cated about this at all. It is just the kind of thing that you, yourself, would do. They ask you to give up your job here and take your money and go down to some place in the Tropics. Why in the world would you go down and start in business if they are apt to confiscate your property? You would say, "I don't want to go there. I will stay here."

Or they want you to go some place up at the North Pole, the north regions. Why in the world would you do that? If they come to you and show you that there is some copper or gold or iron up there, and you can get a group of your fellows together and go up there and develop something that is worthwhile, and spend enough money to make living worthwhile when you get there, and give a lot of employment to people after you get going, then you go and do it, provided conditions of the country were favorable.

Mr. WIDNALL. Does the stimulous for this type of operation come from the country itself, or come from our desire to aid in developing those countries?

Secretary HUMPHREY. It is both. It has to come from the country itself, it has to come from having something worthwhile to go for, and it comes from us ourselves wanting to get people to do that because the world is a better world to live in if we have more people in better shape.

Mr. WIDNALL. If the government of a country actually wants this venture capital, why, then, are they not willing to enter into any kind of a government guaranty for it, when they are trying to encourage calculated risks on the part of the United States and other countries for investment there?

Secretary HUMPHREY. There are two sides to that. We are trying to stimulate private enterprise and private enterprise ought to operate without government guaranties. That is, as to financial guaranties. If the government furnishes the right kind of a climate for business to be done in and the right kind of laws to operate under that is about all the government ought to have to do.

If a business can't succeed under those conditions, then perhaps it better not be started. If the government furnishes the right kind of climate, and offers the right kind of laws to operate under, and there is something worthwhile to do, something you can make and sell, and a market that can be developed or production that can be developed, or something of that kind, then you want to stimulate private capital to go in there and manage it, because that is the way you get your best and fullest development.

Mr. WIDNALL. Will development of enterprises in those countries lead to further competition with American goods?

Secretary HUMPHREY. In some cases, it may. On the other hand, if it does it will mean that we are developing markets that will be added markets that we will have available to sell to. It will work both ways.

Mr. WIDNALL. Essentially, the difference between this proposal and the operation of the International Bank is, first, that it will provide venture capital, and second, loans will not have a government guaranty?

Secretary HUMPHREY. That is correct.

The CHAIRMAN. Your time has expired.
Mr. WIDNALL. Thank you.

The CHAIRMAN. Mr. McVey?

Mr. McVEY. No questions.

The CHAIRMAN. Mr. Hiestand?

Mr. HIESTAND. Mr. Secretary, I am very much interested in this statement, and it supplies a lot of answers to questions I had in mind.

I am mindful also of your other appointment. However, I am not quite clear in one or two ways how this company, with sound financing and just what we want, will work. In other words, the other banks the Export-Import Bank and International are essentially banks. They make loans only. Those loans, as far as I have been able to see, and I presume it is complete, are guaranteed by the governments to which countries we are sending the money.

In the case of the Export-Import Bank, those loans were made either directly to a government or to corporations wholly owned by the government?

Secretary HUMPHREY. No, not in both cases. That is the way the International Bank operates, but not the Export-Import Bank.

Mr. HIESTAND. All of the Export-Import money is spent here? Secretary HUMPHREY. No, not all of it. A little is spent in other countries, but it is not necessarily with governments or Government guaranties.

Mr. HIESTAND. If this as an international corporation is going to put, as you express it, equity capital in, do we do or propose to do other than make direct loans? Can they guarantee private investments, or can they take as investment capital stock in a private company?

Secretary HUMPHREY. You can do both.

Mr. HIESTAND. All three ways?

Secretary HUMPHREY. Yes.

Mr. HIESTAND. Make loans, supply capital, and guarantee?
Secretary HUMPHREY. Yes.

Mr. HIESTAND. Is it contemplated also that we will then invest in private industries, rather than Government or Government-owned industries?

Secretary HUMPHREY. Private industry.

Mr. HIESTAND. In other countries?

Secretary HUMPHREY. That is right.

Mr. HIESTAND. Then we would encourage also perhaps Venezuelan capital being invested in Bolivia and either guarantee it or help finance it?

