The CHAIRMAN. We will have to work it over here in the committee. I am not in agreement with some of the amendments that they are offering. They want just blanket authority to do as they please. Senator SALTONSTALL. My idea, sir, was just a working paper. REQUESTS TO TESTIFY I want to submit to the committee the fact that we have a request from a fellow named Frederick Libby, who is a professional witness on all these things, to appear. I understood that we had closed these hearings. What do you want to do? Do you want to let him come in? You know who he is. Senator KNOWLAND. Do we have another request? The CHAIRMAN. The only other request is from Mrs. Waters. Senator SALTONSTALL. Mr. Chairman, I would move that the matter as to whether or not we continue the hearing be left in the discretion of the chairman. Senator KNOWLAND. The thing we did, Mr. Chairman, and I am not urging it—we have somewhat the same trouble in the Armed Services Committee is to appoint a subcommittee to hear the witnesses so they could not go out and say they were denied a hearing in the situation. There would only be two members of the subcommittee and the reporter who took the testimony, and the record then would be available. The CHAIRMAN. I don't mind that, if there is anybody willing to sit here and hear these people. I am not. Senator SMITH of New Jersey. There will be a lot more demands to be heard if we open the door. Senator KNOWLAND. I am willing to subscribe to the statement of the gentleman from Massachusetts, to leave it in the able hands of the chairman of the committee. Senator SALTONSTALL. Put it in the reverse way, that we will have no further hearings unless, in the discretion of the Chairman, he considers it advisable. Senator SMITH of New Jersey. I think that is proper. [Whereupon, at 4:20 p.m., the hearing was adjourned, to reconvene upon the call of the Chair.] MUTUAL DEFENSE ASSISTANCE PROGRAM-Continued1 FRIDAY, JUNE 16, 1950 UNITED STATES SENATE, COMMITTEE ON FOREIGN RELATIONS, The committees met, pursuant to adjournment on Thursday, June 15, 1950, in the committee hearing room of the Senate Foreign Relations Committee, U.S. Capitol, at 10:30 a.m., Senator Tom Connally presiding. Present: Senators Connally, Green, Tydings, and Smith of New Jersey of the Foreign Relations Committee; Senators Tydings, Chapman, Kefauver, Saltonstall, and Knowland of the Armed Services Committee. Present of the committee staff: Francis O. Wilcox, chief of staff; Thorsten V. Kalijarvi, Pat Holt, Emmett O'Grady and Verne G. Mudge. Also present: John Ohly, Deputy Director, Mutual Defense Assistance; Philip Claxton, and Al Vigderman, Department of State; Francis T. Greene, Department of Nation Defense. The CHAIRMAN. The committee will be in order. MOTION TO REDUCE CREDIT AUTHORITY BY HALF Senator SALTONSTALL. This is my suggestion: Strike out from line 20 on page 8 clean down through line 13 on page 9. That is, strike out (c), and then cut the amount down on page 10, line 12, from $100 million to $50 million. It is primarily aimed for Canada anyhow. This is the provision that allows $100 million of credit instead of cash on the barrelhead. Isn't that right? Senator SMITH of New Jersey. Not pages 8 and 9. You are talking about page 10, are you not? Senator SALTONSTALL. My suggestion was, on page 8, to cut out from line 20; that is, cut out (c). Senator SMITH of New Jersey. We are talking about different texts, then, because my text starts (c) on line 24. I don't know. Senator SALTONSTALL. I don't believe you have Committee Print No. 2. Senator SMITH of New Jersey. Let's get the same one, so we know where we are at. Senator SALTONSTALL. My suggestion is to cut out paragraph (c). 1 See notes, p. 401. 60-522-76-31 Senator SMITH of New Jersey. You are cutting out Saudi Arabia and that group of countries they told us they needed? The CHAIRMAN. That's right. Senator SALTONSTALL. That's right. I would go through line 15 on page 9, the whole (c) clause, and then on page 10 limit the amount of contracts that can be made even with security to $50 million instead of $100 million. Senator SMITH of New Jersey. I do not quite get the purpose of that. Senator SALTONSTALL. The purpose, as I understand it-I may be wrong is that before this, in the present law, they can buy what arms they want if they put cash up for it in advance. Now this bill would allow the President to make contracts without cash on the barrelhead to the extent of $100 million. Isn't that right. NOT AN EXTENSION OF CREDIT IN