putting that money to work, bring it out of hoarding and let those dynamos get busy enough to move the grain, move the cotton, move the machinery, and move the manufactured things from the man who has got them to the man who is going to use them. Mr. BUSBY. You have no tangible assets? Mr. ST. JEAN. No. Mr. BUSBY. Is your interest in the bill to make the provisions more favorable to the type of interest that you serve? Mr. ST. JEAN. To the export interests. We would like to see this bill Mr. BUSBY. You have nothing Mr. ST. JEAN. We do not borrow a dime. Mr. BUSBY. You have nothing for yourself, but you come here rather to suggest a provision for your clients, the provision that you think they are entitled to? Mr. ST. JEAN. Certainly. Mr. BUSBY. In the legislation, if enacted? Mr. ST. JEAN. Certainly. We do not borrow any money; we have no use for money. Mr. MCFADDEN. It is your understanding that, through the Senate amendments, direct relief is given to the exporters of American commodities? Mr. ST. JEAN. Yes; and the precedent on that, as you pointed out, Mr. McFadden, is to be found in the War Finance Corporation under section 9, and this is modeled after the War Finance Corporation, and section 9 dealt with a different emergency but such an emergency as we have now. Section 9 says that said corporation shall be empowered and au thorized, in exceptional cases, to make advances direct to any person, firm, or corporation conducting an established and going business in the United States, whose operation shall be necessary or contributory to the pursuit of the war, but only for the purpose of conducting such business in the United States, and then only when in the opinion of the board or the directors of the corporation, such person, corporation, firm, or association is unable to obtain the funds through banking channels, and so forth. Now, then, we feel that this is a precedent to make a direct loan of the credit of the reconstruction finance corporation, and is essential to the recovery of this depression; and we feel that by making direct loans of credit by way of acceptances we can distribute the wealth of the Nation, and we can help these markets to grow again. The acceptances are the obligations of the American exporter, and he has against them issued a draft which he has drawn against his foreign customer. Mr. STEWART. Then they are foreign credits, are they not? Mr. ST. JEAN. No; they are American credits. Mr. HANCOCK. Do you have any foreigng customers? Mr. Sr. JEAN. No, sir. Mr. TIERNEY. The paper is American credits-the credits are American, but the paper back of it is a foreign agreement? Mr. ST. JEAN. It is American goods that are back of it. Mr. STEWART. In the hands of foreign people, and it is their agreement to do something. Mr. ST. JEAN. Of course, if the man on whom the draft is drawn does not pay, then the American who drew the draft must pay the corporation who accepted it from him. Mr. STEWART. And he is relying on a foreigner's promise? Mr. MCFADDEN. He is not only relying on a foreigner's promise, but he is relying on the security of these goods in a foreign warehouse, in whatever state they may be, in a raw state or a partly finished state or completed state, or in transit, or until they are returned here and stored, perhaps, in a New York warehouse pending being taken over by an American purchaser. Mr. STEWART. And would those be represented by bills of lading? Mr. ST. JEAN. They would have bills of lading while in transit. They would have warehouse receipts, the customary trust receipt, and they passed then into the process of manufacture. Of course, bear in mind, this corporation is concerned with the obligation of the American exporters-the Allis-Chalmers Co., Westinghouse, or whoever it may be. Mr. MCFADDEN. If I may be permitted to observe, those are the same classes of securities that are now in controversy between the New York bankers and the German bankers, in connection with the so-called short-term credits? Mr. ST. JEAN. May I point out our distinction, Mr. McFadden? Here is what I brought out to the Senate hearing, of what the situation is. The short-time credits are frozen, and the reason is this, I think: Our New York bankers, in an effort to keep all of the business they were able to get the reason I introduced the amendment to the last section to try to take the business away from the New York bankers. They wanted 90-day paper, and so when they went into the trade, to finance the export problems, it was not 90 days' credit, it required 9 months' credit, or 12 months' credit, and they said to the foreign bankers," Now, we have got to have some foreign bank on that bill. They carried the American exporter for the first 90 days. Then they wanted the foreign banker to draw on them." And then they would have a capacity of 90 days, and then draw, and finally 9 months' or 12 months' credit