of the hearings before the House Committee on Foreign Affairs on H. R. 1776.

Mr. WOODRUM. Does that complete the answers, Mr. Smith?
Mr. SMITH. No; that is question 4.

Mr. TABER. Do you want to go ahead and give the other answers? Mr. WIGGLESWORTH. Before you do that, I call your attention to the statement you have just given us, indicating $1,516,000,000 of British holdings in the United States as of January 1, 1941. On page 81 of the House hearings on the lend-lease bill, Foreign Affairs Committee, the total as of December 31, 1940, is given as $2,167,000,000. I wonder if you have not omitted the gold holdings and what are referred to as official dollar balances and private dollar balances in the statement you have given us?

Mr. SMITH. Yes; that is correct. In addition to $616,000,000 of marketable United States securities and $900,000,000 of direct investments in the United States, the British held on December 31, 1940, $292,000,000 of gold, $54,000,000 of official dollar balances, and $305,000,000 of private dollar balances.

Mr. SCRUGHAM. Speaking of gold, you mean deposits with the Federal Reserve bank?

Mr. SMITH. No; deposits are included in the official dollar balances. Mr. SCRUGHAM. Do the British own any gold on deposit in this country?

Mr. SMITH. No; the British have no gold in this country. The gold I refer to is all the gold in the British Treasury's possession— in London, Canada, in transit, and scattered in various parts of the world.

Mr. SNYDER. My information was that the British had put on the barrel head cash for the current expansion in this country, up to March 1, of between 54 and 55 million dollars.

Mr. WOODRUM. Is it more than that, is it not?

Mr. SMITH. It is more than that.

Mr. SNYDER. For plant expansion; I do not mean building plants. Mr. SMITH. The total of capital assistance paid out by the British is over $171,000,000.

Question 5: What steps, if any, have been taken to meet prior commitments and what steps are to be taken as to commitments yet to be made?

The United Kingdom will meet her liabilities on existing orders from her existing dollar resources and from dollars which she will acquire in the future. The steps by which these dollar resources are being acquired have been indicated in the answer to question 3 above. The British Government does not have funds adequate to meet additional commitments. It is for these additional commitments that the lend-lease arrangements will be required.

Question 6: What is the monthly rate of expenditure by England and its dominions for war purposes?

The monthly rate of expenditures for United Kingdom, Canada, New Zealand, Australia, South Africa, and India taken together is, according to our information, roughly the equivalent of 14 billion dollars. Nearly 11⁄2 billion dollars of this is the expenditure of the United Kingdom alone.

Mr. CANNON. What about the other quarter billion expenditures?

Mr. SMITH. By the Dominion of Canada, New Zealand, Australia, South Africa, and India.

Mr. CANNON. Combined?

Mr. SMITH. That is right.

Mr. WOODRUM. For what period has that been going on, Mr. Smith; is this currently?

Mr. SMITH. That is current expenditures.

Question 7: What are the British Dominions, and particularly Canada, prepared to do for aid to Great Britain?

Canada is, of course, helping directly with troops, naval and air forces, and is paying all expenses of Canadian forces operating abroad as well as at home. It is anticipated that during the coming year Canada will spend a total of $1.4 billions on her direct war effort. Mr. TABER. You mean in the calendar year 1941?

Mr. SMITH. In the fiscal year 1941-42.

This alone constitutes about 25 percent of her expected national income.

Mr. TABER. You mean of the whole country, rather than the Government?

Mr. SMITH. That is right. Canada with 11,000,000 people would never have an ordinary budget of that size.

In addition, Canada is supplying Britain with large increasing amounts of goods and services in return for a considerable part of which she is getting either blocked sterling in excess of her needs or repatriated Canadian securities held in the United Kingdom.

Just as in the case of Canada, Australia, New Zealand, South Africa, and India have under way and are financing themselves, a war effort of considerable magnitude in relation to their national income. In addition, these countries are acquiring excess blocked sterling in London and some are acquiring repatriated securities as payment for exports of merchandise, services and gold to the United Kingdom and to the dollar exchange areas. This is a form of economic and financial assistance of considerable value to the British war economy.

