CONGRESSIONAL RECORD -- SENATE
June 18, 1968
Page 17602
EXTENSION OF AUTHORITY OF EXPORT-IMPORT BANK IN ORDER TO IMPROVE THE BALANCE OF PAYMENTS
The PRESIDING OFFICER. Under the order of yesterday, the Chair lays before the Senate the unfinished business, which will be stated.
The ASSISTANT LEGISLATIVE CLERK. A bill (H.R. 16162) to enable the Export-Import Bank of the United States to approve extension of certain loans, guarantees, and insurance in connection with exports from the United States in order to improve the balance of payments and foster the long-term commercial interests of the United States.
The Senate proceeded to consider the bill.
Mr. STENNIS. Mr. President, I suggest the absence of a quorum, and I ask unanimous consent that the time be charged equally to both sides.
The PRESIDING OFFICER. Without objection, it is so ordered. The clerk will call the roll.
The assistant legislative clerk proceeded to call the roll.
Mr. BYRD of Virginia. Mr. President, I ask unanimous consent that the order for the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. BYRD of Virginia. Mr. President, this legislation was reported to the Senate by the Committee on Banking and Currency. It was, I thought, a very far reaching piece of legislation. It radically changed the method of doing business for the Export-Import Bank. As reported to the Senate, S. 3218 provided that it shall be the policy of the Congress that the Export-Import Bank make loans or guarantees of loans to the extent of $500 million, which in certain cases could run up to $2 billion, even though there was no reasonable assurance that this money would be repaid.
The form in which this legislation reached the Senate, to me, was completely and totally unacceptable. I could not imagine the Senate passing legislation providing that it is the policy of Congress that the Export-Import Bank should make loans and guarantees and insurance of export-import transactions which, in the judgment of the Bank, do not meet the test of reasonable assurance of repayment. Yet, that is what the Senate was called upon to adopt.
I first protested this bill about 3 weeks ago. I called the attention of the Senate to the proposed legislation in a speech on the floor of the Senate, pointing out that it would radically change the policy regarding the Export-Import transactions, and also pointing out that it is an open-ended proposal which provides that all losses of the Export-Import Bank beyond $100 million would be borne by the general treasury.
I could not accept and I could not vote for S. 3218 in the form in which it came to the Senate.
Then, last week the House of Representatives made substantial changes in this proposal. During the consideration of this matter in the Senate yesterday, and after I had talked with both the majority leader and the minority leader, the managers of the bill recommended, and the Senate agreed, to substitute H.R. 16162, the House bill, for S. 3218, the Senate bill.
This was saying, in a way, that the Senate and the managers of the bill voted to scrap S. 3218 as reported by the committee.
Mr. GORE. Mr. President, will the Senator yield?
Mr. BYRD of Virginia. I am glad to yield to the distinguished Senator from Tennessee.
Mr. GORE. Mr. President, I congratulate the Senator upon the change worked in the bill, largely as a result of his efforts.
I wonder what justification was advanced for the declaration of a policy that a loan be made even though the evidence of repayment was absent.
Mr. BYRD of Virginia. I thank the distinguished Senator from Tennessee for his kind comments.
In regard to his question, the committee report indicates that the Export-Import Bank, in the belief of some, has not been liberal enough in its policies and in regard to making loans.
The Bank has had a very good loan record. I think the managers of the Bank should be congratulated on the management that has given these funds. After all, the funds are the taxpayers' funds and the Bank has been proceeding on the basis, in making loans, that the test of reasonable reassurance of repayment must be met.
Then, it was felt that in order to change that policy, it was necessary for Congress to enact legislation. It was proposed that it be the policy of the Congress that the Export-Import Bank make these loans and other guarantees even though the test of reasonable reassurance of repayment is not met, the purpose being to liberalize the credit policies of the Bank.
However, as the able Senator from Tennessee knows, the Bank is already the bank of last resort for so many of the borrowers. The proposed bill would have the Bank involved in even riskier loans than the Bank has been involved in in the past. It seemed to me that it went too far. As a Member of Congress, it seemed to me that none of us would want to be in the position of directing the Bank to make these loans even though there was no reasonable assurance of repayment. The Bank would come back to Congress in perhaps 5 years or 2 years and say, "We have lost $500 million of the taxpayers' money," or whatever the amount might be, "and we want you to make it up."
