effect that a part, and possibly a very substantial part, of the $547 million to which reference has been made, has not been bought over the years by German nationalists at 10 cents on the dollar, 5 cents on the dollar, or 1 cent on the dollar?

Mr. GILLETTE. I do not know of one shred of evidence.

Mr. LEHMAN. So far as I can see, there is not a shred of evidence that the $547 million has any clear relationship to the actual facts. It may be $547 million; it may be $60 million. The balance may be held by German nationalists and paid off by the German Government to its own nationals.

Mr. GILLETTE. The distinguished and eminent chairman of the committee, the Senator from Wisconsin [Mr. WILEY], my colleague, the distinguished senior Senator from Iowa [Mr. HICKENLOOPER], the distinguished junior Senator from Minnestota [Mr. HUMPHREY], the distinguished senior Senator from North Dakota [Mr. LANGER], all tried to bring out that information by their questioning. We were unable to elicit one word on the subject, except that back in 1943 the Treasury Department had attempted to take a census. They thought there were 37,000 purchasers at that time. I believe they received replies from 21,000 or 25,000. However, they gave up the effort, and they do not know the number now. That census was made 10 years ago, and no one has attempted such a census since.

I wish to speak on another matter, while it is on my mind. I referred to this the other day, and I shall repeat it. Congress passed a resolution offered by former Senator Hiram Johnson, of California, directing the Government to set up a commission to study the sale of the bonds and by whom they were held, and authority was given to the President to put the resolution into effect. It was never put into effect; it became a dead letter. A commission was never created, as provided by the authority of the Johnson resolution. However, private sources set up their own commission, with the blessing of the State Department and with the blessing of firms of attorneys who represented blocks of bondholders throughout the country.

I would be the last person to stand here to prevent John Jones, of New Jersey, or Peter Jensen, of Maryland, from realizing on securities they hold, and in which they had invested, no matter what they paid for them. But I do not like to see, and I shall not keep silent when I see, that being made a pretext for the benefit of certain speculative interests that have come into control of such bonds, or have agreements whereby they will come into control of them. Nor is there a scintilla of excuse for anyone claiming to represent the United States of America writing off $2 billion of debt in order that the holders of private obligations that have been held for years and years may be paid in full.

I wish to refer to what Mr. Pierson said, in effect, in response to a question by me. I asked, "You are to be paid 100 percent, are you not?" He replied, "Oh, yes, but we made concessions on interest. The bonds carried 72 percent.

We have cut it down to 52 percent." There has been 25 years of accumulation, and they agreed to a lesser rate of interest.

vestors are being really underwritten in this instance by the American taxpayers, and without any precedent in the treatymaking policies of the United States,

Mr. GILLETTE. I yield.

Mr. MORSE. I wish to understand the proposal thoroughly before I pass judgment on it. Am I correct in my understanding that what this proposal amounts to in part is that the taxpayers of the United States are being asked to take less than what Germany owes to the Government, so that some private American investors, in pre-Hitler German bonds if they are limited now to American investors are to get 100 percent of the value of the bonds, although they are not going to get the full rate of interest? Is that all it amounts to?

Mr. GILLETTE. That is undoubtedly true. In connection with the eminent Senator's question, I should like to read the following:

The CHAIRMAN. Since the effect of the first agreement we have before us related to German external debts is to provide for payment to prewar private investors, does that not mean that the United States Government will not get as large a settlement for its claims for postwar economic assistance as provided in the second agreements before

us?

with me that that makes it all the more important to know who the investors are, and have full disclosure of the ownership of the bonds, so that it may be ascertained whether the Government is really protecting some American investors who in good faith bought the bonds, or whether the Government is protecting some speculators who have picked them up, including possibly bonds which have gotten into the hands of some owners, as I understand, in certain South American countries?

Mr. GILLETTE. That statement is as clear and logical as a statement could be. There is no doubt that, perhaps, under the validation proceedings which are taken care of in one of the agreements, or in other machinery which is to be provided, there can be a means of determining where these bonds are held, in what amounts they are held, and how they are held, so that we shall have something before us other than what we have now.

Mr. MORSE. Mr. President, will the Senator further yield?

Mr. GILLETTE. I yield.