Question 8: What has Great Britain, its dominions and particularly Canada appropriated for this war?

This information is not readily available; but we have requested it for the committee. However, because of differences in budgetary practice, such figures will not be at all comparable with the defenseappropriation figures for the United States.

Mr. CANNON. With reference to the remaining quarter billion dollars, have you any information as to the proportion in which that amount is being spent by the respective dominions, of the several countries?

Mr. SMITH. No; we do not have that, Mr. Cannon.

Mr. CANNON. You do not know the proportional monthly expenditure of Australia?

Mr. SMITH. Australia is spending the equivalent of about $50,000,000 a month.

Mr. WIGGLESWORTH. It would appear that Canada is putting up about $100,000,000 if you split up her portion of the one-quarter billion.

Mr. SMITH. Yes; in addition Canada is rendering a variety of services that cannot be translated into dollars.

Question 9: What are the potash and borax holdings of the British in the western part of the United States?

Our preliminary information is that there are three large potash and borax companies with properties in the western United States in which the value of the British investment is estimated to be roughly more than $20,000,000. These properties are included in the British direct investments referred to in question 4.

Question 10: What have we bought in the way of gold from Great Britain and its dominions, including Canada, since 1934, by years?

The net imports of gold from the British Empire by years are given in the table below. It should be pointed out that London has been, prior to the war, the leading gold market of the world and hence gold imports from the British Empire were not solely for British account. The table is as follows:

Mr. RABAUT. I take this viewpoint, Mr. Smith: Of course, if we were to force England to liquidate all of her accounts or assets at the present time, or sell such shares as she has in this country, we could not well do that without creating a tremendous effect upon our own holdings, because there would naturally be a recession in the entire market for securities.

Mr. SMITH. It all depends on how it is handled. Proper precautions, I understand, are being taken.

Mr. SCRUGHAM. I am interested in the British ownership an control of the borax and potash industries in this country. To your knowledge, are any definite steps being taken to acquire those interests by the United States Government in part payment for the proposed advance of $7,000,000,000?

Mr. SMITH. I know of no steps to acquire that by the Government, but steps are under way to liquidate British assets here in this country. Mr. SCRUGHAM. While advancing this vast sum of money to Great Britain, should it not be done with the distinct understanding that they will transfer their ownership and control of the potash and borax industries, which are of vital importance to this country, to the United States Government? I realize the emergency requires haste, of course, but these industries mentioned are of basic importance for obtaining purely domestic supplies. The British should promptly transfer them to this Nation, as a small repayment, as well as South American properties that are now also controlled by the British. Is there any comment you would like to make on the subject?

Mr. SMITH. My only comment respecting the industries you mention is that negotiations are under way to deal with the liquidation of assets in relation to the whole situation under this lend-lease bill.

Mr. O'NEAL. I would like to ask for the record this question: Do the holdings you have given of British nationals in this country include the indirect holdings of British nationals in this country? I mean by that, holdings through holding companies organized in this country, where the beneficial interest is in British nationals, or held through dummies of some kind or other?

Mr. SMITH. My understanding is that these holdings insofar as these are known are included in the British estimates presented to Congress in January.

Mr. LUDLOW. The British are not actually giving any security for this, in the sense that we generally understand the term "security," but it is simply a matter of good faith?

Mr. SMITH. Under the lease-lend bill, there will be an agreement. Mr. LUDLOW. With respect to payment for this particular material covered by the bill?

Mr. SMITH. The form has not been decided upon, so far as I know. Mr. RABAUT. Yesterday, when we were in executive session, a question came up as to whether or not the present amount of contracts which the British have in this country, and which totals somewhere between $1,000,000,000 and $1,500,000,000, could be paid from this amount-that is, whether or not any money from this appropriation could be used to pay the cost of those contracts. I understand that this morning, before I came into the room, that matter came up here, and I understand that Mr. Smith's answer was that this money could not be used to pay those contractual obligations. Mr. SMITH. It is my understanding that it is not contemplated to use any of this money for this purpose.

