INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

MAY 31, 1949.-Committed to the Committee of the Whole House on the State of the Union and ordered to be printed

Mr. SPENCE, from the Committee on Banking and Currency, submitted the following

REPORT

To accompany H. R. 4332

The Committee on Banking and Currency, to whom was referred the bill (H. R. 4332) to amend the National Bank Act and the Bretton Woods Agreements Act, and for other purposes, having considered the same, report favorably thereon without amendment and recommend that the bill do pass.

MAIN PURPOSE OF THE BILL

The main purpose of the bill is to facilitate the marketing of securities of the International Bank for Reconstruction and Development by amending the National Bank Act to permit national banks and (subject to applicable State laws) State member banks of the Federal Reserve System to deal in and underwrite securities issued by the International Bank and by exemption from the provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934 securities issued or guaranteed by the bank. The proposed legislation. is necessary in order to remove certain restrictions imposed by those acts which interfere with the International Bank's financing operations and thereby limit its effectiveness in carrying out the purposes for which it was established.

THE ROLE OF THE INTERNATIONAL BANK

The International Bank is an international organization established under Articles of Agreement drawn up by representatives of 44 nations at the Bretton Woods Conference in 1944. The International Bank officially began operations on June 25, 1946. At present there are 48 member governments, including most of the important countries of the world with the notable exception of Russia.

coming to the United States with a bona fide intention of being married to A. George Kato and that she is found otherwise admissible under the immigration laws. It further provides that, in the event the marriage between the alien and Mr. Kato does not occur within 3 months after the alien's entry, she shall be required to depart from the United States, and, upon failure to do so, shall be deported at any time after entry in accordance with the provisions of sections 19 and 20 of the Immigration Act of February 5, 1917.

Since the alien lives in Japan and has never been admitted to the United States, the information relative to this case is very meager. The records in the Immigration and Naturalization files are based on information obtained from Mr. Kato, the alien's fiance. Her age and place of birth are not shown, but it appears that she is probably a native and citizen of Japan, of the Japanese race. Mr. Akio Kato, a natural-born citizen of the United States, met the alien while he was attached to the Eighth Army Military Government on occupation duty in Japan, and wants to marry her if she is granted permission to enter this country. The alien was educated in China and is at present a student in an occidental school in Japan and expects to graduate in April 1949. Her study at this school has included a course in English.

She has no immediate family ties, has been living with relatives, and is a singer, having been offered a movie contract recently with a Japanese company in Tokyo. According to Mr. Kato, she belongs to no political organizations whatsoever. Ile states that she has never been arrested for any offenses of a civil or political nature. Mr. Keto further stated the marriage was planned to take place immediately upon her arrival. In the event the marriage does not take place, he is prepared to pay for her return to Japan.

Mr. Kato has a permanent position as deputy collector of internal revenue, Ogden, Utah, earning about $3,000 a year, and lives with his parents, who own their home and 20 acres of land. He has no one dependent upon him for support. His assets consist of an automobile worth $3,000, cash of $2,500, and personal property worth $500. His educational background is good; he has a B. S. degree in accounting from the University of Utah. He holds a Reserve commission as second lieutenant in the Finance Department of the Army.

The alien is inadmissible to the United States under existing law because of the fact that she is of a race ineligible for naturalization. Subsection (c) of section 13 of the Immigration Act of 1924 (8 U. S. C., sec. 213 (c)) provides that, with certain exceptions, all persons ineligible for citizenship shall be denied admission to the United States for permanent residence. In the absence of special or general legislation, the subject cannot be permitted to enter the United States for permanent residence.

Whether or not H. R. 2709 should be enacted is a question of legislative policy concerning which this Department prefers not to make any recommendation.

Yours sincerely,

PEYTON FORD,

The Assistant to the Attorney General.

After having examined the merits of this case, the committee is of the opinion that the bill should be enacted and it accordingly so recommends.

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

MAY 31, 1949.-Committed to the Committee of the Whole House on the State of the Union and ordered to be printed

Mr. SPENCE, from the Committee on Banking and Currency, submitted the following

REPORT

To accompany H. R. 4332

The Committee on Banking and Currency, to whom was referred the bill (H. R. 4332) to amend the National Bank Act and the Bretton Woods Agreements Act, and for other purposes, having considered the same, report favorably thereon without amendment and recommend that the bill do pass.

MAIN PURPOSE OF THE BILL

The main purpose of the bill is to facilitate the marketing of securities of the International Bank for Reconstruction and Development by amending the National Bank Act to permit national banks and (subject to applicable State laws) State member banks of the Federal Reserve System to deal in and underwrite securities issued by the International Bank and by exemption from the provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934 securities issued or guaranteed by the bank. The proposed legislation is necessary in order to remove certain restrictions imposed by those acts which interfere with the International Bank's financing operations and thereby limit its effectiveness in carrying out the purposes for which it was established.

THE ROLE OF THE INTERNATIONAL BANK

The International Bank is an international organization established under Articles of Agreement drawn up by representatives of 44 nations at the Bretton Woods Conference in 1944. The International Bank officially began operations on June 25, 1946. At present there are 48 member governments, including most of the important countries of the world with the notable exception of Russia.