Mr. MORSE. I am glad the Senator

Mr. RIDDLEBERGER. I should say at the outset, Senator, that the Germans were anxious

to arrive at a settlement of their prewar debts on terms acceptable to their creditors. credit. Of course, in other words, to reestablish their

Every one of the reports that came from counsel representing the bondholders contains assurance that if the agreement can be pushed through, the stage will be set for floating additional German-bond sales throughout the United States.

Mr. Riddleberger continued:

If we had insisted on more for the Government claims, it is doubtful whether a general settlement could have been reached.

I think that the Germans would have ob

jected to settling their postwar claims without a settlement of their prewar debts, but perhaps I should let Ambassador Pierson also give his comment on that question.

Mr. PIERSON. Mr. Chairman, our terms of reference were to find a solution of the German-debt problem which would have the world markets. effect of restoring Germany's credit in the

It was obvious when we got into the matter that the German economy would not support a full payment of both the obligations for postwar aid which, to the United States alone, amounted to $3 billion, and the prewar obligations.

was to be in a position to pay the private If Germany was to make a settlement and creditors any substantial sums, it was imperative that a reduction be made in the postwar obligations which were owed to the three Governments of the United States, France, and the United Kingdom.

There is the answer in the hearing. Mr. MORSE. Mr. President, will the Senator from Iowa yield for my next question?

Mr. GILLETTE. I yield to the Senator from Oregon.

Mr. MORSE. If it be true, as it apparently is, that private American in

I

because there is no substitute for it. The Senator may recall that about a year and a half ago I made a fight in the Senate for full disclosure as to who were the creditors of the Argentine Government who were getting the benefit of an Export-Import Bank loan which the State Department was very anxious to have the Export-Import Bank make. I called for an investigation; but an investigation was never undertaken. talked with a member of the congressional committee who was in Argentina last summer. He said to me, "You do not know how close you were to something very hot. We talked with some Argentine officials. They had no interest in backing up those particular American creditors, because they reported that tremendous pressure had been exerted by the State Department to see to it that those loans were paid through the Export-Import Bank loan, which, after all, really became the responsibility of the American taxpayer."

That is why I said earlier that I am very anxious that an investigation be made of the relationship of some law firms to some men in the United States State Department. It makes no difference to me whether this agreement was negotiated in 1952 or 1953. I take the same position under a Democratic administration as under a Republican administration. I am not in favor of ratifying this agreement.

Mr. GILLETTE. I thank the Senator.
Mr. DOUGLAS rose.

Mr. GILLETTE. Before I yield to the Senator from Illinois, I wish to say that it has been suggested in this debate that the genesis of these negotiations was in Democratic organization, although they were completed in the Republican administration. I care not a snap of a finger what the political complexion of

a

Mr. SMITH of New Jersey. I am confused by the argument, because it seems to me we are starting from different premises. As I have studied the subject and as I understood the testimony, there is not involved a distinct liquidation of an amount of money that Germany owed the United States. I have tried to deter

mine how the obligation from Germany

to the United States arose.

In a memorandum which I hold referring to the early ECA acts I find the following statement:

The claim against Germany for $3 billion for postwar aid was not a debt owed by the German Government or an "amount due," but merely a claim asserted by the United States. A further negotiation with the Germans was contemplated in order to determine what amount was due to the United States and how this amount would be paid. On page 6 of the committee report, in the middle of the page, appears a table showing the United States postwar aid to the Federal Republic of Germany, extending from the date of the initial entry of the United States forces into Germany

to June 30, 1951.

The table shows, in million of dollars:

Net aid exclusive of surplus property obligations------- 3, 014. 0 I stress in those figures "ECA and related aid."

The whole question of what Germany owed us depends a great deal on how we classify Germany and the kind of debt involved. The chief point made by the witnesses for the Government was that we treated Germany in a comparable way with the other countries to whom we had given aid in the postwar period. I have before me the report of the Committee on Foreign Relations of the 80th Congress, 2d session, Report No. 975. I should like to read from the report, because at that time, at the beginning of ECA,

ECA, we distinguished between loans and grants, and as to which countries would get loans and which countries would get grants. We had different policies with regard to various countries, depending on their capacity and what they needed in order to achieve economic recovery.

