\ PANAMA CANAL TREATY RAMIFICATIONS 
 
 Part 2 
 
 HEARINGS 
 
 BEFORE THE 
 
 SUBCOMMITTEE ON THE PANAMA CANAL 
 
 OF THE 
 
 COMMITTEE ON 
 MERCHANT MARINE AND FISHERIES 
 HOUSE OF REPRESENTATIVES 
 
 NINETY-FIFTH CONGRESS 
 
 FIRST SESSION 
 ON 
 
 THE ECONOMIC AND FINANCIAL RAMIFICATIONS OF THE 
 PROPOSED PANAMA CANAL TREATIES AND THE ROLE THE 
 SUBCOMMITTEE WOULD PLAY IN IMPLEMENTING THE 
 
 TREATIES 
 
 APPENDICES A THROUGH J 
 
 INTERNATIONAL BANKING INTERESTS RELATING TO 
 PANAMA, AND OTHER TREATY-RELATED MATTERS 
 
 NOVEMBER 30, DECEMBER 1, 1977 
 
 Serial No. 95-21 
 
 Printed for the use of the Committee on Merchant Marine and Fisheries 
 
 26-608 
 
COMMITTEE ON MERCHANT MARINE AND FISHERIES 
 
 JOHN M. MURPHY, New York, Chairman 
 
 THOMAS L. ASHLEY, Ohio 
 JOHN D. DINGELL, Michigan 
 PAI L G. ROGERS, Florida 
 WALTER B. JONES, North Carolina 
 ROBERT L. LEGGETT, California 
 MARIO BIAGGI, New York 
 GLENN M. ANDERSON, California 
 E (KIKA) db la GARZA, Texas 
 RALPH H. METCALFE, Illinois 
 JOHN B. BREAUX, Louisiana 
 FRED B. ROONEY, Pennsylvania 
 BO GINN, Georgia 
 GERRY E. STUDDS, Massachusetts 
 DAVID R. BOWEN, Mississippi 
 JOSHUA EILBERG, Pennsylvania 
 RON de LUGO, Virgin Islands 
 CARROLL HUBBARD, Jr., Kentucky 
 DON BONKER, Washington 
 LBS ArCOIN, Oregon 
 
 NORMAN E. D'AMOURS, New Hampshire 
 JERRY M. PATTERSON, California 
 LEO C. ZEFERETTI, New York 
 JAMES L. OBERSTAR, Minnesota 
 WILLIAM J. HUGHES, New Jersey 
 BARBARA A. MIKULSKI, Maryland 
 DAVID E. BONIOR, Michigan 
 DANIEL K. AKAKA, Hawaii 
 
 Carl L. 
 Ernest J 
 
 PHILIP E. RUPPE, Michigan 
 PAUL X. McCLOSKEY, Jr., California 
 GENE SNYDER, Kentucky 
 EDWIN B. forsythe. New Jersey 
 DAVID C. TREEN, Louisiana 
 JOEL PRITCHARD, Washington 
 DON YOUNG, Alaska 
 ROBERT E. BAUMAN, Maryland 
 NORMAN F. LENT, New York 
 DAVID F. EMERY, Maine 
 ROBERT K. DORNAN, California 
 THOMAS B. EVANS, Jr.. Delaware 
 PAUL S. TRIBLE, Jr., Virginia 
 
 Perian, Chief of Staff 
 Corrado, Chief Counsel 
 Frances Still, Chief Clerk 
 W. Patrick Morris, Chief Minority Counsel 
 
 Subcommittee on Panama Canal 
 RALPH H. METCALFE, Illinois, Chairman 
 
 GENE SNYDER, Kentucky 
 ROBERT K. DORNAN. California 
 PHILIP E. RUPPE, Michigan 
 (ex officio) 
 
 ROBERT L. LEGGETT, California 
 DAVID R. BOWEN, Mississippi 
 CARROLL HUBBARD, Jr., Kentucky 
 BO GINN, Georgia 
 LEO C. ZEFERETTI, New York 
 JOHN M. MURPHY, New York 
 (ex officio) 
 
 Terrence W. Modglin, Professional Staff 
 Coleman Conrot, Professional Staff 
 Bernard Tannenbaum, Consultant 
 w. Merrill Whitman, consultant 
 Nicholas T. Nonnenmacher. Professional Staff, Minority 
 
 (ID 
 
CONTENTS 
 
 Pago 
 
 Opening statement of Mr. Snyder, November 30, 1977 3 
 
 Subcommittee note: A report entitled, "International Debt, the 
 Banks, and U.S. Foreign Policy," was issued in August 1977 by Sen- 
 ator Frank Church, chairman, Subcommittee on Foreign Economic 
 Policy, Senate Committee on Foreign Relations. Mr. Snyder's state- 
 ment referred at some length to that report, and is reprinted here as 
 background for his questions. 
 
 Appendix A: Questions of Mr. Snyder on various treaty-related matters for: 
 
 I. Governor of the Canal Zone 7 
 
 II. Secretary of the Army 10 
 
 Appendix B: December 30, 1977, response of the Department of Treasury 
 
 to Mr. Snyder's questions on "International Banking Interests Relat- 
 ing to Panama" based on the following items: 
 
 I. Article by Cheryl Payer, Bankers magazine, spring 1977, "Will 
 
 the Government Have to Bail Out the Banks?" 11 
 
 II. Article by Sidney Wise, The Times of London, April 25, 1977, 
 
 "Freedom Proves Lure To The Big Banks" 14 
 
 III. Article by Paul A. Fisher, Twin Circle, October 9, 1977, 
 
 "Panama Canal Treaty: A Money Deal— But Not For You"_ 63 
 
 IV. Letter of Leopoldo Aragon to President Carter, August 28, 
 
 1977 74 
 
 V. Article by Desmond Wettern, London Daily Telegraph, 
 March 3, 1977, "Britain Once Ruled Sea and So Must 
 
 Approve Panama Transfer" 74 
 
 VI. Article by Hobart Rowen, Washington Post, December 14, 
 
 1976, "Other Nations' Debts May Plague U.S." 95 
 
 VII. Memorandum of Nicolas Arditto Barletta, Planification 
 
 Minister of Panama, 1976 105 
 
 VIII. Article by H. J. Maidenberg, New York Times, February 5, 
 
 1974, "The Gnomes of Panama are Creating A Mushroom- 
 ing 'Latindollar' Market" 106 
 
 IX. Article by Murray N. Rothbard, Inquiry, December 5, 1977, 
 
 "The Treaty That Wall Street Wrote" 108 
 
 X. Agreed Minute to proposed Panama Canal Treaty 118 
 
 XI. Article in Wall Street Journal, May 5, 1977 118 
 
 XII. Article in West Watch, November 1977 120 
 
 Appendix C: January 20, 1978, followup response of the Department of 
 Treasury with further answers to Mr. Snyder's questions based on: 
 
 II. The Times of London 123 
 
 III. Twin Circle 124 
 
 IV. Aragon letter 124 
 
 IX. Inquiry 125 
 
 Appendix D: February 27, 1978, second followup response of the Depart- 
 ment of Treasury with further answers to Mr. Snyder's questions 
 based on: 
 
 V. Daily Telegraph 208 
 
 VIII. New York Times 207 
 
 XII. West Watch 207 
 
 March 17, 1978, third followup response of the Department of Treasury 
 with further answers to Mr. Snyder's questions based on: 
 
 XII. West Watch 208 
 
 Appendix E: January 30, 1978, response of the Department of State to 
 Mr. Snyder's questions on "International Banking Interests Relating to 
 Panama," based on the following items, and to other questions on 
 various treaty-related matters: 
 
 I. Editorial by Charles Bartlett, Washington Star, February 25, 
 1977, "Why Some Panamanians Are In No Rush On 
 Canal" 209 
 
 (in) 
 
IV 
 
 II. Article by Christopher Lydon, Atlantic Monthly, July 1977, Page 
 "Jimmy Carter Revealed: He's a Rockefeller Republican". 211 
 
 III. Article by Alan Howard, Nation, October 15, 1977, "The 
 
 Real Latin American Policy" 213 
 
 IV. Article by Jeremiah Novak, Atlantic Monthly, July 1977, 
 
 "The Trilateral Connection" 215 
 
 V. Memorandum from U.S. Embassy in Panama to Department 
 
 of State, October 20, 1£76 217 
 
 VI. Foreword by Senator Henry M. Jackson to committee print. 
 Permanent Subcommittee on Investigations, Senate Com- 
 mittee on Governmental Affairs, "The Rising Soviet and 
 East European Debt to the West" 217 
 
 VII. Article by Charles N. Stabler, Wall Street Journal, April 14, 
 1977, "Developing Debts — Poorer Countries Face Test of 
 Their Ability to Repay Bank Loans — Total Due Continues to 
 Rise: Big Banks Are Confident, But Some Doubts Persist". 218 
 VIII. Article by Linda Charlton, New York Times, December 8, 
 1969, "Carlino Sent on Panama Mission; Rockefeller Envoy 
 Advised General on Coming Elections," and article by 
 Tad Szulc, New York Times, December 9, 1969. "Carlino 
 Mission Puzzles Capital; State Department Declines Com- 
 ment on Panama Trip" 219 
 
 IX. Article by George Nicholas, Spotlight, October 3, 1977, 
 
 "Rocky's CIA Switched Signals on General Torrijos" 228 
 
 X. The Declaration and Programme of Action on the Establish- 
 ment of a New International Economic Order, and the Char- 
 ter of Economic Rights and Duties of States, United 
 Nations, 1974 235 
 
 XI. Article by Don Shannon, Philadelphia Inquirer, November 13, 
 
 1977, "Four Rich Nations Cancel Debts of Poorer Ones"__ 235 
 XII. Article in Panama Star and Herald, April 21, 1977, on Pan- 
 ama-Libya Cooperation Pact 237 
 
 XIII. Article in Newsweek, April 25, 1977, on the results of Omar 
 
 Torrijos' visit to Libya's Chief, Gen. Muamar Kaddafi 237 
 
 XIV. Article by Marlise Simons, Washington Post, June 3, 1977, 
 
 "Canal Treaty Seen Leaving Political Vacuum in Panama". 238 
 XV. Article by Hobart Rowen, Washington Post, December 15, 
 
 1977, "Central Bank Role Is Urged for IMF" 239 
 
 XVI. Article by Mark Allan and Tracey Ehre, Spotlight, June 20, 
 1977, "Financial Triumvirate Lured Russians to Panama," 
 and article by Mark Allan, same issue, "Soviet Foothold in 
 
 Panama Raises Serious Questions" 240 
 
 XVII. Article in La Estrella de Panama, August 29, 1977, on a 
 meeting of the Panama Banking Association and three 
 Panamanian treaty negotiators 244 
 
 XVIII. News story in Panama Star and Herald, December 5, 1977, 
 
 "R.P. Envoy Sees Treaties As 'Insurance Policy"' 245 
 
 XIX. Additional questions of Mr. Snyder on treaty-related matters. 246 
 Appendix F: March 7, 1978, followup response of the Department of State 
 with further answers to Mr. Snyder's questions based on : 
 
 X. Declaration and Programme of Action on the Establishment of 
 
 a New International Economic Order 250 
 
 XV. Washington Post article, "Central Bank Role Is Urged for IMF". 251 
 Appendix G: March 23, 1978, second followup response of the Department 
 of State with further answers to Mr. Snyder's questions based on: 
 
 V. Memorandum from the U.S. Embassy in Panama 254 
 
 XVII. La Estrella de Panama 255 
 
 XIX. Treaty-related matters 256 
 
 Appendix II: Questions of subcommittee minority member, Mr. Dornan, 
 
 asked independently of the Department of State, December 6, 1977, and 
 referenced in question 14, appendix E, item XIX, additional questions of 
 
 Mr. Snyder 259 
 
 Appendix I: Speeches of U.S. Senators containing memoranda referenced 
 either in Mr. Snyder's questions or in answer to them: 
 
 A. "Appointment of Ambassador Sol Linowitz." Statement of Senator 
 JohniSparkman of Alabama and accompanying exhibits, March 
 10, 1977 269 
 
V 
 
 B. "Sol Linowitz: Banker And Treaty Negotiator — A Conflict?" Page 
 Statement of Senator Jesse Helms of North Carolina and 
 
 accompanying exhibits, February 22, 1977 273 
 
 Appendix J: Background on Panama as an offshore banking center: 
 
 I. "U.S. Banks Abroad, Introduction." Chapter 1 of "International 
 Banking" — Part 4 of the FINE Study — Financial Institutions 
 and the Nation's Economy, House Committee on Banking, 
 Currency and Housing, 94th Congress, 2d session, June 1976 *_ 284 
 II. Selected Excerpts from "International Banking" 287 
 
 III. "What Makes An Offshore Financial Centre?" Chapter 1 of 
 
 "Offshore Investment Centres," published by the Banker 
 Research Unit of the Financial Times, Ltd., London, England, 
 1975. Reprinted with permission 290 
 
 IV. "Panama". Excerpt from chapter 5, "Panama, Bermuda, The 
 
 Bahamas and the Caribbean." Ibid 292 
 
 1 Tables have not been reproduced. 
 
INTERNATIONAL BANKING INTERESTS 
 RELATING TO PANAMA 
 
 And Other Treaty-Related Matters 
 
 APPENDICES A THROUGH J 
 
 Questions of Subcommittee Ranking Minority Member, Mr. Snyder, 
 For Various Witnesses Pursuant to the Hearings 
 
 (l) 
 
OPENING STATEMENT OF MR. SNYDER, 
 NOVEMBER 30, 1977 
 
 Is the Panama Caxal Vulnerable — To International Bankers? 
 
 Mr. Snyder. Mr. Chairman, I am looking forward to these hearings 
 as a primary source of information for the American people as to ex- 
 actly what the proposed Panama treaties will cost them. 
 
 I suspect the cost is far higher than the administration spokesmen 
 would have us believe. I welcome the opportunity to put questions to 
 them and other knowledgeable expert witnesses. It is my conviction 
 that the taxpayers will end up footing another very unwelcome bill 
 costing millions should these Panama treaties be ratified. 
 
 The last time this committee met the treaty negotiators on August 
 17. the treaties had not been published, and I found those gentlemen 
 quite unwilling to answer some very simple, elementary questions 
 concerning the~ security of the United States under the proposed 
 agreements. 
 
 Perhaps they will be more forthcoming at this time in regard to 
 those few questions. 
 
 My position is well known as urging the defeat of the proposed 
 treaties. 
 
 As far as the security of the United States is concerned, our pos- 
 session of the Panama Canal in peace and war is vital. I see no sense 
 in our global conflict with the Soviet Union in throwing in our hand — 
 our top cards — and I think the American people agree with me. 
 
 Many Americans, including Members of Congress, suspect the bank- 
 ing interests may be behind the canal giveaway. I have no knowledge 
 as to whether or not they are. but there have been numerous allega- 
 tions in the press. For example, an article in Bankers Magazine for 
 spring 1977, flatly says of the banks, and I quote : 
 
 They want the taxpayers of the creditor countries to pay the bad debts with 
 the money passing — in theory only — through the hands of the debtor governments 
 on its way to repay bank loans. 
 
 An article in the London Daily Telegraph. March 3, 1977, states : 
 
 Apart from political considerations the Carter Administration is also believed 
 to be under pressure from American banking interests to hand the canal over 
 to Panama. 
 
 If there is substance to these allegations, the American people should 
 know of it. If there is none, the allegations should be laid to rest. 
 
 This past August, Senator Frank Church issued a staff report titled 
 "International Debt, the Banks, and U.S. Foreign Policy/' 
 
 I'd like to ask a number of questions based on some things that have 
 appeared in this report and in the press. 
 
 Let me set the background in a few excerpts from the Church 
 report. 
 
 (3) 
 
4 
 
 The Senator sets the problem in his introduction as follows : 
 
 But what we have been dealing with since the oil price increase of 1973 are 
 not temporary deficits but a structural defect in the world economy in which 
 enormous financial surpluses are concentrated in the hands of a very few coun- 
 tries which cannot spend them for goods and services. They are thus deposited 
 in the ••strong" industrial countries. The "weak" oil deficit countries then borrow 
 from the major financial institutions in the strong countries. And there is no end 
 in sight to this cycle of a few permanent financial surplus oil producer countries 
 and burgeoning international indebtedness by weaker oil importing countries. 
 
 The central theme of the Church report, written by Ms. Karen Lds- 
 sakers of the subcommittee staff, is that the world/s major interna- 
 tional banks have become more and more overextended in lending to 
 the debtor oil importing nations and their financial positions are be- 
 coming more and more precarious. 
 
 Mention is made of the Basle, Switzerland, agreement in July 1971 
 of the Board of Governors of the Bank for International Settlement.-, 
 the "central bankers' central bank." 
 
 The United States, though not a member of the BIS. subscribed to 
 the Basle accord at the annual International Monetary Fund meeting 
 in AVashington in October 1974. 
 
 The report states that under the agreement. "Consortium banks 
 which have multinational bank participation will be bailed out on a 
 pro-rata basis by member parent banks, again backed by their own 
 central banks." 
 
 Xote the words, "will be bailed out." 
 
 Key to the background I am setting is this statement in the report : 
 
 It is worth noting that the central banks asked nothing from the private 
 banks in return for their guarantee, at least officially . . . Commercial bank< 
 can continue to compete on the euromarket at margins which do not insure 
 profitability, to take on deposits and external credits without Adequate capital 
 reserves and to roll over hundred million dollar loans to underdeveloped coun- 
 tries who have little or no hope of ever being able to pay them back, without 
 interference from any governmental authority. And if such practices lead to 
 disaster, the governments are pledged to come to the rescue. 
 
 Discussing the nature of the use underdeveloped countries make of 
 these loans just to maintain a given level of domestic consumption, 
 the report states : 
 
 Doubts are therefore raised about the ability of some countries to ever repay 
 their foreign loans, or, in the long run. even to continue to meet interest pay- 
 ments on those loans. 
 
 Toward the end of the report Lissakers cites the Citibank loan to 
 Zaire which had fallen behind in its repayments. Zaire agreed to pay 
 up back interest only if Citibank committed itself to a new $250 mil- 
 lion loan. 
 
 Lissakers sums up the incident with this amazing sentence: 
 
 The Zaire Government is thus holding the money it oices the bonis hostage for 
 a $250 million ransom. 
 
 She goes on : 
 
 The Zaire case raises some interesting questions about just who has the great- 
 est leverage at this stage of international debt buildup — the creditor banks, or the 
 debtor countries? Was Citibank's willingness to understake the task of raising 
 another large loan to Zaire a prudent and sensible response to restore the credit- 
 worthiness of a borrower, or a desperate attempt to avoid as long as possible 
 having to write off a substantial loss on an international loan, and perhaps 
 thereby set a precedent for other debtor countries to follow suit? 
 
5 
 
 Wrapping up the overall international activity, Lissakers asks 
 "whether this process of deficits, recycling, borrowing, and debt re- 
 scheduling can go on indefinitely," and answers it in a way that is, I 
 believe, quite worrisome : 
 
 The viability of the whole international financial system is premised on the 
 assumption that all the players stay in the game ; that the banks continue lend- 
 ing, and the borrowers keep repaying the interest, so that although the principal 
 may be refinanced or "rolled over" for individual borrowers, the money con- 
 tinues to circulate. The biggest threat to the system lies in the possibility that 
 one of the passengers on this merry-go-round will decide to get off — that one 
 of the large debtors finally decides to repudiate its debts, or one of the lenders 
 says "no more" and calls in the chits. Other lenders then follow in order to 
 protect their interests and a domino effect sets in. As the crisis created by the 
 collapse of Herstatt and Franklin National several years ago illustrates, even 
 the disappearance of a relatively minor player can set the multinational bank- 
 ing system teetering. 
 
 Finally, in conclusion, Lissakers asks the $64 question : 
 
 The question arises of how prudent the banks have been in their lending . . . 
 Has the profitability of this activity blinded them to the underlying risks? Or 
 has the banks willingness to lend to foreign countries for balance of payments 
 purposes been premised on the unstated assumption that in the event of a real 
 debt repayment crisis, the governments of the wealthy industrial countries will 
 have to come to the rescue because they cannot afford to see either the debtor 
 countries or their own large banking institutions go under? 
 
 Mr. Chairman, Panama is a debtor nation with almost 40 percent 
 of its annual budget now dedicated just to debt service. 
 
 American and foreign banks have been coming to the rescue. 
 
 I hope we can find out in these hearings if the American people are 
 being set up to bail out the banks, and if, perhaps, the canal giveaway 
 just might play a role in this bailout. 
 
 My questions all relate to my central concern here: Is the Panama 
 Canal vulnerable — to international bankers ? 1 
 
 I repeat, I don't know if the many allegations that such is the case 
 have substance. If they do, the people should know it. If such allega- 
 tions are without merit, they should be laid to rest. 
 
 I am a firm believer in the free enterprise system and have no desire 
 to worsen the banking climate with untoward fear, but news stories 
 on which my questions will be based reflect growing concern in banking 
 and government circles. 
 
 The witnesses may have to obtain some answers from other agencies 
 and submit them in writing, and I hope this can be done expeditiously. 
 Of course, any proprietary information I may request should be sub- 
 mitted without identifying the individual bank involved. 
 
 1 For background on Panama as an offshore banking center, see Appendix J. 
 
Questions of Subcommittee Ranking Minority Member, Mr. Snyder, fob 
 Various Witnesses Pursuant to Hearings on the Economic and Financial 
 Ramifications of the Proposed Panama Canal Treaties 
 
 APPENDIX A 
 
 I. questions for the governor of the canal zone 
 
 Question 1. What is the estimate of the combined payroll of the Panama Canal 
 Company and Canal Zone Government for FY 1978? 
 
 Answer. The combined payroll of the Panama Canal Company and Canal Zone 
 Government, including personnel benefits, is estimated in the 1978 President's 
 Budget at $223.0 million. 
 
 Question 2. What percentage of the total cost of operation of the Canal under 
 the new treaty would be represented by payroll costs? (Please furnish figures 
 used in calculation ) . 
 
 Answers. It is estimated that payroll costs, including personnel benefits, will 
 represent about 58 percent of the cost of operation of the Canal under the new 
 treaty, exclusive of first-year transition costs. The figures used are as follows : 
 
 Millions 
 
 Estimated payroll costs for fiscal year 197S under the new treaty $165. 5 
 
 Total operating expenses for fiscal year 1978 under the new treaty, 
 
 exclusive of transition costs 285. 
 
 Ratio payroll to total costs (perfect) 58 
 
 Question 8. (a) In estimating the cost of operation of the Canal under the new 
 treaty, what is the base rate used for setting wages ? 
 
 Answer. No major change from current practice is contemplated at this time. 
 Current plans call for continuation of the District of Columbia pay base for 
 policemen and fire fighters, Tennessee Valley Authority rates for power system 
 employees, Corps of Engineers rates for floating plant personnel, U.S. Merchant 
 Marine rates for steamship personnel, the General Schedule for clerical, adminis- 
 trative, and fiscal jobs, and the CSC overseas schedule for manual type occupa- 
 tions. In the latter two groups, we expect to continue the current pay cutoff lines 
 between the levels of skill required to be recruited from off-the-Isthmus and 
 those available locally. The latter will be paid on a scale ranging upward from 
 the Fair Labor Stnndards Act Minimum Wage that is applicable in the United 
 States on the effective date of the treaty. 
 
 Question 8.(o) In estimating the cost of operation of the Canal under the new 
 treaty, what additional renumeration will be paid to U.S. nationals employed 
 prior to the effective date of the treaty ? 
 
 Answer. Current plans call for continuation of the Tropical Differential for 
 those individuals currently receiving it. Current employees will also continue to> 
 be eligible for the usual Premium Pay Benefits such as Night Differential, Hazard- 
 ous Duty Pay, and Overtime. 
 
 Question 3.(c) In estimating the cost of operation of the Canal under the new 
 treaty, what additional renumeration will be paid to personnel recruited outside 
 the Republic of Panama ? 
 
 Answer. Individuals recruited off-the-Isthmus will be eligible for the Tropical 
 Differential as well as Premium Pay generally authorized for other employees. 
 
 Question 8(d). In estimating the cost of operation of the Canal under the new 
 treaty, will there be an adjustment in wages because of the difference in income 
 tax rates in the U.S. and Panama? 
 
 Answer. Whether there will be an adjustment in wages because of the differ- 
 ence in income tax rates in the U.S. and Panama will be a matter for decision by 
 
 (7) 
 
s 
 
 the Panama Canal Commission. For planning purposes, however, it is being as- 
 sumed in the interest of conservation that there will be no change in the wage 
 rates of U.S. citizens and that those non-U.S. citizens paid on a U.S. pay base will 
 receive an increase in wages because of the elimination of the Tax Allowance au- 
 thorized in the Memorandum of Understandings accompanying the 1955 Treaty 
 with the Republic of Panama. The amount of the tax factor varies with the rate 
 of pay of the individual and ranges from 1 cent an hour to $2.50 an hour for a 
 weighted average of 18 cents an hour. 
 
 Question 3(c). In estimating the cost of operation of the Canal under the new 
 treaty and in comparison to 1978 payroll costs, what will be the effect on cost of 
 operation of the Canal of the actions taken to effectuate the wage practices indi- 
 cated by your answers to (a) through (d) ? 
 
 Answer. If the Tax Factor were to be eliminated, the additional annual cost for 
 employees remaining with the Panama Canal Commission would approximate 
 $610,000 per year. 
 
 Note. — It is pertinent to note that although the agency does not currently con- 
 template any major change in wage bases or amount of Tropical Differential, 
 treaty provisions permit payments by the Panama Canal Commission of addi- 
 tional remuneration, or the provision of other benefits, such as home leave bene- 
 fits, to United States nationals employed prior to entry into force of the treaty, 
 or to persons of any nationality who are thereafter recruited outside of the Re- 
 public of Panama. Thus, if the Panama Canal Commission finds itself unable to 
 recruit and keep the necessary skills to keep the canal operating at the currently 
 contemplated rates of pay, they can be augmented. 
 
 Question 4- What is the estimated depreciation accrual on Canal Zone Govern- 
 ment capital assets in fiscal year 1978? 
 
 Answer. Depreciation of Canal Zone Government capital assets is estimated 
 at $2,681,000 for fiscal year 1978. 
 
 Question 5. In reference to capital assets of the Panama Canal Company, 
 
 a. What is the estimated depreciation accrual in fiscal year 197S? 
 
 b. What is the estimated depreciation accrual in the first year of operation 
 of the treaty? 
 
 c. What is the estimated depreciation accrual for fiscal year 1978 on assets to 
 be transferred to the Republic of Panama on the effective date of the treaty? 
 
 Answer, a. Depreciation of Panama Canal Company capital assets is estimated 
 at $18,467 thousand for fiscal year 1978. 
 
 b. Depreciation in the first year of operation under the treaty is estimated 
 at $18 million for the capital assets retained by the Commission, including 
 $600 thousand pertaining to former Canal Zone Government assets. 
 
 c. The estimated depreciation in fiscal year 1978 on assets to be transferred to 
 the Republic of Panama on the effective date of the treaty is approximately 
 $4.0 million of which $900 thousand pertains to Canal Zone Government capital 
 assets. 
 
 Question 6. In the operating statement on page 11 of the answers furnished to 
 questions previously submitted, there is a reference to "capital outlay expendi- 
 tures in excess of depreciation" shown as $7,133,000 for 1978 and as zero for 
 1978 with treaty changes. 
 
 0. Why is the entry limited to capital expenditures "in excess of depreciation"? 
 
 b. How does the entry reconcile with your answer to question 3(d) showing 
 capital costs of about $20 million in the first year of operation after ratification 
 of the treaty (1979)? 
 
 Answer, a. The Company has programmed for FY 1978 some $26.0 million 
 of capital outlay expenditures. The $7,133 thousand represents the additional 
 resources required to meet this program over and above funds to be provided 
 from operations of which depreciation is the primary source. 
 
 b. The answer to question 3(d) addresses the obligational requirements of the 
 Panama Canal Company for fiscal years 1978 and 1979 and not the cash outlay 
 requirement. 
 
 Question 7. The 1978 budget estimates show $12,749,000 as the cost of Company 
 sponsorship for its employees and dependents of fire protection, education and 
 hospital services provided by the Canal Zone Government. 
 
 a. What is the breakdown of the total figure between the three types of 
 
 services? 
 
 b. What would the comparable costs be for the Canal Zone Government's 
 sponsorship of these services for its employees and dependents? 
 

 
 c. How will these costs be affected by the treaty? 
 Answer (see table below) : 
 
 [In thousands of dollars] 
 
 
 Education 
 
 Hospital 
 
 Fire 
 
 Total 
 
 (a) Fiscal year 1978 estimate for Panama Canal Company. 
 
 (b) Fiscal year 1978 estimate for Canal Zone government. 
 
 (c) Estimate under treaty: Panama Canal Commission. __ 
 
 6, 868 
 
 3,712 
 7,738 
 
 3, 652 
 712 
 2,774 
 
 2,229 
 (0 
 1,211 
 
 12, 749 
 4, 424 
 11,723 
 
 i Not allocated. 
 
 Question 8. Please supply the figures for fiscal year 1977 and fiscal year 
 1978 to bring up to date the traffic statistics shown in table 6 of the 1976 
 annual report. 
 
 Answer. Traffic statistics for fiscal year 1977 are attached. Fiscal year 1978 
 figures are not available. 
 
 PANAMA CANAL TRAFFIC, FISCAL YEAR 1977 
 
 Traffic assessed tolls 
 Traffic assessed tolls on displacement 
 Total traffic on net tonnage basis tonnage basis 
 
 Number Number Number Displace- 
 
 of Long tons of Panama Canal of ment 
 
 transits Tolls of cargo transits net tonnage transits tonnage 
 
 Commercial ocean traffic » 11,896 $163,826,571 122,978,785 11,868 133,353,132 28 108,642 
 
 U.S. Government ocean traffics... 88 805,983 212,677 59 577,483 29 165,148 
 
 Free ocean traffic »2 13 380 8 21,252 5 10,380 
 
 Total ocean traffic i 11,997 164,632,554 123,191,842 11,935 133,951,867 62 284,170 
 
 Small commercial traffics 759 39,960 2,820 751 48, 717 8 1, 108 
 
 Small U.S. Government traffics 277 12,851 22 953 255 16,769 
 
 Small free traffic 2 s 54 10 50 2,840 4 466 
 
 Total Panama Canal traffic. 13, 087 164,685,365 123,194,672 12,758 134,004,377 329 302,513 
 
 i Ocean traffic includes ships of 300 net tons and over, Panama Canal measurement, or of 500 displacement tons and 
 over on vessels paying tolls on displacement basis (dredges, warships, etc.). 
 
 2 Free traffic includes ships of thj Colombian and Panamanian Government and ships transiting for repairs at the 
 Company-operated yards. 
 
 s Includes vessels under 300 net tons, Panama Canal measurement (or under 500 displacement tons for vessels as- 
 sessed on displacement tonnage). 
 
 Question 0. What is your estimate of U.S. Government transits, tonnage and 
 tolls for fiscal year 1978 and fiscal year 1979? 
 
 Answer. U.S. Government traffic and tolls as estimated in the fiscal year 
 1979 budget are as follows : 
 
 
 1978 
 
 1979 
 
 Transits: 
 
 100 
 
 250 
 
 100 
 250 
 
 Total 
 
 350 
 
 350 
 
 Tolls credits (thousands): 
 
 $994 
 
 6 
 
 $994 
 6 
 
 Total 
 
 1, 000 
 
 1,000 
 
 Vessel tonnage (thousands): 
 Oceangoing: 
 
 Panama Canal net tonnage 
 
 Displacement tonnage. 
 
 Small: 
 
 Panama Canal net tonnage 
 
 Displacement tonnage 
 
 - 645 
 
 185 
 
 - 1 
 
 8 
 
 645 
 185 
 
 1 
 
 8 
 
 Total: 
 
 Panama Canal net tonnage 
 
 Displacement tonnage. 
 
 646 
 
 193 
 
 646 
 193 
 
10 
 
 Question 10. How will the payment to Panama under paragraph 4(a) of the 
 treaty be calculated for U.S. government vessels paying tolls on displacement 
 
 tonnage? 
 
 Answer. It is assumed that for vessels assessed tolls on a displacement tonnage 
 vessel, Panama will be paid at a rate per ton which takes into account the re- 
 lationship between the toll rate applied to Panama Canal net tons and that ap- 
 plied to displacement tonnage. 
 
 The relationship of current tolls assessed on a Panama Canal net ton basis 
 (laden) to tolls assessed on a displacement tonnage basis is .$1.29 to $0.72, the 
 displacement rate being 56 percent of the laden P.C. net rate. Applying the 
 56 percent to the $0.30 per P.C. net ton annuity to Panama yields $0.17 per 
 displacement ton. 
 
 Question 11. Paragraph 1 of Article XIII of the new treaty provides that on 
 termination of the treaty, the Panama Canal shall be turned over to Panama 
 "free of liens and debts, except as the two Parties may otherwise agree". The 
 1976 annual report of the Panama Canal Company showed year-end liabilities, 
 exclusive of the U.S. investment in the canal, of some $92 million. On its face, 
 the cited treaty provision appeal's to require the U.S. to pay off all such liabilities 
 before transfer to Panama. What is the estimated amount of such liabilities at 
 the termination of the treaty and how would the payments necessary to liquidate 
 such liabilities be financed? 
 