It is the opinion of the committee, as well as that of the National Advisory Council on International Monetary and Financial Problems, that the International Bank will have an increasingly important role in the future development of the international capital market and that it is in the interest of the United States to make every reasonable effort to promote the effectiveness of the International Bank. It is expected that the bank will become more and more the focal point for large international financing operations. It is essential that the bank be in a position to raise the funds necessary for it to make sound and productive loans consistent with world economic conditions. During the next few years at least, the International Bank must rely primarily on the private securities market of the United States for such funds and the purpose of this legislation is to assist. the bank in obtaining such funds as expeditiously and economically as possible.

PARTICIPATION OF THE UNITED STATES IN THE INTERNATIONAL BANK

The United States joined the International Bank pursuant to the Bretton Woods Agreements Act (U. S. C., title 22, secs. 286-286k). That act also established the National Advisory Council ou International Monetary and Financial Problems in order to coordinate the policies and operations of the representatives of the United States on the International Monetary Fund and the International Bank with those of agencies of the United States which make or participate in making foreign loans or which engage in foreign financial, exchange, or monetary transactions. The Council consists of the Secretary of the Treasury, as Chairman, the Secretaries of State and Commerce, the Chairman of the Board of Governors of the Federal Reserve System, the Chairman of the Board of the Export-Import Bank of Washington, and the Administrator for Economic Cooperation.

The United States has a very substantial interest in the affairs of the bank. It has subscribed to $3,175,000,000 of its capital stock and it holds approximately one-third of the total votes on the bank's Board of Executive Directors. In addition the International Bank must obtain the approval of the National Advisory Council before that bank may issue, buy, or sell in this country any of its own obligations or any that may bear its guaranty.

Under its Articles of Agreement, the International Bank may borrow funds or guarantee loans only with the approval of the member government in whose markets the funds are to be raised (art. IV, sec. 1 (b)). Moreover, the International Bank may not buy or sell securities which it has issued or guaranteed without the approval of the member government in whose territories the securities are to be bought or sold (art. IV, sec. 8 (i)). The Bretton Woods Agreements Act provides that whenever the Articles of Agreement of the bank require the approval, consent, or agreement of the United States before an act may be done by the bank, the decision as to whether such approval, consent, or agreement shall be given or refused shall (except in certain cases in which specific authorization by the Congress is necessary) be made by the National Advisory Council under the general direction of the President of the United States.

CAPITAL STRUCTURE OF THE INTERNATIONAL BANK

A clear understanding of the capital structure of the bank is necessary in order to appreciate both the necessity of the bank to rely on private capital and the unusually high degree of security which stands behind the bank's obligations.

The authorized capital stock of the bank is $10,000,000,000 and the subscribed capital stock is $8,348,500,000. It is important to note, however, that this does not mean that the bank has that amount to lend. Only 20 percent of the bank's subscribed capital is paid-in capital. And of this only 2 percent is in the form of gold or United States dollars immediately available for lending; the remaining 18 percent is paid in the currencies of the respective members and cannot be used for loans without the consent of the country whose currency is to be used. The United States has so consented to the use of the 18 percent portion of its subscription to the bank.

The other 80 percent of the bank's capital is subject to call only to meet obligations of the bank arising out of its borrowings or guaranties, and is payable in gold, United States dollars, or the particular currency required to meet the obligation for which the call is made. It is not under any circumstances available for lending, but is in the nature of a guaranty fund for the bank's obligations.

Thus the International Bank has had available out of its capital for use in the making of loans, to date, about $745,000,000 in dollars and other currencies. It has also raised for that purpose an additional $282,000,000 in dollars or other currencies in the private investment market by the sale of its own securities and securities guaranteed by it. The bank already has made or is committed to make loans in the amount of about $650,000,000 and it is obvious that for the bulk of its future lending operations the bank must depend on funds raised in the private money market.

MARKETING OPERATIONS OF THE INTERNATIONAL BANK

In July 1947, the bank sold in the United States $150,000,000 of 25-year 3-percent bonds and $100,000,000 of 10-year 2-percent bonds. Those bonds were sold through more than 1,700 securities dealers in 43 States of the United States. The bonds are listed on the New York Stock Exchange and have made an excellent record in the face of the unsettled market conditions which have prevailed during a large part of the past 2 years. The 3-percent bonds are now selling above par and the 2%-percent bonds are selling at par.

The bank has also sold to the Bank for International Settlements the equivalent of $4,000,000 in Swiss franc bonds and has resold with its guaranty to banks and institutional investors in the United States $28,000,000 of bonds and notes which the bank received for loans made by it to four Dutch shipping companies and to the Belgian Government.

Bonds issued by the bank and its contingent liability on securities guaranteed by it are general obligations of the bank backed by its entire resources. These include, in addition to its liquid assets in cash and marketable securities, a special reserve fund into which is paid the commission of 1 percent per year which is charged on all loans made or guaranteed by the bank and, if those resources are not