On page 48 of the report, which is dated February 26, 1948, I find the following statement:

While recognizing that a definitive answer cannot now be given to the question as to what percentage of assistance will be financed by loans and what percentage by grants, the committee believes it desirable to obtain an estimate. In response to its inquiry, the National Advisory Council has estimated that roughly 20 to 40 percent of assistance will be in the form of loans, while 60 to 80 percent will be grants. Without attempting to make a determination, it is probable that in the early stages of the program the countries will be divided into four classes: (1) Countries, such as Switzer

land and Portugal, which will pay cash for commodities received; (2) countries to which assistance will be furnished by loans; (3) countries, like Austria and Greece, where

assistance will be entirely by grants; and (4) countries, like France and Great Britain, where assistance will be partly by loans and partly by grants.

cluded among the countries receiving At that time Germany was not inaid. I am merely quoting from this report in order to emphasize that our policy was to distinguish between the "grant" countries and "loan" countries. We did not expect the "grant" countries to pay back the grants we gave them.

When we return to the table from which I read previously, we find that the aid given to Germany in the postwar period was in the nature of relief and in the nature of ECA and related aid. It covered the same type of aid which we were giving to other countries to help were giving to other countries to help with their economic recovery.

Therefore, I believe the statement which I read before is correct, namely, that the claim against Germany for $3

billion was a claim we asserted, based on It was all the advances we had made. subject to negotiation as to what settlement should be made-and the Young and Dawes loans should be borne in mind-when the other debts entered the picture. We considered the whole situation, including exactly what would be a fair adjustment of the whole matter. Therefore, I cannot accept the position that Germany owed us a fixed $3 billion and that we cut down the amount by one-third.

I say there was room for negotiation. While our negotiators might have gone a little far in the settlement, I do not believe they made a critical mistake, or implied in the argument. were guilty of any wrongdoing, as was

me there was room for negotiation, and there was real reason to see to it that her in such a position that she would we restored Germany's credit and put not need further economic aid, and would be able to help herself.

I am not the authority on the subject the Senator from Iowa is, but I am convinced that there was room for negotiation and that it was not a giveaway.

The whole debt question, so far as I have followed the testimony-and I was present for the testimony-was handled very intelligently and fairly by the groups that were established and which the State Department recognized. We tried to keep chiselers out and prevent the payment of excessive fees. There was never any allegation that excessive fees had been paid, or that any firms made a great deal of money. The fees were agreed to and adjusted. Men like Mr. Rogers and Mr. Bundy, who testified before our committee, represented some of the groups, and they stated that they received a fixed payment for their time, and that it was a very reasonable fee. At the very beginning we raised the question, "Who got a rake-off?" There was no suspicion that any lawyers got any big rake-off.

Mr. GILLETTE. There was no evidence of it. I should like to interrupt the Senator at that point.

Mr. SMITH of New Jersey. I merely wanted my statement to be a part of the

whole picture, which must be considered in defense of the action taken by the committee. The committee studied the

entire subject and, with the exception of the Senator from Iowa, all of us were agreed that the treaty, or agreement, was a fair expression of what should be arrived at between the groups negotiating the settlement.

Mr. GILLETTE. I will say to the Senator from New Jersey, in answer to his very earnest presentation, that if it had been used for the purpose of negotiating a write-down of obligations due the United States Government, there would be very little objection to it, if it was carefully considered, but it would be an entirely different story if it was used for the purpose of having the United States Government take the entire cut in order that the private holders could be paid in full. In that connection I should like to read from the headings. I read the Senator's own question.

Senator SMITH. The agreement for the $1 billion out of the $3 billion was worked out by the Government with Germany, without participation by the private

Mr. PIERSON. It preceded the private negotiations.

Senator SMITH. That was all settled before you started the discussions as to the private obligations.

Mr. PIERSON. That is right. But it was done to make settlement with the private creditors possible.

Mr. President, there, in the words of the chief United States negotiator, is the flat admission that the write-off of $2 billion was made for the express purpose of having the private debts paid in full; and that testimony was given in response to questions by the Senator from New Jersey.