 Answer. It is our understanding that the requirements under paragraph 1 of 
 Article XIII of the new treaty that the Panama Canal shall be turned over to 
 Panama "free of liens and debts" relates to real property, non-removable im- 
 provements thereon, and equipment that is to be transferred to Panama upon 
 termination of the treaty as set forth in paragraph 2(d) of said Article. There- 
 fore, all other assets, such as cash, accounts receivable and inventories will re- 
 main the property of the United States and will be available for settlement of 
 the liabilities of the Commission existing at the termination of the treaty. 
 Based on the financial condition of the Panama Canal Company at June 30, 1976, 
 there would have been available under a treaty termination situation sufficient 
 assets to cover those liabilities requiring an expenditure of funds. 
 
 With respect to estimating the financial condition of the Panama Canal Com- 
 mission at the termination of the treaty, we have no way to do this. 
 
 II. QUESTION FOR THE SECRETARY OF THE ARMY 
 
 Question. Article X of Treaty indicates that everyone employed by the 
 Panama Canal Commission will not lose any compensation. Teachers, how- 
 ever, will not be covered since Article XVIII of the Agreement in implementation 
 of Article IV of the Panama Canal Treaty says the United States Forces 
 may furnish educational, sanitary, and medical services. According to what 
 plan (or plans) are teachers, who will have been transferred from the Canal 
 Zone Government to the Department of Defense, to be or likely to be paid 
 and given periodic raises? Submit estimated costs of this plan or alternative 
 plans. 
 
 Answer. It is our desire to protect Canal Zone school teachers from any 
 loss of pay resulting from a transfer to the Department of Defense. At the 
 same time we want to assure them of periodic pay increases. On the other hand. 
 I certainly recognize the need of the Department of Defense Overseas Depend- 
 ent School System to establish equality of pay among its teachers. In order 
 to balance these competing requirements, we have proposed that Canal Zone 
 teachers retain their current wages and receive one-half the dollar amount 
 of all future DOD teacher wages increases until they reach the DOD wage 
 scale. We are now awaiting the comments of national and Canal Zone labor 
 representatives regarding this plan. Since future pay increases are unknown, 
 specific costs cannot be provided ; however, we can say that in the long term 
 this plan will be somewhat less costly for United States Government agencies 
 than continuation of the current pay system. 
 
APPEXDIX B 
 
 response of the department of treasury to mr. snyder's questions on 
 international banking interests relating to panama 
 
 Department of the Treasury, 
 Washington, B.C., December 30, 1977. 
 
 Hon. Ralph H. Metcalfe, 
 
 Chairman, Subcommittee on Panama Canal, Committee on Merchant Marine and 
 Fisheries, House of Representatives, Washington, D.C. 
 
 Dear Mr. Chairman : In your memorandum of December 14, the Subcommittee 
 requested that I respond to a series of follow-up questions relating to my testi- 
 mony on the Panama Canal treaties on November 30, 1977. 
 
 Attached are responses to most of those questions. Unfortunately it has not 
 been possible to answer all of the questions within the time period requested. 
 Where indicated, additional information will be supplied as soon as possible. 
 With respect to the questions concerning narcotics (West Watch article series 
 of questions), we will shortly provide information that is available from the 
 Customs Service. We have referred your request to other appropriate agencies 
 for information which they may be able to provide. 
 
 I hope this information is of use to the Subcommittee. 
 Sincerely, 
 
 Arnold Xachmanoff. 
 
 Attachments. 
 
 I 
 
 Bankers Magazine, Spring 1977 carried an article by Cheryl Payer entitled 
 • Will the Government Have to Bail Out the Banks 
 I quote the opening and several later paragraphs : 
 
 "American banks with large loan exposures to third world countries are like 
 the person astride the tiger : The dangers of continuing the ride are matched only 
 by fears of what will happen if an attempt is made to dismount. Although most 
 bankers would clearly prefer lending to better credit risks than the deficit-ridden 
 less-developed nations, they are into a number of countries so deeply that a failure 
 at this point to roll over previously extended loans could precipitate the crisis 
 which everyone is trying to avoid. To extricate themselves from their dilemma, 
 the banks are looking toward Washington. 
 
 ******* 
 
 "The cross-default clause is a technique now used also to give private lenders a 
 kind of guarantee on projects that they co-finance in conjunction with the World 
 Bank or Export-Import Bank. While this technique reflects the cooperation and 
 solidarity of associated lenders, a more important phenomenon of the late 1970s 
 will surely be the competitive struggle among creditors when a debtor country is 
 virtually bankrupt and cannot meet all its obligations. The first public sign of 
 such a struggle came last August when Citibank filed suit against the Export- 
 Import Bank, claiming that Ex-Im was arranging a preferential position for itself 
 in prescribing repayment procedures on a new loan to Zaire — which has not made 
 any payments to its commercial bank creditors since mid-1975. 
 
 "Citibank filed on behalf of itself and ten other banks involved in a 1972 
 syndicated loan, charging that Export-Import Bank was attempting to channel 
 Zaire's foreign trade earnings into a special account that would bypass prior 
 claims on the country's foreign exchange. Ex-Im's President, Stephen Dubrul, Jr., 
 promptly rejected the accusation on a technicality, but in turn pointed a finger at 
 the World Bank which, according to Dubrul, has an arrangement which 'borders 
 on being a security pledge.' 
 
 "As more countries fall into arrears on their loan repayments, such squabbles 
 among creditors will become common." 
 
 Question 1. Submit for the record details and the status of the complaint men- 
 tioned above, the response of Stephen Dubrul, Jr., to Citibank, and his charge 
 against the World Bank. 
 
 (11) 
 
 2.J-60.") — 7S 2 
 
12 
 
 Answer. On August 9. 1976, and August 13, 1976, suits were filed in the Southern 
 District of New York against Exinibank and Manufacturers Hanover Trust Com- 
 pany by Citibank and Bankers Trust Company, each for itself and on behalf of a 
 consortium of banks all of whom had made loans to the Republic of Zaire. The 
 object of the suits was to prevent Eximbank from entering into an agreement with 
 the Republic of Zaire, the purpose of which was to establish a mechanism whereby 
 proceeds from the sale of Zaire's copper ore would be applied directly to the 
 repayment of past and future loans by Eximbank to SXEL. Zaire's electric utility. 
 
 A settlement of the suit was reached when Eximbank agreed to limit this repay- 
 ment mechanism to future financial assistance. Both suits were terminated in 
 October 1976; Citibank did so by a Stipulation and Discontinuance. Bankers 
 Trust by a Notice of Dismissal. 
 
 The World Bank only seeks security on its loans to private borrowers, and 
 then only in the manner that a private lender would. The Bank thus assures 
 that it will not compete with the private sector (by extending security-free 
 financing), and that its chances of repayment are not jeopardized by priorities 
 accorded to other lenders. 
 
 Question .?. Submit information on any other squabbles of this nature that 
 have occurred or seem likely to occur among creditors of foreign nations. 
 
 Answer. The Treasury is not aware of any additional legal actions of this 
 nature that have occurred or seem likely to occur. 
 
 I quote the article further : 
 
 "The bankers who are willing to admit that they are in deep trouble because 
 of their Third "World exposure are also nearly unanimous about the solution 
 they expect. They propose that the governments of the creditor countries (pri- 
 marily the U.S., of course) come to the aid of their Third World dependents and 
 their own capitalists by increasing official aid programs, bilateral and multi- 
 lateral, by massive amounts. The banks also hope that governments will bear 
 the main burden of debt rescheduling as they did in the previous wave of Third 
 World debt crises in the 1960s, when private debt was mainly in the form of 
 suppliers' credits. That is. they want the taxpayers of the creditor countries 
 to pay the bad debts, with the money passing — in theory only — through the 
 hands of the debtor governments on its way to repay bank loans. If this does 
 not happen, they warn, we risk a 1930s-style collapse of the banking system 
 when the defaults become numerous. The executive director of Chase Manhattan 
 (London) gave clear expression to this hope and threat in the pages of Euro- 
 money : 
 
 " 'On the one hand, a purely technical analysis of the [Non-Oil Developing 
 Countries] current financial condition would suggest that defaults are inevitable ; 
 yet on the other hand, many experts feel that this is not likely to happen. The 
 World Bank, the IMF. and the governments of major industrialized nations, they 
 argue, would step in rather than watch any default seriously disrupt the entire 
 Euromarket apparatus with possible secondary damage to their own domestic 
 banking systems, which in many cases are already straining under their own 
 credit problems. 5 ' " 
 
 The Executive Director of Chase Manhattan (London), David Rockefeller's 
 bank, feels the governments of mapor industrial nations would step in rather 
 than see the banking systems go down. 
 
 Question 3. How might governments do this? 
 
 Ourxtion n. Discuss various alternative government actions and what their 
 impact would be on the taxpayer. 
 
 Answer. Following a number of bank failures in 1974, central bank governors 
 of the major industrial countries discussed the existing safeguards of the inter- 
 national banking system and issued the following statement: 
 
 "The Governors also had an exchange of views on the problem of the lender of 
 last resort in the Euro-markets. They recognized that it would not be practical 
 to lay down in advance detailed rules and procedures for the provision of tempo- 
 rary liquidity. But they were satisfied that means are available for that purpose 
 and will be used if and when necessary." 
 
 3 David I. Levine, "Developing Countries and the $150 Billion Euromarket Financing 
 Problem," Euromoney at 14 (Dec. 1975). 
 
13 
 
 The principal defense against significant problems arising in the banking 
 industry is appropriate supervisory and regulatory measures to assure that 
 individual banking institutions are sound and are conducting their business in 
 a prudent and stable manner. 
 
 As a regulated industry in the United States, commercial banks must conform 
 to strict guidelines related both to the structure of bank management and to 
 operations (domestic and international). In fulfilling their supervisory responsi- 
 bilities, the U.S. bank regulatory agencies closely monitor developments through- 
 out the system and in individual banks. While particular banks have from time 
 to time run into difficulties, these instances are relatively rare and do not 
 signify any systemic weaknesses. Moreover, the established bank insurance net- 
 work in the U.S., funded predominantly by the banks themselves, assure that 
 almost all depositors will not be jeopardized in the event of bank problems. 
 
 Question 4. Name some of the experts to whom Rockefeller's London man re- 
 ferred and submit for the record their statements on this subject. 
 
 Answer. Since David J. Levine, the Executive Director of Chase Manhattan 
 (London) did not specify which "experts" he was referring to, it is not possible 
 for the Treasury to identify and submit statements by these experts. There are a 
 number of experts who have taken the position that defaults by the non-oil de- 
 veloping countries are not inevitable, and that intervention by governments or 
 multilateral institutions will not be necessary to avoid default. Included among 
 these are Robert Solomon of the Brookings Institution (see Brookings Papers on 
 Economic Activity, 2 :1977 "A Perspective on the Debt of Developing Countries"), 
 Dr. Irving S. Friedman of Citibank (see "The Emerging Role of Private Banks in 
 the Developing World," Citicorp, 1977), and Robert S. McNamara, President, 
 World Bank (see Address to the Board of Governors, Washington, D.C., Septem- 
 ber 26, 1977). 
 
 Question 6. Spell out briefly how the taxpayers in the United States are in- 
 volved with the World Bank, the International Monetary Fund, and other gov- 
 ernment, quasi-government, and multinational lending institutions. 
 
 Answer. The United States is a member of the World Bank and several other 
 multilateral lending institutions such as the Inter-American Development Bank 
 and the Asian Development Bank. The financial obligations of membership in- 
 clude capital subscriptions and contributions to the hard and soft loan windows 
 respectively of these institutions. The involvement of the average U.S. taxpayer 
 derives primarily from the use of general revenues to help meet these obligations. 
 
 The benefits from U.S. membership in these institutions are considerable. The 
 banks contribute to many U.S. economic, humanitarian and political objectives. 
 In the economic area alone the banks are extremely important as institution 
 builders. They are a powerful integrating force, encouraging constructive coop- 
 eration to help increase world output and prosperity. Their emphasis on helping 
 poor people and poor countries is fully in accord with the priorities of the Carter 
 Administration. Besides these broad interests which serve the taxpayer, many 
 U.S. taxpayers derive individual benefits from these banks in the form of pro- 
 curement, investment income, employment, and increased international trade. 
 
 The International Monetary Fund's Articles of Agreement constitute the basic 
 rules for a cooperative and smoothly operating international monetary system. 
 In addition, the IMF is the principal official multilateral source of balance 
 of payments financing. Access to IMF financing is available to members in 
 support of sound and internationally responsible programs of adjustment, and is 
 designed to encourage borrowers to initiate needed corrective measures. Access 
 to IMF resources enables the borrowers to adopt adjustment measures that are 
 compatible with maintenance of a liberal system of international trade and 
 payments. Without such financing, member countries might feel compelled to take 
 recourse to unduly restrictive domestic economic measures, harsh trade and 
 capital restrictions, or aggressive exchange rate practices in order to reduce 
 their financing needs. The IMF, therefore, benefits U.S. taxpayers through 
 promoting an improved international environment, a stronger monetary system, 
 and an expanding world economy that benefits all segments of the American 
 economy. 
 
 The U.S. quota in the IMF is equivalent to about $7.9 billion and will increase 
 to approximately $9.9 billion when the sixth quota increase comes into effect, 
 now anticipated to be in early 1978. The U.S. quota determines U.S. rights to 
 draw foreign exchange from the IMF, U.S. obligations to provide financing to 
 the IMF, and U.S. voting power in the IMF. When the U.S. provides financing 
 
14 
 
 to the IMF, it receives in exchange a highly liquid international reserve asset, 
 usable to meet U.S. balance of payments financing needs. 
 
 Question 7. Is the author's statement that "they want the taxpayers of the 
 creditor countries to pay the bad debts, with the money passing — in theory only — 
 through the hands of the debtor governments on its way to repay bank loans" 
 an accurate summarization of the situation? 
 
 Answer. It is not the understanding of the Treasury Department that banks 
 expect or anticipate the taxpayers of creditor countries to bear the risks atao- 
 dated with the banks' lending decisions. The only exception to this might arise 
 in the case of loans which are guaranteed by agencies of the U.S. Government. 
 For a complete statement of government policy toward international lending 
 by banks, the Committee's attention is directed to the September 20. 1977, testi- 
 mony of Under Secretary Solomon before the Subcommittee on International 
 Trade, Investment and Monetary Policy of the House Committee on Banking, 
 Finance and Urban Affairs. 
 
 II 
 
 The Times of London, April 25, 1977, carried a special report on Panama. 
 Among several articles written by Sidney Wise one was entitled '"Freedom proves 
 lure to the big banks". This article below gives rise to the following questions : 
 
 Freedom Proves Lure to the Big Banks 
 
 Besides having a shipping canal, Panama has a money canal through which 
 flows a stream of offshore funds from most of the world's biggest banks estab- 
 lished in this rapidly growing international finance centre. 
 
 Like the ships that pass through the canal, very few of which stop for un- 
 loading, most of the money that flows in and out of the foreign banks located in 
 Panama is in transit. 
 
 Behind the attractions which continue to draw banks to open branches in 
 Panama is the attitude of the Government, which provides unusual freedom of 
 action. 
 
 There is no sign that this attitude will change. On the contrary, although regu- 
 lations to prevent questionable banking practices have been tightened, the Gov- 
 ernment is convinced of the benefits which the offshore banking boom has brought 
 to the country. 
 
 Few of the giant international banks are absent from Panama, and it also has 
 a surprising number of imaginative medium-sized banks. Bank of America, with 
 $l,S94m, was the biggest in assets at the end of 1975, followed by the First Na- 
 tional Bank of Chicago with $l,286m and Banco do Brasil with $l,134m. 
 
 United States banks are the dominant force, with 13 of the 75 licensed foreign 
 banks. A total of 24 countries are represented. Spain, Germany, Switzerland and 
 Canada have four banks; France has three; and Britain two — Standard Char- 
 tered and the Bank of London and South America, a subsidiary of Lloyds Inter- 
 national. 
 
 Panama's banking boom began shortly after July. 1970, when a new law was 
 adopted to create a solid, confidence-inspiring banking system while granting 
 attractive incentives for Panama-based financial operations. 
 
 One result of Decree Number 238, the title of the new banking law, was the 
 cancellation of operating permits of 248 doubtful banks, many of which were non- 
 operative. This reduced the number of banks to 21. At the same time, a banking 
 commission was created to supervise a more tightly controlled system of financial 
 operations. 
 
 Panama jealously guards the now internationally recognized image of banking 
 safety which it has established since the law was adopted. Applications to open 
 banks are carefully screened and it may be a year or more before permission is 
 granted. 
 
 Only four permits were granted last year. This was a result not only of the 
 strict requirements of the commission but also of the aftermath of the world 
 recession and because Panama may be reaching a temporary saturation point 
 in attracting banks. 
 
 Tax incentives have been one of the most powerful stimulants of Panama bank- 
 ing. Almost total tax exemption in foreign operations is granted to banks estab- 
 lished in the republic. Tax exemptions also apply to interest earned from savings 
 accounts and long-term deposits, as well as the interest gained on loans and other 
 financial transactions originating in Panama with people outside the country. 
 
15 
 
 In addition, foreign loans and deposits are not required to have a cash or legal 
 reserve. 
 
 Rapid growth followed the new banking law. The number of banks rose from 
 21 to 75, and the total assets of the banking system have increased by almost 3,000 
 per cent since 1967. Nine years ago total assets were $346m ; now they exceed 
 S10,000m. 
 
 It took more than just tax incentives to accomplish this kind of growth. For 
 banks with international operations, particularly those in Latin America, it 
 would be difficult to find a place with more attractions than Panama. 
 
 There are no controls over the free flow of capital in or out of the country. 
 There are no exchange problems since the United States dollar is the legal 
 tender of Panama, which also eliminates fears of currency devaluation. 
 
 Another strong incentive for bank location in Panama is the long-established 
 record of political and economic stability which the nation has enjoyed. 
 
 Moreover, English is the working language of the country, rapid telephone 
 and cable communications are available and Panamanians, including even Gov- 
 ernment officials, are surprisingly prompt and punctual for the Latin-American 
 country. 
 
 Domestic loans by all banks in Panama totalled only $233m in 1967. By 
 1975, they increased sixfold to exceed $l,435m. Since neither Panama's economy 
 nor credit capacity has grown at more than a small fraction of such a rate of 
 increase, it seems clear that the banks have made a disproportionate allocation 
 of local credit. 
 
 The presence of so many large foreign banks doing multi-million dollar opera- 
 tions annually has made it possible for Panama to receive credits to develop 
 local industry, agriculture and the economy to an extent far beyond what it 
 might be able to obtain otherwise. 
 
 There are three types of banking licenses in Panama. A general license permits 
 banks to carry out both domestic and international operations. At the end of 
 last June there were 47 such banks. An international license limits banks to 
 only foreign operations. There were 19 such financial institutions. A third cate- 
 gory of license permits only representative banking work. There were five such 
 licenses. 
 
 The fact that Panama has a bank secrecy law and permits numbered accounts 
 has inspired a description of this tiny nation as "a Latin Switzerland", but it is 
 clear that Panama grants incentives and privileges to banks operating in its coun- 
 try of which banks in Switzerland can only dream. 
 
 That does not mean that questionable banking practices are allowed, but that 
 the Government is willing to provide additional attractions to transform Panama 
 into an increasingly important world trade banking centre. 
 
 The very process of expanding Panama as an international banking centre 
 helps to stimulate its growth as a trading centre and vice versa. 
 
 The banks in Panama can have almost unrestricted freedom to carry out au- 
 thorized financing operations while paying taxes only on domestic profits. There 
 are no exchange controls, nor is there a central bank, and freedom of capital 
 transfer and investment is almost unhampered. 
 
 Another seemingly logical extension of the present concentration of so many 
 important banks in Panama is a proposal to create a Latin American multina- 
 tional foreign trade bank. Exports of manufactured goods from Latin America are 
 expected to reach $17,000m by 1980. 
 
 The proposal is sponsored by Panama and was favourably received at a meet- 
 ing last September of the Latin American Central Bank governors. 
 
 Steps are being taken to increase further the volume and kind of services per- 
 formed by Panama's financial centre. 
 
 On Wednesday Panama's first international banking convention will be held. 
 Representatives of the international financial community will meet for three days 
 to discuss future possibilities of the country's banking centre with special regard 
 to loan syndications, money brokerage, foreign exchange, money management, 
 bankers' acceptances and investment banking. 
 
 Questions 1, 2, 10, and 12. Is it true that "most of the money that flows in 
 and out of the foreign banks located in Panama is in transit"? If it is true, why 
 is it necessary for those funds to pass through foreign banks located in Panama? 
 What special tax advantages may be gained by U.S. commercial banks operating 
 through Panama branches? What special advantages does Panama offer to com- 
 
1G 
 
 mercial banks with regard to loan syndications, money brokerage, foreign ex- 
 change, money management, bankers' acceptances and investment banking? 
 
 Answer. As of end-December, 1976, external liabilities of all banks in Panama 
 amounted to nearly $8.6 billion while their external assets totalled almost $7.S 
 billion. That is, over 90 percent of the foreign funds obtained by banks operating 
 in Panama were in effect relent to residents outside of Panama. While detailed 
 information on the operations of all foreign-owned banks operating in Panama 
 is not available, the bulk of the claims and liabilities are on the books of the 
 foreign-owned banks in Panama. 
 
 Regional money or financial centers tend to improve the efficiency of interna- 
 tional capital markets, for example, by placing banks closer to their exporters 
 and borrowers. The choice of location depends upon a wide variety of factors, 
 including the legal environment in the foreign country. 
 
 For information concerning tax advantages and other benefits of Panama as 
 an offshore banking center, please refer to the supplementary information sup- 
 plied with Deputy Assistant Secretary Xachmanoff's testimony. 
 
 Question S. Please submit annual figures dating from January 1970 for total 
 U.S. dollars going to the Republic of Panama and the number of those dollars 
 in turn going on to third countries. Break down each category by amounts, 
 sources of those amounts, country of destination, whether recipient was a gov- 
 ernment or private entity, and other related information on this flow of funds. 
 Do the same for Eurodollars. 
 
 Answer. Attached are aggregate data on sources and uses of funds of the 
 Panamanian banking system, 1973-1976. While the Comptroller of the Currency 
 may have some material possibly relevant to answering some detailed aspects of 
 this question it does not now have the comprehensive information necessary to 
 answer accurately the questions relating to geographical breakdown; currency 
 composition and the identity of borrowers. Also attached are data, published by 
 the Bank for International Settlements, which provide the information avail- 
 able on Euro-currency flows. Additional data on bank positions in Panama are 
 also provided in the answers to several of the other questions. 
 
 TABLE 1.-S0URCES AND USES OF FUNDS OF THE PANAMANIAN BANKING SYSTEM 
 [In millions of U.S. dollars) 
 
 1373 1974 1975 1976 
 
 I. Local sources: 
 
 A. Demand deposits: 
 
 Private . 
 
 Government 
 
 Total. 
 
 B. Private time deposits 
 
 C. Savings deposits . 
 
 D. Other local deposits 
 
 E. Other liabilities 
 
 F. Capital and reserves 
 
 Total, Panamanian sources. 
 
 II. External sources: 
 
 A. IPC deposits: 
 
 Demand 
 
 Time 
 
 Savings 
 
 Total, IPC deposits.. 
 
 B. Bank deposits: 
 
 Demand 
 
 Time 
 
 Other... 
 
 Total, bank deposits. 
 
 C. Obligations 
 
 D. Other liabilities 
 
 Total, external sources... 
 
 III. Local uses: 
 
 A. Loans 
 
 B. Securities 
 
 C. Liquid assets in Panama... 
 
 D. Other assets 
 
 Total, local uses 
 
 See footnote at end of table. 
 
 5151 
 
 $191 
 
 $170 
 
 0) 
 
 99 
 
 68 
 
 46 
 
 (') 
 
 250 
 
 259 
 
 216 
 
 $228 
 
 219 
 
 257 
 
 309 
 
 322 
 
 133 
 
 139 
 
 155 
 
 178 
 
 7 
 
 9 
 
 
 
 83 
 
 97 
 
 121 
 
 122 
 
 130 
 
 157 
 
 206 
 
 184 
 
 822 
 
 928 
 
 1.007 
 
 1,034 
 
 47 
 
 62 
 
 101 
 
 129 
 
 319 
 
 542 
 
 1,036 
 
 1,165 
 
 5 
 
 7 
 
 10 
 
 14 
 
 371 
 
 611 
 
 1.147 
 
 1,308 
 
 84 
 
 129 
 
 47 
 
 183 
 
 1,937 
 
 4, 508 
 
 5,839 
 
 6, 327 
 
 113 
 
 18 
 
 61 
 
 2, 134 
 
 4, 637 
 
 5, 904 
 
 6, 571 
 
 72 
 
 77 
 
 96 
 
 566 
 
 162 
 
 121 
 
 110 
 
 113 
 
 2, 739 
 
 5, 446 
 
 7,257 
 
 8,558 
 
 1,025 
 
 1,352 
 
 1,525 
 
 1,628 
 
 14 
 
 23 
 
 26 
 
 29 
 
 44 
 
 69 
 
 79 
 
 91 
 
 58 
 
 79 
 
 102 
 
 83 
 
 1,141 
 
 1,523 
 
 1,732 
 
 1,831 
 
17 
 
 TABLE 1.— SOURCES AND USES OF FUNDS OF THE PANAMANIAN BANKING SYSTEM-Continued 
 
 1973 1974 1975 1976 
 
 IV. External uses: 
 
 A. Loans 
 
 B. Demand deposits 
 
 C. Time deposits 
 
 D. Securities 
 
 E. Other assets 
 
 Total, external uses. 
 
 Total assets (total liabilities) 
 
 Memo: Net funds supplied to Panamanian economy. 
 
 1,314 
 
 2, 980 
 
 4, 451 
 
 4, 743 
 
 142 
 
 192 
 
 335 
 
 361 
 
 686 
 
 1,161 
 
 1,198 
 
 1,938 
 
 57 
 
 68 
 
 54 
 
 90 
 
 197 
 
 446 
 
 452 
 
 626 
 
 2, 396 
 
 4,847 
 
 6,500 
 
 7,758 
 
 3, 537 
 
 6,370 
 
 8, 232 
 
 9, 589 
 
 319 
 
 595 
 
 725 
 
 797 
 
 1 Not available. 
 
 Source: "The Structure of the Panamanian Banking System," paper delivered by John J. McGuire, Security Pacific 
 Interamerican Bank, Panama (See appendix.) 
 
 Bank for International Settlements, 
 
 Monetary and Economic Department, 
 
 November 11, 1977. 
 
 Eurocurrency and Other International Banking Developments — 
 Second Quarter 1977 
 
 After a seasonal contraction at the beginning of the year, international bank- 
 ing activity, as measured by external assets of banks in group of ten countries 
 and of branches of U.S. banks in the principal offshore centers of the Caribbean 
 and Far East, showed a marked expansion in the second quarter of 1977, by 
 $26 billion to a total of $573 billion, bringing the increase over the year to 
 nearly $100 billion ( table 1). 
 
 Adopting a somewhat broader perspective and looking at the first half of 
 1977 as a whole, the rate of growth in the reporting banks' external assets, at 
 scarcely 5 percent, is seen to have been more moderate than the 8 percent 
 expansion recorded in the first 6 months of 1976. Apart from the fact that 
 the seasonal contractionary influences at the beginning of the year seem to have 
 been stronger than usual, this slow-down reflects primarily smaller increases in 
 foreign lending by banks in the United States and Canada and an actual decline 
 in external assets of banks in Japan. On the other hand, the growth of external 
 assets of banks in the narrowly defined Eurocurrency market accelerated. 
 
 Returning to the figure for the second quarter, the external assets of banks 
 in the eight reporting European countries rose by $17.8 billion, after a $1.7 
 billion decline in the first quarter. Of this increase, $4.9 billion represented 
 traditional foreign lending in domestic currency. Of the $12.9 billion growth 
 in foreign currency assets, about 60 percent was in dollars and 30 percent in 
 Deutsche mark; assets in sterling and Swiss francs showed no change (table 2). 
 The bulk of the growth in this Eurocurrency lending was accounted for by the 
 banks in the principal market centers, that is, in the United Kingdom, France, 
 Belgium-Luxembourg, and the Netherlands, whereas the external claims of banks 
 in Italy showed a further decrease (table 1). 
 
 TABLE 7.— EXTERNAL POSITIONS IN DOMESTIC AND FOREIGN CURRENCY OF BANKS IN GROUP OF 10 COUNTRIES 
 AND SWITZERLAND AND OF THE FOREIGN BRANCHES OF U.S. BANKS IN THE CARIBBEAN AREA AND THE FAR 
 
 EAST 1 
 
 [In millions of US dollars, end-March 1977 (revised)] 
 
 Liabil- 
 
 Liabilities/assets vis a vis ities Assets 
 Group of 10: 
 
 Belgium-Luxembourg (HCJU)... 22,379 27,074 
 
 France (HCJU) 27,522 25,610 
 
 Germany, Federal Republic 
 
 (HCJU) 20,982 27,555 
 
 Italy (HCJU) 9,062 16,743 
 
 Netherlands (HCJU) 17,983 11,906 
 
 Sweden (HCJU)... 2,432 5,593 
 
 Switzerland (CJU)2 61,073 11,276 
 
 United Kingdom (HCJU). 73,043 62,363 
 
 Canada (HJU) 13,334 10,516 
 
 Japan (HCU) 9,099 32,905 
 
 United States (HCJ) 59, 955 33, 566 
 
 Total 316,864 265,107 
 
 See footnotes at end of table. 
 
 Liabil- 
 
 Liabilities/assets vis a vis ities Assets 
 
 Other countries in Western Europe: 
 
 Andorra. 59 2 
 
 Austria (CU) 4,669 5,162 
 
 Cyprus.. 299 122 
 
 Denmark (CU) 1,973 5,307 
 
 Finland (CU) 855 3,694 
 
 Gibraltar 60 5 
 
 Greece (CJU)__ 3,038 2,990 
 
 Iceland 108 217 
 
 Ireland (C) 1,547 1,766 
 
 Liechtenstein... 241 318 
 
 Malta.. 513 4 
 
 Monaco 22 
 
 Norway (CU) 2, 038 5, 358 
 
 Portugal (CU) 774 1, 042 
 
18 
 
 TABLE 7.— EXTERNAL POSITIONS IN DOMESTIC AND FOREIGN CURRENCY OF BANKS IN GROUP OF 10 COUNTRIES 
 AND SWITZERLAND AND OF THE FOREIGN BRANCHES OF U.S. BANKS IN THE CARIBBEAN AREA AND THE FAR 
 
 EAST'— Continued 
 
 [In millions of US dollars, end-March 1977 (revised)— Continued 
 
 Liabilities/assets vis a vis 
 
 Liabil- 
 ities 
 
 Other countries in Western Europe- 
 Continued 
 
 Spain (CU).. 5,491 
 
 Turkey (CJU) 455 
 
 Vatican 122 
 
 Yugoslavia (CJU) 1,700 
 
 Residual (HCJU) 5,817 
 
 Total 29, 781 
 
 Other developed countries: 
 
 Australia (CU) 794 
 
 New Zealand (C)... 268 
 
 South Africa (CU)... 656 
 
 Residual (HCJ) 305 
 
 Total 2,023 
 
 Eastern Europe: 3 
 
 Albania... 91 
 
 Bulgaria... 307 
 
 Czechoslovakia 414 
 
 German Democratic Republic... 609 
 
 Hungary 935 
 
 Poland (U) 558 
 
 Rumania 210 
 
 Soviet Union (CU) 2,054 
 
 Residual (HCJU) 401 
 
 Total 5, 579 
 
 Caribbean area: 
 
 Bahamas (JU) 16,695 
 
 Barbados 68 
 
 Bermuda (JU) 3,550 
 
 Cayman Islands (U)<_ * 8, 286 
 
 Cuba(JU).. 145 
 
 Dominican Republic. 6 
 
 Haiti.. 10 
 
 Jamaica 35 
 
 Netherlands Antilles (U) L 657 
 
 Panama (JU) 4,695 
 
 Trinidad and Tobago (U) 591 
 
 West Indies (UK)(U) M73 
 
 Residual (HCJU). 3,084 
 
 Total 39, 295 
 
 Latin America: 
 
 Argentina (JU) 3,169 
 
 Belize 20 
 
 Bolivia 112 
 
 Brazil (JU) 5,320 
 
 Chile(JU) 700 
 
 Colombia (JU) 1,180 
 
 Costa Rica. 82 
 
 Ecuador (JU) 561 
 
 El Salvador 120 
 
 Guatemala 160 
 
 Guyana 25 
 
 Honduras 87 
 
 Mexico (JU) 4,557 
 
 Nicaragua 128 
 
 Paraguay 44 
 
 Peru(JU) 454 
 
 Surinam 136 
 
 Uiuguay(U) 661 
 
 Vene?uela(JU) 7,599 
 
 Residual (HCJU) 5,261 
 
 Total 30,376 
 
 Assets 
 
 8,139 
 2,311 
 62 
 2,349 
 5,136 
 
 Liabilities/assets vis a vis 
 
 Liabil- 
 ities 
 
 Assets 
 
 43, 984 
 
 2,693 
 855 
 6, 962 
 1,524 
 
 12, 034 
 
 1,961 
 1,044 
 3,719 
 2,976 
 5, 945 
 798 
 9, 425 
 2,581 
 
 28, 449 
 
 36, 051 
 38 
 924 
 5 9,981 
 993 
 160 
 19 
 338 
 1,516 
 7, 749 
 43 
 5 217 
 5, 833 
 
 63, 862 
 
 3, 315 
 10 
 353 
 20, 540 
 1, 100 
 1,662 
 243 
 979 
 121 
 164 
 82 
 164 
 18, 141 
 362 
 45 
 3,006 
 13 
 188 
 
 5, 292 
 
 6. 039 
 
 61,819 
 
 Middle East: 
 
 Oil-exporting countries (J): * 
 
 (a) Low absorbers: Ku- 
 
 wait, Qatar, Saudi 
 Arabia, and United 
 
 Arab Emirates 30,917 2,396 
 
 (b) High absorbers: Bah- 
 
 rain, Iran, Iraq, 
 
 Libya, and Oman 12, 875 7, 409 
 
 Other countries: 
 
 Egypt(JU) 2,027 1,298 
 
 Israel(JU). 2,983 1,997 
 
 Jordan.... 493 88 
 
 Lebanon (U) 2,983 473 
 
 Syria (U) 459 250 
 
 Yemen 659 25 
 
 Yemen People's Democra- 
 tic Republic 193 9 
 
 Residual (HCJU)' 9,212 2,648 
 
 Total 62,801 16,593 
 
 Other Africa: 
 
 Afars and Issas (French terri- 
 tory)... 29 6 
 
 Algeria (J). 2,383 1,835 
 
 Angola.. 108 40 
 
 Benin 42 
 
 Botswana/Lesotho 15 77 
 
 Burundi.. 23 
 
 Cameroon. 78 82 
 
 Canary Islands.. 8 
 
 Central African Empire 16 2 
 
 Chad 12 6 
 
 Congo. 54 68 
 
 Ethiopia 298 
 
 Gabon.. 100 310 
 
 Ghana (U).. 161 92 
 
 Guinea 9 33 
 
 Ivory Coast... 519 363 
 
 Kenya (J) 506 89 
 
 Liberia (JU) 1,339 4,625 
 
 Malagasy.. 57 3 
 
 Malawi 50 55 
 
 Mali 13 
 
 Mauritania 71 23 
 
 Mauritius 32 3 
 
 Morocco (U) 1,020 629 
 
 Mozambique 93 1 
 
 Namibia. 13 
 
 Niger 33 19 
 
 Nigeria (J) 559 322 
 
 Rhodesia 45 7 
 
 Rwanda 67 3 
 
 Senegal 75 59 
 
 Sierra Leone 46 16 
 
 Somalia 72 4 
 
 Sudan.... 142 322 
 
 Swaziland 57 
 
 Tanzania.. 203 12 
 
 The Gambia 8 3 
 
 Togo 34 24 
 
 Tunisia 241 93 
 
 Uganda 57 18 
 
 Upper Volta 15 4 
 
 Zaire (U) 370 806 
 
 Zambia (J) 164 391 
 
 Residual (CU) 1,090 1,619 
 
 Total 10, 306 12, 088 
 
 Sea footnotes at end of table. 
 
