Table 26.—Value of foreign-owned United States assets, June 14, 1941—Continued

1 Excluding gold held under earmark for foreign account by the Federal Reserve Bank of New York, which amounted to $1,916,000,000.

For statistical purposes only, control was determined on the basis of the ownership of 25 percent or more of the voting stock of corporations and analogous interests in partnerships and other organizations. Less than $50,000.

4 Included in the totals.

Taxes, amounting to about $37,850,000, collected under Sec. 503 of the Sugar Act of 1937, to be made available for public relief and civilian defense in the Philippine Islands, are not included in this figure. NOTE. The figures are rounded and will not necessarily add to the totals.

Foreign-controlled enterprises, book value; securities, market value; deposits, stated value; other assets, estimated value.

Source. Treasury Department, Census of Foreign-owned Assets in the United States, pp. 61-63, Government Printing Office, 1944.

Table 27.—Estimated value of foreign-owned United States assets, end of 1946 [In millions of dollars]

Foreign investments in the United States.

Private United States "obligations".

16, 145

12, 805

Notes.-Direct investments, book value; securities, market value; short-term assets and U. S. Government obligations, stated value.

Source: Based on Treasury Department, TFR-300 data, adjusted by the Department of Commerce and Treasury Department on the basis of current information.

C. UNITED STATES SECURITIES AND OTHER LONG-TERM ASSETS OF COUNTRIES PARTICIPATING IN THE EUROPEAN RECOVERY PROGRAM

Because of the special interest in the subject, estimates of long-term foreign investments in the United States of the 16 countries participating in the European recovery program have been prepared for the information of the committee. (See table 28.) The total long-term assets of these countries as of the middle of 1947 amounted to $4,930,000,000. About $2,200,000,000 consisted of stocks and bonds, the bulk of which are probably of a readily marketable character. Direct investments accounted for an additional $1,700,000,000; these consist of the American branches and subsidiaries of foreign corporations and other United States companies 25 percent of whose voting stock is held abroad. Interests in estates and trusts and other miscellaneous assets, including real estate, account for the remaining $1,000,000,000.

The character of these assets and the measures taken by the principal countries with respect to them are discussed by countries below:

TABLE 28.—Estimated foreign-owned gold reserves and United States assets June 30,

1947 1

1 Holdings of International Monetary Fund and International Bank for Reconstruction and Development excluded. The United States assets of these and other international organizations on this date, amounted to $2,714,000,000.

2 Including Belgian Congo.

3 Including dependencies.

4 Including Netherlands West Indies.

5 Short-term foreign assets not broken down by countries include $110,000,000 of brokerage balances, $900,000,000 of estimated holdings of United States currency and claims against the United States Government and an omission estimate of $500,000,000.

NOTE

Gold: Data represent total holdings of governments and central banks without regard to location. Short-term assets: Composed principally of deposits in American banks and holdings of U. S. Government Treasury bills and certificates.

Long-term assets: Securities item is composed of holdings of stocks and bonds of United States corporations and bonds of the U. S. Government. The "Other" item is composed of controlling interests in United States corporations, interests in estates and trusts, and other types of property holdings. These assets vary widely as to availability and liquidity.

The differences between this table and table 27 are explained as follows: (1) Table 27 includes $474,000,000 of assets of international organizations. Such assets were excluded from table 28. (2) Between Dec. 31, 1946, and June 30, 1947, the liabilities of United States banks to foreigners decreased by $680,000,000, principally a reduction in U. S. Government bills and certificates held for foreign account. (3) Various changes in other items including a reduction in the market value of United States common stocks and net sales of United States securities by foreigners.

Source: Based on Treasury Department, TFR-300 data, adjusted by the Department of Commerce and Treasury Department on the basis of current information.

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UNITED KINGDOM

Among the countries participating in the European recovery program the United Kingdom held by far the largest amount of long-term assets in the United States. The holdings of the United Kingdom were estimated to have a value over $2,000,000,000 as of the middle of 1947. The United Kingdom and its nationals hold substantial amounts of stocks and bonds issued by United States corporations. It is estimated that the current market value of these securities is about $600,000,000.

British subjects also have substantial interests in foreign-controlled United States enterprises. These interests, called direct investments, have a current book value in excess of $1,000,000,000.