Congress could hardly refuse to make it up because Congress itself, were it to approve the original bill, would have directed the Bank to make those loans, even though there is no reasonable assurance of repayment. Thus, I think it is a very undesirable piece of legislation.
The bill now before the Senate is greatly improved, and was further improved yesterday. It specifies that before a loan can be made, it must offer sufficient likelihood of repayment.
In querying the Senator in charge of the bill yesterday, to differentiate between "offer sufficient likelihood of repayment" and the present term of "test of reasonable assurance of repayment," as to where the difference lies, I frankly could not get clear in my mind how those two terms differed. In my judgment, they do not differ substantially, if at all.
So, for that reason, I am inclined to go along with the legislation as it has been amended by the Senate, not only in adoption of the House bill, but also in adoption of the amendment offered by the Senator from Illinois [Mr. DIRKSEN], which places a limit on the amount of money the Federal Treasury will bear of any losses the Export-Import Bank might incur. It places a limit of $100 million as the part the Federal Treasury would bear.
The purpose of this legislation is to expand export transactions, in the hope that our balance of payments position will be improved. This is a worthy objective.
But, I submit, if we are going into very high-risk loans where the chance of repayment is small, then that cannot possibly help our balance of payments, because the money is going out, it is not coming in.
All in all, I think that the Senate did a good day's work yesterday in scrapping Senate bill 3218, substituting H.R. 16162, and adopting the amendment offered by the Senator from Illinois, which I was pleased to support.
I was also pleased that the Senate adopted the amendment submitted by the Senator from Virginia which specifies that the Export-Import Bank shall submit quarterly to the Congress details of all loans that it makes under the particular section that the Senate will be called upon to vote shortly.
It seems to me it is important for Congress to have this information, so that it will know how properly to legislate in the future. It should also be helpful in protecting the taxpayers of this country.
Mr. President, I reserve the remainder of my time.
Mr. MUSKIE. Mr. President, yesterday, in the discussion of the pending measure, the distinguished Senator from Iowa [Mr. MILLER] put a question to me in these words. He said:
I should like to know whether in the last three or four years there have been, let us say, 100 applications, or perhaps 50, which would have been approved under the new policy, or even 25, so that we will have an idea of the volume we are talking about. The Senator's illustrations will be most helpful, but I should like to know how many of the applications we are talking about occurred over a 2-, 3-, or a 4-year period.
I suggested to the Senator yesterday that I doubted very much that there was that kind of specific information available, especially in view of the fact that I had asked for similar information.
Nevertheless, I asked the agency to undertake to respond to the Senator's question, and I have here a five-page memorandum which I think might be helpful not only to the distinguished Senator from Iowa but to Senators as a whole as they read the RECORD.
So I should like to ask unanimous consent that the memorandum be included in the RECORD at this point.
There being no objection, the memorandum was ordered to be printed in the RECORD, as follows:
EXPORT-IMPORT BANK OF THE UNITED STATES,
Washington, D.C.,
June 18, 1968.
Memorandum to Senator Muskie.
From: B. Jenkins Middleton, Vice President, Program Planning and Information.
Subject: Response to question of Senator Miller during floor debate on S. 3218 (see page 17417 of the Congressional Record for June 17, 1968.)
During the floor debate on S. 3218 Senator Miller made the following request:
"I should like to know whether in the last three or four years there have been, let us say, 100 applications, or perhaps 50, which would have been approved under the new policy, or even 25, so that we will have an idea of the volume we are talking about. The Senator's illustrations will be most helpful, but I should like to know how many of the applications we are talking about occurred over a 2-, 3-, or a 4-year period."
During the colloquy on this subject, Senator Muskie indicated that such a list might be difficult to obtain for two principal reasons: First, the submission by Eximbank of a list of transactions which it has not fully considered but which it believes might be approved under the new program might be considered as an advance approval of these transactions; and second, any such list which might be compiled would not present a true picture since "in many cases the applications never come to the Bank because of the awareness of the Bank's existing policy".