19 
 
 TABLE 7.— EXTERNAL POSITIONS IN DOMESTIC AND FOREIGN CURRENCY OF BANKS IN GROUP OF 10 COUNTRIES 
 AND SWITZERLAND AND OF THE FOREIGN BRANCHES OF U.S. BANKS IN THE CARIBBEAN AREA AND THE FAR 
 
 EAST 1 — Continued 
 
 [In millions of US dollars, end-March 1977 (revised)— Continued 
 
 Liabilities/assets vis a vis 
 
 Other Asia: 
 
 Afghanistan.. 
 
 Bangladesh 
 
 Brunei 
 
 Burma 
 
 Cambodia 
 
 China (U) 
 
 Fiji- ..— 
 
 French Polynesia 
 
 Hong Kong(JU). 
 
 India (JU) 
 
 Indonesia (JU) 
 
 Korea, North 
 
 Korea, South (JU) 
 
 Malaysia (JU).... 
 
 Nepal 
 
 New Hebrides 
 
 Pakistan (JU) 
 
 Liabil- 
 
 ities 
 
 Assets 
 
 82 
 
 2 
 
 66 
 
 13 
 
 912 
 
 19 
 
 34 
 
 14 
 
 53 
 
 18 
 
 2,015 
 
 301 
 
 29 
 
 24 
 
 20 
 
 44 
 
 5,919 
 
 7, 688 
 
 1,292 
 
 444 
 
 1, 829 
 
 3, 506 
 
 140 
 
 396 
 
 2,411 
 
 4, 036 
 
 1, 639 
 
 1.08O 
 
 55 
 
 3 
 
 63 
 
 100 
 
 391 
 
 174 
 
 Liabil- 
 
 Liabilities 'assets vis a vis ities 
 
 Other Asia— Continued 
 
 Papua New Guinea 101 
 
 Philippines (JU) 1,703 
 
 Sikkim/Bhutan. 7 
 
 Singapore (HJU) 7,541 
 
 Sri Lanka 49 
 
 Taiwan (JU) 2,624 
 
 Thailand (JU) 1,053 
 
 Vietnam 150 
 
 Residual (CU) 1,102 
 
 Total 31,280 
 
 International institutions (U) 3, 495 
 
 Unallocated HCJU 10, 131 
 
 Grand total 541,931 
 
 Memorandum item: Oil-exporting 
 
 countries (HJU) 66,953 
 
 Assets 
 
 132 
 2, 432 
 15 
 9, 437 
 19 
 2,717 
 1,561 
 59 
 983 
 
 35, 217 
 1, 534 
 6,414 
 
 547, 101 
 25.415 
 
 1 Foreign branches of U.S. banks in the Bahamas, Cayman Islands, Panama, Hong Kong, and Singapore. 
 
 2 The positions vis a vis the BIS are included under Switzerland, except for the U.S. banks v.hich report them under 
 the residual for "Other countries in Western Europe." 
 
 » Excluding positions of banks located in Germany vis a vis the German Democratic Republic. 
 
 * Figures for the U.S. banks' liabilities and assets vis a vis the Cayman Islands ate estimates based on other statistical 
 raports. 
 
 5 Revised. 
 
 • Includes positions of Japanese banks vis a vis Kuwait, Saudi Arabia, United Arab Emirates, Iran, Iraq, and Libya only. 
 ' Includes partly on an esiimated basis the positions of U.S. banks vis a vis Middle Eastern countries other than Egypt, 
 
 Israel, Lebanon, Syria, and Libya (which is included under the residual for "Other Africa"). 
 
 Note: A full country breakdown of the reporting banks' liabilities and assets is available only for banks in Belgium- 
 Luxembourg, France, Germany, Italy, the Netherlands, Sweden and the United Kingdom, and for the branches of U.S. 
 banks in the Caribbean area and the Far East. For banks in the other reporting countries— Canada, Japan, Switzerland 
 and the United States— the country breakdown is less than complete and its extent is indicated by the use of the letters 
 C (Canada), J (Japan), H (Switzerland) and U (United States). The liabilities of banks in the United States exclude U.S. 
 Treasury bills and certificates held in custody by the banks on behalf of nonresidents. 
 
 Excluding the double-counting resulting from the redepositing of funds be- 
 tween banks within the reporting area but allowing for the use of Euro-currency 
 funds for domestic lending, the second-quarter growth of the narrowly defined 
 Euro-currency market may be estimated to have amounted to about $12 billion 
 (Table 5). This raised the total volume of Euro-credit to $267 billion, or 22 per 
 cent above its year-earlier level. On the uses side of the market, the most notable 
 feature during the second quarter was the continued strength of demand for 
 Euro-currency funds from within the reporting European area itself. The absorp- 
 tion of funds inside the area rose by nearly $7 billion, the bulk of which repre- 
 sented direct foreign currency lending to the non-financial sector. The largest 
 single item was an expansion by $2.8 to $7.8 billion in foreign currency credits 
 extended to domestic borrowers by banks in Italy (Table 4). The counterpart of 
 this domestic Euro-currency lending was a further increase of $2.9 billion in the 
 Italian banks' net external borrowing in foreign currency. As a result, the Italian 
 banks' net external position has shifted from balance at the end of 1975 to net 
 liabilities of $6.9 billion, thereby financing considerably more than the whole of 
 the Italian current-account deficit during this 18-month period. In the second 
 quarter of 1977, moreover, there were sizable increases in the reporting banks' 
 Euro-currency credits to the non-bank sectors of most of the other countries 
 inside the area, notably Sweden. 
 
 Outside their own area the European banks' claims dropped by $3.2 billion 
 vis-a-vis Japan, but rose by about $8.5 billion vis-a-vis the rest of the world. 
 Of this, $2.1 billion was channelled to offshore centres. In addition, credits to oil- 
 exporting countries rose by $1.5 billion, for the third quarter in succession ; lend- 
 ing to developed countries outside the Group of Ten also went up by $1.5 billion 
 and lending to eastern Europe by $1.2 billion. Claims on non-oil developing coun- 
 tries, which had remained flat during the first quarter, also showed some increase. 
 
 On the sources side of the market, about half of the new funds were supplied 
 from within the reporting area itself. Direct deposits by non-banks inc reased by 
 $1.5 billion and deposits by official monetary institutions rose by $2.3 billion, the 
 
20 
 
 remaining $2.2 billion being provided by other financial institutions and the 
 reporting banks themselves. 
 
 From outside the reporting area the main sources of new funds were the 
 United States (+$3.7 billion), the oil exporters (+$3.2 billion) and the offshore 
 centres of the Caribbean and Far East (+$1.4 billion). There was, moreover, 
 a further substantial increase of $1.4 billion in deposits by developing countries, 
 which raised the total amount of funds received by the market from this group 
 of countries to $24.8 billion, or $7.7 billion above the year-earlier level. As claims 
 on these countries went up by only $4.2 billion over the same twelve-month 
 period, the Euro-banks' net asset position vis-a-vis developing countries has 
 dwindled from $4.2 billion to only $0.7 billion. 
 
 On the other hand, deposits by Japan declined by $1.8 billion during the second 
 quarter and there were some withdrawals of funds from the market by Canada 
 and by eastern European countries. Reflecting the weakness of balanee-of-pay- 
 ments positions, deposits by "other developed countries" showed no increase. 
 
 Turning to other international financial centres, the external assets of banks 
 in the United States, after a $3.4 billion drop in the first quarter of the year, 
 went up again by $5.4 billion (Table 1). The resultant $2 billion increase in the 
 first half of the year compares with a $8.4 billion expansion in the first six months 
 of 1976. This slowdown has to be seen in the context of the deterioration of the 
 US balance-of -payments position which tends both to reduce balance-of-pay- 
 ments financing requirements in the rest of the world and to add. largely in the 
 form of official deposits, to the supply of funds to the Euro-currency market. The 
 greater part of the second-quarter increase in the US banks' external assets was 
 recorded vis-a-vis other Group of Ten countries. Claims on the offshore centres 
 of the Caribbean and Far East went up by $1.5 billion and direct claims on non- 
 oil developing countries by only $0.4 billion, while there was little increase 
 elsewhere. 
 
 The rate of growth of the external assets of the US banks' branches in the 
 offshore centres of the Caribbean area and Far East dropped from 25 percent 
 in the first half of 1976 to about 12.5 percent in the first half of 1977. In absolute 
 figures the slowdown was. however, much less pronounced and growth remained 
 rapid by any standards. Roughly half of the $6.3 billion second-quarter expan- 
 sion in the external assets of these branches were lent directly to developing 
 countries and oil exporters. Claims on the United States edged up by only $0.3 
 billion, whereas liabilities to the US bank and non-bank sectors rose by $2.7 
 billion. 
 
 The introduction as from June 1977 of a reserve requirement on their short- 
 term external liabilities tended to induce banks in Japan to shift their foreign 
 business to their affiliates abroad. This may. in fact, have been a major influ- 
 ence behind the second-quarter drop in external assets and liabilities by $2.S 
 and 3.4 billion respectively reported by banks in Japan. Moreover, the $0.6 billion 
 decline, from $7.8 to 7.2 billion, in the banks' net. external debtor position seems 
 to have been related to the strong Japanese balance-of-payments position and 
 official encouragement given to the banks to increase gradually the yen com- 
 ponent in the financing of Japanese imports. 
 
 Looking again at the broadest available measure of international bank lend- 
 ing, about $14 billion of the second-quarter growth in the external assets of banks 
 in Group of Ten countries and of branches of US banks in the offshore centres 
 represented claims within this wider reporting area, a figure which is inflated 
 by a substantial amount of double-counting due to redeposits between the report- 
 ing banks themselves. Claims outside this area rose by about $12 billion (Table 
 6). The largest item In the increase was $4 billion of new lending to western 
 European countries outside the Group of Ten, with Spain. Denmark and Norway 
 the largest takers of new funds (Table 7). In fact, at the end of June total claims 
 on non-Group of Ten western European countries exceeded their year-earlier 
 level by $13 billion, whereas over the same period liabilities to these countries 
 edged up by only about $1 billion. This clearly illustrates the important role that 
 the banks in the international markets have been playing in financing the cur- 
 rent-account deficits of this group of countries. 
 
 Claims on oil-exporting countries, which had already expanded rapidly in pre- 
 ceding quarters, rose by another $3.5 billion to $29.6 billion, or 71 percent above 
 their mid-1976 level. Liabilities to oil-exporting countries went up by $4.4 billion 
 to a total of $72.4 billion. Venezuela and — perhaps somewhat surprisingly — the 
 Middle Eastern "high absorbers" were the largest suppliers of new funds, but 
 also the largest borrowers. Deposits received from the "low absorbers" showed 
 only a relatively modest increase. 
 
21 
 
 Claims on developing countries went up by $2.4 billion, or by $0.3 billion less 
 than the deposits obtained from those countries. As in the case of the European 
 countries outside the Group of Ten, the year-on-year increase in gross claims 
 totalled $13 billion, but virtually the whole of this amount had as a counterpart 
 an increase in the reporting banks' liabilities to the developing world, a develop- 
 ment which reflects the very substantial improvement in the international re- 
 serve position of this group of countries over the last year or so. The second- 
 quarter expansion in claims on developing countries was spread over a fairly 
 large number of countries, with Brazil and Mexico together accounting for only 
 about $0.9 billion of new takings. Similarly, the supply of new deposits came 
 from quite a broad range of countries, the largest individual item being $0.5 
 billion of new funds received from China. 
 
 Claims on eastern Europe, which had declined by $0.6 billion during the first 
 quarter, went up by $1.4 billion. At the same time, withdrawals of deposits by 
 eastern European countries, after amounting to $2.1 billion in the first quarter, 
 slowed down to $0.1 billion, which meant that the increase in eastern Europe's 
 net indebtedness to the reporting banks, at $1.5 billion, was the same as in the 
 first quarter. 
 
! 
 
 I I 
 
 I i 
 
 IN 
 
 1 
 
 p 
 
 PI 
 
 I 
 
 « 
 IP 
 
 i 
 
 » 
 
 i 1 
 I 
 
 a 
 i 
 
 J 
 I 
 
 IP 
 
 j 
 
 22 
 
 2222SS52S 
 
 assess 
 
 ililll 
 
 22£;2222S 
 
 25522338 
 
 222**22* 
 
 »2222S22 
 
 : : 
 
 m 
 
 iiilill 
 
 22222223 
 
 2222=222 
 
 ■ 
 
 111 I Is! I 
 
 1 
 
 ill 
 
 I 
 
 If 
 I 
 
 ; o.e 
 
 II 
 
 n 
 
 .it 
 
 !l 
 
 ! 
 
 S E S 
 
 Si? 
 
 111! 
 
23 
 
 £ -5 
 
 > c 
 < 'oc 
 CO = 
 
 > ^ 
 
 to ^ 
 
 1-1 
 
 o + 
 O ^ 
 
 "S > 2 
 
 5.S? y 
 S 2? 5 
 O o fc 
 
 • to cm cm cn o oo 
 
 • r-.' cm cd cd" r-.' 
 
 -KMrotn i—i CM 
 
 O oo oo cri co' 
 
 ^■^■mci CD — i 
 
 CO CO OO CO OO "=3" 
 
 r-» o r- oo e 
 oo" ^ «r cd < 
 
 CMCM CMCMCMC 
 
 OOOO 
 
 cm'co 
 
 CD CO OO ^3" CO CD 
 
 osi cvi co oo <* >* 
 
 CO o 
 co cd 
 
 CD OO OO OO < 
 
 . lo coo OMi-nn 
 
 CD co 
 oo o 
 
 CXI CO CD OO 00 I 
 
 >r-~ co cd o r 
 
 CM CM CM CO CO OO 
 
 o oo oineoo 
 cm to co co —i 
 
 CM CM CM CM CM OO 
 
 f-N OO r- I CO — < 
 
 CD O CD CD OO CO CD CD I — 
 
 lo id cd co co co aS cd co cor-.' 
 
 CO CO OO ^J- t3- CO 
 t-I CM CM CM CM CM 
 
 r- cd oo t t cm . 
 
 ICM CMCO CO OO OO OO COCO 
 
 CO lO o oo 
 
 cvi csi co co 
 
 CD oo OO CO 
 
 CO CO CO CO •— ' CO 
 
 co co cd oo «a-' *r 
 
 ■— i O 1" CO CO CM 
 
 CM* CM CM cm' CM CM 
 
 co -h oo r — cd o loco 
 CO CO oo cri oo t t f 
 
 ^•«* CMCMCOCD 
 
 O 00 O CD CO ' 
 
 *--^r~ O CD «J-CD 
 
 CO CM LO CM 
 
 CD CO 
 CO CD 
 
 CM CM 
 
 co'o 
 
 . O CD OO 
 
 ; cm' d 
 
 )CM CM OO 
 
 J CM CMCM 
 
 co--oo< 
 cd' cd oo < 
 
 [cnmix 
 Ij-j^r-.' 
 
 CO OO CO CD 
 
 CO OO' CD CM* 
 CO oooo «3- 
 
 O CO 
 
 CM CO 
 
 E 
 
 cd cd 
 
 TflOCD 
 ' CD CD CD 
 
 ;«3-loco 
 
 icDOJCD 
 
24 
 
 ■Suj 
 
 £2 = 
 
 — CMrsoO 
 - 
 
 IClCx- —CM 
 CM CM CM 90 COCO 
 
 CM O r. 00 CO 00 CM CO 
 
 is) rsOOwm 
 >«e w-j u-> ui to 
 
 CM W5 mNVIh COCM 
 
 ro wi iri cd to rsrs 
 
 .00 —CM 
 ' — CM CM 
 
 CO CO LniS^N t— i CT> 
 00 oS oc oc ct> — ' CM CM 
 
 CD CT) CvjOtNi^ 0)0 CMCM IfiTf 0O«f to "J- 
 
 co r>. to t o~ _ 
 mis en o*> CT) oo 
 
 o oo mo — co co *r *r co 
 od rd cd ^■^•^t«t «rc\i 
 
 CT) to 
 
 CM CM 
 
 00 CM «S" cO 
 CM CO CO CO 
 
 -~ _~ _r to . 
 
 — cn *r co to oo 
 o ltS rs oo ct> < " 
 
 CM «3- — • 
 
 — — —CM CM CM 
 
 O CM CO «T r-~ to 
 lo ufi u-j to W *r 
 
 CD CT) r*» C7> Ps lO 
 
 •w to o*) tn 
 
 CM CM CM CM CM CM — — — — . 
 
 O Cx OO . 
 
 -r O t' < 
 
 o — oooo ^j-cti 
 o cm cd co — o to co 
 
 a> a> 
 
 JO -Q 
 
 E E 
 co o 
 
 QJ <D 
 
 "-><!) — 
 
 «T CO CO 
 
 I CT CT) CT) 
 
 5 E 
 
 a> co o co -t- <u 
 
 ° Q J = "£ 
 
 , S— <V)Q 
 
 i T to to I 
 
 5f a> 
 
 5 = 
 
I 
 
 I 
 
 :o»oi 
 
 2' esi cd cS i c5 eS 
 
 i 111 b 
 
26 
 
 OOOOOtOCOCDtOlO 
 
 «a- n-i to' uS to' to od od 
 
 O " ^ — .' —I —J ~ 
 
 oocDcor-r^rocno 
 ,_; ^ ,_; ^ csi csi 
 
 i co m ld 00 CD lo 
 
 «*tor-~r-~CDO>— 'O 
 
 • co <r> ■* to 
 
 csir-ir-^csjcvioou-ir-.' 
 
 LD CD CD CD OO 00 00 CD 
 
 cd csi csi csi csi csi csi csi 
 
 cncocooo-<rHN 
 
 ) to CO CO CO — i to •— I 
 ■ 00 CD CD O O O ■ — 1 
 
 tnooto^i-totocsjuo 
 co tsi csi csi csi csi cd cd 
 
 OOCDOOOCO^l- 
 
 Tfr-.tor-~oo^HCsiL<-) 
 ^'^rt^^csicsicsi 
 
 00 00 0)00-00 
 
 CDti->CO«S-**00U-ICD 
 UO LT> LT) ITS LfS IT) tO tO 
 
 ujiDcnoirscooio 
 
 LOOOOOCDOCDCDO 
 
 ) to to to OO CO CSI CO 
 ) CO CO CO CO ^ ^ 
 
 — « CD Csi CSI O OO 00 tn 
 
 TMninuiujooeors 
 
 p~tor-^L»or>-r-«r-.tn 
 
 * CSI CO CO CO CSI t— « p 
 
 E E_ 
 
 CD CD O 
 ° ° TO 
 
 qqS- 
 
 T tO 
 
 £ Ex 
 
 ^ CD D 
 
 ) to to to r- r- oo 
 
 cdi — omTtcooi-i 
 
 o cd o o o r~ ■ 
 
 CD CSI •— < CSI » t— » CSI 
 
 <f fsOOOCMcaiD 
 
 <csjcsicsicsicsicsi 
 
 CSJCDCDCD-*CSICO*-« 
 
 CD CD n 11 
 
 .o-o ; -s x> 
 
 EEr : £ E 
 u o i c au l; r 
 
 CD CD <2 =3 CD CD <2 3 
 
 • in to 
 
 CD-g 
 
 OO c 
 
 i§2 
 
 O CD 
 CD 
 
 £ o 
 
27 
 
 O-g o 
 .Era 
 
 5 co 
 
 E2 
 
 -£= o o 
 
 csicocsiCT>csiooir>r»» 
 
 co «a* *s* n* xj-' ir> in lo 
 
 < in oo oo ir> us 
 co co co co «a-' «* ir> irj 
 
 coco^cocococo^r 
 
 oi oi o" i-i csi csi CO 
 
 r-.-*csi«a-csj*»-<£>ir> 
 cvi co' co co co co co* CO* 
 
 CT> o — > or? r-~ o < 
 
 OIOIOOOIOOO 
 
 OOOOOOIOIOhh 
 
 ^ ^ csi -< csi csi csj 
 
 oir>r-.o>ooincsicsi 
 «3* t -3- «r *r lt) ui io 
 
 «»•' tj" «9* Lei ui c£> (x> 
 
 CSJ CSI f— « CSJ CSJ CSI CSI 
 
 ' CO CO 
 
 to Ti- m in 
 
 o»csior--oor-«c£>ir> 
 
 O ~h CO ID IT) to " 
 
 CO CO CO CO CO 
 
 ir>r-.cr>Lr>iomex>oo 
 
 cS » - ' ' — ' CSJ* CO' ^ "3-' LT) 
 
 — <CSJCSJCSl»rtOcOtO 
 CO CO* CO CO* CO* CO co' CO* 
 
 EEr ! I E. 
 
 I 00 
 
 OS. 
 
 «3- IT) 
 O) CT) Si 
 
 03 <D 
 -O -O 
 
 CT> S> CT) 
 
 005—78- 
 
28 
 
 oooooooo 
 • crior-'i/ii 
 
 oooooooo 
 r»o — — < rr> tr> to 
 
 -«CMCMCMcMCMCMCM 
 
 r>-cMOtotocMr^to 
 
 tOenTTOO^fOOCMOl 
 
 in er> oo tr> r»- in ld cvj u-> . 
 
 in CT> 0"> -h CM «3- U0 u-OC 
 — — i CM cm CM CM CM ~ — * • 
 
 's I 
 
 to — 
 
 O —J 
 
 E . 
 
 si 
 
 E « 
 ■ 
 
 ■9 » 
 
 I s 
 
 lf> p"» o cr> — to CM r 
 cS iri to tb cd oS • 
 
 - CO o — to o 
 
 o <*j* in to oo cm ■ 
 
 co oo co — ootn 
 
 o (\j j«i ^ rv m 
 
 motooocooococo 
 
 m — en' S— 
 •r ooo 2 E 
 
 r c-j — uj . 
 
 n o c - _ 52 
 • :r — -a = 
 
 lliijl 
 
 0) ra ,--_o_ 
 
 •E Eon?-? 
 
 • O MJO c 
 ro £ Oh- CO 
 
 ~ - — i r- — 
 
 n 
 
 CMCM-3-tOOltOCOCO 
 
 o^pooocommoo 
 coeooSoSoo'ood 
 
 CMinoeotocMCOcn 
 cdtototdr^odr^-cd 
 
 cs c s ;"2 ? 
 
 o i> 1-5-5 
 
 •2J-C = 5- 
 
 a. ■*- ro < o. 
 oo „-S<2Q._ « 
 = re oo .-oc 
 
 -H !2 f „- oo oo = 
 
 LU0P=< fci 
 
 < o- 
 
 " = = l'5§ oo « 
 
 > no oo — ■ cm ( 
 
 .oomuiNPs 
 
 inoorrtM — m* oo in o cm oo to to to 
 
 o> Co 
 
 E E 
 
 EEr i | E _ 
 qqS-^ooqS-^ qoS 
 
 11 
 
 oo to cj 'i £ oo to a> 
 o ^ ^ q. o J- <- 
 
 1 9 
 
 .yj=r3Soo£ "oo 
 
 «r e .£ m « 
 
 cj o X; ™ ^"O _ o a> 
 
 Ilfsii Hi 
 
 t|a«l§ "£.2 
 
 E „, m n o 3 -~ <Z 
 !_"*" 3 C= £ = 
 
 o a 5— 
 
 CO CO 00 
 
 : 5 ■ S 9 5 2 
 
 » JS— or? tu E " 
 
 = ^2 - "C co «- <n 
 
 i z) o c J= a> 5? 
 
 ; ™r *- ™ - 
 
 . a. w c= >> o 
 
 : oo «/> o o ** 
 
 ! 5 ro E 5 § 
 
 "*~ o 
 
 "=>,in.ti">tr "0>J= 
 m J2 ^3= C c * 
 
 co jo ^a^-gi'ss 
 
 ■c^t; J o E ™ j 
 
 tt into 
 
 § S = £"°_S 2 * 5.J2 
 
 o ™ " «J <0 
 
29 
 
 TABLE 6. — EXTERNAL POSITIONS, IN DOMESTIC AND FOREIGN CURRENCY, OF BANKS IN THE GROUP OF 10 COUN- 
 TRIES AND SWITZERLAND AND OF THE FOREIGN BRANCHES OF U.S. BANKS IN THE CARIBBEAN AREA AND 
 THE FAR EAST i 
 
 [In billions of U.S. dollars] 
 
 1976 1977 
 
 1975, 
 
 Decern- Septem- Decem- 
 
 ber June ber ber March June 
 
 Banks' claims on: 
 
 Group of 10 countries and Switzerland 
 
 Of which: 
 
 Reporting European area 
 
 United States 
 
 Canada 
 
 Japan 
 
 Offshore banking centers 2 
 
 Other countries in Western Europe 
 
 Australia, New Zealand, and South Africa. 
 
 Eastern Europe -. 
 
 Oil-exporting countries 
 
 Nonoil developing countries 
 
 Of which: 
 
 Latin America 3 
 
 Middle East 
 
 Other Asia 
 
 Other Africa 
 
 Unallocated 4 
 
 Total 
 
 Banks' liabilities to: 
 
 Group of 10 countries and Switzerland 
 
 Of which: 
 
 Reporting European area 
 
 United States 
 
 Canada 
 
 Japan 
 
 Offshore banking centers 2 
 
 Other countries in Western Europe 
 
 Australia, New Zealand, and South Africa- 
 Eastern Europe 
 
 Oil-exporting countries 
 
 Nonoil developing countries 
 
 Of which: 
 
 Latin America 3 
 
 Middle East 
 
 Other Asia 
 
 Other Africa 
 
 Unallocated * 
 
 Total 
 
 235 1 
 
 241.0 
 
 248.8 
 
 270.2 
 
 265. 1 
 
 274.7 
 
 165.4 
 
 166.0 
 
 170.8 
 
 193.4 
 
 188.1 
 
 199.7 
 
 30 7 
 
 32 1 
 
 33 8 
 
 33 3 
 
 33 6 
 
 34 
 
 7.1 
 
 8.' 6 
 
 9.3 
 
 9.' 4 
 
 10.' 5 
 
 io!s 
 
 31.9 
 
 34.3 
 
 34.9 
 
 34. 1 
 
 32.9 
 
 30.2 
 
 61.9 
 
 72.5 
 
 76.7 
 
 83.5 
 
 84.8 
 
 89.0 
 
 31.8 
 
 35.0 
 
 38.3 
 
 42.7 
 
 44.0 
 
 48.0 
 
 9.0 
 
 10.7 
 
 11.4 
 
 11.8 
 
 12.0 
 
 12.3 
 
 21.6 
 
 25. 1 
 
 26.8 
 
 29.0 
 
 28.4 
 
 29.8 
 
 14.3 
 
 17.3 
 
 20.0 
 
 24. 1 
 
 26. 1 
 
 29.6 
 
 63.0 
 
 70.2 
 
 73.5 
 
 80.9 
 
 80.8 
 
 83.2 
 
 43.5 
 
 49.6 
 
 51.8 
 
 57.4 
 
 57.1 
 
 58.1 
 
 3 3 
 
 3 2 
 
 3. 5 
 
 4 4 
 
 4 
 
 4 1 
 
 12.9 
 
 13.9 
 
 14.3 
 
 14.7 
 
 15.1 
 
 16.1 
 
 3.3 
 
 3.5 
 
 3.9 
 
 4.4 
 
 4.6 
 
 4.9 
 
 5.0 
 
 4.9 
 
 4.6 
 
 5.4 
 
 5.9 
 
 6.2 
 
 441.7 
 
 476.7 
 
 500. 1 
 
 547.6 
 
 547. 1 
 
 572.8 
 
 270. 1 
 
 284. 3 
 
 294. 4 
 
 320. 5 
 
 316. 9 
 
 332. 6 
 
 209.1 
 
 210.6 
 
 216.5 
 
 241.4 
 
 234.5 
 
 247.6 
 
 42.0 
 
 51.9 
 
 54.2 
 
 56.3 
 
 60.0 
 
 65.7 
 
 9.9 
 
 11.8 
 
 12.6 
 
 12.6 
 
 13.3 
 
 12.2 
 
 9.1 
 
 10.0 
 
 11.1 
 
 10.2 
 
 9.1 
 
 7.1 
 
 40.8 
 
 49.4 
 
 51.4 
 
 56.0 
 
 57.0 
 
 61.8 
 
 31.1 
 
 29.4 
 
 31.1 
 
 32.6 
 
 29.8 
 
 30.5 
 
 2.1 
 
 2.2 
 
 2.1 
 
 2.4 
 
 2.0 
 
 2.4 
 
 6.3 
 
 6.2 
 
 6.1 
 
 7.7 
 
 5.6 
 
 5.5 
 
 51.8 
 
 54.6 
 
 59.1 
 
 64.2 
 
 68.0 
 
 72.4 
 
 37.0 
 
 41.8 
 
 43.5 
 
 49.8 
 
 51.8 
 
 54.5 
 
 16.3 
 
 17.6 
 
 17.7 
 
 22.3 
 
 22.1 
 
 22.6 
 
 6.0 
 
 6.9 
 
 6.9 
 
 7.3 
 
 7.6 
 
 8.2 
 
 10.6 
 
 12.6 
 
 13.7 
 
 14.9 
 
 16.0 
 
 17.8 
 
 4.1 
 
 4.7 
 
 5.2 
 
 5.3 
 
 6.1 
 
 5.9 
 
 7.9 
 
 8.8 
 
 8.4 
 
 10.4 
 
 10.8 
 
 11.4 
 
 447.1 
 
 476.7 
 
 496.1 
 
 543.6 
 
 541.9 
 
 571.1 
 
 1 Foreign branches of U.S. banks in the Bahamas, Cayman Islands, Panama, Hong Kong, and Singapore. 
 
 2 Bahamas, Barbados, Bermuda, Cayman Islands, Hong Kong, Lebanon, Liberia, Netherlands Antilles, New Hebrides 
 Panama, Singapore, West Indies. 
 
 3 Including those countries in the Caribbean area which cannot be considered as offshore banking center?. 
 Including! nternational institutions 
 
 Note: The figures in this table are partly based on estimates. 
 
