I will say to the committee that this estimate has not yet been received by the House, but Mr. Pierson is leaving town on business and, in view of the fact that he is leaving, we thought it best to have the benefit of the information that he can give us at this time. Therefore, we are having this hearing a little bit in advance of the formal reception of the estimate.

Mr. Pierson, will you give us a general statement of your situation down there?

GENERAL STATEMENT: ADMINISTRATIVE EXPENSES

Mr. PIERSON. Mr. Chairman, I assume that what appears in this mimeographed statement will become a part of your record.

The CHAIRMAN. Yes.

Mr. PIERSON. The Export-Import Bank of Washington meets all of its administrative expenses out of earnings and, accordingly, this is a justification of a request for a supplemental allocation of its own funds rather than for a supplemental appropriation.

For the fiscal year ending June 30, 1943, the bank requested an allocation for administrative expenses in the amount of $270,500. The request was based upon estimates prepared during November and the early part of December of 1941. The Congress authorized the expenditure by the bank during the fiscal year ending June 30, 1943, of only $200,000. Increased activity of the bank as a result of demands on its facilities since Pearl Harbor and the Pan-American Conference at Rio de Janeiro in January 1942 necessitates an additional allocation for administrative purposes in the interest of adequate execution of the present program.

Since January 1942, the bank has authorized 38 new loans aggregating $347,498,812.07. In order to meet the many new problems which the war has created in this hemisphere and in order to justify the support which we are seeking from the countries of Latin America, recently approved projects must be carried out expeditiously and with extreme care. In addition to the new projects, many of those authorized during the past few years such as the Brazilian Steel Plant and the Inter-American Highway south to the Panama Canal have assumed increased importance.

The Brazilian Steel Plant, upon completion, will be able to turn out steel rail, ship plate, and many other vital types of manufactured steel to relieve in part Brazil's demand upon the mills and shipping facilities of the United States. With respect to the Brazilian Steel Plant, the bank has opened letters of credit and made individual commitments to the extent of $25,000,000, such letters of credit and commitments to require the bank to effect between 4,000 and 5,000 disbursements during the next year.

Financing by the bank to develop the Itabira mines in Brazil and to rehabilitate transportation systems for the delivery of many strategic materials will require the supervision of and disbursements in connection with orders placed in this country numbering many thousands.

It will be recognized that purchases for export cannot be effected as in peacetime trade and that manufacturers and suppliers are now justified in requesting letters of credit or immediate payment against documents. Such a situation, however, increases the administrative problems of the bank. In this respect it may be well to point out again that the authorization of a commitment by the bank is not

followed by a single transfer of funds, but that, in order to assure the utilization of the funds in accordance with the terms of the loan, disbursements are made from time to time only as required to make appropriate payments or reimbursement for proper expenditures.

In addition to the new loans above-referred to, there are 116 credits previously authorized, very few of which have been disbursed in full. Accordingly, there are now on the books of the bank 153 active loans and commitments totaling $621,835,823.11 which require constant attention, including numerous conferences and negotiations and the preparation of contracts and other legal documents, and there is one contingent commitment in the amount of $86,000,000 in favor of the Republic of Brazil for such projects as may be agreed upon between Brazil and the bank provided that at such time funds are available within the limitations placed by law upon the lending authority of the bank. In view of the fact that no two loans are of the same nature the work cannot be standardized to any appreciable extent.

The present volume of business of the bank is indicated by the net earnings during the fiscal year ending June 30, 1942, which amounted to $7,671,579.60. Earnings for the first 2 months of the present fiscal year were $1,179,069.27.

The estimates attached indicate the increases which will be required because of the greater volume of business as compared with former years.

Disbursements for administrative expenses for the fiscal year ending June 30, 1943, symbol, account No. 93-269-total by months

1 Does not include obligations incurred but unpaid of $5,993.18 for July and $5,558.29 for August.

Statement of salaries for fiscal years 1941, 1942, and 1943 (2 months), actual and

1941.

1942.

1943 (2 months).

1 Full year.

Fiscal year

estimated

Fiscal year:

1941 1942. 1943.

EXHIBIT A. JUSTIFICATION OF ESTIMATES

Limitation $165, 000

220, 000 200, 000

The following tables set forth the aggregate of transactions actually handled during the fiscal year 1942 and estimates for the fiscal years 1943 and 1944. The estimates for 1943 and 1944 are necessarily tentative and are subject to revision.

AMOUNT OF ORIGINAL ESTIMATE AND AMOUNT ALLOWED FOR 1943

Mr. PIERSON. What we are asking for now is substantially what was allowed by the House for this fiscal year, which was $270,500. After the conference meeting with the Senate, this amount was reduced to $200,000. We asked the Budget to restore the full amount of $270,500, and they have now recommended $60,000. It is substantially the same amount we requested, with the allocation for the 2 months just elapsed deducted.

