We are under the 5-minute rule, I may say to the gentleman. Mr. Secretary, I am interested in getting your thought in regard to consumer credit and its possible development in backward areas. Will the investments of this new corporation encourage the development of consumer credit? Secretary HUMPHREY. Mr. O'Hara, I hardly know how to answer that. There is no immediate program for doing that. Whether as time goes on there will be, it is pretty hard to say. The powers are pretty broad for this organization, and it is possible something of that kind might develop, but the contemplation at the present time is in the way of development of constructive enterprise. I am thinking now of productive enterprise-the producing of goods and development of resources, and that sort of thing, rather than operating in the financial area. Now, of course, it doesn't do you any good to produce things if you don't sell them, and I think there is no absolute prohibition to operating in the financial area, but I don't know that that has ever been thought of until you suggested it. Mr. O'HARA. Have you been satisfied or uneasy about the growth in consumer credit and increase in volume in this country? Secretary HUMPHREY. I think you would have to answer that this way: The development of consumer credit-the development of paying for things as you use them-is one of the great stimulants to better living in America. It is one of the great stimulants to saving in America. People will save by paying for something while they are using it, much more easily than they will save by saving up the money first and then buying the thing and having it to use. So long as the payments and the terms and the security of the individual, as well as of the use of that in the whole economy is kept within proper bounds, I think it is a very stimulating thing, and I think it is one of the things that has helped raise the standard of living in this country. It has dangers, as any extension of credit has if it gets overextended. Mr. O'HARA. Then it would be logical to expect that consumer credit might be encouraged in the foreign countries to which these investments will be going? Secretary HUMPHREY. I have heard it said that that is one of the things that we are going to see over the next decade, or 15 or 20 years. Those things come a little slowly. People have to get educated to them, but I have heard it said that that is one of the things that is already beginning to take hold, and that it will spread, and, if so, you will see undoubtedly a great stimulation to productive capacity there, as you have here. Mr. O'HARA. Mr. Secretary, I was interested in the last paragraph on page 3: We hope the Corporation will be able to influence these countries to take favorable attitudes toward investors. I hope this does not mean that the Corporation would interfere in the domestic affairs of other countries? Secretary HUMPHREY. No. Mr. O'HARA. In attempting to influence their governments? Secretary HUMPHREY. No. What is meant is, for example, let us take a country where there is relatively small investment, where there are resources that can be developed profitably. Let us say that by the assistance of the IFC, joined with good management of private capital, you go in there and open up some properties and make a lot of jobs and develop a successful enterprise, and that you can pay good wages and people in that particular country have work, employment, and move ahead. When that happens people see the benefits that can come from that kind of operation, and then realize that that country, if it wants others to come and do the same thing and make more jobs and make more goods for the people to have, more places for them to work, better pay, more goods to have to live with, that if they are going to do that they must not confiscate property. They must have certain moral standards the government I am talking about now-the government, itself, must protect the investment that is made, and make it attractive for money from other places in the world to come in there, develop the country, make the jobs and goods for people to have. If by example you can get that thing started, and people see how well it works, that is the way it will influence the development, and that is the way it will influence the attitude of one country toward the fostering of the kind of climate, the kind of things that are necessary for private investment to make a country grow and develop. Mr. O'HARA. Thank you. The CHAIRMAN. Mr. McDonough. Mr. MCDONOUGH. Mr. Secretary, in your statement you say that this would become a reality "when 30 countries with a subscription of at least 75 million have accepted membership." In other words, it isn't a reality yet? Secretary HUMPHREY. Not yet. Mr. MCDONOUGH. Among those 30 countries-is Yugoslavia one of the countries considering this plan? Secretary HUMPHREY. I think Yugoslavia is out of this. I think they indicated they were not in, for the present at least. Mr. MCDONOUGH. They are not interested? Secretary HUMPHREY. I think so, at this time. Forty-seven governments in addition to the United States have expressly indicated that they are in favor of