months, our present policy is to give favorable consideration to such loans where it is obvious that a loan on shorter terms does not fit the case. In other words, we prefer to grant such loans on a term basis rather than, say, on a 90-day basis, which would be renewed from time to time at rates probably lower than those applicable to term loans.

6. No.

7. Yes.

8. Yes, on a few occasions with entirely satisfactory experience.

9. Yes.

10. We very definitely feel that the Export-Import Bank has facilitated the expansion of international trade in the past and that there is very real need for the continuance of such a Government agency. It seems to us that an additional service which the Export-Import Bank might offer would be "convertibility insurance." We believe that many desirable transactions are not consummated because of the unwillingness on the part of exporters and banks to assume the risk that dollar exchange will not be available. We realize that FOA offers such insurance for long-term investments but, so far as we know, there is no method available at present to insure convertibility for current short-term transactions. It is a pleasure for us to try to assist you in your investigation and we trust that you will feel free to call on us if we can supply any further information.

Very truly yours,

H. A. FREY, Jr., Assistant Vice President.

The CHAIRMAN. In other words, your position is, whether or not a customer, even though he may have the currency of his own country and be willing to pay on the due date of the note or obligation, if his country does not have dollars, he cannot pay you?

Mr. FREY. That was the position of Brazil.

The CHAIRMAN. You think that peril is one that ought to be undertaken by some governmental agency such as the Export-Import Bank? Mr. FREY. Yes. It may not need to be a continuing policy, but certainly for the time being.

The CHAIRMAN. You have been listening all day, have you not? Mr. FREY. I did not get here until this afternoon.

The CHAIRMAN. Do you have any comments?

Mr. FREY. No, sir, I do not think so.

The CHAIRMAN. Do you disagree or agree?

Mr. FREY. I agree with what I have heard. I think the commercial banks, as a whole, are pretty much in agreement on the bank in the past, and perhaps what it should do in the future.

The CHAIRMAN. I gather this group of witnesses today are for the continuation of the bank.

Let me say that the purpose of this study is not to eliminate the bank. It is a study to find out what we ought to do in respect to credit and finance in this whole matter of international trade. I still say that you bankers have the big end of it; that is, the matter of financing it, particularly financing it on longer terms, making the dollars of these foreign countries go further.

Mr. FREY. I agree with that.

The CHAIRMAN. If they can find the answer to that, set up finance companies in their own country to sell on the installment plan, sell

automobiles and everything that we sell here on 10, 15, or 20 percent down, long-terms, learn how to sell securities to their people in private enterprise, as we have done in this country for years they are beginning to do it in some of these countries, and I am glad to see it-they will get there all right.

It is just a question of whether or not we are going to get our share when they do. I do not think there is any question that they will become industrialized and will increase their standard of living.

Thank you very much. We appreciate your statement.

Mr. Maffry, will you take the stand one minute? You were with the Export-Import Bank?

STATEMENT OF AUGUST MAFFRY, VICE PRESIDENT, IRVING TRUST CO., NEW YORK, N. Y.-Resumed

Mr. MAFFRY. Yes, sir.

The CHAIRMAN. As vice president, I believe, a few years ago?
Mr. MAFFRY. Yes, sir.

The CHAIRMAN. I wanted to ask you this question: What, in your opinion, did Reorganization Plan No. 5 do, or what effect did it have upon the operation of the Export-Import Bank, and particularly, am thinking in terms of their guaranteeing exporter loans?

I

Mr. MAFFRY. On this point, I should like to give you a personal opinion.

The CHAIRMAN. Yes, that is all right.

Mr. MAFFRY. Whereas this morning, when I spoke, I was giving you the considered opinions of my institution.

The CHAIRMAN. We understand that.

Mr. MAFFRY. On this point, it seems to me that the principal effect of Reorganization Plan No. 5 was to impair the independence and autonomy of the Export-Import Bank and to make it more difficult, even more difficult than it has been in the past, for the bank to function effectively and efficiently.

May I specify? I am speaking, now, particularly about exporter loans, loans made by the bank on application of and with the participation of individual exporters for their exclusive benefit.

I do not see how the bank can consider such applications effectively, efficiently, or in a reasonable period of time, if every single transaction has to go before a Cabinet committee. I fully appreciate that the general policies under which the Export-Import Bank works must be defined in the first instance by statute, as they have been. I appreciate that other broad policies under which the bank operates must be fixed by a committee of Cabinet level, largely because the bank is, after all, working with public funds and one must be certain that it ority, works within proper limitations.

But it seems to me there is a large class of transactions on which the bank ought to be able to pass, to say "Yes" or "No" on its own authority without reference in each instance to a Cabinet committee.

The effect of this is to make it extremely difficult and extremely time consuming to get a decision from the bank. This is no fault of the bank. The bank has an extremely competent management, in my opinion. It has an extremely competent staff, which is perfectly capable of passing on its own authority on many of the applicatiors that come to it. This is my opinion, sir.

The CHAIRMAN. I was opposed to Reorganization Plan No. 5. I was opposed to the plan that took the Board of Directors away from the RFC. I was opposed to the plan that took the Board of Directors away from the Export-Import Bank and put it in the hands of one director. I just cannot conceive of a bank or a corporation not having a board of directors.

Mr. MAFFRY. Nor can I.

The CHAIRMAN. I do not know why the Export-Import Bank, which has $2,800,000,000 in loans outstanding, should be in that category. I always felt they should have a good strong board of directors. Just as I felt before we liquidated the RFC, it ought to have had a good, strong board of directors instead of being a one-man operation. Nevertheless, it does have a one-man operation.

Since Congress did not object to Reorganization Plan No. 5, we have a Director and Deputy Director. Even under that plan, it could work properly, I presume, if the council would give them sufficient latitude. I do not know whether they have or have not. We will find out before we get through with our study. It is one of the things we are going into. We will find out just how much time is wasted and lost, just how much they have held back the operations of the ExportImport Bank.

Mr. MAFFRY. This is the principal criticism that one hears of the bank.

The CHAIRMAN. The slowness in operation?

Mr. MAFFRY. Yes. I rarely hear the bank criticized because it says "No" to an application.

The CHAIRMAN. It is because it says "Maybe," or "Yes"?

Mr. MAFFRY. They can't tell you, because there are six other departments of the Government which must be consulted.

The CHAIRMAN. It takes too long to come to a decision?

Mr. MAFFRY. That is right.

The CHAIRMAN. I have heard that, too. We are going to try to find out why that condition exists before we get through with our study.

Thank you very much, gentlemen. We appreciate your being here today. We may want to call you back later.

We have a big problem to solve, to try to make this whole business better. Thank you very much. We will recess now until 10 o'clock

tomorrow morning, when we will have 8 or 9 witnesses.

(Whereupon, at 3:17 p. m., the committee recessed, to reconvene at 10 a. m., Friday, January 29, 1954.)