30 
 
 TABLE 7.— EXTERNAL POSITIONS IN DOMESTIC AND FOREIGN CURRENCY OF BANKS IN GROUP OF TEN COUNTRIES 
 AND SWITZERLAND AND OF THE FOREIGN BRANCHES OF US BANKS IN THE CARIBBEAN AREA AND THE FAR EAST ■ 
 
 [Amounts in millions of US dollars end-June 1977J 
 
 Liabilities/assets vis-a-vis 
 
 Liabilities Assets 
 
 Group of 10: 
 
 Belgium-Luxembourg (HCJU). . 22, 643 28, 178 
 
 France (HCJU). 30,774 27,614 
 
 Germany, Federal Republic 
 
 (HCJU) 22,267 29,103 
 
 Italy (HCJU) 8,784 17,633 
 
 Netherlands (HCJU) 20,158 14,333 
 
 Sweden (HCJU).... 2,852 6,746 
 
 Switzerland » (CJU). 65,185 12,367 
 
 United Kingdom (HCJU) 74,916 63,687 
 
 Canada (HJU) 12,238 10,840 
 
 Japan (HCU). 7,068 30,162 
 
 United States (HCJ) 65,675 33,997 
 
 Total 332,560 274,660 
 
 Other countries in Western Europe: 
 
 Andorra. 74 1 
 
 Austria (CU) 4,983 5,460 
 
 Cyprus.... 377 126 
 
 Denmark (CU) 2,173 6,345 
 
 Finland (CU) 811 3,702 
 
 Gibraltar... 53 4 
 
 Greecd(CJU) 3,091 3,142 
 
 Iceland 119 244 
 
 Ireland (C)_... 1,608 1,852 
 
 Liechtenstein... 274 64 
 
 Malta 529 9 
 
 Monaco... 44 
 
 Norway (CU) 2,279 5,894 
 
 Portugal (CU) 773 1, 180 
 
 Spain (CU) 5,242 8,946 
 
 Turkey (CJU) 531 2,407 
 
 Vatican. 130 
 
 Yugoslavia (CJU) 1,632 2,503 
 
 Residual (HCJU) 5,820 6,161 
 
 Total 30,543 48,040 
 
 Other developed countries: 
 
 Australia (CU) 876 2,993 
 
 New Zealand (C) 271 827 
 
 South Africa (CU) 774 6,883 
 
 Residual (HCJ) 466 1,612 
 
 Total 2, 387 
 
 Eastern Europe: * 
 
 Albania 70 
 
 Bulgaria. 308 
 
 Czechoslovakia 425 
 
 German Dem. Rep 626 
 
 Hungary... 748 
 
 Poland (U).. 538 
 
 Rumania 134 
 
 Soviet Union (CU) 2,259 
 
 Residual (HCJU). 397 
 
 Total 5,505 29,817 
 
 Caribbean area: 
 
 Bahamas (JU) 18,907 38,318 
 
 Barbados 32 13 
 
 Bermuda (JU) 3,541 898 
 
 Cayman Islands (U)<... 9,970 11,471 
 
 Cuba(JU). 215 1,085 
 
 Dominican Republic 9 163 
 
 Haiti. 9 15 
 
 Jamaica" 68 321 
 
 Neth. Antilles (U) 1,770 1,438 
 
 Panama (JU). 4,844 7,829 
 
 Trinidad and Tobago (U) 560 64 
 
 West Indies (French) 12 
 
 West Indies (United KingdomXU) 455 333 
 
 Residual (HCJU). 2,903 5,128 
 
 Total 43,295 67,076 
 
 Liabilities/assets vis-a-vis 
 
 Liabilities Assets 
 
 12,315 
 
 23 
 2,068 
 1,131 
 3,799 
 3, 121 
 6, 148 
 903 
 9, 968 
 2,656 
 
 Latin America: 
 
 Argentina (JU) 3,493 
 
 Belize 20 
 
 Bolivia 172 
 
 Brazil (JU).. 5,452 
 
 Chile (JU)... 694 
 
 Colombia (JU). 1,212 
 
 Costa Rica. 99 
 
 Ecuador (JU). 515 
 
 El Salvador 198 
 
 Guatemala 151 
 
 Guyana. 34 
 
 Honduras 89 
 
 Mexico (JU). 4,507 
 
 Nicaragua... 93 
 
 Paraguay 90 
 
 Peru (JU) 350 
 
 Surinam.. 127 
 
 Uruguay (U).. 547 
 
 Venezuela (JU) 8,908 
 
 Residual (HCJU) 5,387 
 
 Total 32,138 
 
 Middle East: 
 
 Oil-exporting countries (J): * 
 
 (a) Low absorbers: Kuwait, 
 
 Qatar, Saudi Arabia, 
 and United Arab 
 
 Emirates 31, 290 
 
 (b) High absorbers: Ba- 
 
 hrain, Iran, Iraq, 
 
 Libya, and Oman 15, 124 
 
 Other countries: 
 
 Egypt (JU) 2,381 
 
 Israel (JU) 3,039 
 
 Jordan 491 
 
 Lebanon (U) 3,051 
 
 Syria (U).. 615 
 
 Yemen 736 
 
 Yemen People's Democra- 
 tic Republic 240 
 
 Residual (HCJU) 6 9,157 
 
 Total 66, 124 
 
 Other Africa: 
 
 Algeria (J) 2,221 
 
 Angola 161 
 
 Benin 42 
 
 Botswana/Lesotho 13 
 
 Burundi. 29 
 
 Cameroon 72 
 
 Canary Islands 1 
 
 Central African Empire 21 
 
 Chad 8 
 
 Congo 64 
 
 Djibouti 38 
 
 Ethiopia 333 
 
 Gabon 103 
 
 Ghana (U)._. 145 
 
 Guinea 8 
 
 Ivory Coast... 443 
 
 Kenya (J) 689 
 
 Liberia (JU) 1,217 
 
 Madagascar Democratic Repub- 
 lic 52 
 
 Malawi 76 
 
 Mali 14 
 
 Mauritania 44 
 
 Mauritius 20 
 
 Morocco (U) 682 
 
 Mozambique 92 
 
 Niger.... 36 
 
 Nigeria (J) 621 
 
 Rhodesia 45 
 
 Rwanda 70 
 
 Senegal 77 
 
 3, 360 
 8 
 
 375 
 20, 845 
 
 1,220 
 L 543 
 259 
 1,182 
 132 
 160 
 43 
 152 
 18, 726 
 353 
 54 
 3,083 
 7 
 
 176 
 6, 383 
 6, 107 
 
 64, 168 
 
 3, 085 
 
 8, 470 
 
 1,295 
 1,971 
 103 
 457 
 307 
 30 
 
 9 
 
 2, 726 
 
 18, 453 
 
 1,925 
 42 
 3 
 41 
 
 93 
 7 
 1 
 6 
 
 62 
 1 
 2 
 
 354 
 85 
 40 
 416 
 111 
 ,745 
 
 9 
 
 59 
 1 
 
 18 
 
 5 
 
 541 
 
 7 
 
 16 
 368 
 
 53 
 2 
 
 81 
 
31 
 
 TABLE 7. — EXTERNAL POSITIONS IN DOMESTIC AND FOREIGN CURRENCY OF BANKS IN GROUP OF TEN COUN- 
 TRIES AND SWITZERLAND AND OF THE FOREIGN BRANCHES OF US BANKS IN THE CARIBBEAN AREA AND THE FAR 
 EAST i— Continued 
 
 [Amounts in millions of US dollars end-June 19771 
 
 Liabilities/assets vis-a-vis Liabilities Assets 
 
 Liabilities/assets vis-a-vis 
 
 Liabilities Assets 
 
 331 
 10 
 
 6 
 26 
 80 
 16 
 
 1 
 
 812 
 389 
 
 Sierra Leone 55 12 
 
 Somalia.... 76 
 
 Spanish North Africa 53 . 
 
 Sudan.. 151 
 
 Tanzania 231 
 
 The Gambia 23 
 
 Togo 35 
 
 Tunisia 200 
 
 Uganda 63 
 
 Upper Volta. 11 
 
 Zaire (U)___ 455 
 
 Zambia (J).... 181 
 
 Residual (CU). 1,249 1,881 
 
 Total. 10,220 12,669 
 
 Other Asia: 
 
 Afghanistan. 90 9 
 
 Bangladesh 66 12 
 
 Brunei - 1,035 22 
 
 Burma. 24 13 
 
 China (U) 2,456 379 
 
 Fiji. 25 19 
 
 French Polynesia... 10 61 
 
 Hong Kong (J U)... 6,053 8,064 
 
 India (JU). 1,522 441 
 
 Indonesia (JU) 
 
 Kampuchea Democracy.. 
 
 Korea, North 
 
 Korea, South (JU).. 
 
 Malaysia (JU) 
 
 Nepal. 
 
 New Hebrides 
 
 Pakistan (JU) 
 
 Papus New Guinea 
 
 Philippines (JU) 
 
 Sikkim/Bhutan 
 
 Singapore (HJU).. 
 
 Sri Lanka 
 
 Taiwan (JU) 
 
 Thailand (JU)... 
 
 Vietnam. 
 
 Residual (CU) 
 
 Total 
 
 International institutions (U). 
 Unallocated (HCJU) 
 
 Grand total... 
 Memorandum item: 
 countries (HJU)... 
 
 Oil-exporting 
 
 2, 151 
 
 3, 540 
 
 36 
 
 3 
 
 54 
 
 415 
 
 2,643 
 
 4, 479 
 
 1,862 
 
 1, 334 
 
 56 
 
 1 
 
 62 
 
 119 
 
 450 
 
 208 
 
 150 
 
 223 
 
 1,699 
 
 2, 367 
 
 AQ 
 
 14 
 
 8, 423 
 
 9, 654 
 
 70 
 
 9 
 
 2,865 
 
 3,091 
 
 1,099 
 88 
 
 1,618 
 
 71 
 
 1,520 
 
 1,121 
 
 34, 558 
 
 37, 287 
 
 5, 235 
 
 1,779 
 
 8, 524 
 
 6,577 
 
 571, 089 
 
 572, 841 
 
 71, 37S 
 
 28, 857 
 
 1 Foreign branches of U.S. banks in the Bahamas, Cayman Islands, Panama, Hong Kong, and Singapore. 
 1 The positions vis a vis the BIS are included under Switzerland, except for the U.S. banks which report them under 
 the residual for "Other countries in Western Europe." 
 a Excluding positions of banks located in the Federal Republic of Germany vis a vis the German Democratic Republic. 
 
 * Figures for the U.S. banks 'liabilities and assets vis a vis the Cayman Islands are estimates based on other statistical 
 reports. 
 
 6 Includes positions of Japanese banks vis a vis Kuwait, Saudi Arabia, United Arab Emirates, Iran, Iraq, and Libya only. 
 
 • Includes partly on an estimated basis the positions of U.S. banks vis a vis Middle Eastern countries other than Egypt, 
 Israel, Lebanon, Syria, and Libya (which is included under the residual for "Other Africa"). 
 
 Note: A full country breakdown of the reporting banks' liabilities and assets is available only for banks in Belgium- 
 Luxembourg, France, Germany, Italy, the Netherlands, Sweden, and the United Kingdom, and for the branches of U.S. 
 banks in the Caribbean area and the Far East. For banks in the other reporting countiies— Canada. Japan. Switzerland 
 and the United States— the country breakdown is less than complete and its extent is indicated by the use of the letters 
 C (Canada), J (Japan), H (Switzerland) and U (United States). The liabilities of banks in the United States exclude U.S. 
 Treasury bills and certificates held in custody by the banks on behalf of non-residents. 
 
 Question 4. Submit names of the 13 (or more) U.S. banks operating in 
 Panama. List total assets of those banks and assets of the branches in Panama, 
 if permissible. Do the same for the other 62 (or more) foreign commercial 
 banks operating in Panama, if available. 
 
 Answer. The list of U.S. branches operating in Panama is provided in re- 
 sponse to Question 14, below. The total assets of most of the U.S. and foreign 
 banks which operate in Panama are shown on the attached table (excerpted 
 from The Banker 1 , June, 1977). While the Comptroller of the Currency may 
 have some material concerning the assets of the Panamanian branches of indi- 
 vidual U.S. banks, it does not now have the comprehensive information neces- 
 sary to answer the question accurately. 
 
 1 Subcommittee note : The Banker "Top 300" list of the World's leading commercial banks. 
 Assets of those U.S. and foreign banks which operate in Panama (Answer to Question 14) 
 possibly may be found in this compilation. 
 
32 
 
 SSa8SsSS2g*S825SS8SSSS28sSS8SSSiSSSSSS5gB 
 
 gsSsisllslg~§isSlEss5»iIlslS5gi£lsS5l§SK 
 
 iiiiimiiiiiiiiiMiiiiiiMihittiithi 
 
 : : : 
 
 lililitiiillijiiiiii 
 
 i 
 
 1 
 
 ! 
 
 il 
 
 1 
 
 I 
 
 b 
 
 ! 
 
 i I i i | 1 f l I I i i 1 J I i I il 
 
 I I 1 1 1 I 1 I 1 ! 1 I I 1 I I J I 1 
 
 J cvi co * tfi «> - cd a> o cJ cvS £ jn jg g co «j o 
 
 ii 
 
33 
 
 S~3~3£"S£'£S3££^^ ° £2£2 3 § a 88 2 8~i2 8~8"S 5 8*8" SVS'S'S" 
 
 r-T pJW r-7 r-T r-Tr-T .-T^T 
 
 22222222222222222222222 222222222222222—— 2222222 — 5; 
 
 ss^*aaassss^sss"s"^s^ss" sa"aaa"s^a"aa^s»a"s™"a"3aa>fsaas"s 
 
 liliiiiili 
 
 : : 
 : : 
 
 I 
 
 1! ill 
 
 il 
 H 
 
 ! : 
 | j 
 
 if 
 
 i i 
 : : 
 
 !, 
 
 J if s 
 
 
 
 II 
 
 i Ii 1 
 
 34. Union 
 
 35. Taiyo 
 
 limit 
 
 -.. , M M ii 
 ii 1 1 11 1 1! m 1 1 1 i M ! 1 ii 
 
 1 1 M M j j I \ \ i i I ! J I I \ i\\ 
 
 ! lii il l I! I \\\\U I Ii* 
 ilUiW if ililli Ji!l! iff 
 1 1 ! I s i 1 1 1 1 ll j 1 i J 1 i 1 1 i 1 J fii 
 s U 1 1 lit i 1 1 3 i 1 f W M I j f J A 
 
 a si si a « si g a s' si a s 5 s g pj « g ° 5 3' 5 5 * 
 
34 
 
 n 
 
 1] 
 
 Pit 
 I! 
 
 Ifii 
 
 ii 
 
 :::::: 
 
 S i i 
 
 iiJJjiiiiJiJjjJJJ 
 
 1 1 i j 1 : 1 1 1 1 1 } j ! I ! 1 1 ] 1 11 
 
 IliiillfiJII! lill I 
 
 3 5? 3 5 S S 3 3 S S S Si S 8 S 3 S 8 S S 
 
 i 
 
 i 
 I 
 
 it 
 
 1 1 
 
35 
 
 ££S22£i2;3S2£i™;. 
 
 !S2222222222222i£2222-!22222222222222 
 
 iiijiijiiijiiit^ 
 
 j 
 
 ill 
 hi 
 
 HMMUUHlMiM 
 
 11 
 
 j 
 
 ! 
 
 I? 
 
 J 
 
 Jljjjll! . . . 
 
 Iiiji in ii irr-f i=ij 
 
 I ■; il 1 1 U 1 1 1 1 1 i i M 3 1 
 
 iiiif ii 1 jliiiiilPiii 
 
 S £ 8 S g K S K S 15 
 
 f» S § 3 3 3 S S g £5 §8 S 
 
36 
 
 Pi 
 « 
 
 1! 
 
 I! 
 
 m 
 
 _T_r — — T ifl'n- -T-T 
 
 o-» ---- ~a 
 
 mmmmmmmmmmmmmmmmmm 
 
 iMmiMiMiMiiMmmiMMiiMimM 
 
 : : : 
 
 : : i 
 
 liinlHililnllln 
 
 : : : i 
 
 i 
 
 ! 
 1 
 
 jji 
 
 i 
 
 I 
 
 III!! 
 
 H I A s lJpJl'l 
 
 I! 
 
 1 
 
 Si! 1 
 
 liiil 
 
 $ si S S U S * £ tf-tf 8 § "8 8 3 | | S 8 jj 
 
37 
 
 *SS5g3138S83S85S35g38aSSS85^ 
 
 X5aQC3C3cQCDc3C5a30Q00a3OC3c3C3OCJD000C3C3c3«C3C30QDDo< 
 
 i 
 
 ! 
 
 : : 
 
 siiiNiili 
 
 i 1 1 1 I ! Ill I i I 
 
 y 
 
 i 
 
 IllJil 
 
 i i 1 1 1 1 
 
 liM! 
 
 Itf I f 1 1 1 1 111 1 1 1 1 1 ^ 1 1 1 HI H £ 
 
38 
 
 II 
 
 III! 
 
 coo" ^.-<rr 
 
 iiimimiUirMmiMimmMnmiM 
 
 : i : l 
 : : : I 
 
 HiU'imUiU 
 
 Hi 
 
 It 
 
 J 
 
 ! ! 
 
 II 
 
 i 
 
 i 
 
 iiiiilifUiiiiiii 
 
 i 1 ! S i i i*i i i i i m i i i i i i i 
 
 2 s S B = S S 5 S S S s S 2 s S s 5 2 S 
 
39 
 
 IlllsSSlSlaSSISslslSISIs; 
 
 ££££££ 
 
 Ilsllllsllllsssllllllsll! 
 
 iMMfmiiiitMiMiiMMimimiiimiirmii 
 
 Wiilllliiiiiiiiiiilili 
 
 i 
 
 ill 
 Hi 
 
 i 
 
 111 
 
 i 
 
 ill 
 If 
 
 i 
 
 liMifMUHiMij 
 
 tli fijillillii 
 
 illlHsiiilillffi 
 
II 
 
 40 
 
 n 
 
 if 
 II 
 
 if 
 
 cooJcvTcsj-oocrr tfcroftnUf cnVg\o>J<Nj"evj-— \-%~"~ VJe^ 
 
 Isilli lllilllsilisislissillslillllllli 
 
 lODotJcaCDoacDCDmcDcjaGCjacjoacDCCimm 
 
 in 
 
 IN 
 
 1 1 
 
 Mi. . 
 
 IlJisl 
 
 ! 
 
 . . If! 
 Ji ill 
 
 * i s j 1 1 1 1 j n! ! 1 
 
 linmffm? 
 
41 
 
 5 5 S I i 1 § S i § § i 1 5 5 5 5 S 3 5 S I 
 
42 
 
 n 
 
 a 
 
 i! 
 
 J 
 
 ll if 
 
 jjillilfiJJlJiJUli 
 
 : : : : : 
 
 j 
 1 
 
 i 
 
 tin 
 
 si 
 
 I 
 
 Mi 
 
 mnum. 
 
 IlfJllfWli 
 
 5 S S S S § 5 « £ § 5 g ti S S * g 3 S f 
 
43 
 
 eJ-^*Vi>Je>iVJc>jVsiV»e^ 
 
 sslsllllls ills ^§a§§§§§§g§SS§SSS^SSS§§§§§§§iB 
 
 jJAUJitiJ its! jjijiJilliiwijiiijijil&'iitiiiiijiffiii 
 
 i i i 
 
 JJiiiiiiililtJiliiiJJJJi 
 
 i 
 
 f II Hid 
 
 iJiiii 
 
 iii 
 
 1 1 1 i i 
 
 iiyiiiiwijyiyiiJi 
 
 ist|?l!ilHUIiii!P!! ?{: 
 
 I 
 
 2. r )-(]05— 78 4 
 
I! 
 
 44 
 
 cnT cnT cnT i-« cnT csT oJ" •— <nT — «" cvT *S cnT — T cnT —■ «" oS cvj" — cnT cnT cvT - 
 
 H 
 
 n 
 
 IS 
 
 ;~_- r _r_r,-,"'rt _r— r_r.— ■ 
 
 iiiiJjliiiiiiiJji 
 
 I 
 
 I 
 
 : : : : 
 
 * i 
 
 I! 
 
 i 
 
 m 
 
 I!! 
 
 ajiliiUlyilJ-., 
 
 H III 11 li lf!P 
 
 nummmm 
 
 % $ § I § § 5 S S 5 £ S S g S I £ 
 
 i! 
 
lsig||g~|giSllSSsIllIsgSSlsSISglgSss°~ 
 
 illlllllgllllllll 
 
 i : j 
 
 iliUjilililjlJiiii 
 Illi 
 
 illilSiiJiiyilii 
 
 ilfiii 
 
 IW!HiUPiii 
 
 8 £ i £ £ $ i £ £ £ £ £ £ £ £ £ £ £ i 
 
46 
 
 Question 5. Please submit a copy of decree No. 238, the July 1970 Banking 
 
 Law of Panama. 
 Answer. Attached is a copy of decree No. 238. 
 
 Cabinet Decree Number 238 
 
 [July 2, 1970] 
 
 Whereby the banking system is amended and the National Banking Commis- 
 sion is established. 
 
 The Provisional Board of Government 
 Decrees : 
 Preliminary Title 
 chapter i 
 
 Scope of its Application and Definitions. 
 
 Article (1) — This Cabinet Decree shall apply to Banks organized in accord- 
 ance with Panamanian laws engaged in banking business in Panama, or abroad 
 and to Banks organized abroad engaged in banking business in Panama. 
 
 Paragraph : Only juridical persons may engage in the banking business. 
 
 Article (2) — For the purposes of this Cabinet Decree, the terms hereinafter 
 set forth, shall have the following meaning : 
 
 (a) "Bank": Every juridical person engaged in the banking business, other 
 than the Savings and Loan Associations authorized according to the laws; 
 
 (b) "Banking Business": Primarily the act of obtaining financial resources 
 from the public through the acceptance of demand or time deposits of money or 
 through any other means authorized by the pertinent law T ; and the use, on ac- 
 count and risk of the bank, of such resources for loans, investments, or any 
 other transactions authorized by law or banking practices. 
 
 (c) "Establishment": Any office, branch or agency of a Bank conducting all 
 or any of the banking activities or businesses ; 
 
 (d) "Commission": The National Banking Commission; 
 
 (e) "Commissioners" : The Members of the National Banking Commission; 
 
 (f) "Demand Deposits" : All those payable on demand; 
 
 (g) "Time Deposits": All those which are not payable on demand. They are 
 divided into two categories : Fixed Time Deposits and Savings Deposits ; 
 
 (h) "Local Deposits". 
 
 1. Deposits payable to natural persons residing in Panama ; 
 
 2. Deposits payable to juridical persons organized in accordance with Pana- 
 manian laws and which earn taxable income in Panama, excepting only from 
 this definition juridical persons whose income is derived from sources outside of 
 the national territory; and 
 
 3. Deposits payable to foreign juridical persons with branches qualified to 
 operate in Panama and whose deposits are in fact under the control of the 
 Panamanian branch; 
 
 (i) "Foreign Deposits" : All those which are not "local deposits"; 
 
 (j) "Unsecured Credit Facilities": Those granted without real collateral or, 
 if collateral is furnished the value thereof is lower than the sum owed; 
 
 (k) "Assigned Capital" : That part of the paid-in capital stock which any bank 
 organized under foreign laws, attributes, assigns or pledges to its banking busi- 
 ness in Panama, through its Panamanian branch: 
 
 (1) "Productive Assets": The loans and investments placed economically in 
 the Republic of Panama ; 
 
 (in) "Capital Reserve": That which is created from funds originating from 
 profits made or from other sources, which are accumulated in order to strengthen 
 the financial condition of the Bank; 
 
 (n) "Representativt Office": Those established to act as representatives of 
 Banks, but which do not engage in banking business on their own account; 
 
 (o) "Mortgage Bank": A Bank whose i>ortfolio of loans consists of at least 
 seventy five (75%) percent of mortgage loans with a term of not less than five 
 (5) years: 
 
 (p) "Contingent Credit": That which is granted to Banks engaged in banking 
 business in Panama, by another Bank outside of Panama or in the case of 
 
47 
 
 Branches or Agencies of foreign Banks, by their Home Office. This credit must 
 be granted in accordance with the terms and conditions established by the 
 Commission ; 
 
 (q) "Interest" : The sum or sums which in any form or under any other name 
 are collected or paid for the use of money. 
 
 Title L — National Banking Commission 
 
 CHAPTER I. GENERAL PROVISIONS 
 
 Article (3) — The National Banking Commission is created and assigned to 
 the Ministry of Planning and Economic Policy. 
 
 Article (4) — The Commission shall have the following objectives, aside from 
 those assigned by this Cabinet Decree : 
 
 (a) To insure that the solidity and efficiency of the Banking System is main- 
 tained so as to promote monetary and credit conditions conducive to the stability 
 and sustained growth of the national economy. 
 
 (b) To strengthen and promote the proper conditions for the development of 
 Panama as an international financial center. 
 
 CHAPTER II. ORGANIZATION 
 
 Article (5) — The Commission shall be composed of seven (7) members with 
 a right to speak and vote, as follows : 
 
 (a) The Minister of Planning and Economic Policy who will preside over it; 
 
 (b) The Finance and Treasury Minister. 
 
 (c) The General Manager of the National Bank of Panama (Banco Nacional 
 de Panama). 
 
 (d) Three (3) representatives of the Banks, who must be Panamanian citi- 
 zens, domiciled in the Republic and Bank officials. 
 
 They shall be appointed by the Executive Body from a list of three (3) names 
 to be submitted by the Panama Banking Association, and 
 
 (e) One member appointed by the Executive Body who cannot be a Bank 
 director, officer or employee. 
 
 Article (6) — The Commission shall have a Technical Secretariat that shall 
 be headed by a Secretary and shall be staffed by the personnel deemed necessary 
 to dicharge its duties. The Secretary shall attend the meeting of the Commission 
 with a right to speak only. 
 
 The personnel, the records, the files and property of the Technical Secretariat 
 of the National Banking Commission shall be transferred to the Ministry of 
 Planning and Economic Policy. 
 
 Article (7) — The alternates of Minister of Planning and Economic Policy, the 
 Finance and Treasury Minister and the General Manager of the National Bank 
 of Panama shall be the Economic Planning and Policy Vice Minister, the Finance 
 and Treasury Vice-Minister and the General Manager of the Savings Bank, 
 respectively. 
 
 Article (8) — Each representative of the Banks shall have an alternate ap- 
 pointed in the same manner as his principal. 
 
 Article (9) — The Commissioner appointed according with paragraph (e) of 
 Article 5 shall have an alternate appointed in the same manner as his principal. 
 
 Article (10) — The Commissioners as well as their respective alternates, shall 
 be appointed for a period of three (3) years by the Executive Body and with 
 adhonorem status. 
 
 Transitory Paragraph : The terms of the first Commissioners proposed by 
 the Banking Association of Panama and their alternates will be of 1, 2 and 3 
 years respectively, so that the terms of a Commissioner and his alternate ends 
 each year. The term which corresponds to each one of them will be determined 
 by casting lots at the first meeting of the Commission. 
 
 Article (11) — The Commissioners may be removed only by the Executive 
 Body at the request of five (5) Commissioners, if any of the following circum- 
 stances occur: 
 
 (a) They are permanently disabled to discharge their duties ; 
 (l>) They are declared bankrupt or are found in an evident state of in- 
 solvency ; 
 
 (c) They are condemned for crime against property or public faith or; 
 
 (d) They no longer meet the requirements which were established for their 
 appointment. In case of removal of any of the appointed Commissioners, the 
 
48 
 
 vacancy shall be filled by his alternate until a new principal be chosen and 
 appointed for the remainder of the term of the removed Commissioner 
 
 Article (12)— In case of temporary and permanent absences and until such 
 time as a new appointment is made, the Commissioners shall be replaced bv 
 their respective alternates. 1 : 
 
 Article (13)— The Commissioners referred to in Paragraph (d) of Article 5 
 shal be disqualified from acting when the Bank of which they are Officers is 
 involved m the issues to be considered by the Commission. 
 
 Article (14)— The functions of the Commission, in addition to those other 
 specifically assigned in this Cabinet Decree, are the following : 
 
 (a) To meet at least every two months and, also whenever convened by the 
 President of the Commission or at the request of at least three commissioners • 
 
 (b) To decide on such matters as are submitted by the President the Sec- 
 retary or any of the members of the Commission ; 
 
 (c) To issue the resolutions referred to by this Cabinet Decree ; 
 
 (d) To assist the Executive Branch in regulating the provisions of this 
 Cabinet Decree and to establish its own internal bylaws, subject to the approval 
 of the Executive Body ; 
 
 (e) To recommend to the Executive Body the appointment of the subordinate 
 personnel which the Commission may need to properly discharge its functions • 
 and 
 
 (f) To determine, within the administrative sphere, the interpretation and 
 scope of legal provisions on banking matters. 
 
 Article (15) — The decisions of the Commission shall be adopted by an ab- 
 solute majority, except in those cases especially covered by this Cabinet Decree. 
 
 The presence of at least five (5) commissioners shall be required to constitute 
 quorum. 
 
 Title II. — The Banking System 
 
 CHAPTER I. — QUALIFICATION 
 
 Article (16) — Except for the Official Banks, no person shall engage in banking 
 business without previously having obtained the proper authorization from the 
 Commission, through the issuance of the respective license. 
 
 Three (3) types of licenses shall be issued, to wit : 
 
 General License : Which shall be issued to Banks organized under Panamanian 
 laws and to authorized branches of Banks organized under foreign laws to 
 engage in banking business both within or outside of Panama ; 
 
 International License: Which shall be issued to Banks organized in accord- 
 ance with Panamanian laws and to authorized branches of banks organized 
 under foreign laws to conduct, exclusively, from an office established in Panama, 
 transactions which are completed, accomplished or are intended to take effect 
 outside of Panama. 
 
 License of Representation : Which shall be issued to the Banks organized 
 in accordance to foreign laws to establish exclusively representative offices in 
 Panama. 
 
 Paragraph: The Commission shall extend to every Bank currently operating 
 in the Republic and which is duly authorized by the Commission, the license 
 appropriate to its activities according to those mentioned in the preceding 
 paragraphs. 
 
 Article (17) — At the time this Cabinet Decree becomes into effect, the licenses 
 to engage in banking business which are in force at such time will be considered 
 valid for a period of up to one (1) year, a term that may be extended for an ad- 
 ditional year when, in the judgment of the Commission, there exist justifiable 
 causes therefor. Within this period, the holders of the aforementioned licenses 
 must comply with the provisions of Article 30 and 31, in order that they be 
 issued a license in accordance with the present Cabinet Decree. Notwithstanding 
 the foregoing, the banks organized in accordance with Panamanian laws, the 
 75 percent of the stock or shares of which, at least, are owned by natural persons 
 who are citizens of Panama or foreigners with more than five (5) years of resi- 
 dence in Panama, will have a period of five (5) years, within which they must 
 comply with the provisions of the aforementioned Articles 30 and 31 of this 
 Cabinet Decree. 
 
 Article (18) — With the exception of national institutions or associations which 
 are exclusively engaged in humanitarian or charitable activities, no person who 
 is not an authorized Batik shall use in its name, corporate name, description or 
 denomination, in invoice headings, letter paper, notices, announcements or in 
 
49 
 
 any other form, the word "bank" or derivatives thereof, in any language, which 
 may lead to believe that it is engaging in banking business. 
 
 Paragraph : Notaries are forbidden ito authorize public documents or copies 
 thereof, acts, statements or instruments proper to their office and to authenticate 
 signatures which violate the provisions of this article. The Public Registry Office 
 is forbidden likewise, as far as its recordings are concerned. At the time this 
 Cabinet Decree becomes effective, companies already registered, organized ac- 
 cording to Panamanian laws, or qualified to do business in the Republic, and 
 whose denomination or corporate name violates the provision of this Article, shall 
 have a period of 90 days within which to dissolve voluntarily, secure a license 
 from the Commission to engage in banking business, or amend their charter to 
 change their denomination or corporated name. Once this period has expired, 
 the Commission shall so notify the Director General of the Public Registry so 
 that he will proceed to add a marginal note in the registration of any company 
 which may have not complied with what has been hereinabove provided, to the 
 effect that the said company has been dissolved as a matter of law T , or its authori- 
 zation to conduct business in Panama has been revoked, depending on whether 
 it is a Panamanian or a foreign company. 
 
 Article (19) — Whenever it is known or there are reasonable grounds to be- 
 lieve that a natural or juridical person is engaging in banking business in viola- 
 tion of the provisions of this Cabinet Decree, the Commission shall be empowered 
 to examine their books, accounts and documents in order to determine whether it 
 has violated or is violating any provision of this Cabinet Decree. Refusal to ex- 
 hibit these books, accounts and documents, shall lead to presume that it is engag- 
 ing in banking business without the required license, in which case the Commis- 
 sion shall be empowered to so inform the Public Registry Office in order that the 
 marginal notation referred to in the previous Article may be entered and the 
 appropriate penalty is imposed. 
 
 Article (20) — In the case of new banks which are to be organized in accord- 
 ance with Panamanian laws, the Commission will issue a temporary permit, for 
 a term of ninety (90) days for the sole purpose that the organization of the com- 
 pany using the word "bank", or any of its derivatives might be recorded in the 
 Public Registry Office while the issuance of the respective license is being proc- 
 essed. If the period expires, and all the requirements for the issuance of the 
 license have not been met, the Commission shall so inform the Director General 
 of the Public Registry so that the marginal note referred to in Article 12 may 
 be made. 
 
 Article (21) — The license to engage in banking business must be requested in 
 writing from the Commission, enclosing : 
 
 (a) An authenticated copy of the Charter and By-Laws with their respective 
 amendments if there are any. If these documents are written in a foreign lan- 
 guage, the corresponding translation made by a legally authorized translator 
 must also be enclosed. 
 
 (b) A copy of the Financial Statement, with a closing date within the ninety 
 (90) days prior to the date of the request, duly certified by a firm of certified 
 public accountants. 
 
 (c) A certified check to cover the costs of the investigation referred to in 
 Article 23 of this Cabinet Decree in favor of the National Treasury for the sum 
 of B/.500.00 in the case of a bank organized according to the laws of Panama, 
 and for the sum of B/.1,000.00 in the case of a bank organized under foreign 
 laws. 
 
 ( d) Any other requirement established by the law or the Commission. 
 
 Article (22) — In any case in which the Commission notifies the Director Gen- 
 eral of the Public Registry to make the marginal note mentioned in Articles 18, 
 19 and 20, the Commission shall publish such notification for three (3) consecu- 
 tive days in one daily newspaper with wide circulation throughout the Republic, 
 and once in the Official Gazette. 
 