would be extended them. They extended long-time credits on short-term credit paper. The crash came on June 20, when the moratorium was declared and the situation of the foreign bankers was such that these New York. bankers were running around trying to find out who they were going to get to take the others off of their hands. They knew, when they went into it, that the credit could not be liquidated in 90 days. They had not a chance of it being liquidated in the time specified in the face of the paper. I say that the original credit should be open to the American exporter, and in the name of the American exporter and on the credit of the American exporter, and he alone must bear the credit for the time it takes to liquidate the paper. Then, you are down to common sense. Do not inject any foreign banks into it. Do not try to make it appear, because we are taking 90-day paper, that you have got fresh paper; it is not eligible for the Federal reserve bank, and should not be held by a commercial bank. Mr. MCFADDEN. But is is now eligible under the Federal reserve system, by the amendment which this committee and Congress 95808-32-9 * putting that money to work, bring it out of hoarding and let those dynamos get busy enough to move the grain, move the cotton, move the machinery, and move the manufactured things from the man who has got them to the man who is going to use them. Mr. BUSBY. You have no tangible assets? Mr. ST. JEAN. No. Mr. BUSBY. Is your interest in the bill to make the provisions more favorable to the type of interest that you serve? Mr. ST. JEAN. To the export interests. We would like to see this bill Mr. BUSBY. You have nothing Mr. ST. JEAN. We do not borrow a dime. Mr. BUSBY. You have nothing for yourself, but you come here rather to suggest a provision for your clients, the provision that you think they are entitled to? Mr. ST. JEAN. Certainly. Mr. BUSBY. In the legislation, if enacted? Mr. ST. JEAN. Certainly. We do not borrow any money; we have no use for money. Mr. MCFADDEN. It is your understanding that, through the Senate amendments, direct relief is given to the exporters of American commodities? Mr. ST. JEAN. Yes; and the precedent on that, as you pointed out, Mr. McFadden, is to be found in the War Finance Corporation under section 9, and this is modeled after the War Finance Corporation, and section 9 dealt with a different emergency but such an emergency as we have now. Section 9 says that said corporation shall be empowered and authorized, in exceptional cases, to make advances direct to any person, firm, or corporation conducting an established and going business in the United States, whose operation shall be necessary or contributory to the pursuit of the war, but only for the purpose of conducting such business in the United States, and then only when in the opinion of the board or the directors of the corporation, such person, corporation, firm, or association is unable to obtain the funds through banking channels, and so forth. Now, then, we feel that this is a precedent to make a direct loan of the credit of the reconstruction finance corporation, and is essential to the recovery of this depression; and we feel that by making direct loans of credit by way of acceptances we can distribute the wealth of the Nation, and we can help these markets to grow again. The acceptances are the obligations of the American exporter, and he has against them issued a draft which he has drawn against his foreign customer. Mr. STEWART. Then they are foreign credits, are they not? Mr. ST. JEAN. No; they are American credits. Mr. HANCOCK. Do you have any foreigng customers? Mr. Sr. JEAN. No, sir. Mr. TIERNEY. The paper is American credits-the credits are American, but the paper back of it is a foreign agreement? Mr. ST. JEAN. It is American goods that are back of it. Mr. STEWART. In the hands of foreign people, and it is their agreement to do something. Mr. ST. JEAN. Of course, if the man on whom the draft is drawn does not pay, then the American who drew the draft must pay the corporation who accepted it from him. Mr. STEWART. And he is relying on a foreigner's promise? Mr. MCFADDEN. He is not only relying on a foreigner's promise, but he is relying on the security of these goods in a foreign warehouse, in whatever state they may be, in a raw state or a partly finished state or completed state, or in transit, or until they are returned here and stored, perhaps, in a New York warehouse pending being taken over by an American purchaser. Mr. STEWART. And would those be represented by bills of lading? Mr. ST. JEAN. They would have bills of lading while in transit. They would have warehouse receipts, the customary trust receipt, and they passed then into the process of manufacture. Of course, bear in mind, this corporation is concerned with the obligation of the American exporters--the Allis-Chalmers