Statement of proposed obligations for purchase and hire of passenger motor vehicles for the fiscal year 1958

Export-Import Bank of Washington
fund.

1

Users and public purpose

$660 All staff members: Transportation to and from official meetings and conferences in the Washington area with Members of Congress, U. S. Government officials, personnel of foreign embassies, and officials of international organizations. Messengers: Delivery of special dispatches; movement of light equipment, supplies, and packaged documents. All within the Washington area.

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. 2 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. As a consequence the administrative load as to certain credits has shifted from the commercial banks to the bank.

The current money market resulted in the bank receiving inquiries and applications which normally would have been directed to and financed by commercial banks or private sources. The Board of Directors has resisted extending credits when it was obvious that the approval of the application would be contrary to our Government domestic fiscal policy. A further effect of the current money market is that the potential for selling parts of the bank's portfolio in the financial market is reduced.

The bank's expanded exporter credit program was inaugurated approximately 2 years ago. The number and type of applications being received, together with related changes in financing, are circumstances which have changed the operational pattern of the bank without any significant change in policy. Many of the credits authorized, where the bank participates with others, are for very small amounts; in some instances the bank's participation is less than $1,000. Credit information is required on each foreign dealer, and the bank is establishing current credit files to expedite the processing of credits of this type. As a further measure of expediting the processing of applications, the bank is encouraging exporters to submit credit information on their potential customers abroad prior to requests for actual financing. The number of applications received under this program exceeded the number of applications received for all other types of credit. Although the applications individually are for considerably less than commodity, or project type credits, the work required by members of the staff is in some instances greater than on the larger type credits. A workload factor to be considered in this connection is that the bank will be advancing its own funds in these loans, whereas at the outset of the program there was reason to believe the funds would be advanced by commercial banks.

Comparison with 1957

ANALYSIS OF THE BANK'S 1958 BUDGET

The bank is requesting an administrative expense limitation of $1,980,000 for fiscal 1958 out of estimated net profits of $63.1 million. The amount requested represents an increase of $310,000 over the approved limitation of $1,670,000 for fiscal 1957. A comparative analysis of the 2 fiscal years also indicates an increase in net profit of $2.4 million in 1958.

The 3 largest items included in the increase of $310,000 are due to (a) contributions to the civil-service retirement fund, $97,000 (per Public Law 854, approved July 31, 1956); (b) the increase in the average employment for permanent positions, $157,700; and (c) travel, $30,000. Contribution to the civilservice retirement fund is included for the first time and represents approximately 30 percent of the total increase. An increase in workload is contemplated during fiscal 1958 and travel is estimated to be at a level above the current fiscal year projection.

The bank is operating on a reduced budget for the current fiscal year as a result of absorbing certain unbudgeted expense items which were effective July 1, 1956. Public Law 854, approved July 31, 1956, increased salaries of members of the Board by $23,000. The annual office rental was increased $0.10 per square foot. Neither item was contemplated nor included in the 1957 budget estimate. The estimated savings required is approximately $26,600. In order to preclude exceeding the approved limitation the Board of Directors determined that savings were to be effected by (a) curtailing employment, although additional employees are needed to several divisions; (b) restricting travel; and (c) deferring the acquisition of additional office space.

The amount requested for personal services, $1,543,000, reflects an increase of $165,700 over fiscal 1957. Nineteen additional positions are provided which increase the gross number of permanent budgeted positions from 202 to 221. Included in the 19 positions are 9 technical positions, namely, 1 assistant treasurer, 1 statistician, 2 economists, 3 engineers, and 2 lawyers. The remaining 10 are clerical and stenographic positions. (At December 31, 1956, there were 186 employees on the payroll, including 5 directors, 77 technical, and 104 clerical and stenographic.) The need for these additional positions is directly related to the increase in the number of active loans including the work performed in the consideration of applications and the approval of new loans. Based upon the estimated volume of new business in fiscal 1958 together with the carryover of work resulting from the heavy backlog of credits authorized in the current and prior fiscal years, the workload involved will transcend any previous year. Increased demands will be made upon the economic, engineering, and legal divisions, requiring seven additional technicians. Due to the increased demand and need of special and comparative information, the position of a statistician is projected for fiscal 1958. This position will eliminate time loss and work interruptions of accountants and clerks in meeting such requirements. The Vice PresidentTreasurer was elevated to the position of Senior Vice President in the latter part of fiscal 1956. At the same time the Assistant Treasurer was elevated to the position of Treasurer. The replacement of an Assistant Treasurer is required to assist in the financial transactions and controls of the Treasurer. The 10 clerical and stenographic positions are required in the following offices and divisions: Office of the Treasurer (1), Accounts (4), Administrative (1), Engineering (1), Legal (1) and Loan Division (2).

Between June 30, 1956, and December 31, 1956, the bank's permanent employees increased in number by 14. This was a significant accomplishment in that technicians, who were being recruited for more than a year, represent 9 of the 14 positions.