Eximbank concurs in these statements by Senator Muskie.
Moreover, a mere statement of the number of "applications" received by the Bank over the past 2 to 4 years which might have been approved had the export expansion facility under consideration been in existence would not be meaningful. "Applications" run the gamut from requests for so-called "special buyer credit limits" under short-term export credit insurance policies which have been as small as $5,000 to applications for direct credits to foreign purchasers in amounts which, under Eximbank's normal programs, may range as high as $100 million or more.
Moreover, an "application" which is turned down may take the form of a telephone call.
Earlier in the debate, prior to Senator Miller's request, Senator Muskie submitted for the record a series of examples of transactions which might have been assisted under the proposed export expansion facility (see Congressional Record, page 17412). We believe that this type of illustrative example is more helpful to an understanding of the potential nature and volume of business which could be done under the new program than would be a listing of the number of applications which might be involved. Perhaps the following additional examples will be responsive to the substance of Senator Miller's request.
The proposed export expansion facility will permit assistance to export transactions involving a number of countries where political and economic risk factors now preclude Eximbank from offering medium-term guarantees or insurance under its regular operations. Perhaps the outstanding example in this category is Indonesia, which is potentially an important market for U.S. products. It is the fifth largest country in the world, with a population of over 100 million.
Indonesia has been going through a period of debt readjustment. Eximbank has an exposure in that country of some $80 million. The Bank has not been receiving payments under these credits for some time, but it has worked out an arrangement with the Indonesians for the resumption of payments and lengthening of repayment periods. This has been done in cooperation with other Western creditors of Indonesia, and the Soviet Union has worked out a parallel arrangement.
There is growing confidence in the chances for Indonesian recovery. Nevertheless Eximbank does not feel that under its "reasonable assurance of repayment" standard it can resume the extension of loans, guarantees, and insurance for exports to that country until further progress is evident and it becomes clear that payments on existing debts will be resumed. In the meantime, however, both the Japanese and some of our Western competitors have resumed their export credit, guarantee, and insurance operations for exports to Indonesia. Eximbank does not wish to be left behind in this resumption of normal commercial activity, but feels that the new authority is necessary for early resumption of its activity there.
Nigeria, like Indonesia, is a country for which the Bank is not currently able to provide export credit support. With the new authority a resumption of Eximbank activity involving exports to that country may become possible.
There are also instances in which Eximbank's existing commitments are so large in relation to the foreign exchange position and prospects of the borrowing country that the Bank's Board has deemed it prudent to limit new undertakings in support of export sales. Brazil, for example, is a country in which the readjustment process has been under way for a considerably longer period than is the case with Indonesia, but which also has a large external debt which requires servicing.
Eximbank's exposure in Brazil has been around $700 million for some time. While the Bank has been willing to make new commitments in Brazil in the amount of repayments being received on its outstanding commitments, up to the present time Eximbank has not been willing to increase this exposure. Other exporting countries, however, have a far smaller exposure in Brazil, and with the improving prospects for the country they have been vigorous in their support of exports destined for the Brazilian market. With the new authority, Eximbank will be in a far better position to offer our own exporters the same kind of support which is being extended to our foreign competitors.
Other countries where Eximbank feels it is near the limit of the exposure it should take on under its existing authority are the Dominican Republic, Turkey, and Bolivia.
The new facility can also serve to assist transactions involving a number of foreign airlines, some of which are owned by countries which are financially weak and others of which are privately owned and only marginally profitable. Potential sales opportunities in this category exist in Bolivia, Chile, Honduras, Guatemala, and Brazil.
On occasion the proposed fund could be used for direct loans to foreign borrowers in order to assist in financing projects where it is important for the U.S. to be the initial supplier so as to affect the future development of an important market abroad. This is particularly true of projects involving sophisticated technologies. Possibilities of this type are projects involving the construction of facilities for nuclear power plants and satellite communications ground stations in countries where the amount of credit required is large in relation to the country's foreign exchange resources, the borrowing entity is not a first-class credit risk, or the level of Eximbank's outstanding commitments is already high.