 Article (23) — When an application for a license is under consideration by the 
 Commission, the Commission will conduct or order to be conducted the investiga- 
 tion it may deem necessary, so as to ascertain the authenticity of the documents 
 filed, the financial status and the background of the applicant, the reputation 
 and experience of its officers, the adequacy of its capital, and any other data 
 which may be necessary for the proper enforcement of this Cabinet Decree. 
 
 Article (24) — Within ninety (90) days after receiving the application, the 
 Commission by means of a resolution, must issue or refuse to issue the license, 
 serving notice of said resolution on the applicant. 
 
50 
 
 Article (25) — In order that they may never be without representation, the 
 banks organized under foreign laws must appoint at least two (2) general attor- 
 neys-in-fact, both of whom must be natural persons with residence in Panama 
 and one of whom, at least, must be a citizen of Panama. 
 
 Article (26) — The Commission shall revoke the license of any bank for any of 
 the following reasons : 
 
 ( 1 ) It has ceased to engage in banking business ; or 
 
 (2) It does not begin operations within the six (6) months following the is- 
 suance of the license. The Commission may also, by a resolution adopted by a 
 majority vote of five (5) commissioners, revoke said license when a bank does 
 not comply with any of the provisions of this Cabinet Decree. Before revoking the 
 license, the Commission shall serve notice on the Bank advising it its intention 
 to revoke, giving it the pertinent reasons to do so, and the Bank shall have a 
 term of twenty-one (21) calendar days, beginning on the day it was served 
 notice, to explain the reasons why it considers that its license should not be 
 revoked, attaching to such explanation the evidence available before the action, 
 which it deems applicable. Once said term expires, the pertinent decision shall be 
 issued by the Commission by means of a resolution. 
 
 Article (27) — Once the resolution whereby a license is revoked becomes final, 
 the Commission shall immediately proceed as follows : 
 
 (1) Communicate the measure to the Director General of the Public Registry, 
 so that the corresponding marginal note may be made, and 
 
 (2) Publish the resolution in a newspaper of wide circulation for three (3) 
 consecutive days and once in the Official Gazette. 
 
 Article (28) — No bank may open a new establishment without previous notice 
 to the Commission. When a bank deems that is is necessary to close or to trans- 
 fer an existing establishment, it must obtain previous authorization from the 
 Commission, merely to enable the Commission to be able to oversee that the 
 closing is performed in an orderly fashion and in a such manner that interests 
 of the depositors of said establishment are protected. 
 
 Article (29) — No bank engaging in banking business in Panama may merge or 
 consolidate, nor sell all or part of the assets it possesses in Panama, when such 
 an action is equivalent to a merger or a consolidation, without prior authoriza- 
 tion from the Commission. 
 
 CHAPTER II. — CAPITAL 
 
 Article (30) — Every bank engaging in banking business in Panama must have 
 a paid-in capital or an assigned capital, as the case may be of not less than one 
 million Balboas ( B/.l, 000,000.00 ) . The paid in or assigned capital must consist 
 of assets free from encumbrances, kept at all moments within the Republic of 
 Panama. 
 
 Paragraph 1. Every bank organized according to Panamanian laws and which 
 engages exclusively in banking business outside of Panama, must maintain at 
 all time in Panama, in assets free from encumbrances, of such types as the 
 Commission authorizes, a sum of not less than Two-Hundred and Fifty Thousand 
 Balboas (B/. 250,000.00), in order to guarantee that its obligations will be fully 
 met. 
 
 Paragraph 2. Every bank organized according to Panamanian laws, a seventy- 
 five percent (75%) at least, of its shares is owned by natural persons who are 
 citizens of Panama, or foreigners with more than five (5) years of continuous 
 residence in Panama, may start operations with a paid-in capital of Two-Hundred 
 and Fifty Thousand Balboas (B/.250.000.00) . This capital must be increased 
 periodically up to the minimum capital required referred to in this Article, 
 within a maximum period of ten (10) years. 
 
 (a) Forty Thousand balboas (B/.40,000.00) per year during the first five (5) 
 years : and 
 
 (b) Seventy-five thousand balboas (B/.75,000.00) per year during the last 
 five (5) years. 
 
 The balance, if there is any, must be capitalized before the above mentioned 
 term expires. 
 
 Article (31) — Every bank engaging in banking business in Panama must 
 maintain a capital reserve, so that its paid-in or assigned capital, as the case 
 may be, plus said capital reserve, is at no time less than the percentage that 
 from its productive assets is set forth by the National Banking Commission. 
 
 The paid in or assigned capital plus the capital shall not be at any time, less 
 than four percent (4%) of the productive assets. 
 
51 
 
 No bank shall declare, credit or pay dividends nor distribute or transfer any 
 part of its profits without first accumulating the reserves referred to in this 
 article. 
 
 Article (32) — Every bank shall maintain assets within Panama equivalent 
 to a percentage of its local deposits. Said Percentage shall be determined by the 
 Commission, according to the national economic and financial conditions. It 
 shall be the same for all banks, and must not exceed one hundred percent 
 (100%) of such deposits. 
 
 Paragraph : Upon this Cabinet Decree becoming effective and until the Com- 
 mission determines otherwise, the percentage referred to in this Article shall be 
 eighty five percent (85 percent) . 
 
 Article (33) — Banks, other than Mortgage Banks, operating within the coun- 
 try, which receive local savings deposits, shall be bound to invest within a term 
 of not less than ten (10) years, in housing mortgage loans, in the Republic of 
 Panama, a minimum of 50 percent of such deposits ; or to invest in interest earn- 
 ing mortgage, warrants, certificates or bonds issued by the National Mortgage 
 Bank of the Republic of Panama. 
 
 The Commission shall determine periodically, in consultation with the Min- 
 istry of Housing, the portion of the 50 percent which will be invested in housing 
 loans for social interest, or in warrants, certificates or bonds earning interest, 
 issued by the National Mortgage Bank. 
 
 The Commission shall establish the terms and conditions under which the non- 
 mortgage banks shall adjust their operations to the provisions of this article. 
 
 Paragraph : Banks are forbidden to invest their savings deposits in their own 
 mortgage certificates, bonds or securities. 
 
 CHAPTER EEL CONTINGENT CREDITS 
 
 Article (34) — Every bank, in order to maintain its license, must be the bene- 
 ficiary of a contingent credit in dollars of the United States of America, granted 
 by a foreign bank, or by its own Head Office abroad in the case of branches of 
 foreign banks (approved by the Commission), for an amount of not less than ten 
 (10 percent) percent of the total of its productive assets as of December 31st or 
 the previous 30 June, as the case may be. The Commission may, nevertheless, de- 
 mand a revision at any other date. The terms and conditions of this credit shall 
 be established by the Commission. 
 
 When for any reason, any bank of the system cannot obtain or renew the 
 stand-by credit referred to in Articles 34 and 35, the Commission shall be em- 
 powered to enter into negotiations with the bank in question and the other 
 banks of the National Banking System regarding the granting of a special short- 
 term credit by the latter in favor of the former, this credit shall be distributed 
 proportionally among the other banks of the system according to the minimum 
 amount of the contingent credit to which each of them is bound. Before receiving 
 such a special credit, the bank in question must prove that it has not been able to 
 obtain or renew the aforementioned contingent credit. 
 
 Article (35) — The contingent credit shall be utilized by the beneficiary bank 
 upon withdrawal from the national banking system within a period of six ((*>) 
 months, of sums in excess of ten percent (10 percent) of the total of its deposits 
 employed or invested in Panama. In such a case, the Commission may require the 
 banks to use such credits, total or partially, and to maintain the proceeds thereof 
 within Panama. Each bank, at its free discretion, shall determine the use of 
 the funds thus obtained. 
 
 When any bank of the system encounters itself with liquidity difficulties due 
 to a decrease in its deposits, the Commission shall be empowered to enter into 
 negotiations with the bank in question and the other banks of the national bank- 
 ing system regarding the granting of a special short-term credit by the latter in 
 favor of the former. This credit shall be distributed proportionally among all 
 the other banks of the system, according to the minimum amount of the con- 
 tingent credit to which each one of them is bound. 
 
 Before being able to receive such a special credit, the bank in question must 
 exhaust its own contingent credit. 
 
 CHAPTER IV. — LEGAL RESERVE 
 
 Article (36) — Every hank must maintain a legal reserve consisting of cash 
 assets, of not less than five (5) and not more than twenty-five (25) per cent of 
 
52 
 
 the total amount of its local deposits. Within such minimum and maximum, the 
 legal reserve shall be fixed periodically by the Commission, by written notice 
 thereof shall be given to each bank. 
 
 Article (37) — Not less than 30 percent of the legal reserve must consist of 
 currency of legal tender in Panama, maintained by each bank in its own 
 possession. 
 
 The excess may consist in demand deposits in Banco Nacional de Panama or 
 in National Treasury Bills, which shall not earn more then three percent (3 per 
 cent) interest per year with maturity of not more than ninety (90) days. Such 
 deposits shall be subject to verification by the Commission. 
 
 Paragraph 1 : At the time this Cabinet Decree becomes into effect and until 
 the Commission determines otherwise, the legal reserve shall be twelve per cent 
 (12 per cent) for demand deposits and six per cent (6 per cent) for time deposits 
 and the minimum percentage of this legal reserve which must consist of currency 
 of legal tender in Panama shall be thirty (30 per cent) per cent. 
 
 Paragraph 2: The banks shall have thirty (30) days, beginning on the effec- 
 tive date of this Cabinet Decree, to comply with the provisions of this article. 
 
 Paragraph 3 : The Commission may authorize that the excess up to seventy 
 percent (70 percent) may consist of other assets, provided that said authoriza- 
 tion is adopted by the affirmative vote of five (5) of its members. Said assets 
 must have sufficient liquidity so as to serve the purposes of the legal reserve. 
 
 Article (38) — The legal reserve shall be uniform for all banks, but the Com- 
 mission may fix different legal reserve for the different types of deposits. 
 
 Article (39) — The banks must file a report with the Commission, promptly 
 in the form and as periodically as the Commission may prescribe, in order to 
 assure proper compliance with the provisions of this Chapter. 
 
 Article (40) — The Commission shall give any bank which ceases to comply 
 with the provisions of this Chapter, three (3) working days notice to correct 
 this deficiency. Once said term has expired, if the deficiency has not been 
 corrected the Commission shall impose a fine equivalent to two percent (2 per- 
 cent) of the amount of the deficiency in the legal reserve, and shall grant the 
 bank fifteen (15) calendar days to correct such deficiency. 
 
 Article (41) — Non-compliance after the expiration of the fifteen (15) days 
 referred to in the previous article, or repeated violations of the provisions of 
 this Chapter shall give the Commission the power to revoke the license or to 
 follow the procedure established in Chapter XI, in so far as it is applicable. 
 
 CHAPTER V. BANKING LIQUIDITY 
 
 Article (42) — Every bank which engages in banking business in Panama must 
 always maintain a minimum balance of liquid assets, equivalent to the percent- 
 age of the gross total of its deposits as may be determined from time to time by 
 the Commission. Said percentage shall not exceed thirty-five percent (35 per- 
 cent), except in the case of mortgage banks for which it shall not exceed twelve 
 l>ercent (12 percent). With this exception, the percentage shall be the same 
 for all banks. 
 
 Paragraph : If a bank which operates within Panama receives credits or 
 deposits from its Head Office, Branch, Subsidiary or Affiliated Company outside 
 of Panama, such credits or deposits shall be excluded from the gross total of its 
 deposits for the purpose of figuring the percentage of liquidity. 
 
 Article (43) — The changes in the percentage of liquidity must be complied 
 with within the term indicated by the Commission, which shall not be less than 
 thirty (30) calendar days. Upon this Cabinet Decree becoming effective and until 
 the Commission determines otherwise, the percentage of liquidity applicable shall 
 be of ten percent (10 percent) for mortgage banks and thirty percent (30 per- 
 cent) for all other banks. Banks presently authorized to operate shall have a 
 period of ninety (90) days, as of the date this Cabinet Decree becomes effective, 
 to comply with said percentages of liquidity. 
 
 Article (44) — For the purposes of the previous articles, the assets hereinafter 
 specified shall be considered liquid, provided they are free from all liens or en- 
 cumbrances and are freely transferable : 
 
 (a) Cold or currency of legal tender in Panama : 
 
 (b) Net balances in the Clearing House in the Republic of Panama ; 
 
 (c) Net balance in any bank in Panama, payable on demand or within a term 
 of not more than ISfi dnys and obligations payable in Panama on demand or within 
 a term of not more than 1S6 days ; 
 
53 
 
 (d) National Treasury Bills or other securities issued by the State with a 
 maturity of not more than one year ; 
 
 (e) Net balances in any banks abroad approved by the Commission payable 
 on demand or within a term of not more than 186 days and in currencies which, 
 in the judgment of the Commission, are freely convertible and transferable, up 
 to a maximum of 30 percent of the required percentage of liquidity. 
 
 (f ) Unmatured bills of exchange bearing at least the signatures of two sub- 
 stantially solvent persons, as drawer and acceptor, and payable within 186 days in 
 any place and currency approved by the Commission, in accordance with the 
 requirements of paragraph (e) ; 
 
 (g) Treasury bonds issued by a foreign government or international financial 
 organizations in accordance with the requirements established in paragraph (e) 
 of this article, up to a maximum of 5 percent of the required percentage of 
 liquidity. 
 
 (h) Other assets which this Commission may authorize by a majority vote of 
 five (5) of its members. 
 
 Paragraph : Subject to the above mentioned percentage limitations and to the 
 other requirements provided for by this Cabinet Decree, the distribution among 
 the different types of liquid assets referred to in this article, shall remain at the 
 discretion of each bank. 
 
 Article (45) — Violations of the provisions of this chapter, shall be sanctioned 
 by the Commission with a fine of not less than B/.l, 000.00 and not more than 
 B/.10.000.00. 
 
 Article (46) — It shall be assumed that a bank has violated the provisions of 
 this chapter and the previous chapter if it has not furnished within the required 
 period the documents and reports requested by the Commission in order to as- 
 certain compliance with the provisions of Articles 36, 37, 42 and 43. 
 
 CHAPTER VI. BANKING INTEREST 
 
 Article (47) — The provisions of Law No. 4 of 1935 shall not be applicable to 
 banks authorized in accordance to the present Cabinet Decree. Whenever it may 
 be necessary to accomplish the objectives mentioned in Article 4, the Commission 
 may by means of a resolution adopted by a favorable vote of five (5) of its mem- 
 bers, fix the maximum rate of interest which, directly or indirectly, may be 
 charged by the bank on the local loans or credits they grant, that is to say, those 
 economically invested or utilized within the Republic of Panama. Interest shall 
 be computed on balances owed. 
 
 Article (48) — Any bank may pay whatever interest it deems fit on its foreign 
 deposits and on the local time deposits. Nevertheless, in order to establish a dif- 
 ference in the rate of interest which may be paid on local "savings deposits" by 
 mortgage banks in comparison to the other banks, the Commission shall, by 
 means of a resolution adopted by an affirmative vote of five (5) of its members, 
 fix the maximum rate of interest payable by the former and the latter, with a 
 minimum differential of not less than one percent (1 percent) in favor of the 
 mortgage banks, in connection with the aforementioned "local savings deposits". 
 No interests may be paid on local demand dej>osits. 
 
 Paragraph : For the purposes of this article, the Commission shall determine 
 the maximum amount, below which a time deposit shall be considered a "savings 
 deposit - '. 
 
 Article (49) — The violations of the provisions of this chapter shall be sanc- 
 tioned by the Commission with a fine of not less than B/.1,000.00 and not more 
 than B/.10,000.00, without affecting the obligation to return the interest charged 
 in excess. 
 
 CHAPTER VII. DOCUMENTS AND REPORTS 
 
 Article (50) — Within the three (3) months following the close of each fiscal 
 year, banks organized in Panama with regards to all of their operations, and 
 organized abroad with regards to the operations of their Panamanian establish- 
 ments, must file with the Commission the corresponding balance sheet and profit- 
 and-loss statements, signed by the Legal Representative or bv one of the Bank's 
 Ceneral Attorney-in-fact. The Financial Statements mentioned in this article 
 shall be filed and audited in the manner prescribed bv the Commission 
 
 Article (51)— The banks shall exhibit throughout the vear, in a prominent 
 place of each one of their establishments in Panama, a copy of their last audited 
 Balance Sheet, and shall publish it in a newspaper of wide circulation in the 
 Republic within three (3) months following the close of each fiscal year 
 
54 
 
 CHAPTER VIII. PROHIBITIONS AND LIMITATIONS 
 
 Article (52) — No bank shall declare, credit or pay any dividends, nor distribute 
 or transfer all or part of its profits, until having totally amortized or created 
 sufficient reserves to amortize all deferred expenses, including their preliminary 
 expenses, organization expenses, commissions paid on the sale of shares, broker- 
 age fees, losses incurred and any other expenses not represented in the Bank's 
 tangible assets, or while there exists a loss of capital. 
 
 Article (53) — Banks are forbidden to grant loans or credits, to any one, natural 
 or juridical person, or to grant any collateral or incur in any other obligation in 
 favor of such a person, the total of which exceeds at any given moment five per- 
 cent (5 percent) of the bank's deposits, capital and reserves. The limitation 
 provided for in this article shall not be applicable to transactions which : 
 
 (1) Consist in the negotiation of : 
 
 (a) Bills of exchange drawn or promissory notes issued in good faith as a 
 consequence of an underlying transaction having a collateral security, or secured 
 bankers acceptances or by 
 
 (b) Other commercial paper, which the Commission may authorize and which 
 are owned by the person who negotiates same with the bank, by means or a 
 blank endorsement without recourse. 
 
 (2) Are secured either by bank "avals" or collateral deposits or by collateral 
 fully secured for its total value which has ascertainable market value or other- 
 wise has a value as collateral according to a bona fide determination made by an 
 officer of such bank, of at least fifteen percent (15 percent) over the amount of 
 the obligations secured thereby. 
 
 (3) Represent loans to the State, its autonomous or semi-autonomous institu- 
 tions or Municipalities or are guaranteed by the Nation or any foreign State 
 approved by the Commission. 
 
 Article (54) — Banks are forbidden to : 
 
 (1) Grant or obtain loans or credits with their own shares as collateral. 
 
 (2) Grant loans or credits without collateral, in excess of fifteen percent (15 
 percent) of their capital and capital reserves in favor of: 
 
 (a) One or more of its directors, whether these are granted to them jointly 
 or severally ; 
 
 Cb) Any juridical person of which one or more of its directors is a director or 
 officer or a guarantor of the loan or credit facility ; 
 
 (c) Any juridical person, or association of individuals in which the bank, or 
 one or more of its directors or officers have individually or jointly a majority 
 interest. 
 
 (3) Grant loans or credits without collateral or without having a third party 
 as guarantor, to any of its employees, for an amount in excess of the salaries, 
 wages and other yearly emoluments earned by the said employee. 
 
 Article (55) — When applying the prohibitions specified in Articles 53 and 54, 
 the Commission may determine if the interests of a group of natural or juridical 
 persons are interrelated in such manner that they should be considered as a sin- 
 gle person. Nevertheless, it shall not be deemed that the bank has violated the 
 provisions of these articles even though the debts of the group does exceed ap- 
 plicable limits at the moment of their computation, provided that the bank adopts 
 the necessary measures to correct the excess within the period of time fixed by 
 the Commission. 
 
 Article (56) — Banks are forbidden to acquire or possess shares or interest in 
 any other types of enterprises, except in trust, for more than twenty five percent 
 (25 percent) of the bank's paid-in or assigned capital plus its capital reserve. 
 Exception is made of the interest or shares which the bank acquires in payment 
 of siims owed thereto, in which case they must be liquidated at the earliest op- 
 portunity consistent with the economic interests of the bank, as judged by the 
 Commission, which may set a term for this purpose. 
 
 Article (57) — The provision of the previous article does not forbid the pur- 
 chase or sale of shares at the request and for the account of a client 
 
 It neither forbids, upon the previous authorization obtained from the Commis- 
 sion, the acquisition or sale of shares of any corporation organized for the pur- 
 pose of insuring bank deposits, promoting the development of a money or secu- 
 rities market in Panama, or improving the financing facilities for economic 
 development. 
 
 Article (68) — Banks are forbidden to buy. acquire or rent for themselves, real 
 estate properties, except in the following cases : 
 
55 
 
 (a) When it is necessary for their operational requirements or for housing or 
 recreational needs of their personnel ; 
 
 (b) When acquiring land in order to promote land or housing developments 
 for sale, provided that the sale is effected in accordance with the provisions of 
 Article 56 ; 
 
 (c) Under exceptional circumstances and with the prior authorization from 
 the Commission. 
 
 Paragraph : Nevertheless the banks that have accepted real estate properties 
 as collateral, may however in case of default, acquire such properties in order to 
 sell them at the earliest opportunity, consistent with the economic interests of 
 the bank, in the judgment of the Commission. 
 
 Article (59) — Any bank that, prior to the date this Cabinet Decree become 
 effective, has participated in any transaction incompatible with the provisions of 
 this Chapter, shall, within three (3) months following said date, file with the 
 Commission a report of such transactions and within the three (3) following 
 years liquidate them totally, unless the Commission grants extensions due to 
 exceptional circumstances. 
 
 Article (60) — Banks are forbidden to receive deposits while they are in a state 
 of insolvency, they are forbidden likewise to receive any other type of assets 
 from any person who has not been previously advised by the bank of said state 
 of bankruptcy. No official, director or officer who has, or should have knowledge 
 of said bankruptcy, shall accept or authorize receipt of deposits or any other 
 assets in violation of the provisions of this Article. 
 
 Article (61) — The violations or the provisions of this chapter shall be pun- 
 ished by the Commission with fines of not less than one thousand balboas 
 (B/.1,000.00), and not more than ten thousand balboas (B/. 10,000.00). 
 
 CHAPTER IX. BANKING INSPECTION 
 
 Article (62) — All banks must file with the Commission in the manner pre- 
 scribed thereby : 
 
 (1) At the latest on the twentieth (20th) day of each month, a statement 
 showing the assets and liabilities of their establishments in Panama at the close 
 of their operations on the last working day of the previous month and 
 
 (2) Before the last working day of the month following the quarters which 
 end on March 31, June 30, September 30 and December 31, a statement contain- 
 ing an analysis of the credit facilities and other assets at the disposal of their 
 establishments in Panama at the close of operations of each quarter. 
 
 Paragraph : Notwithstanding the above the Commission is authorized to re- 
 quest any bank or any enterprise operating in Panama in which the bank has a 
 majority interest or effective control, any documents and reports concerning the 
 operations and activities of its establishments. 
 
 Article (63) — When the reports furnished pursuant to the previous article, 
 are of a confidential nature in accordance with Article 74, the Commission may 
 only publish consolidated data with overall figures. 
 
 Article (64) — At least every two (2) years, the Commission must conduct 
 one or more inspections of each bank, to determine if its financial situation is 
 solvent and if in the course of its operation it has complied with the provisions 
 of this Cabinet Decree. Such inspections will include all establishments and 
 enterprises in Panama in which the banks have a majority interest or effective 
 control. The total cost of the inspection and its incidental expenses shall be 
 paid by the bank. 
 
 Article (65) — When requested in writing, every bank shall be obliged to 
 show the inspector, authorized by the Commission for such a purpose, the ac- 
 counting books, minutes, cash currency securities owned by the bank, docu- 
 ments and vouchers, as well as the reports and documents relative to its 
 operations. 
 
 Nevertheless, in order to protect the interests of the bank's clients and the 
 confidentiality that its operations require, the examination by the Commission's 
 Inspectors may not include any type of deposit accounts, nor the securities in 
 custody, nor the safe-deposit boxes, nor the documents derived from credit 
 transactions which clients maintain with the bank, unless there is a judicial 
 order issued in accordance with Article 89 of the Code of Commerce. 
 
 Article (66) — Every refusal of a bank to submit to the inspection provided 
 for in the previous article, shall be punished by the Commission with a fine 
 not to exceed one thousand balboas (B/.1,000.00) , without prejudice to the 
 
56 
 
 application of the provisions of Article 26 of this Cabinet Decree. If any of the 
 documents or reports furnished turn out to be false in any respect, the bank 
 shall be punished by the Commission with a fine of not less than one thousand 
 balboas (B/.1.000.00) and not more than ten thousand balboas (B/.10,000.00) r 
 without prejudice of the applicable penal sanctions. 
 
 Article (67) — If in the judgment of the Commission, the inspection proves 
 that the operations of the bank are conducted in an illegal or negligent manner, 
 or that its capital has suffered loss, or that it lacks solvency, the Commission 
 shall require the bank to immediately adopt the necessary measure indicated 
 to that effect, to correct the deficiencies, and may designate a person of proper, 
 training and experience to advise the bank concerning the measure that it should 
 take to correct the deficiency determining the compensation the bank shall pay 
 him. 
 
 Article (68) — Each bank shall designate annually, at its own expenses, certi- 
 fied public accountants who in the judgment of the Commission are profession- 
 ally qualified, whose duty shall be to render a report concerning the fiscal year, 
 to the shareholders or partners of each bank organized under the laws of 
 Panama, and to the Head Office, in case of banks organized under foreign laws, 
 and in the report said accountants shall certify if, in their opinion the Balance 
 Sheet and the Profit-and-Loss Statement are complete, accurate, and show the 
 true and correct state of the bank's operations. The reports of the certified pub- 
 lic accountants shall be read, together with the bank's board of directors report, 
 at the annual meeting of the shareholders or partners of each bank organized 
 under the laws of Panama, and shall be forwarded to the Head Office of each 
 bank organized under foreign laws. A copy of the report shall be filed with the 
 Commission. 
 
 Article (69) — If the bank does not make the appointment referred to in the 
 previous article, the Commission shall make it. determining therefor the com- 
 pensation to which the certified public accountants thus designated, shall be 
 entitled. Said compensation shall be paid by the bank. 
 
 Article (70) — Xo certified public accountant or firm of certified public ac- 
 countants may act as auditor of a bank, if said public accountant or any mem- 
 ber or employee of the firm is or has been an employee, director or officer, or is 
 or becomes a shareholder or partner of said bank. 
 
 (Article (71) — Without prejudice to the provisions of the Commercial Code 
 or any other laws in force, every person who is a director or officer of a bank, 
 and all other persons to whom its administration is entrusted, shall cease in 
 their functions : 
 
 (1) If they are declared in bankruptcy or find themselves in insolvency pro- 
 ceedings ; or 
 
 C2) If they are condemned for any offense against property or public faith. 
 
 Said persons may never again hold such offices or functions in any bank, with- 
 out the Commission's express authorization. 
 
 Article (72) — No person who has been a director or officer, or who has par- 
 ticipated in the administration of a bank which has been compulsorily liquidated 
 may, without the Commission's express authorization, act as director or officer 
 or participate in the Administration of another bank. 
 
 Article (73) — The Commission shall be immediately notified of any civil or 
 criminal action filed, because of a violation of any provision of this Cabinet 
 Decree, committed by a bank or any other person. 
 
 Article (74) — The Commission is forbidden to conduct or order investigations 
 concerning the private affairs of any bank's clients. The information obtained by 
 the Commission in the exercise of its functions may not be revealed to any per- 
 son or authority, except if Judicially requested in accordance with the legal pro- 
 visions in force or if they were consolidated data in terms of global figures. The 
 violation of this stipulation shall be sanctioned in accordance with the provisions 
 of Article 101 of this Cabinet Decree. 
 
 Paragraph : The Commission may not publish any information acquired pur- 
 suant to this Cabinet Decree, unless it has previously obtained the consent in 
 Writing of the bank or client concerned. 
 
 Article (75) — The Official Banks remain in every instance subject to the in* 
 sjkh'I ion and su]>orvision of the office of the Comptroller General of the Republic, 
 in accordance with the provisions of the Constitution and the law. Therefore, the 
 provisions of Articles 64 and 68 of the present Cabinet Decree shall not be appli- 
 cable to the Official Banks. 
 
;>/ 
 
 CHAPTER X. — VOLUNTARY LIQUIDATION 
 
 Article (76) — In order to proceed to its liquidation or dissolution, every bank 
 must obtain previous authorization from the Commission, which shall grant it 
 when the bank is solvent, that is to say, when the bank possesses sufficient liquid 
 assets to reimburse its depositors and to pay its creditors. 
 
 Article (77) — Once the authorization is granted, the bank will immediately 
 cease operations and its powers are limited to those which are necessary to carry 
 out its liquidation, collect its credits, reimburse its depositors, pay its creditors 
 and to settle its businesses. 
 
 Article (78) — Within thirty (30) days following the authorization, the bank 
 must mail to each depositor, creditor, interested party in funds held by the Bank 
 as trustee, leaseholder of safe-deposit box, or depositor of assets in custody, a 
 notice of liquidation which shall include whatever information the Commission 
 may specify. Said notice shall also be posted in a visible place of each of the 
 bank's establishments and shall be published in the manner indicated by the 
 Commission. 
 
 Article (79) — The authorization to liquidate will not prejudice the rights of 
 the depositors or creditors to receive the total amount of their credits, nor the 
 rights of the owners of funds or other assets to have them totally reimbursed. All 
 legitimate credits of the bank's creditors and depositors must be paid, and all 
 funds and other assets which the bank holds in any other capacity, shall be reim- 
 bursed to their owners within the period of time fixed by the Commission upon 
 authorizing the liquidation. 
 
 Article (80) — No distribution of assets can be made to the shareholders or 
 partners, until having previously satisfied all the depositors and creditors, ac- 
 cording to the liquidation plan approved by the Commission. 
 
 In connection with credits under litigation, the Bank shall deliver to whomever 
 may be appointed therefore by the Commission, an amount sufficient to cover 
 such credits; and he shall hold it in his possession until thereon decided by 
 law. 
 
 Article (81) — Upon completion of the liquidation, if there remains unclaimed 
 funds or credits, the bank shall deliver to whom the Commission designates, the 
 necessary sum to satisfy them. The unclaimed assets and securities shall simi- 
 larly be delivered to whom the Commission designates, along with the corre- 
 sponding certified inventory. The funds thus deposited will be transferred to the 
 State at the end of five (5) years. Furthermore, the assets and securities may be 
 sold by its depositary, with the prior authorization of the Commission, at the 
 end of the first year, and the proceeds of their sale shall be transferred to the 
 State at the end of the fifth year, if they remain unclaimed by their proprietors. 
 
 Paragraph : The provisions of this article will be interpreted without prejudice 
 to the right granted by Article 103. 
 
 Article (82) — During the cause of the voluntary liquidation, the receivers 
 must : 
 
 (1) Furnish the Commission as regularly as it may determine, the reports it 
 may request concerning the process of liquidation ; and 
 
 (2) Inform the Commission immediately should they become aware that the 
 marketable assets shall be insufficient to reimburse the depositors and to pay the 
 creditors. 
 
 CHAPTER XI. — INTERVENTION, REORGANIZATION AND COMPULSORY LIQUIDATION 
 
 Article (83) — The Commission, by means of a motivated resolution approved 
 by the vote of five (5) of its members, may intervene a bank, taking possession of 
 its assets and assuming its administration in accordance with the provisions of 
 Article 85. in any of the following cases : 
 
 (a) If its capital or capital reserve has suffered loss or lacks solidity; 
 
 (b) If it conducts its operation in a illegal, negligent or fraudulent manner ; 
 
 (c) If it can not continue its operations soundly ; 
 
 (d) If once requested, it refuses to show the accounting records for operations 
 carried out, or has in some way hindered the inspection of the bank ; 
 
 (e) If the assets of the bank are not sufficient to satisfy the total of its liabili- 
 ties : 
 
 (f) If the Commission deems it convenient, because the voluntary liquidation 
 has been unduly delayed. 
 
58 
 
 Article (84) — Upon intervening, the Commission will order a notice stating so 
 to be placed in the bank's offices, indicating the hour in which the intervention 
 became effective, which in no case may be prior to the posting of the notice. 
 
 Article (85) — When the Commission resolves to intervene a bank, it shall ap- 
 point the interventor or interventors it deems necessary, in order to exercise 
 exclusively, the administration and control of the bank, with the powers the Com- 
 mission may determine, and which shall include the following : 
 
 (a) Suspend or limit the payment of its obligations ; 
 
 (b) Employ the necessary auxiliary personnel ; 
 
 (c) Execute any document on behalf of the bank ; 
 
 (d) File, defend or prosecute on its behalf, any action or proceeding to which 
 it might be a party. 
 
 Once the intervention has been carried out, the interventor or interventors 
 sliall make an inventory of the assets and liabilities and file a copy thereof with 
 the Commission, which will make it available to the interested parties who may 
 so request it. 
 
 Article (86) — The resolution by which the intervention of a bank is ordered 
 implies the authority to order its reorganization, request its compulsory liquida- 
 tion or to desist from the intervention, for which purpose the Commission shall 
 have sixty (60) calendar days from the date on which the notices mentioned in 
 Article 84 are posted, or if the appeal referred to in the following article is 
 tiled, than sixty (60) days after judgment thereon is rendered. 
 
 Article (87) — The resolution by which the intervention of the Bank is ordered, 
 may be proceeded against only by means of a contentious-administrative re- 
 course of full jurisdiction, ("recurso contencioso administrativo de plena juris- 
 diceion"). The term within which to file such an appeal shall be a maximum of 
 thirty (30) working days, from the date on which the notice referred to in 
 Artile S4 is posted. 
 
 The Court may not suspend provisionally, in any case, the effects of the 
 intervention decreed, but in order for the Commission to order the reorganiza- 
 tion or to request the compulsory liquidation of the bank in question it shall 
 be necessary for the Court to have decided on the pending appeal. 
 
 Article (88) — When the Commission intervenes a bank, all prescription of 
 limitations relative to any of the bank's rights or causes of action, and the 
 terms relative to lawsuit and proceedings to which the bank is a party, shall 
 be suspended for up to six (6) months. 
 
