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The January 1934 report of the Ministry of Merchant Marine states the following analysis of tonnage acquired with the aid of the maritime credit law. These figures show that of the total tonnage aided by provision of the law, 61 percent was tonnage acquired in France :

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Mr. SAUGSTAD. There is in France a protective margin in favor of French shipbuilders and this was illustrated in connection with this law. In the law, there is a provision that if an owner calls for bids in a French shipyard and if the French shipyard charges or proposes to charge more than 15 percent more for the vessel than it can be purchased for in a competitive market, the French Government may advance and underwrite his mortgage on the vessel built or purchased in the foreign country.

There was one point I forgot in discussing interest rates. The interest rates are established either by the sales price of the bonds that are issued by the bank for the purpose of raising funds which are to be advanced under this policy, or they may be fixed by the current prices of real estate mortgage loans, plus 1 percent. I think the lowest quotation I had on those loans was 7.4 percent.

Mr. CULKIN. Have the French financed the construction and purchase of any ships abroad, to your knowledge ?

Mr. SAUGSTAD. Yes, sir.
Mr. CULKIN. In what countries?
Mr. SAUGSTAD. Mostly in Germany.
Mr. CULKIN. New construction?
Mr. SAUGSTAD. Yes, sir.
Chambre Syndicale des Constructeurs de Navires et de Machines Marines, no. 31 B.

Mr. Culkin. That is where this provision you referred to a moment ago is effective?

Mr. SAUGSTAD. Yes, sir.

Mr. Culkin. Where the cost is 15 percent over the foreign market, then the Government itself will finance the purchase?

Mr. SAUGSTAD. Will underwrite the paper.

Mr. Culkin. Will underwrite the paper for the purchase and construction of a ship abroad-outside of France !

Mr. SAUGSTAD. Yes, sir.

Mr. Culkin. And to what extent, just generally, has that been done ?

Mr. Saugstad. In January 1934 the ministry of merchant marine reported that under the act 61 percent of the tonnage acquired under these loans was acquired in France; that purchases abroad were 64,631 gross tons; that construction abroad was 29,856 gross tons, and that construction in France was 149,167 gross tons.

Mr. CULKIN. The French were wise in that.
Mr. Sargstad. They have long experience with this policy.

Mr. WALLGREN. Did I understand you aright to say that the interest rate was 7.4 percent?

Mr. Saugstad. The last quotation I had was about 7.4 percent.

Mr. WALLGREN. I would like to have you repeat that statement again. I asked if I was right in understanding you to say that the interest rate was 7.4 percent?

Mr. SAUGSTAD. That is the last notice I have seen.

Mr. SIROVICH. You stated, on the item of reconstruction, that the French House of Deputies had voted for 5 years a sum amounting to 200,000,000 francs?

Mr. SAUGSTAD. Authorized the Credit Foncier to advance that amount.

Mr. SIROVICH. And then after these 5 years they voted an additional 125,000,000 for 4 years?

Mr. SaugsTAD. Yes, sir.

Mr. SIROVICH. That means that the French House of Deputies voted for construction purposes the sum of 1,500,000,000 francs.

Mr. SaugsTAD. It means the chamber voted to extend credit to that amount.

Mr. SIROVICH, Which in conformity with the international exchange amounts to about $100,000,000.

Mr. SAUGSTAD. Yes, sir. Mr. Sirovich. Which they have put away for the construction of new ships, or the reconditioning of ships, or anything that appertains to construction?

Mr. SAUGSTAD. Yes, sir.

Mr. SIROVICH. Now of this $100,000,000, you stated, further, that the Government, through the House of Deputies, had arranged on the interest basis up to a certain tonnage for cargo and for passenger ships, that the individual, or the corporation, or company that borrowed or had the ship built would have to stand a limit of 2 percent and a maximum of 3-percent interest; is that right?

Mr. SAUGSTAD. Yes, sir; a minimum limit.

Mr. SIROVICH. Now, it struck me, while these figures seem so very large—and I want the chairman to correct me if I am wrong—that

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we have put away for construction purposes the sum of about $246,000,000. Is that right, Mr. Chairman.

The CHAIRMAN. I do not think that is correct. There was originally $125,000,000 authorized for the loan fund and then subsequently the authorization was increased to $250,000,000, but I cannot tell how much has since been actually appropriated. There was $125,000,000 and then they increased the authorization, but it never reached $250,000,000.

Mr. SIROVICH. So, according to my theory, we have today about $246,000,000 against which we have begun to build and reconstruct new ships.

The CHAIRMAN. I do not think we have that much in our construction loan fund now.

Mr. SIROVICH. We have not that much now, but we had that amount,

The CHAIRMAN. I do not think so; we never had that amount. Mr. SIROVICH. We had 146 and 90, I think—something like that, that was brought out in the testimony a few years ago.

The CHAIRMAN. We will get that from the Shipping Board. Mr. SIROVICH. On that basis, I want to come to my point, that we show our munificence for the construction of ships by advancing as high as 75 percent of the first mortgage against those ships, so that companies can build new ships, and rebuild and get rid of the obsolete ships that are derelicts upon the ocean of commerce. Now do you not think upon the basis that we charge, as the hearings have brought out, anywhere from an eighth to a quarter of 1 percent, up to 312 percent

The CHAIRMAN. It is 31/2 percent now.

Mr. Sirovich. It is 31/2 percent now, but we have as low interest as an eighth and a quarter, up to 312 percent maximum, in which shipbuilders can build new ships,

The CHAIRMAN. Now, wait a minute. They have not that oneeighth of 1 percent now at all. That was a misinterpretation that never ought to have been put into effect by the Shipping Boardthat one-eighth of 1 percent. And that was changed so that the charge was 312 percent for foreign shipping. Mr. SIROVICH. But they have charged less than 312 percent. The CHAIRMAN. Yes; before the act of 1928. Mr. SIROVICH. That is what I am trying to bring out. The Chairman. You said they had that available now. Mr. SIROVICH. I said we had available now for the construction of new ships perhaps anywhere from seventy-five to one hundred million dollars, I think. The CHAIRMAN. I am not prepared to answer that.