There are also a number of rapidly developing countries -- Korea, Taiwan, Israel, and Iran come immediately to mind -- which are no longer heavily dependent on concessionary aid-type assistance but whose current import requirements for capital equipment on normal commercial terms are greater than the Bank can meet under its normal standards. It may nevertheless be desirable to preserve for the United States the benefits of trade relationships which have been established with these countries as a result of previous AID and Export-Import Bank financing.
There exists today a considerable volume of medium-term business in such areas, involving railroad rolling stock and other transportation equipment, highway construction equipment, and a variety of industrial machinery, which might be lost to the U.S. without the proposed facility.
Most of the examples cited thus far have involved "country problems" -- that is, problems with the debt capacity and foreign exchange capability of the country itself which are relevant whether the actual borrower within the country is public or private. But even where there is no "country problem" there may be problems involving the creditworthiness of the individual buyer. As an example, for several years Eximbank has had guarantees outstanding to several U.S. commercial banks covering repetitive shipments of automobile components and knocked-down automobiles to a company in a middle eastern country. The guarantees have been issued at the request of two American automobile manufacturers. The foreign buyer assembles the automobiles and sells them. The aggregate liability of the Bank under these guarantees has been about $2 million. The guarantees protect the U.S. commercial banks against defaults on account of both the commercial risks -- such as the possible bankruptcy of the buyer -- and the political risks which are inherent in credit transactions with foreign countries. The risk of inconvertibility is probably the most important potential cause of loss of a political nature.
In this particular case the foreign buyer has a good reputation and a good record of servicing his debts. However, the assets of the company consist primarily of plant and equipment, and the assets of the principal owner, who has guaranteed the debt obligations of the company, are largely tied up in the company and in real estate -- in other words, in assets which cannot be readily liquidated. As is so often the case with companies abroad, the balance sheets and income statements of the buyer are not readily understandable to American financial analysts. Eximbank therefore considers its present exposure of some $2 million to be marginal even under the present statutory standard, which requires that transactions supported by the Bank offer "reasonable assurance of repayment."
Now, however, the two American automobile manufacturers, who rely heavily upon export sales to support their manufacturing facilities in this country, are seeking to increase their sales to and through this particular foreign buyer. They have accordingly asked Eximbank to increase its liability under its guarantees of these transactions to an aggregate of some $12 million. The Bank does not believe it can do this under its present authority. However, in view of the buyer's reputation and other favorable factors the Bank is inclined to the view that there may be a "sufficient likelihood of repayment to justify the Bank's support in order to actively foster the foreign trade and long-term commercial interest of the United States" -- the standard proposed by the bill, as amended. This, then, is another concrete example of a case in which the proposed authority may make a very real contribution to our exports, our commercial interests, and our balance of payments.
Mr. MUSKIE. Mr. President, I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The assistant legislative clerk proceeded to call the roll.
Mr. BYRD of Virginia. Mr. President, I ask unanimous consent that the order for the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. BYRD of Virginia. Mr. President, as one who has taken a keen interest in the pending legislation for more than 3 weeks, I wish to speak a few concluding words.
In the form that the bill was submitted to the Senate by the committee, it was to my mind completely unacceptable. I could not support the committee's recommendation.
Yesterday, however, the Senate took a series of actions which greatly improve the legislation, which eliminate the more objectionable features, which would give protection to the taxpayers which the original version did not give, and which, in addition, knock out of the bill a congressional policy statement which to my mind it would have been unthinkable for Congress to have adopted.
So, Mr. President, with the changes that have been made by the Senate, I feel that this is now a proposal I can support. I still have some doubt as to its wisdom, and I have doubt as to the need for it; but I think the new phraseology with respect to policy and the safeguards that have been written into the measure insofar as the handling of moneys from the general Treasury is concerned makes the proposal acceptable.
Mr. TOWER. Mr. President, I rise in support of H.R. 16162, companion bill to S. 3218, designed to improve the U.S. balance-of-payments situation through facilities of the Export-Import Bank.
Under this bill, $500 million of the Bank's present authorization would be set aside as a separate fund, or category, for loans to which the present law's limitation of "reasonable assurance of repayment" would not apply. The new criteria under H.R. 16162 would be "sufficient likelihood of repayment."
