ADDITIONAL STATEMENTS AND DATA American Bankers Association, statement and appendix tables received for the record....... Page 479 American Insurance Association, letter from Walter D. Vinyard, Jr., counsel 510 American Society of Corporate Secretaries, Inc., manual for proxy solicita- 424 Letter to President Ford enclosing letters from international shipping lines complying with Arab boycott----- News release naming Federal agencies and private organizations.. Central Paper Co., letter from David H. Berkowitz, vice president---Chamber of Commerce of the United States, Task Force on Foreign Investment in the United States, staff report on special restrictions to foreign investment in special U.S. commercial activities____ Commerce Department, letter to Secretary Frederick B. Dent from Senators Wiliams and Javits-- Committee of Publicly Owned Companies: Correspondence with Securities and Exchange Commission regarding beneficial ownership, takeovers, and acquisitions--- Statement before the SEC, file No. 4-175, public factfinding investigation Dickstein, Shapiro & Morin, letter subsequently received for the record from Charles H. Morin__. 308 305 515 454 48 477 474 281 General Accounting Office, excerpt from supplement to "Reporting Requirements and Dissemination of Information of Corporate Ownership and Structure" 142 General Dynamics Corp., letter from John P. Maguire, Secretary to 478 487 Justice Department, exchange of letters with Attorney General Edward I. 47, 68 174 Machinery and Allied Products Institute, letter from Charles W. Stewart, president 516 Mirabelli, Gould, Noto & Holloway, letter from Mario V. Mirabelli, counsel, 522 National Association of Securities Dealers, Inc., comments on S. 425 in letter from Gordon S. Macklin, president___ 483 National Foreign Trade Council, Inc., letter received from Melville H. 484 New York Clearing House, summary of position on section 4 of S. 425....... 524 Ad Hock Committee to Improve Proxy Solicitations_. 423 422 Letter to George A. Fitzsimmons, Secretary, Securities and Exchange 407 Letter to Senator Williams from Gordon L. Calvert, vice presidentgeneral counsel... 406 List of members of Advisory Committee on International Capital 346 List of participating data bank survey firms. 349 Members firm foreign activity study-- 347 Paper titled "The Capital Needs and Savings Potential of the U.S. Ronson Corp.: Letter to Senator Williams from Louis V. Aronson II. Letter to stockholders____. News release containing recommendations on S. 425Securities and Exchange Commission: Page 320 321 322 Chairman Garrett's answer to Senators Williams and Javits letter of concern on Arab boycott_. 49 Letter to Chairman Garrett from Senators Williams and Javits expressing concern on Arab League's boycott attempts--. Memorandum dated March 5 on S. 425_. 47 110 Summary of rules and regulations established pursuant to the Federal securities laws with regard to the reporting of ownership of securities 124 Treasury Department, exchange of letter between Secretary Simon and United States Council of the International Chamber of Commerce Inc., list of members___ State Department, letter to Senator Williams from Robert J. McCloskey, Statement of George A. Vonder Linden, Operations Committee, Securities Industry Association before the Securities and Exchange Commission in the matter of beneficial ownership, takeovers and acquisitions by foreign and domestic persons__ 46 436 45 250 Wall Street Journal, article titled "Review and Outlook," dated Feb. 20, 1975 United States Trust Co., statement of Charles W. Buek, chairman of the board and president__ 499 471 Washington Star, reprint of article in which Treasury Secretary William 36 CHARTS AND TABLES Foreign direct investments in the United States: Value by country or origin__ Value by industry Component of national savings, percent of total savings. Foreign tender offers-fiscal year 1973.. Investment and productivity, 1960-73-. New York Stock Exchange: 95 95 473 466 472 Commissions generated from foreign activity as a percentage of total commissions Foreign purchases and sales of U.S. corporate stocks and bonds.. 367 364 360 Gross foreign purchases and sales of U.S. corporate bonds 366 Gross foreign purchases and sales of U.S. corporate equities. 