Mr. SMITH of New Jersey. Mr. President, I should like to say that I do not see anything so nefarious about that, if they were attempting to establish Germany on such a basis that she could obtain credit in the world market, and thus be able to finance the Adenauer government. That government then had no credit, anyway.

The question was whether we wished to continue making credits available on a handout basis, or whether we wished to have them made available on a sound economic basis, so that the old debts would be recognized and liquidated.

I do not criticize the statement made by the Senator from Iowa, but I point out that there was no alternative if this problem was to be solved. If I thought there was an alternative, I would certainly consider it seriously.

Let me point out that I regret very much that the Senator from Oregon has suggested that there might be a rakeoff by any lawyer. Similarly, I regret very much any implication of bad faith. I believe the facts certainly do not warrant any such implications. On the contrary, I believe the negotiators did an excellent job, and I take off my hat to them.

Mr. WILEY. Mr. President, will the Senator from Iowa yield to me?

Mr. GILLETTE. I yield.

Mr. WILEY. Let me say that we should realize that Germany is attempting to settle all her debts. For instance, there is a matter of settlement of the

Jewish claims. If we do not arrange to have these matters adjusted, Germany will not be able to have credit in the world market, and thus will not be able to proceed with her own business in the markets of the world.

In the second place, in reference to the statement, oft reiterated, that the bonds which might have gotten into the hands of speculators. The agreement provides for the establishment of a commission to validate the bonds, because the evidence showed that a number of bonds had been retired by Germany and were in Berlin; and when the Russians entered Berlin, they took the bonds, which thus may have gotten into the hands of crooks. So one of the purposes the committee had in mind was to have established a commission to validate or, as the case might be, to invalidate bonds. Bonds acquired after 1945 would be invalidated. In other words, in the event the bonds were stolen by the Russians, the bonds would be invalidated.

In my humble opinion, Mr. President, if the Senate does not ratify these agree

ments, the question of whether we deprive a few bondholders of a profit will be of little significance, for in that event we shall be detrimentally affecting the world situation, and that would be most unwise and most serious.

Mr. DOUGLAS. Mr. President, will the Senator from Iowa yield, to permit me to ask a question of the chairman of the committee?

Mr. GILLETTE. I am glad to yield for that purpose.

Mr. WILEY. Let me point out that the Senator from Iowa is a very yielding

gentleman.

Mr. GILLETTE. Except on the principal question involved in this matter. [Laughter.]

Mr. DOUGLAS. Mr. President, will the Senator from Wisconsin state what was the write down which the British took on their governmental credits against Germany?

Mr. WILEY. I believe it was 25 percent. I have the figures here.

Mr. DOUGLAS. The United States took a percentage write down of from 63 to 67, did it not?

Mr. WILEY. Yes. The claim of the United Kingdom was reduced from 201 million pounds to 150 million pounds.

Mr. DOUGLAS. That is a reduction of approximately 25 percent, whereas the United States write down would be between 63 and 67 percent, would it not?

Mr. WILEY. There is no question that we have given more than other countries have, and that apparently we shall continue to give more.

The question is whether we shall upset the international applecart merely because some of the other countries have not given so much as we have given.

Mr. DOUGLAS. Is not the real point that the United States taxpayers are now being asked to give more, in order that internationalists and others who hold these bonds will obtain more?

Mr. WILEY. The real point is that if these agreements are not ratified, we shall not get back a penny of what otherwise we shall be able to get back.

Mr. GEORGE. Let me say that the real point is that we gave the British more than we gave the Germans.

Mr. MORSE. But the British were our allies-not our enemies.

Mr. GEORGE. These transactions occurred during the postwar period.

Mr. MORSE. However, that does not wash out the wrongs of the wartime period.

Mr. GEORGE. No; if Senators wish to refight that war.

Mr. DOUGLAS. Mr. President, will the Senator from Iowa yield further to me?

Mr. GILLETTE. I yield.

Mr. DOUGLAS. Are not two distinct questions involved? Is not the first question question whether Germany has the ability to make a total payment, and whether we wish to have a total payment made, to the United States? Personally, I myself do not feel competent to pass on the question of whether Germany can pay $1 billion, or $1,800,000,000, or $2 billion, or what not.

