When we reached the United States, we had hoped that by the 10th of this month to have a very exact break-down for you of the Italian requirements, based on the first balance sheet we had received. But I think it is fair to the members of the staff who are sitting here to say we must have received six different sets of figures from that time up to the final figures that were given to us on the 10th of November. In fact, the figures given to us by the President, Mr. Chairman, as you may recall, do not correspond in any way with the figures now before you, and that was only some 2 weeks ago. That means that the requirements and figures are changing constantly.

I am pointing that out and making a special point of it and a special plea to the committee, because to my mind it is the most clear-cut demonstration that the sooner we can get a new set-up in this whole situation, which can deal with the screening of figures and which can deal with the figuring of our own allocations, the sooner can an intelligent aid program of any kind be developed.

There is another thing in connection with those figures that are before you. To me, as I said before, it is confusing as to what categories of goods we are being asked to give away and what we should still continue lending money on or require dollar payments.

If you analyze these figures before you, there was no rhyme nor reason why certain commodities were picked out and then the statement was made that this shall be a grant-in-aid. What has actually happened is that the full requirement for full dollar balances of these countries have been put together and then an estimate has been made as to what each county can pay for themselves from their remaining resources; the balance is then added up and put under these heads as a balance-of-payments item, which would take care of the entire dollar requirements.

In other words, what is happening here, in the so-called interim-aid program, is not what I think was given in the testimony yesterdaya temporary relief program. What is actually being done is that a longer-range program, a complete longer-range program is being advanced forward for two countries and Austria-two countries in particular and Austria.. We are being asked really to make a balanceof-payments contribution to take care of the entire economy and not merely a certain section of the economy.

There is another confusing thing. In the assets that are listed as available to these countries, there is quite a careful break-down, but there are some items that are left out. I do not think they are very serious, but I think it only right to point them out to the committee, because it might be embarrassing when the committee comes to the floor of the House with a bill of any kind, if they are asked about these and no mention has been made of them of any kind whatsoever. There is a footnote that indicates, for instance, that in France there is $440,000,000 in gold still left. That is correct. That gold is being held as a reserve against any currency backing and it is probably a wise thing that it should be so held.

On the other hand, when one is told that there is not a dollar left of any kind as of December 1 or as of December 15 with which to make foreign purchases, that item is still there.

There are still some items of reserve in the Export-Import Bank loans and the International Bank loans that can be used for a part of this program.

In addition to that there are, of course, the French holdings in the United States. I gather that yesterday in the testimony of Under Secretary Lovett here there was some discussion of those holdings. I think that that situation ought to be made entirely clear to the committee.

In 1941 the United States Treasury took a census of foreign holdings of currency and investments in the United States. They did that I think in order that they might be able temporarily to block those funds until a proper determination could be made as to what were enemy funds and what were neutral funds. That particular census showed that the French had roughly $800,000,000 in holdings here in this country. The French Government has tried very hard, first with the Blum Mission that came here in 1946 and again recently, to ascertain from our Government as to who the individuals are that hold those funds because, under French law, those funds should all have been reported to the French Government and have been made available to the French Government in helping it out in its financial crisis.

The total sum that there is now in the United States is probably not as large as $800,000,000. I think a good estimate of it would be about half a billion dollars. It is in the form of bank deposits and in the form of investments, in the form of shares in investment trusts, and things of that kind.

Because of a promise made by our Treasury to the various banks and brokers and other holders of these securities at the time the inventory census was made, the Treasury feels that it is not free to reveal to the French Government the names of the individuals who, in fact, have been violating French law by not reporting these particular figures to the French Government. That is probably a perfectly proper promise for the Treasury to uphold, but it raises an immediate question that I think the Congress ought to take cognizance of: Whether or not we should become a sanctuary for refugee money which in a sense was illegally left with us, according to the laws of the owners' home country, without requiring that that at least be revealed to the home government.