361 Savings and investment as percent of GNP. 472 FOREIGN INVESTMENT ACT OF 1975 TUESDAY, MARCH 4, 1975 U.S. SENATE, COMMITTEE ON BANKING, HOUSING AND URBAN AFFAIRS, SUBCOMMITTEE ON SECURITIES, The subcommittee met at 10:01 a.m. in room 5302 of the Dirksen Senate Office Building; Senator Harrison A. Williams, Jr., chairman of the subcommittee, presiding. Present: Senators Williams, Tower, Helms, and Jacob Javits (by special invitation of Senator Williams). Senator WILLIAMS. This hearing by the subcommittee on Securities will come to order. This morning the Subcommittee on Securities begins hearings on S. 425, the Foreign Investment Act of 1975, legislation which I introduced on January 27 along with Senators Sparkman, Jackson, Thurmond, Weicker, Laxalt, Leahy and Morgan. The purpose of the bill is to rationalize and coordinate the regulation of foreign investment in the United States through three amendments to the Securities Exchange Act of 1934. This would be accomplished by, first, requiring the disclosure of the beneficial ownership of all equity securities of all publicly traded corporations, and thus assure effective monitoring of foreign investment in American business. Second, the bill would amend the tender offer provisions of current law-the so-called Williams Act-to require all foreign investors to notify the SEC and the President before acquiring 5 percent or more of the equity securities of any U.S. company. And third, the bill would establish a straight-forward and usable procedure by which the President may prohibit such a transaction if he deems it appropriate for the national security, to further the foreign policy, or to protect the domestic economy of the United States. The increase in foreign investment in the United States in recent years is a plain fact of international economic life. Unfortunately, we do not have completely accurate or reliable figures-a problem this bill is in part designed to cure. However, regardless of the specific dollar figures, there is no argument that foreign investment has been growing at an extraordinary rate. According to the best figures available, in the decade from 1962 to 1973, all foreign direct investment in the United States-investment amounting to control of a business enterprise-rose from $7.4 billion to $14.4 billion, an annual average growth rate of approximately 7 percent. In 1973 direct foreign investment rose to $17.7 billion-a rate of increase of 24 percent. At the end of 1974, estimates are that direct investment totaled over $20 billion and may be as high as $34 billion. Every prediction I have seen indicates the inflow of foreign capital will increase even more sharply during 1975. Whatever the precise amounts, there can be no doubt that we are confronted with a shift in the source of investment in American business of potentially enormous impact. I believe it is generally agreed that there are three basic reasons. for the sudden expansion of foreign investment in the United States. The first is the success of traditional American economic policynamely, an open-door policy to all investors regardless of nationality or source of funds. The second reason is the recent currency reevaluations combined with the low price/earnings ratios of many U.S. corporations. And the third and most important reason for the increase in foreign investments stems from the October 1973 oil embargo, the energy crisis, and the quintupling of world oil prices. As a result of the monopoly pricing of oil, the Organization of Petroleum Exporting Countries (OPEC) is accumulating financial resources at a pace without parallel in world history. There is not the slightest doubt that the oil-producing countries are scanning the globe looking for safe investment harbors for surplus petro-dollars. Perhaps the most striking transaction to result from the Middle East's new wealth occurred last July when Iran acquired a 25-percent interest in Krupp, the huge West German steel, munitions and weapons producer. This acquisition followed earlier purchases by Iran of two other large West German steel mills. Kuwait's has also bought heavily into European industry. Kuwait's most publicized investment was a $300 million purchase of 14 percent of the German auto maker, Daimler Benz. This acquisition was negotiated and consumed in secrecy and caught the German financial community and government by complete surprise. Embarrassed by its inability to determine the identity of the purchaser until Chancellor Schmidt ordered the intermediary bank to disclose its principal, the Bonn government is now contemplating new regulations to require notice of major stock purchases by foreigners. To follow this up, it was recently announced that one of Germany's largest private banks has acquired a controlling interest in Daimler Benz for the express purpose of keeping majority ownership within the country. Significantly, this action occurred after consultation with and encouragement by the Bonn Government. Arab investors recently attempted but failed to buy a controlling share of Lockheed Aircraft, a major U.S. defense contractor. This bid failed only because of the Defense Department's industrial security program. Still more recently-in fact only last month-Iran won administration approval in principle to become a major stockholder of Pan American World Airways-the largest U.S. international air carrier. A number of potential dangers are posed by large scale foreign investment in the United States. Let me give only a few examples. (1) The use of the control of a U.S. company in a manner contrary to national security, slowdowns, refusals to supply, and dealings with foreign powers; (2) the operation of a U.S. company in a manner con |