Is not the other question whether, in the case of any total amount the Germans pay, we should put private bondholders in a preferred position, with the result that they would obtain 100 percent payment, whereas the Government of the United States and the taxpayers of the United States would be left holding the bag for the residual amount, and would be taking a cut of approximately two-thirds?

Mr. SMITH of New Jersey. Mr. President, will the Senator from Iowa yield, to permit me to ask a question of the Senator from Illinois?

sey is saying they were securities, that is one thing, but if they were obligations, then certainly what has happened is that two-thirds of them were scaled down.

Mr. SMITH of New Jersey. All I am saying in answer to that is that Germany was a prosperous country when those advances were made, or when most of them were made. Some of them were made earlier, but most of them when she was a relatively prosperous country. Therefore she was in the same position as the other countries, with whom we had to work out the problem of grant or loan. The status was not clearly defined and was subject to negotiation carried on and settled in the way I suggested.

I ask unanimous consent, in connection with my remarks, to have a memorandum which was prepared at my request by the Department of State regarding the whole background of these advances under the ECA Act inserted in the RECORD at this point.

There being no objection, the memorandum was ordered to be printed in the RECORD, as follows:

MEMO CONCERNING STATEMENT BY MR. ERIC G. KAUFMAN ON REICHSMARK BONDS OF THE KONVERSIONSKASSE

1. The claim against Germany for $3 billion for postwar aid was not a debt owed by the German Government or an "amount due" but merely a claim asserted by the United States. A further negotiation with the Germans was contemplated in order to determine what amount was due to the United States and how this amount would be paid.

Mr. SMITH of New Jersey. My question is whether the Senator from Illinois would say that where we may have made ECA or MSA loans or grants to other European countries, we should require those countries to consider those grants, if they are grants, as on a par with any loans they might have obtained prior to that time? I do not know just what the policy has been.

Mr. DOUGLAS. I do not know the relative terms of the agreements between the various governmental agencies which dealt with Germany, as compared with the terms agreed upon in the case of other countries. But is the Senator from New Jersey maintaining that the advance of from $3 billion to $3,200,000,000 was not a debt? Is he maintaining it was a gratuity which the United States gave to Germany, but upon which the United States has no claim?

Mr. SMITH of New Jersey. No. I claim it is in the same class with the other advances we made under ECA or MSA. The question of whether it was a grant or a loan was not settled, because at that time we did not know Germany's status. The question was to be negotiated, and it was negotiated and settled on that basis. That is my point..

Mr. DOUGLAS. But we are not now considering other countries. In this case we are considering Germany. Were those advances to Germany obligations which Germany should repay, or were they gratuities which require no repayment? If the Senator from New Jer

or grant basis but also on other terms which be found appropriate. The pertinent language of this section reads as follows:

Section 111 (c) (1).—"The Administrator may provide assistance for any participating country, in the form and under the procedures authorized in subsections (a) and (b), respectively, of this section, through grants or upon payment in cash, or on credit terms, or on such other terms of payment as he may find appropriate, including payments by the transfer to the United States (under such terms and in such quantities as may be agreed to between the Administrator and the participating country) of materials which are required by the United States as a result of deficiencies or potential deficiencies in its

B. The Bilateral Agreement between the United States and Germany made it clear that the aid was furnished not as a loan but as a deferred claim. This Agreement was entered into pursuant to Section 111 of the ECA Act and copies were furnished to the Congress. The pertinent language in the Agreement reads as follows:

Art. 1, paragraph 3.-"All assistance except conditional aid furnished by the Government of the United States of America to the Federal Republic of Germany pursuant to this Agreement shall constitute a claim against Germany. To the extent that expenditures are made from the GARIOA Special Account established under Article V of this Agreement, credit will be given, at the time of final settlement of the claim of the United States of America against Germany, for any amounts expended for purposes which are then determined not to have been for the benefit of the German economy or the German people. The proceeds of exports from all future production and stocks of the Federal Republic will be available for payment for assistance made available pursuant to

this Agreement. At the earliest practicable time consistent with the rebuilding of the economy of the Federal Republic on healthy, peaceful lines, such proceeds shall be applied for such payment on a basis not less favorable to the United States than that accorded the United States or the United Kingdom for costs incurred pursuant to the memorandum of agreement between the United States and the United Kingdom dated 2 December 1946, (1) as revised and supplemented, (2) relating to the economic integration of the United States and United Kingdom Zones of Germany.