 Article (89) — If within the term specified in Article 86, the Commission 
 should decide that the reorganization of the bank is in order, after hearing the 
 opinion of the bank in question, it shall draw up a reorganization and shall 
 publish it during three (3) consecutive days in a daily newspaper of general 
 circulation in the Republic. 
 
 Article (90) — No bank asset shall be subject to attachment, embargo or 
 withholding while the bank is intervened or in process of reorganization. 
 
 Article (91) — If so authorized therefor by the Commission the interventors 
 may be able to obtain loans in the name of the Bank and offer the properties 
 thereof as a guarantee for such loans. 
 
 Article (92) — All necessary expenses caused by the intervention, the reorgani- 
 zation or the liquidation, shall be paid from the bank's assets. 
 
 Article (93)— No reorganization plan shall be drawn up unless it meets the 
 following requirements : 
 
 (a) That it be feasible and equitable to all the depositors, creditors, share- 
 holders or partners, as the case may be ; 
 
 (b) That it provides for the dismissal of any director, official or employee 
 responsible for the situation which make the reorganization necessary, because 
 of his negligent, fraudulent or illegal actions; 
 
 (c) That any anticipated merger or consolidation meet the requirements of 
 this Cabinet Decree and other legal provisions in force. 
 
 Article (94)— Whenever circumstances arise during the process of the re- 
 organization, which make the plan unfair or its execution inconvenient, the 
 Commission may modify it, or request the liquidation of the bank as hereinafter 
 provided. . . 
 
 Article (95)— If the Commission decides that the liquidation of a bank is in 
 order, it shall serve personal notice thereof upon its legal representative and 
 notify its shareholders or partners, depositors and creditors, by publishing the 
 resolution to said effect during three (3) consecutive days in a newspaper of 
 general circulation, and will request the dissolution and liquidation of the bank 
 to the competent court according to the legal provisions in force. 
 
59 
 
 Article (96) — Once the liquidation is requested, the Commission shall see 
 that a notice of the petition for liquidation is sent by mail to each depositor, 
 creditor, leaseholder of safe-deposit box or bailor of assets, to the address 
 which appears in the books of the bank. A copy of this notice shall be posted 
 in a visible place of the establishments of the bank. This notice should include 
 a statement indicating the sum which, according to the books of the banks, 
 appears as a credit balance of the depositors or creditor. 
 
 Article (97) — The safe-deposit boxes the contents of which have not been 
 withdrawn thirty (30) days after the date of the judicial resolutions by which 
 the liquidation is decreed, shall be opened by the competent Court and its con- 
 tents as well as the unclaimed assets which are held by the bank shall be 
 subject to the procedure provided for in Article 81. 
 
 CHAPTER XII. — VARIOUS PROVISIONS 
 
 Article (98) — The classification of each bank provided for in Article 1010 of 
 the Fiscal Code, shall be made by the Commission according to the criteria that 
 it will establish therefor. 
 
 Article (99) — By priorly informing the public to such effect, the Commission 
 shall establish the days on which the Bank cannot carry out business for the 
 public ; such days do not have to coincide necessarily with the holidays. 
 
 Article (100) — The Commission shall determine the days of the week and 
 hours during which the banks shall be open to the public. The Commission, for 
 causes it deems justifiable, may authorize exceptions to the general rule. 
 
 Article (101) — Any person who furnishes information in violation of this Cab- 
 inet Decree, or who violates any of the prohibitions established in it for which no 
 specific punishment is provided for shall be subject to a fine from B/.500.00 to 
 B/.l, 000.00, imposed by the Commission, without prejudice to the applicable 
 criminal and civil liabilities. 
 
 Article (102) — Every bank must advise the Commission with regards to any 
 assets, funds and securities held by it which remain inactive for five (5) years 
 and which belong to persons whose whereabouts are unknown. The Commission, 
 after ascertaining this fact, shall order its net value to be transferred to the 
 National Treasury. 
 
 Article (103) — The State will be obliged to return to its owner the funds men- 
 tioned in the previous article, if they are claimed within ten (10) years after 
 the date on which they have been transferred to the State, but the restitution 
 will be made without charging interest. 
 
 Article (104) — Without prejudice to the provisions of the Fiscal Code, all the 
 establishments of a bank in Panama, shall be considered as one bank, for the 
 purposes of this Cabinet Decree. 
 
 Title III. — Final Provisions 
 
 Article (105) — With the exception provided for in Article 87, resolutions passed 
 by the Commission shall only be subject, within the administrative jurisdiction, 
 to a petition for reconsideration filed before the commission itself by the inter- 
 ested party within five (5) working days from the date of notification. 
 
 Article (106) — In every case of voluntary or cumpulsory liquidation of a bank, 
 the obligations of said bank, including the deposits must be satisfied according to 
 the order of priority established by the laws in force. Notwithstanding, in case 
 the special credit referred to in article 35 has been granted to the Bank to be 
 liquidated, this credit shall have priority over any other of the bank's obligations. 
 
 As far as the deposits are concerned, the priority among them will be as 
 follows : 
 
 (a) Local deposits of natural or juridical persons residents in the territory 
 under the jurisdiction of Panamanian authorities will be paid first. 
 
 (b) Once the reimbursement of the local deposits is completed, the deposits 
 which have physically entered the territory of the Republic of Panama and the 
 bank's patrimony belonging to persons domiciled outside of Panama, shall then 
 be considered and returned, as it may be possible ; and 
 
 (c) If there remains a balance after these reimbursements, it shall be dis- 
 tributed among the owners of foreign deposits that have not physically entered 
 the territory of Panama. 
 
 Article (107) — The banks already intervened and in process of liquidation on 
 the date this Cabinet Decree becomes effective shall be governed by Law 101 
 of July 8, 1941, and other provisions which modify it or complement it. 
 
 25-605 O - 78 - 5 
 
60 
 
 Article (108) — The bank wishing to adopt a fiscal period different from the 
 calendar year and have been so authorized by the Finance and Treasury, shall so 
 notify the Commission. 
 
 Article (109) — Only the provisions contained in Chapters V, VII, VIII and 
 IX of Title II shall be applicable to the official banks, provided these provi- 
 sions are not in conflict with the laws concerning said banks. 
 
 Notwithstanding the foregoing, Chapters IV and VI and Articles 99 and 100 
 of Chapter XII shall in any case apply to the Official Banks. 
 
 Article (110) — This Cabinet Decree completely revokes Law 101 of July 8, 
 1941 and all other legal provisions inconsistent therewith. 
 
 Article (111) — This Cabinet Decree shall become effective on the date of its 
 publication in the Official Gazette. Let it be communicated and published. 
 
 Given in the city of Panama, on the second day of the month of July of the 
 year one thousand nine-hundred and seventy. 
 
 Demetrio B. Lakas, President of the Provisional Board of Govern- 
 ment ; Lie. Arturo Sucre P., Member of the Provisional Board 
 of Government; Juan Antonio Tack, Minister of Foreign Rela- 
 tions; Jose A. De La Rosa, Minister of Finance and Treasury, 
 ("Ministro de Hacienda y Tesoro") ; Nidia M. De Quintero, 
 Minister of Education, In Charge ; Demostenes Vergara, Minister 
 of Public Works, In Charge; Carlos E. Landau, Minister of 
 Agriculture and Livestock; Fernando Mandredo, Minister of 
 Commerce and Industries; Romulo Escobar Bethancourt, Minis- 
 ter of Labor and Social Welfare ; Jose Renan Esquivel, Minister 
 of Health ; Juan Materno Vasquez, Minister of the Presidency. 
 Question 6. What were the nature and nationalities of the 248 banks whose 
 permits were cancelled by the new bank law? 
 
 Answer. Neither the Treasury Department or the State Department have the 
 information available to answer this question. 
 
 Question 7. Please list and explain the nature of each tax incentive granted to 
 international banks by decree No. 238. 
 
 Question 8. If it is true, as Wise wrote, that foreign loans and deposits are not 
 required to have a cash or legal reserve, please comment on the various effects 
 of such provisions. 
 
 Answer. We will attempt to provide this information for the record as soon 
 as possible. 
 
 See Appendix C for answers to Questions 7 and 8. 
 
 Question 9. If it is true that there are no controls over the free flow of capital 
 in and out Panama, and that Panama has a bank secrecy law permitting num- 
 bered accounts, what U.S. Government banking rules and regulations may be 
 avoided by U.S. commercial banks operating through Panama branches? 
 
 Answer. We have no evidence that U.S. commercial banks are using their 
 Panama branches to avoid U.S. Government banking laws and regulations. For 
 more detailed information concerning numbered accounts, please see Question 15 
 in the series of questions relating to the London Times article. 
 
 Question 11. Wise indicated the possible creation in Panama of a Latin Ameri- 
 can multi-national foreign trade bank. What would the role of U.S. commercial 
 banks be relative to this multi-national bank should it come into being? What 
 advantage might accrue to those banks? Would it be quasi-governmental? What 
 would its relationship be to U.S. taxpayers? 
 
 Answer. The Latin American Export Bank (Bladex), headquartered in Pan- 
 ama, will begin operations early in 1978. Bladex will be strictly a commercial 
 operation ; it will rediscount acceptances from Latin American commercial banks 
 and provide medium-term financing for capital goods exports from Latin Amer- 
 ican countries. U.S. and other foreign commercial banks with subsidiaries in 
 Panama will be invited to subscribe 40 percent of the initial capital ($20 mil- 
 lion) ; 40 percent will also come from Latin American commercial banks and 
 20 percent from Latin American central and state banks. The advantages to 
 participating U.S. and other commercial banks will be the opportunity to share 
 in the profits of Bladex. There is no relationship to U.S. taxpayers. 
 
 Question 13. Compare generally the international banking climate of The Ba- 
 hamas, The Caymans and any other offshore financial center in the Western 
 Hemisphere, with that of Panama, as to : 
 
 (a) Tax advantages, 
 
 (b) Currency exchange, 
 
61 
 
 (c) Local banking regulations, including control, inspection and reporting, 
 reserve requirements, and the like, 
 
 (d) Effective U.S. bank regulation, and inspection. 
 
 Answer. All established offshore financial centers in the Western Hemisphere 
 are characterized by the absence of income taxation on payments of interest on 
 deposits to foreigners, and for the most part, on dividends as well. It is our 
 understanding that each of the offshore centers has a bank regulatory body which 
 within permissible legal limits exercises discretionary authority in established 
 legal reserve requirements. To our knowledge, none of these centers imposes 
 reserve requirements on liabilities in foreign currencies at banks which operate 
 solely on an offshore basis. U.S. banks operating branch offices in these offshore 
 centers are regulated by federal and/or state authorities within the U.S. since 
 these branches are an integral part of the parent bank and are not legally distinct 
 entities under U.S. law. 
 
 Question 14. Name the United States banks operating under each of the three 
 classes of banking licenses in Panama. 
 
 Answer. Attached is a list prepared by the National Banking Commission of 
 Panama of all banks and the respective licenses under which they operate in 
 Panama as of September 1977. U.S. institutions are underlined for convenience. 
 
62 
 
 SISTE.MA MffCARfO PANAMl":".0 TOR DANCO Y TIPO DE I.ICEflCIA SEGUH FF.CHA 
 DE IN1CIO DL CPEKACIONES Y r'kOCEDENCIA: lo. SEP. de 1977 
 
 LICENCIA OF.NtKAl 
 
 •incoi Of.cialc.-. 
 
 1. ' Binco Ntcioml dePuun 
 X. C«la dr AhnrroS 
 
 jiancoj Pr.vgd"i:* 
 
 L Cmh«nk. N A 
 
 2. 1 hr C >. . <c M.r.hatl.n IU. 
 
 3. YUwcp TaAtmTtf fag 
 
 4. Banco GructaJ. S. A. 
 
 -»ri-,nal. S. Aj. 
 
 VZrCro d* SawtaaaSrTy R 
 Primer llsncc dc Aborro' 
 E:nco ilc Colombia.. S. A. 
 B -.nl. »l Aft 
 
 ■ lUCq V.crcantal QC Panama, S. 
 Banco Calclcm. S. A. 
 Banco dc Doroti. S. A. 
 Binco Fx tenor. S. A. 
 Bi--.ro dr! Comcreio. S. A. 
 RrpubEc "nill» il Bjnk. Ire. 
 T br Fata l Nj;,cr. d R.-.rJi of_Crue«£ft. 
 Banco interorc anieo de Pan.- mi. S. A. 
 
 » bv»7 brt cm tco na vzktrc: 
 
 DNlid TaHllaMlliWlllllM Lank. A. G. 
 AJrcni'i.r Dank Nederiond. N". V. 
 Banco Continental dc Pan.-una. S. A. 
 Eir.Cjue Anval. S. Jk. 
 
 Bank of Boston L South America. Ltd. 
 Pac;hc Atlantic BarJx. Inc. 
 
 Bir.co tata&jd C-!omUiano r> Panama. S. A. 
 The Bank of Tokyo. Ltd 
 Banco Intemacional de Tanini. S.A. 
 Trade Development Bank Overseas. Inc. 
 Banco Comcrci.il AntioQucno. S. A. 
 The Fir>' Nation': H>r.k_ol Boj.f.oa 
 Banc- Do UrlsC. S. A 
 VaMa dc Ba-cc:. S A (frubank.. Inc.) 
 .V.'.v n-nk. S..Y._ 
 
 n.cncano uc L''>.-\rroUn. S. A. 
 Ctfac lr.:.tar.:< nca.n Bank. S. A. 
 linn.-vl CeMMCU Hank of Cruna 
 f Nova Sco-ia 
 ii. C A. dc Venezuela 
 
 Banco S 
 Securit. 
 1h- Int. 
 
 The Batt 
 lira i 
 
 I3U 
 
 S. A. 
 
 if Switzerland (Panama). S. A. 
 
 42. The Knval flank of Canada 
 
 43. Banco I— llllMlllll dc Panama. S A. 
 
 44. Banco dc hnnMn, S. A. 
 
 45. Banco Infrnacional de CoaTa fiiea 
 48. Me n" Lynch Ir.trrnat.ona l Bank, Inc . 
 
 Licencia Intemacional: 
 
 1. Bank of Commerce 4- RmM Inc. 
 
 2. Banco Airman Par vr.rii... S. A. 
 
 3. Bank of Imrttnirnl <m | Trade. Inc. 
 
 A. Hank Corporation <0»crva»). S. A. 
 
 i. Natinn.-lc de Tari$ 
 
 C. El Bioeo Mrtr politano. S. A. 
 
 I. Wcitrm lnleironiincnt.il Hank. Corp. 
 >. Weston Bank.nt Corporation 
 
 9. Intcian.cncan Hank Corporation. S-r\. 
 
 10. The Bank of To«>o (r.,nnna). S. A. 
 
 II. Adela 111 until ITllllllll Co . S. A. 
 
 12. S«-c-irit> Tacific llank (fj..«n,j|J _A^_ 
 
 13. BasaM I'ror- Dtor del Comrn.ii' l.atinoamcricana. S. A. 
 
 14. 5ta> StrerV.Bsi.k (r J .,.in. l. Corp 
 
 15. T.'rU I.He ran.cne a* U,rV. $, A 
 
 16. "lorrr.tcTb--mu.ion li.o.k \lc JVn.m*. S. A. 
 
 17. B A. I. I. (M. Ur EaU) Inc. 
 
 18. Standard Cn-rtcred Bank. Ltd. 1 
 
 19. Ilibeat llankjnt CoO'Cfation 
 23. Crrdity Lyonnait 
 
 31. Banco dc la Nac.nn Arcrntlna 
 
 32. Banco Kio de la Plata (Panama). S. A. 
 
 Licencia de Repre>enUci6n: 
 
 1. Banco Fapanol de Crcdilo 
 
 at Kniea tsehanre Bank 
 
 3. Dicd-ner Hank. A. C. 
 
 4. Iniontn Hi n.l.don Bank 
 
 tv. WnilJ llank.nl Corporation Ltd. 
 
 C. Ibeio— Amcilca Bank - Akllcnccsellacbafl 
 
 I. Banco NaclonaJ dc Cuba 
 
 Frcha 
 
 Inleio 
 
 
 
 Upera 
 
 ciunra 
 
 
 Procrdr ncla 
 
 Oct. 
 
 12-1 9f»4 
 
 
 Panama 
 
 Jun. 
 
 5-1*34 
 
 
 Panama 
 
 Ac... 
 
 17 inoi 
 
 
 K. 1'. A. 
 
 Mar. 
 
 I i nr. 
 
 
 r . I*. A. 
 
 Fi.e. 
 
 5 -10 in 
 
 
 Kr.nn. 
 
 Ahr. 
 
 i-isr.s 
 
 
 Pali.rn* 
 
 Aco. 
 
 20 -1957 
 
 
 t L A. 
 
 Mar. 
 
 10-19C2 
 
 
 Fspana 
 
 Sep. 
 
 16— 1SG3 
 
 
 
 Aro. 
 
 7—1964 
 
 
 Colombia 
 
 No». 
 
 24 — 1964 
 
 
 F U A. 
 
 Jun. 
 
 If, — igr.fi 
 
 
 FrancU 
 
 r>ic. 
 
 13 — I90C 
 
 
 C.'-.mbia 
 
 
 14-1907 
 
 
 Cili ■Mi 
 
 Feb. 
 
 22—1967 
 
 
 F.ipaiia 
 
 Max. 
 
 8-1967 
 
 
 Colombia 
 
 Abr. 
 
 14— 19G7 
 
 
 Ecuador 
 
 Sep. 
 
 28-1970 
 
 
 E. U. A. 
 
 Mar. 
 
 2—1971 
 
 
 E. L*. A. 
 
 Oet. 
 
 26 -1971 
 
 
 Panama 
 
 Die. 
 
 21-1971 
 
 
 Alcmania 
 
 Ene. 
 
 1—1972 
 
 
 llolanda 
 
 Jul. 
 
 17 — 1972 
 
 
 
 Oct. 
 
 1C— 1972 " 
 
 
 Bahamas 
 
 Feb . 
 
 1—1973 
 
 
 IncJatrrra 
 
 Feb. 
 
 2-1973 
 
 
 Itont Kon« 
 
 Abr. 
 
 23—1973 
 
 
 Col.mibia 
 
 Mar. 
 
 25-1973 
 
 
 Ja^.a 
 
 May. 
 
 28-1973 
 
 
 P.naml 
 
 Jul 
 
 27—1973 
 
 
 
 Ato. 
 
 C-1973 
 
 
 Colombia 
 
 A»o. 
 
 23-197.1 
 
 
 E. U. A. 
 
 Sep. 
 
 S-1973 
 
 
 Brasil 
 
 Sep. 
 
 10—1973 
 
 
 Multinacional 
 
 Oet. 
 
 1-1973 
 
 
 F-. L'. A. 
 
 Mar. 
 
 1H-1974 
 
 
 Venezuela 
 
 Jun. 
 
 7-1974 
 
 
 E. L\ A. 
 
 Ato. 
 
 1-1974 
 
 
 China 
 
 Nor. 
 
 11-1971 
 
 
 Canada 
 
 Die. 
 
 3 — 1974 
 
 
 VcnczvcU 
 
 May. 
 
 \a~ ' n^«! 
 
 
 Braid 
 
 May. 
 
 IB— 1979 
 
 
 Sui.-a 
 
 Jun. 
 
 • i 'f -i 
 
 
 f- I 1 . A. 
 
 
 tnin-^ 
 
 
 Canada 
 
 J I 
 
 i?T_i 
 
 
 Mul'ovicionaJ 
 
 r> 
 
 Oct 
 
 
 
 
 
 17 k-c 
 
 
 r i r 1 * ?' r4 
 
 uL 
 
 
 
 
 Nov 
 
 ic nbn 
 
 
 It h i« 
 
 Ato 
 
 - 1 1.,'-, 
 
 
 
 Oct. 
 
 : i iwi 
 
 
 V.uili: ..ci.-n«l 
 
 Ato. 
 
 14 -1971 
 
 
 tmim 
 
 Abr. 
 
 9 - 1V73 
 
 
 Franria 
 
 Dir. 
 
 14 - i:n.i 
 
 
 Uruoiay 
 
 Ahr. 
 
 
 
 
 May. 
 
 
 
 
 May. 
 
 2 15.74 
 
 
 Bahamas 
 
 Mar. 
 
 7— r.i7l » 
 
 
 Jaooei 
 
 Jun. 
 
 9-1074 
 
 
 Suua 
 
 
 
 
 
 Dic° 
 
 3-1974 
 
 
 Alcmania 
 
 Jun. 
 
 2- 197.'. 
 
 
 K. 11. A. 
 
 Sep. 
 
 l--:975 
 
 
 1U V. A. 
 
 Sep. 
 
 IV P.I75 
 
 
 Canada 
 
 Abr. 
 
 1- 19-o 
 
 
 Arabia 
 
 Jul. 
 
 1-1976 
 
 
 Intlalerra 
 
 May. 
 
 0- IV77 
 
 
 MullinaciunaJ 
 
 
 
 
 Franeia 
 
 
 
 
 Argentina 
 
 
 
 
 Arcenllna 
 
 «<CL 
 
 25 IBM 
 
 
 K.Pana 
 
 Del. 
 
 5- 1971 
 
 
 Corra 
 
 May. 
 
 3-1973 
 
 
 Alcm.nl. 
 
 f Cb. 
 
 11-1976 
 
 
 C.n.dl 
 
 Uk. 
 
 1-1976 
 
 
 Bahamas 
 
 »eb. 
 
 14-1977 
 
 
 Alcmania 
 
 COMIMON BANC AMI A NACIONAL 
 
63 
 
 Question 15. U.S. law prevents U.S. banks or branches overseas from offering 
 numbered accounts. Does this apply to subsidiaries of U.S. banks? If not, what 
 subsidiaries of United States banks in Panama, if any, offer numbered accounts? 
 
 Question 16. Does any U.S. bank have an interest, direct or otherwise, in any 
 bank offering numbered accounts in Panama ? 
 
 Answer. We have been informed by the Office of the Comptroller of the Cur- 
 rency that there are no prohibitions against United States banks or their foreign 
 branches offering numbered accounts. Indeed, many banks, especially those located 
 in the Miami area, presently offer numbered accounts. All domestic branches of 
 banks incorporated in the United States and U.S. branches of foreign-incorporated 
 banks are, however, required by 31 U.S.C. 1051 et sec. and 31 C.F.R. 103.34 to keep 
 on file taxpayer identification numbers of all depositors residing or doing business 
 in the United States, and to keep certain records of financial transactions with 
 respect to these accounts. These requirements would apply even if the account 
 were to be maintained under a fictitious name, or merely as a number. These 
 reporting requirements would not apply to foreign-incorporated subsidiaries of 
 U.S. banks. 
 
 In addition, each person subject to the jurisdiction of the United States (except 
 a foreign subsidiary of a U.S. person) having a foreign bank account is required 
 to provide such information concerning such account as specified on his Federal 
 income tax return. 
 
 Treasury has no information concerning which, if any, subsidiaries of United 
 States banks in Panama offer numbered accounts. Similarly, we do not have in- 
 formation on whether any U.S. bank has an interest, direct or otherwise, in any 
 bank offering numbered accounts in Panama. 
 
 Questions 17 and 18. What are the guarantees of security for loans to the 
 Republic of Panama and its official agencies? If it is pledged security, (a) is it 
 enforceable? (b) how? 
 
 Answer. While the Comptroller of the Currency may have some material con- 
 cerning guarantees of security for loans to the Republic of Panama, it does not 
 have the comprehensive information necessary to answer this question accurately. 
 To indicate whether and how particular security arrangements are enforceable 
 would involve detailed analyses of the security arrangements on particular loans 
 in light of the law governing the loan contract, possible immunities from suit, 
 etc. Without detailed information about particular security arrangements, we are 
 not in a position to perform such analyses. 
 
 Question 19. How much of the loans by U.S. commercial banks to the Pana- 
 manian Government are guaranteed by external official agencies, such as the 
 Inter-American Development Bank? 
 
 Answer. Although the charters of the Inter-American Development Bank and 
 the IBRD allow them to guarantee commercial bank loans, neither bank has 
 ever done so in Panama or any other country. 
 
 Ill 
 
 [From the Twin Circle, Oct. 9, 1977] 
 Panama Canal Treaty : A Money Deal — But Not Fob You 
 (By Paul A. Fisher) 
 
 Concern is growing in Congress that there may be more behind the pressure 
 to approve a new Panama Canal treaty than appears on the surface. 
 
 "I'm not sure whether the treaty is intended to help poor Panama or big banks," 
 one Capitol Hill source told Twin Circle. 
 
 Charles Bartlett, a reporter for the Washington Star, wrote on Feb. 25 : 
 
 "The (Panama) regime has put the small nation so deeply in the red that 
 the canal treaty has no supporters more fervent than the American bankers whose 
 hopes for repayment rest on a revival of faith in the Panamanian economy." 
 
 LINOWITZ REPRESENTED PANAMA 
 
 Much of the concern about the Panama negotiations focuses on Special Am- 
 bassador Sol Linowitz who was the principal negotiator on the canal treaty 
 because in 1973 he represented the Republic of Panama in its negotiations 
 with your government. 
 
64 
 
 Mr. Linowitz received a special six-month appointment to negotiate the 
 treaty. Such an appointment did not require the advice and consent of the 
 Senate, as do the usual ambassadorial appointments which give Senators an 
 opportunity to explore the appointee's background. 
 
 At the time of his appointment, Mr. Linowitz was quoted as saying he would 
 not take the job if he had to give up his private business associations. 
 
 Further, his business connections at the time of his appointment and for 
 several months thereafter included membership on the boards of directors of 
 Pan American World Airways and Marine Midland bank. Both businesses 
 have considerable financial interest in Panama. 
 
 Pan-Am employs 151 people and had $14 million in sales last year, according 
 to a report furnished to Sen. John Sparkman of Alabama. 
 
 LINOWITZ'S BANK LOAN 
 
 A similar report concerning Marine Midland was made available by Sen. 
 Sparkman. It shows that the New York City-based bank has $6.2 million in out- 
 standing loans to the Panama government as of the first of this year. Additionally, 
 it had an unspecified share in a $115 million internationally syndicated loan. 
 
 Further, Marine Midland, through Intermarine London, owns Bream Shipping 
 Company. Intermarine also owns two Panamanian special-purpose shipping com- 
 panies, International Ship Finance (Panama), Inc., and Avon Shipping, Inc. 
 
 These latter two companies each own a Panamanian flag vessel on behalf of 
 Japanese owners. The vessels are financed by Intermarine. 
 
 Dr. Louis Gasper, staff consultant to the House Banking Committee told 
 Twin Circle that as of Jan. 1, a syndicate of 10 American banks had loaned 
 Panama an estimated $200 million, of which $8 million had been loaned by 
 Marine Midland. This loan is believed to be an expansion of the $115 million 
 loan mentioned in Sen. Sparkman's report. 
 
 OTHER BANKS TOO 
 
 The other banks involved in the $200 million loan to Panama, according to 
 Dr. Gasper are : Banker's Trust, Bank of America, Chase Manhattan Bank, First 
 National City Bank, First National of Chicago, Philadelphia National Bank, 
 First National Bank, First Chicago Bank, and Security Pacific Inter-America 
 National, which is affiliated with Security Pacific of Los Angeles. (The exact 
 location of all the listed banks was not known to Dr. Gasper) . 
 
 Panama's debt has grown from $167 million in 1969 to approximately $1.5 bil- 
 lion according to Congressman George Hansen of Idaho and Senator Harry Byrd 
 of Virginia. While all of this amount is not owed to commercial banks, the World 
 Bank estimates that fifty percent is owed to such financial institutions. The re- 
 mainder is owed to quasi-government institutions such as the World Bank, the 
 Export-Import Bank, and similar organizations. 
 
 PANAMA TAX FREE BANKS 
 
 According to Sen. Jesse Helms of North Carolina, interest payments alone 
 will consume 39 percent of Panama's 1977 budget. 
 
 Bankers' interest in Panama has grown considerably since 1970, the year that 
 country enacted a new law which permits banks to operate there tax free. Prior 
 to 1970 there were in Panama only a handful of banks with assets of a few 
 million. Today, only six years later, 73 banks with assets of $8.6 billion are 
 located there. 
 
 Dr. Gasper told Twin Circle that in the "next couple of years" Panama will 
 be the third largest banking center in the world, ranking behind only the United 
 States and England. 
 
 ROCKEFELLER WRITES LAWS 
 
 "The new banking law was practically written by David Rockefeller," the con- 
 gressional banking consultant said. 
 
 Dr. James Lucier, staff aide to Sen. Jesse Helms said he did not know who 
 drafted the new Panamanian bank law, but noted that General Omar Torrijos, 
 Panama's Strongman, met with New York City bankers shortly after assuming 
 power in 1969, and the banking law followed the next year. 
 
65 
 
 rockefeller's guest 
 
 According to the New York Times, Gov. Nelson Rockefeller met with Gen. 
 Torrijos in New York City on Sept. 26, 1969, at which time the General spent the 
 evening at the Governor's Westchester home. 
 
 The newspaper added : 
 
 "Most of General Torrijos 5 time in New York was taken up in discussions with 
 banks and financial institutions concerning assistance to Panama." 
 
 On Dec. 8, 1969, the same newspaper reported that Gov. Nelson Rockefeller 
 sent former Assembly Speaker Joseph Carlino to Panama to "advise General 
 Omar Torrijos how to set up a representative government." 
 
 The Times pointed out that neither the State Department (which normally 
 conducts America's foreign relations), the White House, nor the American em- 
 bassy in Panama were aware of Mr. Carlino's visit. 
 
 According to the Panamanian embassy the new banking law went into effect on 
 July 2, 1970. 
 
 Many Congressional sources and press reports have observed a close tie by the 
 Carter Administration to the Trilateral Commission, and the issue of conflict of 
 interest is now being debated. 
 
 The Washington Post on Jan. 19 stated that the Trilateral Commission is "a 
 private international organization put together by David Rockefeller to stimulate 
 the establishment of dialogue between West Europe, Japan and the United 
 States. 
 
 Among members of President Carter's administration who played important 
 roles in negotiating the Panama treaty are : 
 
 President Carter, Vice President Walter Mondale, Secretary of State Cyrus 
 Vance, Secretary of Defense Harold Brown, and Ambassador Linowitz. 
 
 The treaty of agreement was concluded four hours and 40 minutes before Am- 
 bassador Linowitz's appointment was terminated. 
 
 Question 1. Is it true that David Rockefeller wrote Panama's Banking Law of 
 1970, a law by which Sidney Wise wrote in the Times of London, April 25, 1977, 
 "it is clear that Panama grants incentives and privileges to banks operating in 
 its country of which banks in Switzerland can only dream"? 
 
 Question 2. If he was not the law's author, in fact, was he or any of his people 
 involved in any way whatsoever with its drafting? If so, detail who, how, when, 
 where, and to what extent. 
 
 Answer. Neither the Treasury Department or the Department of State have 
 any information concerning these questions. 
 
 Question 3. 1 Fisher describes Ambassador Sol Linowitz as having represented 
 the Republic of Panama in 1973. Did Mr. Linowitz ever represent the Republic 
 of Panama? If so, when and in what capacity? Did he ever represent any private 
 Panamanian entity? 
 
 Answer. Ambassador Sol Linowitz has never represented the Republic of Pan- 
 ama nor any Panamanian entity. 
 
 Question 4. 2 Mr. Linowitz has been Chairman of the Board of Xerox Corpora- 
 tion which is building an installation at Panama's Tocumen Airport. Please 
 supply all available information about this facility. Is Xerox to have any special 
 tax breaks from Panama for expanding its operations there? • 
 
 Answer. Mr. Linowitz left Xerox Corporation in 1966 and has not been an 
 officer or a director of that company since. 
 
 Question 5. 3 Please supply any additional data, available regarding operations 
 in Panama by Pan American World Airways and Marine Midland and its 
 subsidiaries. 
 
 Answer. Pan American World Airways and Marine Midland submitted 
 memoranda to the Department of State on their operations in Panama prior to 
 Mr. Linowitz' appointment as Ambassador in February 1977. These memoranda 
 have been published in the Congressional Record on March 10, 1977 (S. 3992). 4 
 
 Question 6. Please supply such data on affiliated or subsidiary corporations, if 
 any, of other U.S. banks operating in Panama. 
 
 1 This information was supplied by the State Department. 
 
 2 This information was supplied by the State Department. 
 
 3 This information was supplied by the State Department. 
 * See Appendix I, A (Exhibit 2). 
 
66 
 
 Answer. In Question 14 relating to the London Times series of questions, 
 we have provided a list of U.S. banks operating in Panama. While the Comptroller 
 of the Currency may have some material relevant to the operations of affiliated 
 or subsidiary corporations of U.S. banks operating in Panama, it does not have 
 the comprehensive information necessary to answer this question accurately. 
 
 Question 1A. Please submit for the record details dating from January 
 1970 on individual U.S. commercial bank loans to the Government of the Republic 
 of Panama and any of its agencies by date, name of bank and the amount in- 
 volved, etc., and terms of repayment, dates and amounts of interest due, dates and 
 amounts of principal due and indicate loans from foreign branches. Please sub- 
 mit the same information for consolidated and syndicated loans to Panama by 
 U.S. commercial banks. Submit the same for individual or syndicated loans 
 from foreign commercial banks. 
 
 Question 10. Submit data (similar to that requested in Question 7A above) on 
 loans to the private sector in Panama made by U.S. commercial branches and 
 affiliates. 
 