Co., Westinghouse, or whoever it may be. Mr. MCFADDEN. If I may be permitted to observe, those are the same classes of securities that are now in controversy between the New York bankers and the German bankers, in connection with the so-called short-term credits? Mr. ST. JEAN. May I point out our distinction, Mr. McFadden? Here is what I brought out to the Senate hearing, of what the situation is. The short-time credits are frozen, and the reason is this, I think: Our New York bankers, in an effort to keep all of the business they were able to get the reason I introduced the amendment to the last section to try to take the business away from the New York bankers. They wanted 90-day paper, and so when they went into the trade, to finance the export problems, it was not 90 days' credit, it required 9 months' credit, or 12 months' credit, and they said to the foreign bankers, " Now, we have got to have some foreign bank on that bill. They carried the American exporter for the first 90 days. Then they wanted the foreign banker to draw on them." And then they would have a capacity of 90 days, and then draw, and finally 9 months' or 12 months' credit would be extended them. They extended long-time credits on short-term credit paper. The crash came on June 20, when the moratorium was declared and the situation of the foreign bankers was such that these New York. bankers were running around trying to find out who they were going to get to take the others off of their hands. They knew, when they went into it, that the credit could not be liquidated in 90 days. They had not a chance of it being liquidated in the time specified in the face of the paper. I say that the original credit should be open to the American exporter, and in the name of the American exporter and on the credit of the American exporter, and he alone must bear the credit for the time it takes to liquidate the paper. Then, you are down to common sense. Do not inject any foreign banks into it. Do not try to make it appear, because we are taking 90-day paper, that you have got fresh paper; it is not eligible for the Federal reserve bank, and should not be held by a commercial bank. Mr. MCFADDEN. But is is now eligible under the Federal reserve system, by the amendment which this committee and Congress 95808-32- -9 passed recently, and which I possibly am going to put in a motion to repeal, because it is a source of great embarrassment to the Federal reserve system. Mr. ST. JEAN. I think six months is the limit under the Federal reserve act. Mr. MCFADDEN. I know; but they have got a vast amount of this paper, which there is not any security back of at the present time, as you undoubtedly know. Mr. ST. JEAN. What they are objecting to is this bill drawn to create dollar exchange, against which there is no document Mr. BUSBY. You say, in the Senate hearing, "Our corporation is a research body specializing in export credits." Mr. ST. JEAN. Yes. Mr. BUSBY. So you do not look to the United States for your business; you are looking to it as the originating end of your business, and you are looking to the foreign countries as to the consummating point, when you are finishing-that is, when your clients are finishing their transactions; isn't that so? Mr. ST. JEAN. No. Mr. BUSBY. What did you mean by this sentence: “Our corpora tion is a research body specializing in export credits"? Mr. ST. JEAN. Yes. Mr. BUSBY. How are you going to have exports, when it is a domestic transaction? Mr. ST. JEAN. A manufacturer or exporter comes to us and says, "We have an opportunity to sell $100,000 worth of—” Mr. BUSBY. The exporter, would you call him a business man in this country? Mr. ST. JEAN. Yes; and as an illustration, Allis-Chalmers and Company and Mr. BUSBY. Let me ask you this question: Your client comes to you and he is a man who does business in this country? Mr. ST. JEAN. An American exporter. Mr. BUSBY. Who does he do business with? Mr. ST. JEAN. Abroad. Mr. BUSBY. All of your problems and propositions involved here are not with situations that are completed in our country, and the situations with which the American people are primarily interested alone in this legislation, but situations where American business men are doing business with some other part of the world? That is the situation, is it not? Mr. ST. JEAN. I think it is just as important to Mr. BUSBY. I am not talking about that. Mr. ST. JEAN. No; that is not the situation. Mr. BUSBY. What is the situation! Mr. ST. JEAN. The situation is this: That where an American manufacturer, or farmer, or farm association of any importance has a certain percentage of purely domestic business and they have some export business- Mr. BUSBY. I challenge the statement as not being true, as to the importance of it. They do not all have foreign contacts. Mr. ST. JEAN. We have over $3,000,000,000 of export business in this country. |