C. The advances to Germany were regarded by the Administration as being more in the nature of a grant than in the nature of a loan, since the amount to be recovered was uncertain. Therefore, in reports made to the Congress the aid to Germany was classified in a grant category rather than in a loan category, even though the aid was furnished on a deferred claim basis. For example, page 36 of the Twelfth Report to Congress of the Economic Cooperation Administration for the Quarter ending March 31, 1951.

2. U. S. policy with respect to the terms of settlement for postwar economic aid was established by the Congress in the ECA Act of 1948. The settlement with Germany was made pursuant to that policy.

A. The ECA Act of 1948 set forth criteria and procedures to be followed in determining how much of aid furnished to a country under the Marshall Plan should be repaid to the United States.

Section 111 (c) (1).-"In determining whether such assistance shall be through grants or upon terms of payment, and in determining the terms of payment, he shall act in consultation with the National Advisory Council on International Monetary and Financial Problems, and the determination whether or not a participating country should be required to make payment for any assistance furnished to such country in furtherance of the purposes of this title, and the terms of such payment, if required, shall depend upon the character and purpose of the assistance and upon whether there is reasonable assurance of repayment considering the capacity of such country to make such payments without jeopardizing the accomplishment of the purposes of this title."

B. The Bilateral Agreement of 1949 with Germany conformed to this concept. In the exchange of letters which is attached to the Bilateral, the United States High Commissioner assured the German Chancellor that repayment would take into account the following considerations:

McCloy's Letter of December 15, 1949 to Chancellor Adenauer.-"I have the honor to confirm by this letter certain statements made by the representatives of the United States Government during the course of the negotiation of the Economic Cooperation Agreement signed today.

"The representatives of the United States Government have stated that, while the United States retains a lien on the proceeds of all German exports as provided in Paragraph 3 of Article 1, the United States Government will consider German ability to pay and other relevant factors when settlement of the claims therein referred to, and of similar claims provided for in Article XII, is requested.

"In connection with the subject of claims against Germany in general, I should also like to confirm the statement made that the only claims covered by the Agreement are claims arising through the furnishing of ECA and GARIOA assistance by the United States to Germany after the effective date of the Agreement, and through the furnishing of ECA aid under the provisions of the Economic Cooperation Agreements signed on behalf of their zones of Germany in April 1948 by the United States, United Kingdom and French Military Governors respectively. The claims

of the United States against Germany arising through the furnishing of past GARIOA aid, and other claims, are not covered by this Agreement. It is understood, however, that their exclusion from this Agreement in no way affects their validity, and that they will be asserted by the United States at the appropriate time on a similar basis with the claims acknowledged by the Federal Republic in signing this agreement. . .

66

"... At the time of the final settlement envisaged in Paragraph 3 of Article I, the Government of the United States will, of course, provide more detailed information with regard to expenditures respecting which it then determines to maintain a claim against Germany. . ."

C. The same considerations were repeated in the exchange of letters between the Allied High Commission and Chancellor Adenauer on March 6, 1951, at which time the Federal Government assumed responsibility not only for ECA aid and GARIOA aid extended after the Federal Republic was established but also for GARIOA and similar aid extended prior to the Bilateral Agreement of December 1949. This exchange shows again that the amount to be repaid on these obligations would be determined at a general settlement at which other German obligations would be considered.

Chancellor's Letter of March 6, 1951 to Chairman of Allied High Commission.-II. "The Federal Government acknowledged hereby in principle the debt arising from the economic assistance furnished to Germany since May 8, 1945, to the extent to which liability for such debt has not previously been acknowledged in the agreement of economic cooperation concluded on 15 December 1949 between the Federal Republic and the U. S. of America or for which the Federal Republic has not already taken over responsibility under Article 133 of the basic law. The Federal Government is ready to accord the obligations arising from the economic assistance priority over all other foreign claims against Germany or German nationals. . ."