Mr. TABER. The testimony by Mr. Smith this morning was that the British have a total cash or dollar balance to meet balances of $1,018,000,000 of contracts that they have hanging.

Mr. RABAUT. I am asking Mr. Smith now, but I thank you for your observation.

Mr. SMITH. I meant to say it could be legally paid, but whether it would be done or not

Mr. RABAUT. First, can it be done? And then I will ask, “Will it be done?"

Mr. WOODRUM. If it would not be done, we need not bother about the other question. I do not think there is any boubt about the fact that they could do it.

Mr. SMITH. As to the second question, it will not be done, because it is pretty clear that you would have to establish a bench mark as to where British orders left off and where lend-lease orders began. Otherwise we would be in confusion as to transactions. It is contemplated, as indicated in this testimony, that the British would make payment for outstanding orders that the British Purchasing Mission have committed themselves to up to the passage of the LendLease Act.

Mr. RABAUT. That is the reason the question was advanced, and I asked about this entire situation in the terms of national defense. Now, if there is to be $1,000,000,000 worth of orders for the British, or if they have on order $1,000,000,000 worth of material, that means $1,000,000,000 worth of defense material. Now, if we come along and augment that with $7,000,000,000, that would mean $8,000,000,000 worth of defense material, but if we pay for that $1,000,000,000 worth

of material from funds under this bill, it would leave only $7,000,000,000 worth of defense material that is being produced. If that is done and you do not think it will be done-but if that should be done, we would have lessened the amount of defense material to the extent of $1,000,000,000.

Mr. SMITH. I think the record that has been made is clear on that point. If it is not, I will make it clear.

Mr. RABAUT. There was quite a discussion about that in the committee.

Mr. TABER. You did not tell us the amount of cash balance that the British have. You gave the securities, but you did not give the cash balances. Do you know anything about that? Perhaps they do not have any. I do not know.

Mr. SMITH. At the present time the cash balance is small.

Mr. TABER. On December 31, say that the dollar assets amounted to approximately $350,000,000.

Mr. SMITH. And since then they have paid out $382,000,000.

Mr. TABER. Let me ask you this, and I would like you to be in a position to answer it for the record, if you can: There are a lot of these British-held securities. To a certain extent they have been liquidated, and they have been a menace to our own security market. It is impossible to dump them. In addition, there are a lot that are not readily marketable securities held by them. Now, will it be the disposition of the administration to take those securities that cannot be marketed without upsetting our own financial structure and without sacrificing those securities too seriously, as security for such defense materials as are sent to Great Britain, and that are procured as the result of the lease-lend bill? If you are not in a position to answer that now, make a note of it, and answer it in the record.

Mr. SMITH. I am in a position right now to answer in the affirmative with full assurance. It is my understanding however that the proceeds of liquidation of British-held securities and investments in the United States will be needed to complete payment on existing British orders.

Mr. TABER. Now, the result of the answer you have given me, Mr. Smith, is this, is it not, that if this Government pays out money for airplanes, tanks, repairing ships, building ships, or anything else, that may be turned over to the British, insofar as their assets will permit, upon delivery our Government will receive their securities which are not marketable and cannot be turned into cash, insofar as they are available as security for the payment of these things.

Mr. SMITH. Yes. Insofar as they are not needed for payment on existing British orders.

Mr. LUDLOW. Do we understand that there will be a segregation of the accounting of items under the lend-lease bill from items under the regular operations?

Mr. SMITH. Yes, sir.

Mr. LUDLOW. I wonder if you will find any difficulty in that, where for instance a manufacturing establishment will be partially engaged in manufacture to meet the requirements of the United States and partly in the manufacture of articles to meet the lend-lease program requirements. How will it be possible to make that segregation?

Mr. SMITH. Let me point out to you that we have the cost of the items at the time they are transferred to any other country.