Secretary HUMPHREY. That is right.

Mr. HIESTAND. Loans, then, would be made to corporations who already have a stake invested abroad and to supplement that stake, presumably?

Secretary HUMPHREY. It might be. It might be to expand an existing company, or it might be to start a brandnew one. I want to be sure that I am correct in one statement that you made that I answered.

We do not buy stock, which has responsibility of management that goes with it. It is a debenture or something of that kind.

Mr. HIESTAND. You use the term in your statement "equity capital."

Secretary HUMPHREY. It is equity but not management equity capital. It is in this medium ground. You have all sorts of stages here. You have the stages of firm debt. You then have a stage of intermediate debt, and then you have various kinds of instruments such a debentures, convertible debentures, or things of that kind, and then you get down to the final equity, which is common-stock equity. This is not to buy common-stock equity, which has the burden of management. This must have common-stock equity behind it.

Mr. HIESTAND. Your security, then, for the guaranties of investments abroad is what?

Secretary HUMPHREY. It is a common-stock equity behind us plus the management.

Mr. HIESTAND. But the corporation doesn't take and own the common stock of these corporations that you are financing?

Secretary HUMPHREY. The what?"

Mr. HIESTAND. The common stock.

Secretary HUMPHREY. No; the IFC doesn't own the common stock. Somebody else owns it. That money is put in the enterprise, and it is behind our money.

Mr. HIESTAND. I am wondering what the IFC's security is?

Secretary HUMPHREY. The security is the money that has been put in for common stock behind our money, and our appraisal of the validity of the management.

Mr. HIESTAND. Private capital can invest in IFC?

Secretary HUMPHREY. Private capital will be the common-stock money behind our capital.

Mr. HIESTAND. In addition to the $35 million that the Federal Government puts up?

Secretary HUMPHREY. No; that money goes into the operating company. It doesn't come into the IFC at all. The only money that goes into the IFC is the money of the countries that are subscribers. That goes into the IFC. Now, the IFC money will go into the copper-mining company of Venezuela, or the rayon factory of Venezuela, or of Timbuktu, probably behind some firm debt money, but ahead of some common-stock money in that rayon company or that mining company.

Mr. HIESTAND. It could be preferred stock?

Secretary HUMPHREY. Not stock, but debentures.

Mr. HIESTAND. Thank you, sir.

The CHAIRMAN. Mr. Secretary, what effect do you think the International Bank for Reconstruction and Development, and the International Monetary Fund has on world peace and prosperity? Don't you think those people, meeting once a year, have some effect in that respect?

Secretary HUMPHREY. I very definitely do. I think it has an effect. Nobody is quite as bad as you think he is if you know him well enough or even see him occasionally Not only that, but I think it also has had a great effect on explaining to countries-just as we were talking here a few minutes ago-why it is that countries have to have the right kind of things or people just won't go to them.

I think it has helped in getting better relationships established throughout these countries with respect to each other, and for development of all these countries.

The CHAIRMAN. What you say has impressed me when I think of the Bank and the Fund. I think it will have a great effect on the peace of the world and I think this organization will accentuate that to some extent.

Secretary HUMPHREY. I think that is right. That is what we hope. The CHAIRMAN. Mr. Brown?

Mr. BROWN. Mr. Secretary, the Export-Import Bank has done a splendid job throughout the years. If I support your proposal, I have to be sure that it will not interfere in the operation of the Export-Import Bank and that it is not designed to take over the ExportImport Bank.

Secretary HUMPHREY. Oh, no. This, if anything, will supplement the opportunity for Export-Import Bank to make additional loans. Mr. BROWN. They may take over the functions of the bank.

Secretary HUMPHREY. No. This operates in an entirely different field than the Export-Import Bank can get in. Let me illustrate again how it could be: You decide you want to go some place in Asia and start a jute operation. You need some machinery and some equipment to start your plant. You have some money of your own. You go to the Export-Import Bank and you say, "I want to make a loan from you to buy a lot of American equipment to ship over there, to put into a plant to start this operation." They figure about how much money they can lend you on the American equipment that will go over there. You add that to the money you have and you don't have enough. They can't lend you any more because that is all there is a reasonable prospect of repayment as you stand. You go to this institution and you say, "If I had another million dollars, or another hundred thousand dollars, I not only could make my loan from the Export-Import Bank to buy the machinery that will be made in America to go over there, but with the money I am going to put in, if I had that extra $100,000 I could make this thing go."