It was my intention to offer as an amendment to the Senate version of the bill language similar to that appearing in H.R. 16162 relating to sufficient likelihood of repayment. Since we have now substituted H.R. 16162 for the Senate bill, the substance of my amendment will be incorporated into the final version of the bill.
Mr. President, the U.S. balance of payments has been running a deficit for 17 of the last 18 years.
After World War II, these deficits began and, until the mid-1950's, have run about $1 billion a year. Many have felt that a modest deficit in our balance of payments was both a necessary and a desirable means of providing the dollars needed for European economic recovery, but, by 1959, our payments deficit had risen to more than $3.5 billion annually.
By 1961, there was no longer a shortage of dollars abroad. Foreign monetary authorities became reluctant to hold increasingly large amounts of their international reserve assets in dollars. Such a situation posed a real and continuing threat to the strength of the dollar, and, as a result, the U.S. Government began taking action to improve our balance-of-payments situation.
More specifically, since 1965, the United States has witnessed a substantial increase in this deficit. This situation has been brought about primarily because of a sharp increase in our imports, our increased military expenditures abroad in support of the Vietnam war, outflows of capital for private investment, and, to a lesser extent, because of a widening gap in the travel account. During the fourth quarter of last year our balance-of-payments deficit increased sharply as a result of the British devaluation of the pound in November of 1967. As confidence in the pound and the dollar declined, foreign deposits were withdrawn from the United States, followed by a burst of speculative buying of gold. Measures were immediately taken by the United States to free our gold stock. In order to sustain international confidence in the dollar, the United States must take additional steps which are necessary to reduce our balance-of-payments deficit.
A major factor in the total balance of payments picture is U.S. exports to foreign governments.
Last year the United States exported some $30 billion worth of products, the highest in our country's history. The trade surplus from that commerce contributed about $3.5 billion to our payments balance. However, there are indications that if our foreign trade is not further stimulated, the trade surplus this year will be sharply reduced rather than raised.
Mr. President, the Export-Import Bank has been a powerful force in furthering American exports over the years. I believe that our present trade situation and balance-of-payments position justify an aggressive posture by the Bank in its operations under existing statutory authority. It should be possible to adopt such a posture without jeopardizing in any way the well-deserved reputation of the Bank as a basically sound lending institution. I am convinced that such a reputation can be preserved while, at the same time, the Eximbank continues to offer adequate support to our exporters.
Under present statutory authority, the Export-Import Bank is limited to credits offering "reasonable assurance of repayment."
This special fund called for by H.R. 16162 would be created in the belief that loans issued will improve our balance of payments and will foster the long-term commercial interest of the United States.
The Senate is mindful, I am sure, of the extraordinarily important role that the Export-Import Bank has played for many years in financing the exports of the United States into areas where credit risks were somewhat higher. Time and again, the Bank has inaugurated new techniques and introduced new principles of international finance. Such new ideas, techniques, and innovations have been followed, for the most part, by all the great exporting nations of the free world. Japan has even given the name "Export Import Bank" to its financing facility.
Testimony before the Senate Banking and Currency Committee was implicit in its praise and appreciation for the fiscal responsibility of the Bank. Also evident was the notion that the time has come when the Eximbank could do much more to promote U.S. exports if a very reasonable modification could be made in the statutory authorizations of the Bank.
Mr. President, our trade surplus last year fell to less than $3.6 billion, a decrease from the $6.6 billion in 1963. Inherent, of course, in all business transactions is financing; the strong arm of financial encouragement is sorely needed to aid the efforts to increase our exports. Private financing still continues to carry the major burden of financing the exports of the United States, however, domestic pressures on our private financial institutions are so severe today that they cannot respond in the international field to the degree necessary. Private banks likewise are unable to respond in those areas where credit risks are somewhat greater -- yet these are precisely the areas where the United States can increase its exports.
Mr. President, the Export-Import Bank continues to operate as one of the oldest of our Government's international credit facilities in existence. Though the Eximbank has built up substantial reserves, the Bank is heavily committed in many underdeveloped and developing countries. And naturally, as the Bank's credit commitments increase in a particular nation, its risks of taking large and sudden losses as the result of general political or economic developments in that country also increase.
