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Mr. HINSHAW. Does the Export-Import Bank clear with the fund on its question of the short-term commercial loans?

Mr. Black. Well, the American Director on the International Monetary Fund also attends all of the meetings of the National Advisory Council, so there is a coordination there between the fund as there is between the banks.

Mr. Hinshaw. It seems a splendid opportunity to play one against the other, and I may be wrong.

The CHAIRMAN. That is the reason that I asked the question whether there was any competition on the interest rates.

Mr. BLACK. There is no competition; no. It is all perfectly understood between the institutions.

The CHAIRMAN. Does the NAC have any jurisdiction in controlling the loans made by the Export-Import Bank?

Mr. BLACK. Yes; they have to go to the National Advisory Council for approval on their loans.

Mr. HINSHAW. I think you can appreciate, Mr. Black, the position of the Members of Congress, who have a great many things to think about and a great many actions to take that are seemingly unrelated; that it is a little difficult for some of us to comprehend all of the angles that are involved here.

Mr. BLACK. I don't see how you do it.
Mr. HINSHAW. I do not think that we do.

The CHAIRMAN. We are very appreciative of your attendance. I understand that you are going to start on Tuesday for Borneo, and I do not know whether it could be any worse to you than we have been today.

Mr. BLACK. It will be a little different, Mr. Chairman. The CHAIRMAN. We do appreciate your appearance and the fund of knowledge that you bring to the committee in its consideration of what it considers a very important matter.

It is encouraging to realize that a man with a background of business experience such as you have had, should be in the position that you are in. We appreciate very much the patience with which you have been questioned, and we value the importance of the information that you have given to us.

As to the future, I would like to finish these hearings as soon as we can, and it is obvious that we are unable to do so this afternoon. We have a desire to question in some particulars the Securities and Exchange Commission representatives. I also understand that Mr. Lynch is here today, is that true? Mr. LYNCH. Yes, sir, Mr. Chairman. The CHAIRMAN. We may have questions of him.

I want to do that on the first open date that this committee has, and by that I mean from the standpoint of not having arranged hearings on other matters, because no day is open to use any more, with the House striving to adjourn by the 19th. But the first open day, as we term it, that we have will be next Thursday, unless we continue tomorrow morning.

It is difficult to have an attendance of the committee on Saturday when the House is not in session.

I am informed that the bill now before the House is now being read, and that it is the intention to remain until it is finished tonight, no matter what hour that may be. In that event the House would undoubtedly adjourn over until Monday.

I appreciate the brevity of time between now and adjournment, and I am inclined to try to go on with these hearings tomorrow so that we can conclude them. Otherwise, if they go over to next Thursday, we are getting perilously near the dead line, and I would like the committee to be in a position to decide this question so that if they decide in favor of the bill it could reach the floor with reasonable expectancy that it would be acted upon.

So if it will not inconvenience you gentlemen, we will try to go on tomorrow morning at 10 o'clock, and whether we will have a great many members present I am unable to say but at least the chairman will be here. In that way we can perhaps conclude the hearings, which I am very anxious to do.

The committee will adjourn until 10 o'clock tomorrow morning.

(Whereupon, at 5:30 p. m., the hearing was adjourned until 10 a. m., Saturday, June 5, 1948.)





Washington, D.C. The committe met at 10 a. m., in room 1334, New House Office Building, pursuant to adjournment, Hon. Charles A. Wolverton (chairman) presiding.



The CHAIRMAN. The committee will come to order. Mr. Black, there are just a few brief things we overlooked yesterday, strange as it may seem.

In your discussion yesterday there was a matter that we did not fully cover.

You have asked for exemption from the Securities and Exchange Act of 1934, as well as the Securities Act of 1933. You stated as to the Securities Act that it was not based on any reluctance over disclosure, but rather over such difficulties as negotiating with dealers without an effective registration statement and as to section 12, liability on dealers.

I assume you likewise have no difficulties over registration under the 1934 act. It would seem, therefore, your principal question is over stabilization under the SEC powers. I am puzzled over the discussion of this subject in your letter of March 9 to the National Advisory Council. Just what are the SEC powers regarding prevention of fraudulent manipulation which disturb you? Do you

intend to stabilize the market for your bonds or of securities you guarantee? Can't you do this within SEC rules?

Mr. BLACK. Well, the International Bank has the right under its articles to buy and sell its own securities. Before we can buy or sell our own securities, before we could stabilize the market in connection with the quotation of a new issue we would have to get permission for such action from the National Advisory Council.

The only thing we are concerned about is that on bonds we guarantee to receive amortization payments in connection with our foreign loans and we might want to purchase bonds with the sinking fund and we are concerned at that time as to the stabilization regulations or manipulation regulations of the SEC.

I would like to refer that further question to Mr. Nurick.


The CHAIRMAN. Well, in that connection, before he answers, I call your attention to the paragraph in your letter to which I have referred. It is as follows:

Furthermore the bank may quite properly find it advisable, at times, to stabilize the market for its bonds. Differences of opinion as to the proper application of the provisions of the act and the regulations of the Commission to such transactions are bound to arise, to the embarrassment of both the Commission and the bank. That is especially true because the definitions under the act of lawful, “stabilization of securities” has not been clearly drawn either by the Securities and Exchange Commission or by the courts.

Mr. Black. Yes, sir.
The CHAIRMAN. Well, will you have that in mind in your answer?
Mr. BLACK. I would like to ask Mr. Nurick to answer that.


The CHAIRMAX. Give your full name, please.
Mr. NURICK. Lester Nurick.
The CHAIRMAN. What is your position ?

Mr. NURICK. Attorney, in the general counsel's office of the International Bank.

The reason why the bank is a little concerned about that situation is this. It arises because of the unusual nature of the bank's marketing activities. We expect to issue all kinds of bonds with all kinds of maturities—some short-term and some long-term—and we also expect that those bonds will have different kinds of sinking-fund provisions.

The bank, if it is profitable to do so, would want to go into the market to buy its securities for sinking-fund purposes.

purposes. That


be a fairly continuous operation.

On the other hand, while the bank is engaged in those sinking-fund operations it may also be engaging in fairly continuous market offerings, so in the one place it may be buying for sinking-fund purposes and in the other place it may be offering new securities.

Now, one possible effect of our purchasing securities in the market may be to raise prices. We have had some discussions with representatives of the SEC on that and we were advised that it might be that purchase for sinking-fund operations of that character would constitute a violation of section 9.

Now, we do not entirely agree with their interpretation, but it is possible that conflict might arise between us.

That is one reason why we want to be exempt from the 1934 act.

Then there is another reason the banks that deal in securities deal in securities which are exempt from both the 1933 and the 1934 acts. As far as the 1934 act is concerned, I think most of their fears are traditional and psychological. They handle bonds which are exempt from both acts and I doubt very much that they would handle bonds which are exempt from one act and not exempt from another act. That is another reason why we want to be exempted from the 19:34 act.

Still another reason is, if the bonds are exempted from the marginal requirements of the 1934 act, they would be more attractive to the investors.

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