III. ". . . It is in the interest of the reestablishment of normal economic relations between the Federal Republic and other countries to work out as soon as possible a settlement plan which will govern the settlement of public and private claims against Germany and German nationals.

"Interested Governments including the Federal Republic, creditors and debtors, shall participate in working out this plan.

"The settlement plan shall in particular deal with those claims, the settlement of which would achieve the objective of normalizing the economic and financial relations of the Federal Republic with other countries. It will take into account the general economic position of the Federal Republic, notably the increase of its burdens and the reduction of its economic wealth. The general effect of this plan shall neither dislocate the German economy through undesirable effects on the internal financial situation nor unduly existing or potential German foreign-exchange resources. It shall also not add appreciably to the financial burden of any Occupation Power.

"The governments concerned may obtain expert opinions on all questions arising out of the negotiations on the settlement plan and on the capacity to pay. . ."

D. The German settlement was reviewed by the NAC, as provided in the ECA Act. The NAC took into account German ability to pay and the existence of other German obligations.

E. The terms of the Bilateral, setting forth the foregoing procedures and criteria, were reported to the Congress.

The Bilateral appeared in Supplement to the 8th Report to Congress of the Economic Cooperation Administration. The March 6, 1951 letter appears in Senate Document Executives Q and R, June 2, 1952, page 53.

F. The treatment of Germany is in line with other treatment Western European countries receiving Marshall Plan aid. The settlement would have taken approximately the same form even if it had not been linked to a prewar settlement. (See table, page 243 of Senate Document on Debt.)

3. The principals applicable to ECA aid are also applicable to GARIOA aid.

A. In 1948, GARIOA aid was programmed as part of the European Recovery Program, even though it was separately administered by the Army.

On page 18 of House Report 1585 of the Committee on Foreign Affairs, March 20, 1948, Report on S. 2202 (Foreign Assistance Act of 1948) appears a table which considers GARIOA, among other things, as a credit in determining the total needs of ECA for its first year.

B. In hearings before the Appropriations Committee, it was made clear to the Congress that it was not anticipated that there would be 100 percent repayment of the funds advanced to Germany under the GARIOA authority.

At one point a proviso was inserted in one of the GARIOA appropriation bills (The First Deficiency Appropriation Bill, 1947, H. R. 2849, draft of House Committee on Appropriations, March 28, 1947) to the effect that repayment would be required for the aid given thereunder. At the request of the State and War Departments the proviso was stricken before the bill became law. The objection of these Departments to a provision of this character was based on the fact that it would remove discretion from U. S. authorities to agree at the time of a peace treaty (if it should seem in the interest of the U. S. to do so) to a reduction in the amount of the U. S. claim against Germany.

Pages 126, 127 Hearings before the Subcommittee of the Committee on Appropriations, United States Senate, 80th Congress, 1st Session, on H. R. 2849

"General RICHARDS. The whole proviso which the State and War Departments recommend be deleted, was not in the bill until it came from the full committee in the House. Down to the $300,000,000 it is as the War Department and the President recommended to the Congress. The other was inserted in the full committee in the House.

Nothing is in the report on the bill to indicate what is intended. Part of it is an establishment of a complete governmental policy which both the State Department and War Department believe should not be undertaken in its entirety at this particular time.

"General HILLDRING, Mr. Chairman, I will try to comply with your request that I be brief.

"STATE DEPARTMENT IN AGREEMENT AS TO REIMBURSEMENT BY JAPAN AND GERMANY

"With respect to the proviso, as we in the State Department understand it, we are not in disagreement with the purpose of it so far as Germany and Japan are concerned. It seems to us that the meaning of it is that we should require either the Governments now in existence, or those that will be created in the future to assume the obligation of these relief burdens.

"With respect to Germany and Japan, the State Department is not in disagreement with that idea. And as an evidence of that, we instructed the commander in Germany before D-day to see to it that Germany reimbursed the United States for all of the relief and rehabilitation assistance that was given by the United States.

"That United States idea was again incorporated in the Potsdam Agreement, which states that:

"The proceeds of exports from current production and stocks shall be available in the first place for the payment for such imports as the United States brings into Germany."

"Again, in pursuance of that same idea, we included in our bizonal agreement with the