Therefore, a certain private credit risk in a given country may be quite good, but, because of the large credit commitments the Bank has in that country, the Board of Directors of the Bank may have considerable difficulty in determining that in that particular case there is a "reasonable assurance of repayment." The borrower who may be a private concern may have a most adequate credit responsibility, and yet the Bank could not make a favorable determination as to his loan.
Mr. President, it should also be pointed out that a foreign government credit facility or central bank which is not so heavily committed as the Eximbank in a particular importing country is often willing and able to guarantee credits of a much lower quality for the sole reason that it has a small extension of risk at that particular time. The situation now faced by the Export-Import Bank is usually just the opposite, and it is unable to embark upon such an arrangement.
Even if the United States were not faced with serious balance-of-payment problems, competition in the world marketplace alone would, I believe, warrant our support of H.R. 16162. The passage of this legislation will encourage acceptance of our exports in difficult markets; it will aid in establishing our products in new markets and expanding markets where the potential for repeat sales is high; and it will assist in the maintenance of existing export markets.
The basic for expanded authority for the Eximbank has been under consideration for years. H.R. 16162 is an outgrowth of recommendations of the Action Committee on Export Financing of the National Export Expansion Council as well as the Export Expansion Act introduced in the Senate in 1965.
I wish to emphasize, Mr. President, that the desired results of this legislation can very well be accomplished without turning the Bank into a soft loan agency. It is clear that in the days ahead, there is more need for the Bank to act as an accelerator rather than as a brake. If H.R. 16162 is administered by the Bank as intended by the legislative history thus far existing, this new facility of the Eximbank can quickly become a forceful and useful addition. Because I believe that it is of the utmost importance to solve our balance-of-payments problem and to foster the long-term commercial interests of the United States, I feel that the Export-Import Bank in the past warrants confidence in a new and challenging future role for the Export-Import Bank of the United States.
Mr. BYRD of West Virginia. Mr. President, I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The assistant legislative clerk proceeded to call the roll.
Mr. MUSKIE. Mr. President, I ask unanimous consent that the order for the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. MUSKIE. Mr. President, I ask for the yeas and nays on final passage.
The yeas and nays were ordered.
Mr. MUSKIE. Mr. President, I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The bill clerk proceeded to call the roll.
Mr. BYRD of West Virginia. Mr. President, I ask unanimous consent that the order for the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
The hour of 2 p.m. having arrived, the Senate, pursuant to the order of yesterday, will now proceed to vote on the passage of H.R. 16162.
On this question the yeas and nays have been ordered, and the clerk will call the roll.
The bill clerk called the roll.
The result was announced -- yeas 88, nays 0, as follows:
[ROLL CALL VOTE LISTING OMITTED]
So the bill (H.R. 16162) was passed.
Mr. MANSFIELD. Mr. President, I move to reconsider the vote by which the bill was passed.
Mr. KUCHEL. Mr. President, I move to lay that motion on the table.
The motion to lay on the table was agreed to.
Mr. MANSFIELD. Mr. President, I ask unanimous consent that Calendar No. 1082, S. 3218, be taken from the calendar and indefinitely postponed.
The ACTING PRESIDENT pro tempore. Is there objection? The Chair hears no objection, and it is so ordered.
Mr. MANSFIELD. Mr. President, I rise to commend the distinguished Senator from Maine [Mr. MUSKIE] for the exemplary manner in which he managed the Export-Import Bank measure just adopted unanimously by the Senate. His abilities as a legislator, his clear and convincing arguments for the measure compelled its overwhelming success. But, even more, its passage represents another outstanding achievement in the abundant record already compiled by Senator MUSKIE. The Senate is deeply in his debt.
Joining Senator MUSKIE to assure this overwhelming success was the Senator from Texas [Mr. TOWER]. During his years in the Senate and as a member of the Banking and Currency Committee he has contributed immensely. His cooperation on this, as on so many proposals, has been greatly appreciated.
Other Senators also joined to assure swift and efficient action. Notable were the efforts of the distinguished minority leader, the Senator from Illinois [Mr. DIRKSEN], and the Senator from Virginia [Mr. BYRD]. And we all may be proud of another fine achievement.