Insurance companies account for about half of the direct-investment total. These consist of 87 fire, marine, and casualty companies, of which 43 are incorporated in the United States and 44 are branches of British companies. Investments in these companies are carried in table 28 at $450,000,000, which is their estimated net worth. The companies' assets consist largely of high-grade stocks and bonds together with real estate and mortgages which in 1946 produced a net investment income of 20.3 million dollars, in addition to the earnings from their underwriting business.

Similarly, all other direct investments-British and other shown in table 28 have been entered at book values, i. e., the equity of the foreign owners in the capital stock, surplus, and liabilities of the American company or branch. There is no adequate method of determining a fair market value for most of these investments. There is no public market for their stock, and the price that could be secured either from public offering or private sale of their securities would depend on a large number of variables. Among these might be mentioned (1) the condition of the capital markets, (2) the degree of political pressure placed on the owning countries to liquidate, and (3) the position of any particular company to be sold in the American industry of which it is a part, including the past earnings, history, character of the management, value of patents owned, value of good will, condition and location of the physical equipment, and many other factors.

The only instance in which a British direct investment was liquidated was the sale in the early days of the war of about 90 percent of the stock of American Viscose Corp., the largest producer of rayon yarn in the United States. The stock of this company was vested by the British Government in 1941 and publicly offered in the United States through a banking syndicate. The British Treasury realized only about $54,000,000 net on this sale, after paying commissions and other expenses, in spite of the fact that the company had a net worth of more than $100,000,000. It was largely because of the failure to secure what was considered a fair value on this investment that no further steps were taken toward vesting and liquidating other direct investments. Instead, the unsold marketable securities still available to the British Government and most of the direct investments that had any sizeable value were pledged against a loan from the Reconstruction Finance Corporation of $425,000,000. Only $390,000,000 was ever drawn, and by the end of August 1947 about half of it had been repaid out of the proceeds of income received on

the pledged securities. The estimated value of the collateral held is about $900,000,000; the balance of the loan outstanding is about $186,000,000.

However, before securing the RFC loan, the British Government had vested and sold in the United States about $700,000,000 of American securities previously owned by its nationals. The private holders were paid in sterling at the equivalent of the dollar value of the securities at the time they were vested.

Except for securities already vested or loaned to the British Government, British holders since October 1, 1947, are no longer required to sell their American securities to the Government on its request. Under the new Foreign Exchange Control Act which went into force on that date, holders of such securities may sell them and reinvest the proceeds in other American securities or may transfer their American securities freely against payment in sterling.

According to estimates of the Department of Commerce, income paid on United Kingdom investments in the United States in 1945 amounted to about $86,000,000, of which $43,000,000 was earned by the insurance companies. The earnings of the latter, due to large underwriting losses, dropped to about $11,000,000 in 1946, thus reducing the total to about $59,000,000 in the latter year. Most of this income, of course, went to service the RFC loan. In any event, in view of the effective administration of British exchange control, it is probable that substantially all the dollars received as a result of this income do become available to the British Government.

NETHERLANDS

Of the countries participating in the European recovery program, the Netherlands is the second largest holder of United States investments. A much larger proportion of the Dutch holdings consists of marketable securities than is the case for British holdings. There have been no vestings by the Netherlands Government of American securities. Dutch holdings of American stocks, estimated at about $400,000,000, represent chiefly interests in large United States corporations and are therefore securities of a high degree of liquidity. They have been traditionally held in Holland in the form of bearer certificates issued by the Dutch administration offices, who in turn hold the original American stock certificates. In addition, the Dutch for many years have held substantial amounts of American corporate bonds, particularly railroad. The estimate for Dutch holdings of direct investments includes the full value of the Shell Union Oil Corp. stock owned by the Batavian Petroleum Co. Batavian in turn is owned partly by the Royal Dutch Co. and the British Shell Co., and partly in other countries. As a matter of fact, the estimates presented in table 28 are based in all instances on recorded addresses, and it may well be that in some cases the actual owners are residents of third countries.

Under the foreign-exchange-control decree of 1945 and the Netherlands banking regulation of July 1946, the Netherlands Government has been granted authority to take over the foreign exchange and foreign securities held by its nationals. Pursuant to this authority the Netherlands Bank has taken control of all privately held gold and foreign currency. The Government has required registration of the