I am not saying that it would necessarily be a good thing to liquidate those investments or holdings, but I think that they are a perfectly proper collateral to put up against Export-Import Bank or International Bank borrowings.

The British, during the war, put up collateral to the extent of $450,000,000 as against an RFC loan. Today the RFC loan is down to $184,000,000. The collateral is worth $900,000,000, or nearly a billion dollars, and it is earning about $30,000,000 a year. That was a transaction that was a perfectly proper transaction at the time. Today that collateral, of course, is very excessive for the amount of loan that is outstanding.

I am raising those points only, sir, because I think those are the kinds of things that are likely to come up in any discussion of this program and I think we ought to be perfectly clear about it from the point of view of the facts.

I also think that it would be highly desirable, if it were possible to do so, for this committee to try to clarify the types of commodities on which loans are to be made and any such commodities which are to be given gratis or for payment in local currencies. I am afraid

that if that is not done you may find that you have set a pattern for a longer-range program that may be very difficult for you to handle, because it may have set something up which you would find was not applicable to other countries when you came to the larger program, and it might be of very real embarrassment to you.

Mr. Chairman, may I say just a word in regard to the actual text of the bill that you have in front of you? I have examined that bill only quite hurriedly, but there are a few things in it that I think have already been brought out in the testimony here so that I will not dwell on them very long.

The first part of the bill, the section dealing with procurement and the provision of funds, is tremendously broad. It is very much broader than any relief bill that has yet come before this committee. In fact, I am a little bothered at the very outset as to why it is necessary to devise still another method of relief, when we have had so many different methods of relief in the past.

I should think, sir, it might be well worth while for your committee to examine pretty carefully some of the past bills to see if an extension of those might not be an easier way of handling it than through raising all the questions all over again which are raised in this particular bill.

There is another phase of the bill that bothers me some. If any long-range program is undertaken, I feel very strongly that one of the most important provisions that might be agreed upon would be in the handling of local currencies that are taken in return for grants-in-aid. There is a possibility that they could be used extraordinarily constructively in the rebuilding of these countries.

What bothers me is that this bill, as it stands now, allows the State Department to make any agreement it sees fit with foreign countries without any congressional direction of any kind whatsoever in the use of those foreign currencies and in the handling of that particular item.

I personally feel it would be better to go back to Public Law 84 of last year in which the final disposition of those currencies and the way in which they were handled was left to the Congress rather than to have that matter settled now in connection with the interim aid program and thereby set a pattern that might be very difficult when it came to handling the problem with other nations.

I am hoping very much, Mr. Chairman, that the members of the committee will have a chance to examine these two reports with regard to Italy and to France. They were prepared with as much care as we could prepare them in the time that was available to us. As you will notice from them, the committee felt very definitely that interim aid was required. It felt that the figures should be extremely carefully scrutinized. It gives its reasons in some detail as to why interim aid is required and makes a pretty careful analysis in each case of the economic situation in those two countries.

Those are, I think, the main points that I was anxious to bring out, but I would like, before perhaps going into further details, if the committee wishes me to do that, to reemphasize the fact that I feel that the Congress should, just as soon as possible, begin examining the question of an organization for any relief program or the handling of any relief program.

I notice that, in his testimony to you, General Marshall said that as soon as any such organization was set up, this interim aid program could be turned right over to it. My own feeling is that with the difficulties that are inherent in trying to make a careful calculation, trying to adjust that calculation to our own domestic economy, the sooner that organization can be set up the better. In fact, I would almost wish that we did not have this haste with respect to any question of interim aid, in order that that could be the first matter to which attention would be given.

Apparently the Harriman committee and General Marshall himself are in agreement that there must be a new agency created. The form of that I am assuming the President will speak of on Monday. I gathered from the testimony given to you by General Marshall that he intimated that the President would lay out that on Monday. But I think our whole committee feels very strongly that that is an extremely important item. It is an extremely important item both to give confidence to the American people that if any dollars are appropriated for the purpose of the program, they will be properly spent and that, before the dollars are asked for of the Congress, there can be a very real and exhaustive scrutiny, one that will stand up, made of the requirements that are submitted to us.