membership in the IFC. The proposed subscriptions of these 47 countries total $53,667,000. With the United States subscription the total becomes $88,835,000. Mr. MCDONOUGH. What is our subscription? Secretary HUMPHREY. Ours is about $35 million. Mr. MCDONOUGH. Is this an agency of the United Nations? Secretary HUMPHREY. This is an affiliate of the International Bank. Mr. MCDONOUGH. And it will supplement and cooperate with the International Bank? Secretary HUMPHREY. That is correct. Mr. MCDONOUGH. It will function with, or will it supplement, any of the services now rendered by the Export-Import Bank? Secretary HUMPHREY. Well, the two banks cross over to some extent, but by and large this is to broaden the field somewhat of the International Bank and to give it an opportunity to operate in a field that now is excluded to it. In other words, the International Bank today can only operate where it has a government guaranty, and this will permit it to operate in cases where there is no government guaranty. Mr. MCDONOUGH. In other words, the only guaranty here is the cooperation of the financial interests of the country rather than the government of the country? Secretary HUMPHREY. That is right. Mr. MCDONOUGH. But will the United States membership in it require a treaty to be negotiated with the country? Secretary HUMPHREY. I don't think so; no. There will be an agreement between the member countries, the same as for the International Bank. Mr. MCDONOUGH. An agreement? Secretary HUMPHREY. That is right. Mr. MCDONOUGH. What assurances do we have that if American investors participate in this that there will be no expropriation of personal property or the real property that is acquired? Secretary HUMPHREY. I suppose the only assurance we can have on that is that the management will attempt to make its loans on a prudent basis. We have very much more money at stake now than this with the International Bank under the same relationships, and, of course, if a country is going to expropriate, it probably does so after disavowing all its obligations, and if one piece of paper isn't much good, another one wouldn't be. Mr. MCDONOUGH. And you believe that this will stimulate American money to be invested in foreign enterprises? Secretary HUMPHREY. That is what we hope, Mr. McDonough. This is experimental. We don't know how well it will work. I am not saying this is any panacea or guaranteeing any results. I view this as a very good, well arranged experiment on a relatively small scale, to see if it will stimulate much further investment. Mr. MCDONOUGH. American capital in foreign countries? Mr. MCDONOUGH. Is it a two-way street? Secretary HUMPHREY. Yes, sir. Mr. MCDONOUGH. I mean is it vice versa? Do you encourage foreign capital in America? Mr. HUMPHREY. Well, no; not to that same extent, I think, because, you see, this country has relatively much more capital than many other places in the world. The way it gets to be a two-way street is by having less developed countries, low scale of living countries, raised up and begin to grow, and that is better for this country, to have other countries in better condition in the world. The more people in the world in better condition the better off we are and the more prospective customers we have to sell goods to as time goes on. We don't expect to get their money invested here, but we expect to see them grow and perhays become prospective customers. Mr. MCDONOUGH. Do you think it will reduce the amount of money we are now appropriating for mutual security and foreign aid? Secretary HUMPHREY. I certainly hope so. Mr. MCDONOUGH. Is it intended to do that? Secretary HUMPHREY. The idea is that if we can get private money moving into these countries, that that will eliminate a lot of need for this aid. The CHAIRMAN. Mr. Vanik. Mr. VANIK. Mr. Secretary, my questions deal solely with the possible competition between the Export-Import Bank and this new agency. Am I correct in understanding that in 1953 you supported the adoption by the National Advisory Council of the policy which provided in effect that if the International Bank could make a loan, or, rather, if the International Bank could make a loan the Export-Import Bank should confine itself to short-term financing of exports and stay out of the development credit field? Is that a correct statement? Secretary HUMPHREY. No, not entirely. What we tried to do was to lessen, somewhat, the direct competition between the banks. We found that to some extent foreigners were coming over here, applying for loans from both banks, and running around and getting one bank, or trying to get one bank, to cut the price of the other, and so forth. We thought that some little better understanding as to the fields within which each could operate was desirable. Mr. VANIK. It should be confined? Secretary HUMPHREY. There is no absolute line you can draw between the fields. They will overlap to some extent no matter what you do, but by and large the long-term governmental development credits are the particular field of the International Bank. The shorter term movement of goods back and forth is the particular field of the Export-Import