 Answer. Attached is a listing of long-term external borrowings by Panama 
 from year-end 1972 through June, 1977. These data, extracted from a World 
 Bank report, give the available information on individual commercial bank 
 loans to Panama and are largely limited to publicly announced syndicated com- 
 mercial bank credits. While the Comptroller of the Currency may have some 
 material concerning individual bank loans to the Republic of Panama, it does 
 not have the comprehensive information necessary to answer this question 
 accurately. 
 
67 
 
 Ills 
 
 l! 
 
 3 
 
 la 
 
 SI 
 
 1 
 
 - i 
 
 H 
 
 • 
 
 it 
 
 J! • 3 
 
 u e e 
 533 5 
 
 3 .S 
 
 !j 
 
 - a 
 
 ill 
 
 O « * 
 
 a 
 
 ! II 1 
 
 4 
 
 ! 3 ? 
 
 2 Is « 
 
 ■2* 
 
 if 
 
 i 
 
 V.I I 
 
 c *| ° 
 *3 » 
 
 a. o u 
 
 -a I ..a 
 
 ■ CO 
 
 S o 5 z - 
 
 5 c ■- o c 
 
 5 5 o - a 
 
 « ~< u e 
 
 U 3 -9 £ O 
 
 -4 «4 
 
 H 
 i 1 
 
 7 8 
 
 a H 
 
 1! 1 
 
69 
 
 >3 
 
 • ~ V 
 
 3 OC 
 JOH 
 < or Z 
 »- a 2 
 O O O 
 - co o 
 
 — tr z 
 
 Q < O < 
 
 - a z d 
 -i < 
 
 Z ML Z 
 
 z < o < 
 
 < a o q (j 
 
 t- X >- — 
 
 >- O -i z jo; 
 
 < < O < ui 
 
 1 CO > 1C CD 2C S 
 Z -I * z z < 
 
 < — O < -I < 
 
 2 CD t- CD < CO Z 
 
 Z at 
 Uuju. <o zu 
 
 vi o O a » a h 
 
 < CO »- -• t/1 
 O CO CO _» Z O B 
 
 ♦ z 
 
 £2 
 
 • Z »- CO 
 
 K O Ul< 
 
 Z >- er 
 
 X -» ui < 
 
 U CO 
 
 »- z — < z 
 
 •-• > u. ac < 
 
 < -t Z < > 
 
 ac i 
 ui ac 
 
 -i 
 
 < e» 
 z - 
 o 
 
 t- OC 
 
 < ui 
 
 < I CO 
 
 z • • 
 a I " 
 
 ui < 
 z3 
 
 z »- 
 — ac 
 
 3 
 
 o o 
 
 Z u. 
 
 z > 
 o « 
 
 »- ~ 3 
 
 z -» a 
 
 3 -» Ui 
 O — 
 2 2 <* 
 < (/» 
 Z 3 
 
 > ~ l/> 
 *- ac 3 ac 
 -OhO 
 -» < 
 
 < Z t- 
 
 d < m z 
 
 O ac «-»ui 
 
 ~3 .5 
 
 • o z o 
 ec — < < 
 ui O -J 
 as oa, 
 2 ac 
 
 3UU.lt. 
 
 Z 3 O O 
 O 
 
 Z ac ui ui 
 
 < ct a. a. 
 o o >- >- 
 
 
 
 
 
 
 
 
 -i 
 
 
 
 
 
 
 < 
 
 
 
 
 
 
 z 
 
 
 
 
 
 
 o — 
 
 
 
 
 
 >- 
 
 ~i < 
 
 
 
 t- 
 
 
 z 
 
 a s 
 
 
 M 
 
 z 
 
 •< 
 
 Ui 
 
 < < 
 
 Q 
 
 
 ui 
 
 
 
 z z 
 
 Ui 
 
 1 
 
 
 
 
 < 
 
 ac 
 
 i 
 
 Ml 
 
 z 
 
 
 O a 
 
 U 
 
 
 
 < 
 
 
 
 
 
 l/l 
 
 a. 
 
 z 
 
 ac u. 
 
 >- 
 
 u. 
 
 Z 
 
 
 o 
 
 < o 
 
 u 
 
 o 
 
 o 
 
 u. 
 
 u 
 
 u 
 
 z 
 
 
 a 
 
 O 
 
 
 ui u 
 
 ui 
 
 Ui 
 
 
 
 
 ►- 
 
 ac 
 
 
 
 o 
 
 <« 
 
 o -> 
 
 ac a 
 
 
 n 
 
 
 
 a at 
 
 3 ui 
 
 
 « 
 
 !j 
 
 
 — 3 
 
 33 
 
 M 
 
 n 
 
 co 
 
 
 Z a. 
 
 
 a 
 
 o 
 
 3 
 
 Ui 
 
 Ui 
 
 ac — 
 
 z 
 
 as 
 
 0L 
 
 <0 
 
 u ac 
 
 3 
 
 
 <a 
 
 Ui 
 
 r- 
 
 co ~- 
 
 Ui w» 
 
 M 
 
 
 ac 
 
 o a u. 
 
 M Ui U» 
 
 »- »- O 
 
 < UI 
 
 Z -J U 
 
 ac a — 
 
 ui s -» 
 
 «- a a» 
 
 Z U 3 
 
70 
 
71 
 
 Question 7B. Please total Panama's total current debt : 
 
 a. to United States commercial banks ; 
 
 b. to foreign commercial banks, and 
 
 c. to government and quasi-government lending institutions, after citing source, 
 date and amount of each loan and any default, postponement or roll-over in its 
 regard. 
 
 Answer. According to World Bank data, as of December 31, 1976, Panama's 
 public and publicly guaranteed medium- and long-term external debt amounted to 
 $1.1 billion (disbursed only), including the following categories of debt: 
 
 1 Approximately three-quarters of bilateral loans to Panama consist of USG loans. A 
 detailed listing of these USG loans as of December 31, 1976, is attached. There has been 
 no default, postponement, or roll-over of any of these loans. 
 
 It should be noted that these figures do not include either private, unguaranteed 
 debt or debt with a maturity of one year or less. At the present time, there is no 
 comprehensive source of data on these categories of Panamanian debt available to 
 the Treasury. 
 
 Millions 
 
 Suppliers credits- 
 Private banks 
 
 U.S. banks 
 
 Public bonds 
 
 Multilateral loans 
 Bilateral loans 1 — . 
 
 $43 
 650 
 355.0 
 25 
 168 
 169 
 
72 
 
 «5.2 
 
 <[> OJ C T3 -H 
 w > - O W 
 * * 3 = 
 
 J-5 
 
 < o 
 E 
 
 2 ■ 
 
 O ts> 
 
 II 
 
 if 
 
 ^a>f^tj><vjpsiir3tvic\jr^a>ir5ir>or»— «o^— «cviooor^csi 
 
 ITXNI CNI CNI CM CO CvJ — 
 
 S S S £ 
 
 . lD <j) ro r- csi 
 
 csj^u^r^ir>r<«> - ^C''<»r^t£)toa5<x) r ~r^r^r^r-»ooooooto 
 
 1 CM CM CNJ O •— ' — •CMCMCMCM^MCMCM — irtrtrt^O 
 
 oooooococdooooooOooooooo^ 
 
 I^OOOMfl-1 P 1' inin '0<0l0l0U3 l£, >£ | U3l^r^MX| — oo 
 
 O o 
 
 II 
 
 o ' o eg 
 
 )3~t;i.n^.ilS>o-'' c o_i 
 
 .□C03$00li.<C000C^UjQ0Q:Q.Uja3lijSOQ.00OO 
 
73 
 
 mintvocooONOooiflU) 
 co«s-a>Lf>«*ocoooir>r-<cv4r~ 
 
 ■ cnj to ro r>. o> •-• co to 
 
 I LD CO 
 
 i .— > i— • 
 
 0(0 
 
 cor»T 
 
 oo 
 o o 
 
 ICSK-f- lC001«3-C\J0»CVJt0O 
 
 i en o 
 
 10 <o — CLncvjm.— nr>co*i-*i-ir5i— < 
 ooooooooooooo 
 
 i co r-» ■— i o cni 
 
 E £ 
 ego' 
 
 O Cl C t ^ 
 
 !.b.E o © o E 
 
 0.75 otp-oEc 
 S a: cd 00 Q t- _i as 
 
 ■5 £ 
 £E~^£ 
 co 7 S 5 < 
 
 W I r- ■ - 
 
 O) 
 
 : © - 
 
 1 i_ CT 
 
 ,5 c: CT ! 
 
 " >*E fc 
 
 — b = i_ c 3 c co 3 t ro 
 
 •B H £ = o-S.E .E >>"SJ2 
 " *- E <u a, «- £ co — *- o 
 S-o<Elg|El-o2 
 
 O K c CT£^ C O Q) X O 
 
 Olu — ujO-hujq:u.uu 
 
 J2 2 <o-g 
 
74 
 
 Question 8. What is the current ratio of international earnings to total earn- 
 ings of the 13 (or more) U.S. banks operating in Panama? 
 
 Question 9. In each of those banks, what portion of international earnings are 
 
 (a) from assets in Panama? 
 
 (b) from assets in other countries earned by way of Panama branches? 
 Answer. We will attempt to provide the Subcommittee with some informa- 
 tion on this subject as soon as possible. 
 
 See Appendix C for answers to Questions 8 and 9. 
 
 Question 11. According to the Wall Street Journal, April 16, 1976, Wells Fargo 
 Bank organized a lending group to provide $19 million for a sugar mill in 
 Panama and the Government of Panama guaranteed the loans. In the United 
 States our public debt figure does not reflect all government obligations, for 
 example, unfunded Social Security, Veterans Benefits or guarantees such as to 
 Lockheed Corporation and New York City. 
 
 (a) Does Panama's public debt figure include such amounts as the guarantee 
 of the loan for the sugar mill, and the like? 
 
 (b) If it does not, what is the extent of such guarantee? 
 
 Answer. Yes, Panama's public debt figure does include loans guaranteed by 
 the Government of Panama. 
 
 IV 
 
 On August 28, 1977, Panamanian citizen Leopoldo Aragon sent a letter to 
 President Carter from Sweden where he resided. In that letter, Aragon, who 
 died by self immolation two or three days later, stated the following : 
 
 "In that manner Torrijos had the means to silence the Panamanian people by 
 sheer terror, crushing all freedoms and human rights, including freedom of 
 speech and assembly, and banning all political parties, so he could perpetrate the 
 role assigned to him — the deliverance of the canal treaties — without interference 
 or criticism. Meanwhile, with U.S. connivance, he, with his sole signature, could 
 obtain foreign loans in the name of the Republic of Panama, and pocket the 
 proceeds at his discretion. In fact he has, by name, the constitutional right to do 
 so according to Article 277 of his tailor-made "Constitution" of 1972, approved 
 by his rubber stamp Assembly. Thus Panama is saddled today with the highest 
 per capita foreign debt, again, with the exception of Israel, in the whole world." 
 
 1. Is it true that Torrijos could obtain foreign loans for Panama with his sig- 
 nature alone? 
 
 2. If not, what individual, or group of individuals, must sign for such loans? 
 Answer. The Treasury Department does not presently have the information 
 
 available to answer these questions, but will attempt to provide an answer for 
 the record. 
 See Appendix C. 
 
 V 
 
 In the London Daily Telegraph, March 3, 1977, an article entitled "Britain 
 Once Ruled Sea and So Must Approve Panama Transfer" by Desmond Wettern, 
 Naval Corresyndent, appeared. The article states in part : 
 
 BANKING INTERESTS 
 
 The use of th£ Panama Canal by British warships is now small. In 1976 a 
 task group of some nine ships used it returning from a nine-month series of 
 exercises and visits east of Suez, but since then no British warship has navigated 
 the canal either way, I understand. 
 
 Apart from political considerations the Carter Administration is also believed 
 to be under pressure from American banking interests to hand the canal over 
 to Panama. 
 
 ACCESS TO PROFITS 
 
 American and international banks, including the London branch of Chase 
 Manhattan, are believed to have lent the Left-wing regime of President Torrijos 
 of Panama large sums and are anxious to obtain interest on their loans. It is 
 felt that interest payment will be possible only if Panama has access to profits 
 from canal dues. 
 
 British banks believed to have provided loans include the Orion Bank, William 
 Brandts' and Son and Lloyds, and Bolsa International. 
 
 Question 1. Identify Chase Manhattan (London) loans to Panama (unless 
 shown elsewhere). 
 
75 
 
 Question 3. Give details of any loans to Panama by such U.S. bank affiliates 
 (unless shown elsewhere). 
 
 Answer. While the Comptroller of the Currency may have some material 
 relevant to answering these questions, it does not now have the comprehensive 
 information necessary to answer the questions accurately. 
 
 Question 2. Identify all foreign banks owned in whole or in part by each of the 
 U.S. banks which operate in Panama. 
 
 Answer. Attached are extracts from the February 22, 1977 issue of "American 
 Banker" listing the U.S. banks which operate in Panama and identifying 
 affiliates of each bank in all foreign countries. 
 
 [Subcommittee note: Full pages are reproduced from the publication. Banks 
 which operate in Panama show such activity under the subheading, "Panama." 
 The first of the extract pages lists the various U.S. banks and their locations in 
 Panama.] 
 
 25-605 O - 78 - 6 
 
76 
 
 32B 
 
 AMERICAN BANKER 
 
 February 22. 1977 
 
 Index to International Activities 
 
 (Continued from preceding page) 
 
 NIGERIA 
 
 Kino 
 
 •ink of America NTASA, San Fran- 
 
 La got 
 
 Bank of America NT43A, San Fran 
 
 Bankers Trust Co, New York. 
 Chase Manhattan Bank N A, New York 
 Citibank NA. New York. 
 First National Bank. Chicago. 
 
 Port Hareourt 
 
 Bank of America NTASA, San Fran 
 
 Continental Illinois National Bank A 
 
 Trust Co., Chicago. 
 First National Bank of Maryland. Bal- 
 
 Manufacturers Hanover Trust Co., New 
 York. 
 
 Morgan Guaranty Trust Co., New 
 York. 
 
 New Jersey Bank NA, West Paterson. 
 
 st. Kins 
 
 nk of America NTASA, San Fran- 
 Sandy Point* 
 
 ink or America NT4SA, San Fran- 
 cisco. 
 
 NORWAY 
 
 Oslo 
 
 Citibank NA. New York. 
 
 Manufacturer 
 
 Hanover Trust Co., 
 
 OMAN 
 
 Matt** 
 
 Bank of America 
 
 Muscat 
 
 Citibank NA, New York. 
 Rand 
 
 oCltibank NA, New York. 
 
 PAKISTAN 
 
 PHILIPPINES 
 
 Cebu 
 
 Citibank NA, New York. 
 Clark Air Force Bate 
 
 First National City Bank, New York. 
 Makati 
 
 American Express International Bank- 
 ing Corp., New York. 
 Bank of America NTASA, San Fran- 
 
 Marine Midland Bank-New York. 
 Philadelphia National Sank. 
 
 Manila 
 
 nk of America NTASA, San Fran 
 
 TASA, San Fran 
 
 American Express International Bank- 
 ing Corp., New York. 
 Bank of America NTASA, San Fran- 
 Citibank NA. New York. 
 Continental Illinois National Bank A 
 
 Trust Co.. Chicago. 
 Morgan Guaranty Trust Co., New York. 
 
 American Express International Bank- 
 ing Corp., New York. 
 
 Bank of America NTASA, San Fran- 
 cisco. 
 
 Citibank NA, New York. 
 
 PANAMA 
 
 Chase Manhattan Bank NA, New York 
 Clti&n.k. NA. K:« York. 
 Canal Zone 
 
 k NA, New York 
 
 Bank of America NTASA, San Fran 
 
 (CISCO. 
 
 Chase Manhattan Bank NA, New York 
 
 Citibank NA, New York. 
 Colombia 
 
 Mercantile Trust Co, St. Louis. 
 David 
 
 Bank of America NTASA, San Fran 
 
 Citibank 
 La Conception 
 
 Chase Manhattan Bank NA, New York. 
 
 Las Tablas 
 
 Citibank NA, New York. 
 Panama City 
 
 Bank of America NTaVSA, San Fran- 
 
 Bankers Trust Co.. New York. 
 Chase Manhattan Bank NA, New York 
 Citibank NA. New York. 
 First National Bank of Boston. 
 First National Bank, Chicago 
 
 Midiantic National Bank, Newark. 
 
 Philadelphia National Bank. 
 
 Security Pacifio National Bank, Los 
 
 Angeles, 
 thawmut Bank of Boston, NA. 
 State Street Bank A Trust Co , Boston. 
 Wells Fargo Bank NA, San Francisco. 
 
 Chase Manhattan Bank NA, New York 
 
 PARAGUAY 
 
 NTAS A, San Fran 
 
 Citibank NA, New York. 
 Puerto Stroessncr 
 
 Citibank NA, New York. 
 
 PERU 
 
 .ima 
 
 American National Bank A TVs ;t Co.. 
 Chicago. 
 
 Bank of America NTAIA, San Fran 
 
 Citibank NA. New York. 
 Citirens A Southern National Bank 
 Atlanta. 
 
 I A. San Francisco. 
 
 NA, New York. 
 
 New York. 
 
 Continental 
 Trust Co 
 Crocker Na 
 Fidelity Ba 
 
 Chicago 
 
 San Francisco, 
 ladelphia. 
 First National Bank of Boston. 
 First National Bank, Chicago. 
 Manufacturers Hanover Trust Co., 
 
 New York. 
 Marine Midland Bank, New York. 
 Mellon Bank NA, Pittsburgh. 
 Morgan Guaranty Trust Co, Now 
 National Bank of Detroit. 
 oPacific National Bank of Washington, 
 Seattle. 
 Philadelphia National Bank. 
 • Rainier National Bank. Seattle. 
 Security Pacific National Bank, Los 
 
 United California Bank, Los Angeles. 
 Wells Fargo Bank NA, San Francisco. 
 
 POLAND 
 
 Warsaw 
 
 First National Bank, Chicago. 
 
 PORTUGAL 
 
 Lisbon 
 
 First National Bank of Boston. 
 
 PUERTO RICO 
 
 Arecibo 
 
 Citibank NA, New York. 
 
 Bayamon 
 
 Chase Manhattan Bank NA, New York 
 Citibank NA, New York. 
 Caguas 
 
 Chase Manhattan Bank NA, New 
 
 York. 
 
 Citibank NA, New York. 
 Caparra 
 
 Chase Manhattan Bank NA, New York 
 Carolina 
 
 Chase Manhattan Bank NA, New York 
 
 Citibank NA, New York. 
 Hato Rey 
 
 Chase Manhattan Bank NA, New York 
 Mayaguez 
 
 Citibank NA, New York. 
 
 Ponce 
 
 Chase Manhattan Bank I 
 Citibank NA, New York 
 
 nhattan Bank I 
 
 A. New York 
 
 Citibank Na 
 Santurce 
 
 Doha 
 
 Chase I 
 Clliban 
 
 OATAR 
 
 I NA, New York 
 
 RAS AL KHAIMAH 
 
 Rai Al Khaimah 
 
 Citibank NA, New Yark. 
 
 ROUMANIA 
 
 RWANDA 
 
 Kigali 
 
 Bank of America NTASA, San Fran 
 
 Cisco. 
 
 Morgan Guaranty Trust Co.. New 
 
 ST. LUCIA 
 
 Chaic Manhattan Ba 
 
 SAMOA (AMERICAN) 
 
 Pago Pago 
 
 Bank of Hawa 
 Citibank NA, New 
 
 SAUDI ARABIA 
 
 leddak 
 
 «A. New York. 
 
 Riyadh 
 
 .bank NA, New York. 
 
 SCOTLAND 
 
 Edinburgh 
 
 American Express International Bank- 
 ing Corp., New York. 
 Bank of America NTASA, San Fran- 
 
 •Chemical Bank, New York. 
 Continental Illinois National Bank A 
 
 Trust Co.. Chicago. 
 First National Bank, Chicago. 
 • Manufacturers Hanover Trust Co.. 
 New York. 
 
 SENEGAL 
 
 nerica NTASA, San Fran 
 
 Bankers Trust Co., New York. 
 Citibank NA, New York. 
 Fidelity Bank, Philadelphia. 
 Morgan Guaranty Trust Co, 
 York. 
 
 SHARJAH 
 
 Sharjah 
 
 Chase Manhattan Bank NA, New 
 
 York. 
 
 Citibank NA. New York. 
 First National Bank, Chicago. 
 
 lurong 
 
 SINGAPORE 
 
 NA, New York. 
 
 Singapore 
 
 American Express International Bank- 
 ing Corp, New York. 
 
 Bank of America NTASA, San Fran- 
 cisco. 
 
 Bank of New York. 
 
 Bankers Trust Co, New York. 
 
 Chase Manhattan Bank NA, New 
 
 Chemical Bank, New York. 
 
 Citibank NA, New York. 
 
 Citizens A Southern National Bank. 
 
 Continental Illinois National Bank A 
 Trust Co, Chicago. 
 
 • First National Bank of Boston. 
 First National Bank, Chicago. 
 First National Bank in Dallas. 
 
 First National Bank of Oregon, Port- 
 land. 
 
 First National City Bank, New York. 
 First Pennsylvania Bank NA, Phila- 
 delphia. 
 Girard Bank, Philadelphia. 
 Harris Trust A Savings Bank, Chi- 
 
 • Industrial National Bank, Providence. 
 Irving Trust Co, New York. 
 Marine Midland Bank, New York. 
 Morgan Guaranty Trust Co, New 
 
 Northern Trust Co, Chicago. 
 
 • Pacific National Bank of Washington, 
 
 Seattle 
 Pittsburgh National Bank. 
 Rainer National Bank, Seattle. 
 Republic National Bank, Oallas. 
 Seattle-First National Bank. 
 Security Pacific National Bank, Lot 
 
 State Street Bank A Trust Co, Boston 
 United California Bank, Los Angeles 
 United States National Bank, Portland 
 Wells Fargo Bank NA, San Francisco. 
 
 SOUTH AFRICA 
 
 Johannesburg 
 
 Citibank NA. New York. 
 European-American Banking Corp. A 
 
 European- American Bank A Trust 
 
 Co , New York. 
 First National Bank of Boston. 
 
 SPAIN 
 
 lilbao 
 
 Bank of America NTASA, San Fran 
 
 Continental Illinois National Bank A 
 Trust Co, Chicago. 
 • Security Pacific National Bank, Los 
 
 Bankers Trust Co, New York. 
 Chase Manhattan Pank NA, New York. 
 Chemical Bank. New York. 
 Citibank NA. New York. 
 Continental Illinois National Bank A 
 Trust Co, Chicago 
 First National Bank of Boston. 
 First National Bank. Chicago. 
 First National Bank of Miami. 
 First National City Bank, New York. 
 
 Trust Co, 
 
 Manufactu 
 
 New York. 
 Marine Midland Bank. New 
 Morgan Guaranty Trust 
 
 SRI LANKA 
 
 ibank NA. New York. 
 
 SWEDEN 
 
 Stockholm 
 
 •Citibank NA, New York. 
 First National Bank of Boston. 
 First National Bank. Chicago. 
 
 SWITZERLAND 
 
 Basle 
 
 American Express International 
 Ing Corp, New York. 
 Ceneva 
 American Express International 
 Ing Corp , New York. 
 • American Fletcher National 
 
 Bank of America NTASA. San Fran- 
 cisco. 
 
 Chase Manhattan Bank NA, New 
 
 York. 
 
 Citibank NA. New York. 
 
 Continental Illinois National Bank A 
 
 Trust Co, Chicago. 
 Fidelity Bank. Philadelphia. 
 First National Bank of Boston. 
 First National Bank. Chicago. 
 
 Marine Midland Bank. New York. 
 Morgan Guaranty Trust Co, Now 
 
 York. 
 
 Northern Trust Co, Chicago. 
 
 United States Trust Co. of New York. 
 
 Lausanne 
 
 American Express International Bank- 
 ing Corp, New York. 
 Citibank NA, New York. 
 Lugano 
 
 Bank of America NTASA, San Fran- 
 Citibank NA. New York. 
 
 Zug 
 
 Chemical Bank, New York. 
 Continental Illinois National Bank A 
 
 Trust Co, Chicago. 
 Mellon Bank NA, Pittsburgh. 
 Zurich 
 
 American Express International Bank- 
 ing Corp, New York. 
 
 Bank of America NTASA, San Fran- 
 cisco 
 
 Bank Leuml Trust Co, New York. 
 Bankers Trust Co, New York. 
 Brown Brothers Harrlman A Co, New 
 
 Chase Manhattan Bank NA. New York. 
 Chemical Bank. New York. 
 Citibank NA. New York. 
 Continental Illinois National Bank A 
 
 Trust Co, CttSOKSJVA 
 First National Bank of Boston 
 Girard Bank, Philadelphia. 
 Manufacturers Hanover Trust Co, 
 
 New York 
 Morgan Guaranty Trust Co., Now 
 
 York. 
 
 Seattle-First National Bank. 
 
 TAHITI 
 
 Papeete 
 
 Bank of Hawaii, Honolulu. 
 Tahiti 
 
 Citibank NA. New York. 
 
 TAIWAN 
 
 Taipei 
 
 American Express International Bank- 
 ing Corp, New York. 
 Bank of America NTASA, San Fran- 
 
 • Rank of California NA, San Francisco, 
 •ankers Trust Co, New York. 
 Chase Manhattan Bank NA, New 
 
 York 
 
 Chemical Bank, New York. 
 
 Citibank NA, New York. 
 
 Continental Illinois National Bank A 
 
 Trust Co, Chicago. 
 Fidelity Bank. Philadelphia. 
 Irving Trust Co N-w York. 
 Morgan Guaranty Trust Co, New 
 
 (Continued on page 55Al 
 
77 
 
 February 11. 1977 
 
 AMERICAN BANKER 
 
 International Activities of United States Banks 
 
 The Information in this listing 
 was supplied by the banks them- 
 selves, by the Federal Reserve Board 
 and taken from the files of the 
 American Banker. Unless otherwise 
 indicated, the information is as of 
 Dec. 31, 1976 Questionnaires were 
 sent to the 300 largest banks in the 
 United States, as well as to a num- 
 ber of smaller institutions that are 
 known to be actively engaged in 
 international banking. Following is 
 the ninth annual revision of the 
 American Banker tabulation: , 
 
 ALABAMA 
 
 Birmingham 
 
 BIRMINGHAM TRUST 
 NATIONAL BANK 
 
 (A Subsidiary of Southern 
 Bancorporation of Alabama, 
 Birmingham) 
 
 International banking policy: 
 
 By virtue or its 13 banking subsidi- 
 aries. Southern Bancorporation is repre- 
 sented in the major market areas of 
 Alabama, and BTNB's International de- 
 partment was established to serve the 
 state's international banking needs 
 through these affiliates. Working with 
 its foreign correspondents, BTNB stands 
 ready to assist Alabama companies ex- 
 
 ing businesses, a strong commitment h 
 been made to provide the innovatii 
 competence and expertise 
 
 "Our major objectives are: to pro- 
 mote the expansion of International 
 trade; to facilitate the Importation and 
 exportation of goods through our own 
 port as well as the many others found 
 in our area; to provide a full range of 
 International services to our customers 
 and correspondents wherever the serv- 
 ices are needed." 
 
 FN8 Mobile serves the International 
 needs of the holding company's four 
 other subsidiary banks throughout Ala- 
 bama. 
 
 Correspondent balance relationships: 
 The First National Bank of Mobile 
 
 banks in eight countries, and 31 for- 
 es maintain 
 bile. Corre- 
 spondent agency arrangements are main- 
 tained with over 300 overseas banks, a 
 number of which maintain branches 
 lich FNB 
 
 dent balances in 14 countries. Principal 
 account relationships are' Mexico, Japan, 
 England, West Germany, Netherlands, 
 Switzerland, France, Asia, Peru and 
 Spain. In addition, 33 banks from 10 for- 
 maintain correspondent 
 the international depart- 
 
 |eign 
 
 FIRST NATIONAL BANK OF 
 ARIZONA, PHOENIX 
 (A Subsidiary of Western Bancorp, 
 Los Angeles) 
 
 International banking policy: 
 
 "To provide a full range of Interna- 
 tional banking and financial services for 
 customers and correspondent banks, to 
 encourage and assist customers in ex- 
 panding their involvement in interna- 
 tional cor 
 trade and i 
 southwesterr 
 
 See listing 
 
 The 
 
 CROSS INDEX BEGINS ON 
 PAGE 28B 
 n Banker list of Inter 
 
 national Activities of U. S. Banks 
 includes a cross index of banks abroad 
 by country. New activities for 1976 
 are indicated m the Index by a (•). 
 
 This reference shows the name of 
 each U. S. bank represented in each 
 foreign country; the type of facility 
 
 country sub-headi 
 ranged alphabetii 
 
 the 
 
 througho 
 
 their international 
 nplete range of docu 
 
 itary 
 
 foreign Investment." 
 
 THE FIRST NATIONAL BANK OF 
 BIRMINGHAM 
 (A Subsidiary of Alabama 
 Bancorporation, Birmingham) 
 
 International banking policy: 
 
 "The First National Bank of Birming- 
 ham established an international de- 
 partment to service the growing needs 
 of our customers for international bank- 
 ing facilities. Our centralized location In 
 Alabama allows us to fully serve the 
 domestic and International needs of the 
 Important and growing industries of 
 Alabama, Mississippi, Georgia, Florida 
 and Tennessee. We emphasize traditional 
 International banking services, such as 
 export financing using Exim Bank, 
 FCIA, and straight country exposure. 
 Import financing, letters of credit, pur- 
 chase 'sale of foreign exchange, and for- 
 eign collections. Using our network of 
 foreign correspondents and foreign gov- 
 
 companies to Increase their export trade 
 or introduce them to world trade." 
 
 Representation overseas: 
 
 CAYMAN ISLANDS 
 George Town: One branch. 
 
 MEXICO 
 Mexico City: Representative. 
 Correspondent balance relationships: 
 
 Through accounts and agency agree- 
 ments FNB of Birmingham has direct 
 access to banks in world financial centers 
 
 Mobile 
 
 AMERICAN NATIONAL BANK 
 & TRUST CO., MOBILE 
 (A Subsidiary of Alabama 
 Bancorporation, Birmingham) 
 
 International bonking policy: 
 
 "Our International banking services 
 run the complete gamut of international 
 business activities, be it trade (or com- 
 merce). Our main area of concentration 
 Is Latin America with special emphasis 
 •n Mexico. Our close personal contacts 
 and knowledge of these areas have 
 proved most beneficial to our custo- 
 
 THE FIRST NATIONAL BANK 
 OF MOBILE 
 (A Subsidiary of First 
 Bancgroup-Alabama, Inc., Mobile) 
 International banking policy: 
 
 "First National Bank In Mobile main- 
 tains an aggressive International depart- 
 ment, staffed by a knowledgeable and ex- 
 perienced staff and designed to provide 
 fast, efficient, personal service to cor- 
 porate customers and financial Institu- 
 tions, both domestic and foreign. In an- 
 
 MERCHANTS NATIONAL BANK, 
 MOBILE 
 
 (A Subsidiary of Southland 
 Bancorporation, Mobile) 
 
 International banking policy: 
 
 "Our principal activity Is In the fi- 
 nancing of our customers' export and 
 import transactions, and In doing so we 
 have always concentrated on two factors: 
 to help them keep the business they 
 have on a sound and profitable basis; 
 and to provide the facilities they need 
 to develop new promising areas of opera- 
 tion. 
 
 "We maintain facilities to meet all 
 types of International financing require- 
 ments, supplementing thoss of our own 
 bank with those of the correspondent 
 banks with whom we keep close contact 
 in most countries of the world. By work- 
 ing as closely as possible with our cor- 
 
 nited States." 
 
 ■ United California Bank,! . , . 
 Los Angeles, principal subsidiary of LOS Angeles 
 Western Bancorp. 
 Representation overseas: 
 BAHAMAS 
 Nassau: One branch. 
 Correspondent balance relationships: 
 First National maintains corresponds 
 
 CALIFORNIA 
 
 LLOYDS BANK CALIFORNIA, 
 LOS ANCELES 
 (A Subsidiary of Lloyds First 
 Western Corp., a wholly-owned 
 subsidiary of Lloyds Bank, Ltd., 
 London) 
 V. S. Subsidiary: 
 
 FIRST WESTERN BANK INTER- 
 NATIONAL, CORP., LOS ANCELES 
 
 This state-chartered corporation Is 
 capitalized at $2 million. 
 
 vide the services our domestic customers 
 need overseas and, at the same time, be 
 of good service In this market to our 
 
 VALLEY NATIONAL BANK, 
 PHOENIX 
 
 Infernaiional banking policy: 
 
 "At the largest bank in the Rocky 
 Mountain Area", w. are we,, versed i i 
 oversea, banking to serve Southwestern j ^ tra^ricC 
 
 firms in their International business activ- — . . . . ... 
 
 itles. Our service, include foreign trad, j Correspondent balance relationships. 
 financing, participation In foreign loan 
 syndications, letters of credit, collections, 
 overseas transfers of funds, foreign ex- 
 change and trade inquiries. We believe 
 
 the close cooperation wit 
 
 Lloyds 
 
 all major trading currencies. Accounts 
 from approximately 200 banks are held 
 by Lloyds Bank California, a member of 
 Lloyds Bank Group which has offices 
 
 er 40 
 
 elation- 
 
 We 
 
 ig frl 
 
 not now foresee a need for our 
 own branches In other countries." 
 Correspondent balance relationships: 
 
 Merchants National holds correspon- 
 dent accounts from 16 banks In nine 
 countries and maintains accounts with 
 22 correspondent banks in 
 plus agency arrangements in othe 
 
 ing friends overseas with whom 
 tain over 1,000 correspondent 
 ships In major cities throughout thi 
 world. 
 