Thank you, Mr. Chairman.

Chairman EATON. We are greatly impressed by the fundamental character of your studies and your presentation of them. On behalf of myself and other economic illiterates, I would greatly appreciate it if you would elucidate what you mean by "balance of payments," a phrase that I notice you are rather fond of using. Of course, we all understand perfectly the difficulties of balancing payments for ourselves, but it is in the international sense to which I am referring.

Mr. HERTER. The balance of payments as I understand it is a table showing how much a country pays for what it imports set against what it receives for its exports. When it must pay more than it receives there is a deficit in the balance.

The balance-of-payments problem becomes a very complicated one these days, because the countries of Europe are exporting a considerable amount in the form of goods to each other, but they receive the currency from the other countries, a currency that is no good as far as purchasing things in our markets are concerned or so far as purchasing them in the dollar areas are concerned.

What upsets the balance of payments is that all currencies are not universally good. And today unhappily there are only very few that can purchase the types of scarce commodities which so many areas of the world now require.

Chairman EATON. Does your analysis then forecast the possibility that the American dollar will eventually become the medium of exchange among mankind?

Mr. HERTER. I do not know whether it will be the American dollarChairman EATON. Of the measure of exchange?

Mr. HERTER. It might very easily. The British tried to make the pound convertible not long ago in the hopes that the pound sterling would become the world currency again. That experiment did not last for very long.

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Chairman EATON. Is it the opinion of yourself and your committee that a currency of that description is necessary if we are to have a permanent world economy?

Mr. HERTER. The setting up of a currency of that kind depends entirely upon what the internal situation is in a great many countries. There is no use in just having a currency unless you have conditions within the country that can maintain a balance so that the currency remains good. Otherwise it will get completely out of balance all over again.

Chairman EATON. I do not want to detain you too long, except I am interested in your emphasis upon the organization to be effected. I think the members of this committee, including the chairman, are very deeply sympathetic with you on your position. But the question arises, if this is really an emergency, this interim-aid problem, of the sort that has been described, we must consider the time that it would take to create an organization to handle it? In other words, it would be a case of the doctor spending so much time packing his case of medicine that the patient died in the meanwhile. Have you any remarks to make on that point?

Mr. HERTER. Yes, sir. The recommendation of the committeeI am speaking now of the committee as a whole-was that if in this special session it were not possible to set up an organization of the type recommended or some similar type, if it could not be done within the special session, then some interim aid through another form would be required.

I am not quite persuaded of General Marshall's statement that this has got to be done by the 1st of December, because I think if you will look again at these tables in the blue book before you, you will see that there are some availabilities for both of these countries after December 1.

So I do not think the question is quite as immediate as the 1st of December. I think the 1st of January would probably be a dead line from the point of view of Italy.

Chairman EATON. Mr. Bloom

Mr. BLCOM. Mr. Herter, have you gone over this tentative or proposed bill before the committee now, sir?

Mr. HERTER. Yes, sir; I have, just very rapidly.

Mr. BLOOM. I was very much interested, Mr. Herter, to find that you only found two objections that you could make to the bill. One was a suggestion to amend the present relief legislation which was passed by the Congress and the other was to have the Congress try to regulate the balance of currency of the respective countries. Those were the only two objections you found in this legislation; is that right?

Mr. HERTER. No, sir; I would not say that. I did not want to dwell at length on the bill itself for the reason, sir, that I gathered that a good many points had been raised in the testimony that is already before you questioning certain wordings of the bill that are very broad. Mr. BLOOM. I am not speaking about the wording of the bill but the bill itself. Let us take the wording of the two parts of the bill to which you found objection, as regards the balance of the currencies and also as regards amending present legislation.

Mr. HERTER. I might refer back to the bill, on which I have some notations, if you like.