The CHAIRMAN. This was provided for, as I recall it, in Mr. Woodrum's bill, as it went to the Senate?

Mr. PIERSON. Yes, sir.

The CHAIRMAN. And, for some reason, the Senate reduced it or eliminated it?

Mr. WOODRUM. They struck all of it out in the Senate, and then we got some of it back in conference.

Mr. PIERSON. I think it was due to a misunderstanding on the part of the Senate. They thought that Lend-Lease was doing this kind of work. As a matter of fact, the bank's transactions are closely connected with the war effort.

Mr. WOODRUM. This amount was approved by our committee. The Export-Import Bank is one of the agencies of the Government that shows a tremendous profit, and if we expanded them enough, they could almost run the war.

The CHAIRMAN. You have had no occasion to change your judgment as to the reasonableness of this estimate?

Mr. WOODRUM. No. I think it is a splendid operation and is splendidly managed by Mr. Pierson.

Mr. PIERSON. You might be interested to hear about some of the things we are doing.

(Discussion off the record.)

CAPITAL STOCK AND LOAN OPERATIONS OF THE BANK

The CHAIRMAN. What is your capital stock?

Mr. PIERSON. $175,000,000, of which $174,000,000 represents preferred stock purchased by the R. F. C., with $1,000,000 of common stock held in the names of the Secretary of State and the Secretary of Commerce.

The CHAIRMAN. What is the limit of your loaning authority? Mr. PIERSON. $700,000,000 outstanding at any one time. The CHAIRMAN. How much do you have outstanding in loans? Mr. PIERSON. Actually outstanding, $175,826,000, and we have undisbursed commitments in the sum of $445,881,000.

The CHAIRMAN. These amounts outstanding comprise how many separate loans?

Mr. PIERSON. One hundred and fifty-three.

The CHAIRMAN. That is not a very large number of loans, comparatively speaking.

Mr. PIERSON. No, sir. The answer to that is this: For example, in the case of the loan to the Brazil Steel Co. of $25,000,000, we have approved $24,000,000 worth of purchases in the United States. That involves literally thousands of individual transactions.

The CHAIRMAN. In a general way, what are these 153 loans, or where are they made?

Mr. PIERSON. They are confined largely to South America and China. The Chinese loans actually outstanding at this time amount to $71,363,000. That is what is left of a disbursement of $114,978,000, the Chinese having repaid $43,615,000 in tung oil, tin, and so forth, which has been delivered in the United States.

The CHAIRMAN. What was done with most of these funds?

Mr. PIERSON. They were used by the Chinese for the purchase of steel, trucks, and other equipment for the Burma Road and other useful purposes.

The CHAIRMAN. Are those purchases made in the United States? Mr. PIERSON. Yes, sir.

The CHAIRMAN. What, if any, of the loans are in arrears?

Mr. PIERSON. There is nothing in arrears. We have no loans in

arrears.

The CHAIRMAN. What in general is the interest rate? Does it vary?

Mr. PIERSON. The interest rates started at around 6 percent, and now are 3.6 percent for short-term loans to South American countries where a foreign bank is involved, and 4 percent on long-term loans made directly to a country.

The CHAIRMAN. There should be a pretty fair profit from these loans.

Mr. PIERSON. We show a profit of $1,179,000 for 2 months.
The CHAIRMAN. For the fiscal year?

Mr. PIERSON. No, sir; for 2 months of the present fiscal year.
The CHAIRMAN. How will they run for the entire fiscal year?
Mr. PIERSON. They were around $8,000,000 last year.

The CHAIRMAN. I note that your earnings in the fiscal year 1937 were $797,402.43, which has increased to $7,629,000 in the fiscal year 1942, and that you estimate earnings for 1943 of $10,000,000. Mr. PIERSON. Yes, sir; I think the 1937 figure is larger than that. The CHAIRMAN. What do you estimate for the current year?

Mr. PIERSON. About $10,000,000.

The CHAIRMAN. What becomes of these profits?

Mr. PIERSON. We use them as a revolving fund. They do not increase our lending authority.

The CHAIRMAN. They come back into the fund and can be used again?

Mr. PIERSON. Yes, sir.

The CHAIRMAN. The limitation on loans is the same?

Mr. PIERSON. Yes, sir; $700,000,000 outstanding at any one time.

ADDITIONAL PERSONNEL REQUESTED UNDER ESTIMATE

The CHAIRMAN. This estimate of $60,000 provides for 13 additional personnel.

Mr. PIERSON. Yes, sir.

The CHAIRMAN. The additional personnel consists of two examiners and some additional accountants and clerks.

Mr. PIERSON. Yes, sir.

The CHAIRMAN. Is this the same force that was requested in connection with the independent offices appropriation bill for 1943, and which was refused?