ORDINARY SENSE Mr. OHLY. That is correct, except that every time, at one time, the Government must have placed at the disposal of the United States the entire amount which would become due if that contract were canceled. In other words, there is no real credit involved in the thing. Senator SALTONSTALL. It is a question of foreign exchange. It is a question, the way it was explained to us, as I understand it, of the relation between Canada and the United States, not making Canada put up $100 million or $50 million in dollars before they get any of the merchandise. Now they could put up security and later pay the amount of money. Isn't that right? Mr. OHLY. It is more than security. It is making available the amount which would become due and would be due under the contract at any time if that contract were canceled, so there is no possibility of loss to the United States. There is no extension of credit in the ordinary sense of the term, and this is to place a limitation on the amount of such transactions which we can enter into, to limit the the scope, extent to which this type of transaction can be used. It is a limitation which has two purposes. One, the number of outstanding contracts, and second, so that this section won't be used too freely. But it is not a credit limitation. Senator SALTONSTALL. There is no credit at all? You mean, there is 100 percent security put up? Mr. OHLY. No, but security is put up for any amount which could become due under the contract if the contract were canceled at that time. That is really 100 percent of the liability outstanding at any one time. The CHAIRMAN. You may not call it a technical credit, but it is a credit in effect. Senator GREEN. Fully secured, isn't that right? Mr. OHLY. That is correct. Senator SMITH of New Jersey. Is the language covering that on the top of page 10, where it says: Provide the United States with a dependable undertaking to pay the full amount of such contract which will assure the United States against any loss on the contract? Mr. OHLY. "And (B) shall make funds available in such amounts and at such times as may be necessary to meet the payments required by the contract in advance of the time such payments are due, including the estimated amount of any damages and costs that may accrue from the cancellation of such contract:". A LANGUAGE CHANGE PROPOSED Senator GREEN. Instead of "including" it ought to be "plus". Senator GREEN. Not clearer; more accurate. It is a different meaning. The CHAIRMAN. What is your argument about the $50 million or $100 million. Do you think the $50 million would be enough? Senator SALTONSTALL. I think it would probably be a little more palatable. The CHAIRMAN. Of course, this comes out of the whole jackpot. Senator SALTONSTALL. No; there are no appropriated funds at all. It involves more military equipment going out of the country. Senator GREEN. I have raised a point, and I would like to have a comment. Mr. OHLY. To substitute the words "in addition" for "including"? Senator SMITH of New Jersey. I would read "including" to mean exactly that in the way it is used here, but I have no objection to the other. Mr. OHLY. The intention of both is the same, and whatever will make it clearer is best. Senator GREEN. I think "in addition to" would be better. The CHAIRMAN. That changes the meaning of it, doesn't it? Dr. WILCOX. Mr. Ohly does not think it changes the meaning. I think we ought to be clear how it changes it, if it does change the meaning. The CHAIRMAN. If you say "including the estimated damages" you mean one thing; if you say "in addition to" you increase the amount. Senator GREEN. That is my idea. They should be. Suppose the damages took up half the amount. Then you got only half of repayment. That is my point. Suppose, for instance, $100 was due as payment, and the damages were $50. In my wording you would get $150 back. According to their meaning of "including" you would get only $100. Senator SMITH of New Jersey. I don't know. I don't agree with you, but I am perfectly willing to change it. The CHAIRMAN. Let's go back and start at the beginning. Senator GREEN. Can't we finish this first? We are jumping back and forth. Senator SALTONSTALL. Mr. Chairman, I would think that the Senator from Rhode Island's suggestion was covered by leaving in the word "including" and putting after it, "in addition," and then "the estimated amount of any damages and costs." The CHAIRMAN. Do you agree with that? Senator GREEN. No; that does not cover my thought at all. |