Budget authorizations and receipts, expenditures and balances

BUDGET AUTHORIZATIONS AND RECEIPTS AVAILABLE

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Mr. PASSMAN. The committee will come to order. We shall now consider the request of the Export-Import Bank of Washington, for an amount not to exceed $1,980,000 for administrative expenses for fiscal year 1958. The amount for the present fiscal year is $1,670,000, and an increase of $310,000 is requested for fiscal 1958.

SUMMARY JUSTIFICATION DATA

We shall insert pages 1 through 8 of the justifications in the record at this point.

FACTORS AFFECTING THE BANK'S 1958 BUDGET

The bank's program as projected for fiscal 1958 represents the continued efforts of the Board of Directors to carry out the objectives and purposes of the bank, as contained in the Export-Import Bank Act of 1945, as amended, which states in part, ***"to aid in financing and to facilitate exports and imports and the exchange of commodities between the United States or any of its Territories or insular possessions and any foreign country or the agencies or nationals thereof; the bank should supplement and encourage and not compete with private capital; * * * loans shall generally be for specific purposes and offer reasonable assurance of repayment."

The bank's program is primarily one of financing American exports and also, as authorized by the Congress, to provide expropriation insurance on commodities exported to certain foreign areas. The bank's loans have to a degree stabilized our domestic economy inasmuch as a large percentage of the loans cover capital equipment or consumer goods manufactured or produced in the United States. Changes in our domestic economy, i. e., when the market changes from a seller's to a buyer's market, stimulates the interest of manufacturers to find new markets. Changes in business trends, such as these, give rise for the need of financing foreign sales.

For some years major loans were on a country-to-country basis, and the bank was primarily concerned with the ability of the borrowing country to repay. Today, many of the bank's loans are based upon an individual's ability to pay, requiring a credit analysis of the individual or foreign dealer. The demands made upon the bank for this type of financing have been on the uptrend for several years and represent a large segment of the workload estimated for fiscal 1958.

1 Does not include increases in authorizations for 18 loans in the amount of $122,695,218. Does not include increases in authorizations for 17 loans in the amount of $20,235,812.

Although the operations of the bank appear similar to those of a commercial bank, they are not comparable and are dissimilar, because of foreign obligors, the terms of the loan, and risk involved. Further, a commercial bank is primarily concerned with the profit angle. The element of profit is also considered by the Export-Import Bank, but the granting of the loan is motivated by additional considerations.

The two primary factors which the Board applies in considering all loan applications are: (a) the soundness of the economy of the country, and the policies of the government officials aimed at maintaining this condition; and

(b) the ability of the country to provide in dollars the principal and interest installments on the dates due.

The bank in presenting its program is not in a position to portray its accomplishments in the usual manner used by most Government agencies. The reason is that the benefits derived by the United States from loans financed by the bank are far-reaching. For example, the bank is financing the construction of a cement plant in Indonesia. Although the plant is not complete, approximately 1,000 United States companies have supplied materials and equipment in its building. Amounts reflected in statements of the bank as to authorizations and disbursements do not indicate in their entirety the foreign trade made possible by the Export-Import Bank financing. The reason for this is that some loans represent only a part of the total amount to be financed. The balance of financing in many instances is furnished by the supplier.

The interest rates on all the Export-Import Bank loans at December 31, 1956, ranged from 2% to 6 percent. The low rate of 2% percent is applicable to the postwar reconstruction and lend-lease loans (1945-46). The rates established are to cover usual operating expenses, the cost of money invested by the United States (i. e., payment to the Treasury of interest on money borrowed, and dividends on the capital stock of $1 billion wholly owned by the United States) and to establish a reserve for possible losses. Loans fully reserved at December 31, 1956, together with writeoffs, total $525,553.90, being approximately one-hundredth of 1 percent of the aggregate loan disbursements of over $5 billion made by the bank since its inception. Delinquent installments totaled $9,260.999.91 as at December 31, 1956. This amount was not charged against the bank's earned reserve because of the expectation of eventual payment.

The substantial increase in the bank's workload during the past 12 months results from the desire and necessity of United States manufacturers and exporters to promote and finance the foreign sale of their products. There has been a continuance of the high level of loan applications received by the bank. Also, the increase in interest rates and the current money market have made it necessary for the bank to perform work and services which usually have been performed by commercial banks through agreements relating to specific credits.

To bring forth practical economies the bank has always endeavored to interest and utilize commercial banks in its loans under takeout or guaranty agreements. The advantages are twofold. The funds disbursed by commercial banks reduce the amount of the bank's draw on the United States Treasury, and, secondly, the bank is relieved of a substantial portion of the paperwork. Such agreements with commercial banks provide the bank with a margin of profit. The increase in interest rates made it undesirable for the Export-Import Bank to continue this type of financing, because the greater cost of funds obtained through commercial banks over the cost of funds from the United States Treasury more than offset any savings from administration of loans by those banks. consequence the administrative load as to certain credits has shifted from the commercial banks to the bank.

As a