The IFC can say to you, "All right, we will buy some convertible debentures from you that will be behind the Export-Import Bank but will be ahead of your money, and if it is a success, they are convertible debentures and we will be able to sell them to somebody at a profit to ourselves. So we will buy $100,000 of convertible debentures in your enterprise." And that enables you to go ahead.

The Export-Import Bank makes a loan it couldn't otherwise make, you go into business, and if you succeed, the IFC sells the convertible debentures. After you get going, it sells them, gets its money back with a profit, and is able to lend it to somebody else. That is the way this thing will work.

Mr. PATMAN. Mr. Chairman?
The CHAIRMAN. Mr. Patman.
Mr. PATMAN. Mr. Secretary-

Secretary HUMPHREY. I wonder, Mr. Chairman, I don't believe I have time to start on another whole round.

The CHAIRMAN. We are not going on another whole round, Mr. Secretary.

Secretary HUMPHREY. I will be glad to stay just a few minutes more. I am already late.

Mr. PATMAN. On June 7, 1955, the New York Times carried a story about the IFC, in which it says:

It is a sort of a small-loan agency for the free world.

Is that pretty well a correct definition of it, Mr. Humphrey ?
Secretary HUMPHREY. I don't know that it would be.

Mr. PATMAN. It is a small-loan agency. You don't expect them to make these huge loans? You don't expect them to make loans over 5 or 10 million dollars, do you?

Secretary HUMPHREY. I really don't know. What we are trying to do is to make this thing succeed. The IFC will have rather limited funds and I would imagine that it would want to spread them, and that would mean relatively small loans.

Mr. PATMAN. You have no intention of giving the smaller people in other countries a better opportunity to secure a loan than you give for our own people here in the United States, do you, Mr. Humphrey? Secretary HUMPHREY. No; not under similar situations.

Mr. PATMAN. Under similar situations-in other words, any concern here that needed a loan under similar and like circumstances would certainly not be discriminated against and would be given the same opportunity as in a foreign country?

Secretary HUMPHREY. Except as conditions discriminated against it, which of course all have to be taken into account.

Mr. PATMAN. Now, then, will the organization have, what is commonly referred to as "w. o. c.'s," without compensation, either on the advisory group or other employees of this organization?

Secretary HUMPHREY. I really don't know, Mr. Patman. I don't know what you are talking about.

Mr. PATMAN. Well, a "w. o. c." is a word that we use, or letters that we use now to refer to people who are working for the Government without compensation.

Secretary HUMPHREY. They might have somebody make trips or reports for them. I don't know.

Mr. PATMAN. Yes; but it is not in the articles of agreement that you will change the existing law? You see, the existing law is against that.

Secretary HUMPHREY. This hasn't anything to do with that.
Mr. PATMAN. It is against that.

Now, then, I have 2 or 3 short questions here: If the IFC is successful, won't it develop into a worldwide RFC, financed in a great measure but not controlled by the United States?

Secretary HUMPHREY. If it built up enough money, you could call it that, if you wanted to. It would still be the IFC and would still operate the way it does. The more it succeeds, the more money it will have to lend.

Mr. PATMAN. It will have the earmarks of the RFC because of the power and authority it will have to make loans. It will have a similarity to the old RFC, which the chairman said is now in an unmarked grave.

Secretary HUMPHREY. Let's stick to the IFC. There are a lot of differences between them.

Mr. PATMAN. At the creation of the worldwide RFC, financed in large measure by the United States Government, doesn't it really give you some concern that we would go all out?

Secretary HUMPHREY. This doesn't give me concern or I wouldn't be advocating it. I hope it will succeed.

Mr. PATMAN. Does it give you some concern when we are offering to foreigners—I say that in a respectful sense, since I have no feeling