Bank. As I say, they must and will cross over. You just can't draw a fixed line, but those, in general, are the lines, the particular field in which they should operate. Mr. VANIK. What is the National Advisory Council attitude on the two? Secretary HUMPHREY. Just as I stated it. Mr. VANIK. Would you favor adoption of a policy statement which would make it clear that the representatives of IFC would oppose the loans that could be made by the Export-Import Bank? Secretary HUMPHREY. I wouldn't expect that IFC could make any loans that could be made by Export-Import Bank. I think the IFC will be in a field out and beyond what the Export-Import Bank can properly do. Mr. VANIK. Then am I correct in understanding that the IFC is a method, or a device to enable the International Bank to make loans without Government guaranties which it cannot now make, or is it the intent and purpose that the IFC shall confine itself to risk capital loans which the Export-Import Bank cannot make because these loans do not provide reasonable assurances of the repayment as the term is interpreted by the Board of the Export-Import Bank? Secretary HUMPHREY. That is right. Both statements you make are true. They are not in the alternative. It is not "either/or," but they are both true. Mr. VANIK. What would be your reaction to a more liberal interpretation of the term "reasonable assurance of payment by the ExportImport Bank," as an alternative to the creation of this new agency? Secretary HUMPHREY. I would be opposed to that. We considered that carefully. I would definitely oppose it, because I think it is very difficult for a bank to make some of the loans, weak loans, or loans that really aren't loans, to you and turn right around to this man or the other man and hold him to loans with a reasonable prospect of repayment. I think there is a place for the Export-Import Bank to facilitate the doing of business in this country. I am sure there is. I am sure that we get a good many days of work for people in America, making things that can be sold and exported elsewhere that the Export-Import Bank can help finance that otherwise wouldn't be sold. Those fellows wouldn't have those jobs unless this financing did take place. That those can have a reasonable prospect of repayment, and should have, and ought to be a banking operation. I think, however, there is also an entirely separate field that can be done under other circumstances, in which, as I say, this experiment may be good. Mr. VANIK. My final question: Don't you believe that we ought to have some firm assurances or commitments that IFC will not compete or invade the field of the Export-Import Bank? Secretary HUMPHREY. Well, I think right on the face of it you have those assurances, but if you wanted some you are certainly entitled to them. There is no reason in the world why the IFC should impede the Export-Import Bank. It is set up to help. It ought to be able to make loans that will bring in some capital-perhaps here is a group of fellows that want to go into business somewhere in the world. They haven't enough equity in their business to make a security that makes it look as though a loan to them would be reasonably well repaid. If the IFC can go in and help them on that side, they might get themselves in position where they could go to the Export-Import Bank and make a good reasonable show of repayment, and by that means get a loan, and start in business. Mr. VANIK. Thank you, Mr. Secretary. Mr. WIDNALL. Mr. Chairman. The CHAIRMAN. Mr. Widnall. Mr. WIDNALL. Secretary Humphrey, what are the main reasons for lack of venture capital in these countries that we are talking about? Secretary HUMPHREY. That is a delicate diplomatic question, I think, in many respects. One reason is there isn't enough assurance in a good many countries of the protection of the capital if it is once invested; the government of some countries has been so insecure, and so minded, that they have not offered any protection for investment when it was once made there. In fact, they have either confiscated it in times past, or they have passed laws that were confiscatory in one way or another, or made it impossible to do business satisfactorily within the confines of that country. When that happens you just don't get money to go there. There are too many good places in the world where it can go so it doesn't go to that kind of place. Another thing another very important thing is that there are a good many places in the world that are not particularly conducive to good living or do not have natural resources. It is pretty hard to get people interested, to go some place where it is either so hot that it is terribly difficult, or so diseased it is terribly difficult, or so cold it is terribly difficult if there be no particular advantages for going there. If there happen to be some excellent attractions in those places people can go in and put in refrigeration or heat, or something or other to make it a livable part of the world, but if you don't have something to base enterprise on, and you have bad conditions, it isn't attractive to go there, so you go to a better place. There isn't anything compli |