Mr. Sirovich. Now, on that basis, I think our Government has been very liberal, very gracious, more so even than the French Government with all of its munificence, if the merchant marine

operators would only avail themselves of the opportunities we give; because that bank you spoke of, the Credit Foncier, only gives up to 50 percent, and under certain conditions up to 70 percent; and, if they give collateral up to 85 percent, and they can take that collateral and go to any bank and get a loan against it. So that there is nothing to that. So that when you compare the Government of

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the United States from the standpoint of subsidy, when you take it from the standpoint of construction, I think we have far outstripped France in the generous way in which we have treated our merchant marine, and we ought to have had better results.

Mr. PENNYPACKER (National Council of American Ship Builders). Mr. Chairman, in regard to the construction loan fund, I have here a statement which was prepared by the Shipping Board showing the status of their construction loan fund as of March 1, 1933. It is not quite up to date. At that time, the total authorized loans from the construction loan fund for both new construction and reconditioning was $147,734,794.66.

The CHAIRMAN. Does that show what payments have been made ! Mr. PENNYPACKER. No; that is just simply the authorization and that includes both new construction and reconditioning.

Mr. SIROVICH. Does it show how much money there was for construction and reconditioning purposes altogether?

Mr. PENNYPACKER. There is a table here; I have given the total of the table. The table shows an authorization for new vessels completed, not completed, and the total.

Mr. SIROVICH. That is only $147,000,000 that you just read?
Mr. PENNYPACKER. Yes, sir.

Mr. SIROVICH. That $147,000,000 is what has already been authorized for construction and reconditioning up to the 1st of January 1933.

Mr. PENNYPACKER. Up to March 1, 1933.

Mr. SIROVICH. Which is $47,000,000 more than the total amount that the French Government showed in 9 years with their 1,500,000,000 francs?

Mr. PENNYPACKER. Yes, sir.
Mr. SIROVICH. So it again proves how generous we have been.

Mr. PENNYPACKER. Out of that total, loans of $116,000,000 plus have been authorized for new construction alone; the balance was for reconditioning.

Mr. SIROVICH. At what interest is that being paid; does it show?

Mr. PENNYPACKER. No, sir; the interest rates are not given in that table.

The CHAIRMAN. That would hardly conform with the report of the Post Office Department which gave a table on page 43 showing that the United States Shipping Board has loaned the following sums in connection with the above construction program to mail contractors at rates of interest varying from one-eighth of 1 percent to 312 percent, and for reconditioning, which total $107,593,957.32, the additional sum, or the difference between these figures and those you gave probably being loans made to ships that did not have ocean-mail contracts, as this undertakes to show only loans that were made to ships that had ocean-mail contracts.

Mr. PENNYPACKER. I think possibly there is some other difference there. The figures I quoted were authorized loans; perhaps the figures you have read were loans actually made.

The CHAIRMAN. I was reading from part 1 of the first day's hearings before this committee. The same information is contained in the Message of the President, which you probably have, on page 9. I have called the Shipping Board and am trying to get the figures.

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Mr. SAUGSTAD. To complete the record on the French section, I want to say that these loans are made under two classes, short-term and long-term. There is a short-term loan which is for 5 years and under which the repayment periods are fixed in the mortgage. The long-term loans are for not to exceed 20-year periods and they are amortized through annuities; in other words, annual payments that include both the interest and the principal.

Then just one more thing: At the time the French Government authorized a 100-percent interest base to which the Government might contribute one-half, they also authorized a 40-percent increase of the Government share provided it did not exceed the appropriation of 6,000,000 francs annually.

Mr. Culkin. You did make the statement a moment ago, Mr. Saugstad, that repayments were in a certain amount. I did not catch the amount.

Mr. SaugsTAD. The repayments are over a period of 20 years or less, depending upon the loan period.

Mr. CULKIN. I know; but I mean the amount of the payments.
I think it is in the record, but I did not catch the amount—the repay-
ments on those loans.
Mr. SAUGSTAD. 80,000,000 francs; about 18 percent of the loans

(Statement made on May 6)
Mr. SAUGSTAD. Mr. Chairman, I have just four brief items which
bring up to date some points that we discussed here in March when I
was before the committee.

The first of these relates to a bill which was introduced in the Chamber of Deputies of France on the 14th day of March and which undertook to accomplish three things. The bill is in the nature of approval of a supplemental agreement dated March 7, 1935, between the French Government and the Compagnie Generale Transatlantique, and provides as follows:

First, that the state shall pay amortization, as to the principal and interest, on the Normandie;

Second, that the Government shall guarantee interest and principal of loans to cover operating deficits for 1933 of 45,000,000 francs, and for 1934 of 10,000,000 francs, in excess of the total subsidy of 150,000,000 francs annually;

Third, that operation accounts of the Normadie shall be distributed in accordance with the agreement of July 20, 1933, and, that in view of the state undertaking the payment for the Normandie, the insurance agreement on that vessel for account of the state is canceled,

Deputy Candace introduced a resolution in the Chamber of Deputies to cancel the contract system as it now exists and to reconstruct it on a limited basis under one national company. We have no further information as to the position of that proposal before the Chamber. If anything comes in before we close these hearings I will submit it. I

may say that when Deputy Candace introduces a measure it always receives very serious consideration because he is one of the principal promotors of the French merchant marine and is an author of one of the standard works on the French merchant marine.

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