 U. S. Affiliate: 
 
 ALLIED BANK INTERNATIONAL 
 NEW YORK 
 Valley National is one of ,8 member! 
 banks of Allied. See listing for Allied : mil 
 International under New York. g a 
 
 MANUFACTURERS BANK, 
 LOS ANCELES 
 
 International banking policy: 
 "Manufacturers Bank, Los Angeles. 
 
 has 8 locations. 7 of them In Los An- 
 geles County, and one In Orange County. 
 
 "Having reached $368 million In re- 
 sources by the end of 1976 from S334 
 million a year earlier, Manufacturers 
 follows a policy of providing the 
 
 ALASKA 
 Anchorage 
 NATIONAL BANK OF ALASKA, 
 ANCHORACE 
 
 International banking policy: 
 
 "The National Bank of Alaska, the 
 largest bank in Alaska, provides complete 
 
 and full international banking services, 
 with our main activities being assisting 
 the exporter and importer In order 
 to promote and expand the foreign trade 
 of Alaska. At present, we have no 
 representative office overseas, but we 
 will make annual visits to the banks and 
 companies in the major marketing areas 
 of the Far East." 
 
 Correspondent balance relationships: 
 
 National Bank of Alaska maintains 
 balances with five foreign banks, and 
 
 Representation overseas: 
 BAHAMAS 
 Nassau: One branch. 
 Correspondent balance relationship 
 Valley National has S4 foreign 
 
 I highest qu 
 
 nging probli 
 
 bank 
 
 its du 
 
 with NBA. NBA also maintains agency 
 arrangements with approximately SO 
 overseas banks. 
 
 ARIZONA 
 
 Phoenix 
 
 THE ARIZONA BANK, PHOENIX 
 
 International banking policy: 
 
 nternational pol- 
 
 -fold: 
 
 fac 
 
 to Arizona's fast-growing International 
 trade; and to generate income from par- 
 ticipation in other profitable interna- 
 tional banking activities related to world 
 trade. The department is a separate 
 profit center contributing substantially to 
 
 overseas branch in the Cayman Islands 
 for Eurocurrency transactions." 
 Representation overseas: 
 
 CAYMAN ISLANDS 
 George Town: One branch. 
 Correspondent balance relationships: 
 Arizona Bank maintains 36 correspon- 
 
 ARKANSAS 
 Little Rock 
 
 FIRST NATIONAL BANK IN 
 LITTLE ROCK 
 
 International banking policy: 
 
 "Our main objective is to provide oi 
 customer base, which is statewide, with I 
 international services as they need them. 
 We have the capabilities to offer any In* I 
 ternational banking service that they 
 might need from travelers foreign ex- 1 
 change to financing exports through, 
 FCIA and Eximbank. Our customers in- 
 clude exporters, importers and Arkansas | 
 correspondent banks. 
 
 "We also actively promote exporting 
 from the state of Arkansas through our 
 call program and association with sev- 
 eral international businesses and organi- 
 zations. We hope to encourage manufac- 
 turers and the agricultural sector in our 
 state to look into expansion of their sales 
 
 Correspondent balance relationships' 
 
 Through accounts and agency agree- 
 ments. First National Bank in Little 
 Rock has access to banks in world finan- 
 cial centers to service our customer 
 needs world wide. 
 
 WORTHEN BANK & TRUST CO. 
 NA, LITTLE ROCK 
 (A Subsidiary of First Arkansas 
 Bankstock Corp.. Little Rock) 
 
 International banking policy: 
 
 "International trade activities, spurred 
 by the 1971 opening of the Arkansas 
 River to navigation, are sharply increas- 
 ing the demand for new banking serv- 
 ices. We are staying ahead of this 
 demand. Through direct relationships 
 with foreign banks, their New York 
 offices and large U.S. banks, our custom- 
 ers receive quality services efficiently 
 provided. 
 
 "We have actively participated In trad 
 
 "The bank s specialty is largely in fi- 
 nancing the shipment of goods. Our 
 ability to do this has been enhanced 
 by the establishment of our fine network 
 of correspondent banks. By having such 
 a broad and profitable relationship with 
 our correspondents, we are thus able 
 to effectively assist international oriented 
 companies with financial packages tail- 
 ored to their Individual requirements." 
 
 ondent balance relationships: 
 
 San. 
 
 :nt balances with 35 banks in 
 countries; 19 foreign banks 
 13 countries maintain correspondent b 
 ances with Manufacturers Bank; a 
 120 foreign banks have agency arranc, 
 
 SECURITY PACIFIC NATIONAL 
 
 BANK, LOS ANCELES 
 (A Subsidiary of Security Pacific 
 Corporation, Los Angeles) 
 
 International banking policy: 
 
 "Security Pacific Corporation, primar- 
 ily throuSh its principal subsidiary, Se- 
 ity Pacific Bank, constantly explores 
 ious possibilities of overseas 
 n- This expansion may assume 
 m of investments, represen- 
 ffices or full-service branches, 
 cisions are always based upon 
 the requirements of our cus- 
 responden 
 
 the va 
 
 tional banking and financial services. 
 "In addition, Security Pacific Bank 
 
 ber of correspondent banking relation- 
 ships throughout the world, and, in turn, 
 extends its presence overseas. These 
 relationships complement the bank's 
 ability to serve its customers on a mul- 
 
 U. S. Subsidiaries: 
 
 SECURITY PACIFIC 
 INTERNATIONAL BANK, N. Y. 
 This Edge Act subsidiary of Security 
 Pacific Bank, incorporated in 1968. is 
 capitalized at $16 million. 
 SECURITY PACIFIC OVERSEAS 
 CORPORATION, LOS ANCELES 
 
 SPOC is an investment Edge Act Cor 
 poration capitalized at $6 million. 
 
 (Cnntinued on nrxt pigei 
 
78 
 
 2B 
 
 AMERICAN BANKER 
 
 February 22. 1977 
 
 International Activities 
 
 i Continued from prereeltn*; paae) 
 SECURITY PACIFIC OVERSEAS 
 
 INVESTMENT CORPORATION 
 LOS ANGELES 
 
 A subsidiary of Security Pacific Over- 
 Kll Corporation, SPOIC was organized 
 for tlx purpose of making overseas In- 
 
 Rtpre levo'-'oi ovefieos.- 
 
 AUSTRALIA 
 Melbourne: Tricontinental Corporation, 
 
 bank with offices in Sydney, la 24% 
 owned by SPOIC. 
 Sydney: Representative office. 
 Security Pacific Australia Ltd, a 
 
 * * 1 BAHAMAS 
 Nassau: One branch. 
 
 BELGIUM 
 Brussels: One branch. 
 
 BERMUDA 
 Hamilton: Security Universe Ltd. Is 50*i 
 owned by Security Pacific Corp. and 
 has finance subsidiaries and affiliates 
 In Hong Kong and the United King- 
 
 Rio de Janeiro: Banco Oenasa de In- 
 vestments, 5 * one of Brazil's larg- 
 est merchant banks, headquartered in 
 Rio de Janeiro with branch offices In 
 Brasilia, Sao Paulo, Belo Honzonte 
 and Porto Alegre. SPOIC has a 20*. 
 Interest in Banco Denasa. 
 
 Sao Paulo: Representative office. 
 ENGLAND 
 
 London: One branch and European head- 
 quarters office of the 
 
 rvlng the In- 
 ternational requirements of Its clientele. 
 It has representative offices In five over- 
 seas locations with minority Inve s tment 
 positions In financial Institutions princi- 
 pally surrounding the Pacific Basin. Its 
 main emphasis lies In lending from Lea 
 Angeles with some placing of Its Euro- 
 currency loans from its Nasaau branch." 
 
 u. s. y.i»fiT»fi 
 
 UNION INTERNATIONAL BANK, 
 LOS ANGELES 
 This Edge Act corporation was estab- 
 
 Repreientaiion overseen: 
 BAHAMAS 
 Nassau: One branch. 
 
 BRAZIL 
 
 Rio de Janeiro: Representative effic*. 
 
 ENGLAND 
 London: Representative office. 
 
 HONG KONG 
 Hong Kong: Representative office. 
 
 Saitama-Union (International) Hong 
 Kong Ltd. Union Bank has a minority 
 interest In this financial Institution. 
 
 JAPAN 
 Tokyo: Representative office- 
 Sun Lease Co, Ltd. Union Bank has 
 a minority interest In this leasing com- 
 
 bed an International department to i BRAZIL 
 rvlee its local customer*' trad* ftnanc- [ an* ** Janelr*: Represent* tiv* c» ce. 
 g, international Investment and foreign &m Paula: Regional •Witt- 
 change need*. Through an expanding lBttrMej#-a , »_ A xuz4 A Hold 
 .K^TTr^:.™^ ■ »0* <"roct lotcrest In - i ba.k whkc 
 able to foreign Branch*, in Recife, Santo* and Ri 
 clienU -U trade. L, Jtntln _ 
 rv.ee. ,n South- 1 BRUNEI 
 
 Bandar Scri Begawan i On* branch. 
 Correspond 1 **/ Wane* rc/ofiomaip*: BURUNDI 
 San Diego Trust is in the process *f | Bujumbura: Banque Comanerclakt * 
 
 makes avail 
 
 establishing reciprocal accounts l* major 
 
 Son Francisco 
 
 BANK OF AMERICA NT&SA. 
 SAN FRANCISCO 
 (A Subsidiary of BankAmenca Corp., 
 San Francisco) 
 
 TMi bank, with a branch In 
 Gitega. is owned by SFOM, a BOANY 
 affiliate (see Switzerland). 
 
 CAMEROON 
 aoundc: Ban que International* pour 
 
 SFOM. l 
 
 B0A« 
 
 .see Switz- 
 
 Canada. BOANY 
 
 CANADA 
 Montreal Trust Co, Ltd, 
 largest trust company 
 P »%. 
 
 Shutoken Lease Co, Ltd. Union Bank 
 has a minority interest in this leasing 
 company. 
 
 MEXICO 
 
 Mexico City: Representative office 
 
 VENEZUELA 
 Caracas: Representative office. 
 Security Pacific International Leasing ' Carmpondent balonct nloiionihipi: 
 (Europe), Inc, a subsidiary of the hoM-| Union Bank has 280 accounts from 
 ■ ng company, has a branch in London. foreign banks and maintains 91 accounts 
 Western American Bank ( Europe) j abroad. 
 
 I."*" owne7T-bsXritt t M ba se k : ' UNITED CaTHfORNIA BANK, 
 currty Pacific National Bank. | LOS ANCELES 
 
 "'owned 1 br^urrt^n'iverL^L-td 00 :,;'* Bancorp., 
 Hamilton, Bermuda, is based here and I LO * 
 has fiv* branch** In the U. K, /*f*mo/rO»oV banking policy: 
 
 FRANCE -United California Bank'* fortlgn ex- 
 
 Paris: Representative office I pension policy Is on* *f branch and/or 
 
 GERMANY en* acqulsitlan *f, or Investment In, for- 
 
 Frankfurt: On* branch. ,i gn tanking institutions. Correspondent 
 
 Munich: Security Pacific International ' 
 Leasing (Europe), Inc: one branch. 
 HONG KONG 
 Hong Kong: Asia and Australasia head- 
 
 overseas expansion and operation. In 
 order to bulM and operate a truly Inter- 
 national banking system, ft employs 
 branches, subsidiaries, representative of- 
 fices and investment participations. 
 
 -By yearend If 71 » 
 13.000 staff members 
 World Banking Division at dlv 
 headquarters i 
 London as well 
 able to offer a 
 
 wholly-owned subsidiary *f BOANY. 
 Vancouver: North Con t in ent Capital Ltd. 
 Is an affiliate *f BankAmenca Cc-c . 
 with office* in Vancouver, Calgary, Ed- 
 I m oat o n, Montreal and Toronto, 
 vcr CAYMAN ISLANDS 
 
 the George Town: One branch. 
 
 World Bank 4 Trust Corp. (Cayman) 
 
 Tokyo, Caracas and Ltd, a subsidiary of Wobaca 
 in the U. S. that are Co, (Luxembourg) in which BofA n a 
 II range of wholesale ; substantial shareholder, 
 and commercial banking services. Cor- 1 CHANNEL ISLANDS 
 
 responding relationships are maintained jersey: One branch, 
 globally, in particular where the bank Bank of America (Jersey). Ltd, a fun 
 has direct office or affiliate- There arc | servic* commercial bonk, ta • whsily- 
 9 branches, currency units and repre- owned BofA subsidiary. 
 
 !t , h J^ CHILE 
 
 Santiago: Representative t ' :e 
 
 Financicra America ri* Chile, S-A, a 
 
 sentative offii 
 
 through a global system equipped to 
 
 COLOMBIA 
 
 International objectives." 
 ! U. S. Siifcuic/ioriej: 
 
 UNITED CALIFORNIA BANK 
 INTERNATIONAL, NEW YORK 
 I This Edge Act unit Is capitalized at 
 
 SPOIC holds a majority intert 
 ink of Canton, Limited, a 
 ■I Hong Kong-based bank I 
 
 ensed branches' in Hong Kong | *nd UNITED CALIFORNIA OVERSEAS 
 
 INVESTMENT CORP., 
 LOS ANCELES 
 
 on* each in Bangkok. Thailand; Kuala 
 Lumpur, Malaysia: and Singapore. In 
 addition. It own* a banking subsidiary 
 
 Edge Act Subsidiary which holds 
 n of UCB's Investment* In foreign 
 :lal Institution*. 
 
 Security Unlvero* (Hong Kong) Ltd. 
 I* BCr% owned by Security Universe Ltd. 
 *f Hamilton, Bermuda. 
 
 JAPAN r?ep/»j»«fofiCWI ortnem: 
 
 Tokyo: On. branch AUSTRALIA 
 
 MALAYSIA Melbourne: Euro-Paclflo Finance Corp.. 
 
 Kuala Lumpur: Branch *f Bank of Can- i Ltd. UCOIC has a minority Interest 
 ton, Hong Kong, an SPOIC subsidiary. \ |„ this medium and long term financial 
 MEXICO Institution. 
 Msxlc* City: Representative ■»««. Sydney: Representative «fflc«. 
 
 NETHERLANDS I BAHAMAS 
 
 Amsterdam: Security Pacific Interna- Nassau: One branch, 
 tlonal Leasing (Europe) Inc; one; BELGIUM 
 oranch. I Bruoseki: Oh branch. 
 
 BRAZIL 
 
 [ Rio d* Janeiro: Representative sfflc*. 
 ENGLAND 
 One branch. 
 
 HONG KONG 
 
 NEW ZEALAND 
 Kuckland: Marac Holdings, Ltd, 
 Auckland-based holding company vi 
 three wholly owned subsidiaries In- 1 
 eluding Marac Finance Ltd, Marac i 
 International Ltd, and Marac Corpora- 
 
 tion Ltd, I 
 
 owned by SPOIC 
 PANAMA 
 Panama City: Security Pacific 
 
 Kong: Representative office. 
 
 nternational Capital Ltd 
 merchant banking subsidiary whi 
 (Panama). S-A. This wholly owned I owned by UCOIC. 
 bank augments the capabilities of both INOONESIA 
 Security Pacific Interamerican Bank, i Jakarta: Representative office. 
 S.A. and Security Pacific Natii 
 
 Bank in Panama. 
 
 Security Pacific 
 S.A. In th« Republic of Panama. This 
 jc r; venture regional bank, of which 
 SPOIC owns SO*., serves the short and 
 medium term lending markets through- 
 out Central America. 
 
 PHILIPPINES 
 Manila: Regional *ffic* of the bank. 
 SINGAPORE 
 
 Branch *f Bank of Canton. Hong Kong. 
 • n SPOIC subsidiary. 
 
 SPAIN 
 
 Barcelona: Security Universe Espana 
 S-A. Is owned by Security Pacific 
 Corp. 
 
 TAIWAN 
 Telp«i: Representative office. 
 
 THAILAND 
 Bangkok: Branch of Bank of Canton 
 Ltd . Hong Kong, an SPOIC subsidiary 
 
 Corr.ipond.nf fco'onc* nloiionihipi: 
 
 Corre.pondent relations arc maintained 
 nan )S0 leading banki 
 
 with 
 
 UNION BANK, LOS ANCELES 
 (A Subsidiary of Union Bancorp, 
 
 LOS Anrrlci 
 
 /n/emofi'ono/ bonting policy: 
 
 opted ■ 
 
 IRAN 
 
 Teheran: Represenutiv* sffic*. 
 
 JAPAN 
 Tokyo: One branch. 
 
 MEXICO 
 
 Mexico City: Representative effk*. 
 PERU 
 
 Lima: R*pre*entativ« office. 
 
 PHILIPPINES 
 Manila: Representative effk*. 
 
 SINGAPORE 
 Singapore: On* branch. 
 
 SPAIN 
 
 Madrid: Representative offke. 
 
 TAIWAN 
 Taipei: On* branch. 
 
 VENEZUELA 
 Caracas: Representative «fflc*. 
 Cotmpo*d*nt bo/once nloiionihipi: 
 United California Bank maintain* 1 
 deposit accounts with foreign ban 
 and Mt foreign correspondent banks 
 maintain accounts with UCB. 
 
 Son D/ego 
 
 SAN DIECO TRUST & 
 SAVINCS BANK 
 (A Subsidiary of San Die-fO 
 Financial Corp.) 
 /nfernofiono/ bowsing policy: 
 -San Dlegs Trust r*c*nlly ha* rstab 
 
 U. S. SabW.fjrics: 
 
 BAMERICAL INTERNATIONAL 
 FINANCIAL CORP. (BIFC), 
 SAN FRANCISCO 
 BANK OF AMERICA 
 NEW YORK (BOANY) 
 BANK OF AMERICA 
 INTERNATIONAL OF CHICAGO 
 
 BANK OF AMERICA 
 INTERNATIONAL OF FLORIDA 
 (MIAMI) 
 
 BANK OF AMERICA 
 INTERNATIONAL OF TEXAS 
 (HOUSTON) 
 
 Reprejenfcrfion oreneoi: 
 
 ABU DHABI 
 See United Arab Emirate*. 
 
 ANGUILLA 
 Th* Valky: On* branch. 
 
 ARGENTINA 
 Buenos Air**: Four branch**. 
 
 AUSTRALIA 
 
 BOANY 
 
 which BofA has a minority interest, 
 ha* b ra nc he s k* Barranquilla, Cad, 
 Medellin, and four in Bogota. 
 
 CONGO 
 
 Brazzaville: Union Congelala* de Banque, 
 with branches la Del hue and Psint*- 
 Noire. is owned by SFOM, a BOANY 
 
 COSTA RICA 
 
 Melbourne: MBC 
 
 InternatlonaL Ltd, 
 finance company with 
 Sydney, Brisbane and 
 
 Sydney: Represenutiv* office. 
 Commercial •> General 
 a. (CAGA), a financial company v 
 30 office* throughout Australia, I* 
 ate in which BOANY own* 20*e 
 
 wholly-owned subsidiary *f BofA. 
 Financicra ri* ajneraca, U. la an af- 
 filiate!* which BIFC own* S1-* Io- 
 ta rest. 
 
 CYPRUS 
 
 Nicosia: Hellenic Bank Ltd. ■****- 
 filial* of BofA. 
 
 DENMARK 
 Copenhagen: Scandinavian representa- 
 tive office; On* branch. , 
 DOMINICAN REPUBLIC 
 SakcdO: Ono aeanch- 
 Santiago: On* branch. 
 Santo Domingo: Two branches. 
 
 Financiers Asorlssts, » * 
 affiliate la which BIFC own* S0% 
 
 DUBAI 
 See United Arab Emirates. 
 
 ECUADOR 
 Guayaquil: On* arsuaca. 
 Quit*: Two branch**. 
 
 EGYPT 
 Cairo: On* branch. 
 
 EL SALVADOR 
 On* branch. 
 ENGLANO 
 On* branch. 
 . — branches; I •ternational Fi- 
 nancial Center; Europe. Middle East, 
 
 ease Underwriting Ltd. arranges 
 leases and financing *f large equipment | 
 Items to be leased. BIFC share* owner- Ir 
 ship with U. S. Leasing International, affiliate of BofA with six other branch** 
 San Franctac* and four Australian firms, in ths U. K. 
 
 Partnership Pacific, Ltd. Is an afflllata **"V.?i' l "«*"« t, ~ 1 
 
 In which BIFC. an Australian bank and "> » wnciiy-ev 
 a Japanese bank are equal partner* hav- \*"'"y ' • 
 
 i , , . K.,~, ,.,,...,1 nf mare than 137 merit 
 
 Acceptance. : San Salve* 
 Blrmlnghan 
 
 rce* of more 1 
 provides long- and medlu 
 and equity financing for 
 
 AUSTRIA 
 Vienna: One branch. 
 
 BAHAMAS 
 Nassau: World Banking Corp, Ltd, 
 an International banking affillat* *f 
 BOANY. I* akt* owned by T*r*nt* Do- 
 minion Bank and other investors. 
 Branch of Bank of America New York. 
 BAHRAIN 
 Manama: On* branch. 
 
 BARBADOS 
 Bridgetown: Ono branch. 
 
 BELGIUM 
 Antwerp : On* branch. 
 Brussels: On* branch. 
 
 William* Giyn Factor. 
 Ltd- ka a factoring affillat* In which 
 BIFC own. S1% interest. 
 
 European Brazilian Bank Ltd. (EURO- 
 BRAZ) is a merchant bank affiliate of 
 Bank of America International. S-A, 
 
 Iran Oversea* 
 merchant bank, w 
 by BofA. 
 
 International Mexican Bask Ltd, a 
 full merchant banking servic. affiliate 
 of BofA International. S-A, Luxem- 
 
 One branch. 
 Reading: BankAmenca Finance Ltd . a 
 BIFC affiliate with a branch In BristaL 
 FRANCE 
 Lenta On* branch. 
 Lyon: One branch. 
 Marseilles: One branch. 
 Paris: Ono branch: South Europe re- 
 
 temational pour I 
 ie Commerce et I'lndustne riu Da- 
 homey, a commercial bank affiliated , 
 with SFOM In which BofA as a sub- 1, 
 
 stantlal shareholder. bank art equal partners. It k> 
 
 BOLIVIA natksnal company which stints In mod- 
 
 La Paz: On. branch. |erni*ati*n and expanaloa projects 
 
 Santa Cruz d* la SUjrra: On* branch. — particularly 
 
 arvau* ri* la Societe Financiers, Euro- 
 one Is an affillat* In which BIFC. 
 European banks and a Japanese 
 
 multi- 
 
 through 
 
 In Europe 
 
79 
 
 February 22, 1977 AMERICAN BANKER 3B 
 
 International Activities : 
 
 long- and medium-term loam, equity 
 financing, and advisory service! for ac- 
 quisitions and mergers. 
 
 Bank of America International S.A. is 
 a merchant bank subsidiary of Bof A 
 International (Luxembourg). 
 
 Societe de Cooperation Industrielle 
 Franco-Sovietique (SOFRACOP), a BIFC 
 affflate with an office in Moscow, serves 
 at agent for East-West trade. 
 
 Societe Financiere pour les Pays 
 D'Outre Mer (SFOM) a holding com- 
 pany with banking subsidiaries In several 
 African nations. Owns United Overseas 
 Bank, Switzerland, A BOANY affiliate. 
 Strasbourg: One branch. 
 
 GABON 
 
 Libreville: Banque Internationale pour le 
 Commerce et r Industrie du Gabon, an 
 affiliate of SFOM In which BofA Is 
 a substantial shareholder. 
 
 GAMBIA 
 
 Bathurst: Branch of Banque Interna- 
 tionale pour le Commerce et I'lndus- 
 trie du Senegal, an affiliate of SFOM 
 in which BofA Is a shareholder. 
 GERMANY 
 
 Cologne: One branch. 
 
 Duesseldorf: One branch. 
 
 Bankhaus Centrals Credit AG, with 25 
 
 branches In West Germany and West 
 
 Berlin, It a wholly-owned subsidiary of 
 
 BofA. 
 
 Frankfurt: One branch; Northern and 
 Eastern Europe regional office. 
 
 Hamburg: One branch. 
 
 Munich: One branch. 
 
 Stuttgart: One branch. 
 
 GREECE 
 
 Athens: One branch. 
 Investment Bank S.A. Is a BOANY 
 
 affiliate. 
 
 Piraeus: One branch. 
 Salonica: One branch. 
 
 GUAM 
 Agana: One branch. 
 
 BA Finance (Guam) Inc., a wholly- 
 owned subsidiary of BIFC. 
 Tamuning: One branch. 
 
 GUATEMALA 
 Guatemala City: Three branches; Re- 
 gional »fflce. 
 
 HONDURAS 
 Comayaguela: One branch. 
 San Pedro Sula: One branch. 
 
 Almecenes de Deposito, S.A. Is an 
 affiliate of BIFC. 
 Tegucigalpa: One branch. 
 
 HONG KONG 
 Hjng Kong: Five branches, Represents 
 
 tlve office and Regional office. 
 
 Atlan and Euro-American (ASEAM) 
 Capital Corp. Ltd., BIFC affiliate, offers 
 merchant banking services In Hong Kong 
 and Southeast Asia. 
 
 BA Finance (Hong Kong) Ltd., a 
 BIFC wholly owned subsidiary. 
 
 BA Leasing and Capital (Hong Kong) 
 Ltd., a BIFC affiliate, offers leasing 
 services In Hong Kong and Southeast 
 Atla. 
 
 INDIA 
 
 Bombay! One branch; Regional Office. 
 
 Calcutta: One branch. 
 
 Madrat: One branch. 
 
 New Delhi: Representative office. 
 
 INDONESIA 
 Jakarta: Two branches. 
 
 IRAN 
 
 Teheran: Representative office also cov- 
 ering Afghanistan. 
 
 Foreign Trade Bank of Iran la a 
 BOANY affiliate. 
 
 IRELAND 
 Dublin: One branch. 
 
 ITALY 
 
 Milan: Representative office. 
 
 Banca d'America e d'ltalla, with depos 
 
 Its exceeding SI billion, Is a subsidiary in 
 
 which BOANY ownt 97% Interest. It 
 
 operates 89 offices in Italy. 
 
 IVORY COAST 
 
 Abidjan: Banque Internationale pour le 
 Commerce et I'lndustrle de la Cote 
 d'lvolre, with branches throughout the 
 Ivory Coast, is owned by SFOM, a 
 BOANY affiliate. 
 
 JAMAICA 
 
 Kingston: Jamaican American Merchant 
 Bankers, Ltd. Is a wholly owned sub- 
 sidiary of BIFC. 
 
 JAPAN 
 
 Kobe: One branch. 
 
 Okinawa: Two branches. 
 
 Osaka: One branch. 
 General Lease Co., Ltd., Is an affiliate 
 
 In which BIFC ownt 20% Interest. 
 
 Tokyo: Atla Division headquarters; one 
 branch; Regional Office. 
 Tokyo Investment Services (Int'l.) 
 
 Inc., Ltd., 50?i> ownership of BankAmer- 
 
 Ica Realty Services, Inc. 
 
 Yokohama: One branch. 
 
 KENYA 
 
 Nairobi: Commercial Bank of Africa 
 Ltd., with a branch In Mombasa Is 
 owned by SFOM, a BOANY affiliate. 
 KOREA 
 •eoul: One branch. 
 
 KUWAIT 
 
 Kuwait City: Financial Group of Kuwait, 
 a finance and investment company In 
 which BIFC Is a 30% shareholder. 
 LEBANON 
 
 Beirut: One branch. 
 
 LUXEMBOURG 
 Luxembourg: Ameribas Holding, S.A.. a 
 BIFC subsidiary. 
 
 Wobaco Holding Co., S.A., over 45% 
 BOANY ownership. 
 
 Bank of America International, S.A., 
 is a merchant bank with an office In 
 London and representative offices In 
 Paris and New York. 
 
 Bank of America S.A. Is a full service, 
 wholly-owned subsidiary of BofA. 
 
 Bank of Credit & Commerce Inter- 
 national, S.A. BofA has over 44% Inter- 
 est. 
 
 Societe Financiere Europeenne Is an 
 affiliate of BIFC and the holding com- 
 pany of Banque de la SFE, Paris. 
 MALAWI 
 
 Blantyre: Commercial Bank of Mal- 
 awi, Ltd., a commercial bank with 30% 
 BofA ownership. 
 
 MALAYSIA 
 
 Kuala Lumpur: One branch. 
 Asian and Euro-American Merchant 
 
 Bankers — ASEAM — (Malaysia) Ber- 
 
 had, a BIFC affiliate, Is a merchant 
 
 MARIANA ISLANDS 
 Saipan: One branch. 
 
 MARSHALL ISLANDS 
 Majuro: One branch. 
 
 MEXICO 
 
 Mexico City: Repretentative office. 
 
 Arrendai.ora Cornermen, S.A., a BIFC 
 Investment leasing induttrial equipment 
 and vehicles. 
 
 Corporacion Financiera S.A. It a de- 
 velopment bank subsidiary of BOANY. 
 
 MOROCCO 
 Casablanca: Banque Marocalne du Com- 
 merce Exterieur, with branches In 
 Rabat, Tangier and Tetuan, 1 1 a 
 BOANY- affiliate commercial bank. 
 NETHERLANDS 
 Amsterdam: One branch. 
 
 Amparls, B.V. Is a medium term fi- 
 nance company affiliate in which BIFC 
 owns a 50% interest. 
 
 Rabomerica International Bank, 
 N.V. is a commercial and merchant bank 
 with minority BofA ownership. 
 Rotterdam: One branch. 
 
 NETHERLANDS ANTILLES 
 Curacao: One branch In Willemstad. 
 
 NEW CALEDONIA 
 Noumea: Banque de Paris et des Pays- 
 Bas Nouvelle-Caledonie; BofA has a 
 30% Investment in this commercial 
 bank. 
 
 NEW HEBRIDES 
 
 Vila: Pacific International Trust Co., 
 Ltd, It an affiliate in which BIFC 
 
 | ownt an over 20% interest. 
 
 I NEW ZEALANO 
 
 Wellington: New Zealand United Corp, 
 Ltd., is a merchant bank In which 
 BIFC owns a 20% Interest. It has 
 branches in Auckland and Christ- 
 
 NICARAGUA 
 Managua: Three branches. 
 
 NIGERIA 
 
 Lagos: Savannah Bank or Nigeria Ltd. 
 is minority-owned by BofA. It has 
 a branch In Port Harcourt, Kano, and 
 
 a8 °* OMAN 
 Matrah: National Bank of Oman, a full 
 service commercial . bank In which 
 BofA hat a 20% ownerthlp. 
 
 PAKISTAN 
 Karachi: One branch. 
 Lahore: One branch. 
 
 PANAMA 
 Colon: One branch. 
 David: One branch. 
 Panama City: Three branches; Regional 
 Office; Latin America Currency Unit. 
 Financiera Bamerical, S.A. Is a wholly 
 owned subsidiary of BIFC. 
 
 PARAGUAY 
 Asuncion: Three branches. 
 
 FinAmerlca Paraguay is a wholly- 
 owned subsidiary of BIFC. 
 
 PERU 
 Lima: One branch. 
 
 PHILIPPINES 
 Manila: One branch. 
 
 BA Finance Corp. of the Philippines 
 It an affiliate of BOANY. 
 
 Insular Bank of Asia and America, 
 BofA 30% ownership in commercial 
 banking with 28 branches. 
 
 PUERTO RICO 
 San Juan: Bamerical Mortgage and Fi- 
 nance Company, Inc., a wholly-owned 
 BIFC affiliate. 
 
 RWANOA 
 Kigali: Banque Commerciale du Rwanda, 
 with four branches is owned by SFOM, 
 a BOANY affiliate. 
 
 ST. KITTS 
 Basseterre: One branch. 
 Sandy Points: One branch. 
 
 SCOTLAND 
 Edinburgh: One branch. 
 
 SENEGAL 
 Dakar: Banque Internationale pour le 
 Commerce et I'lndustrle du Senegal, 
 with branches In Bathurst (Gambia), 
 Thles and Saint-Louls-du-Senegal, Is 
 operated by United Overseas Bank, 
 Geneva, owned by SFOM, a BOANY 
 affiliate. 
 
 SHARJAH 
 See United Arab Emirates. 
 
 SINGAPORE 
 Singapore: Four branches: Regional Of- 
 fice; Atla Currency Unit. 
 Asian and Euro-American Merchant 
 Bank— AGEAM— Ltd., a BIFO affiliate. 
 SPAIN 
 
 Madrid: Representative office. 
 
 Banco Commercial para America It a 
 BOANY affiliate. 
 
 Banco Intercontinental Espanol Is a 
 BOANY affiliate with branches in Bilbao 
 and Barcelona. 
 
 BBA Leasing, S.A, with BIFC 50% 
 ownership. 
 
 Interfinanclera, S.A, a BOANY In- 
 vestment for consumer financing. 
 
 Interpromotors, S.A, is a BOANY in- 
 vestment handling real estate actiyities. 
 
 SURINAM 
 Paramaribo: Handel's Industrial and 
 Credit Bank, a BofA investment, Is a 
 commercial bank with three branches. 
 SWITZERLAND 
 Geneva: United Overseas Bank which 
 operates banks in Burundi, Cameroon, 
 Congo (Brazzaville), Ivory Coast, 
 Kenya, Rwandj, Senegal, Uganda, and 
 Upper Volta, Is owned by Societe Fi- 
 nanciere pour les Pays d'Outre Mer 
 (SFOM), Geneva, In which BOANY 
 Is a shareholder. 
 Lugano: Corner Bank Ltd, based here, 
 hat branches In Locarno, Ascona, 
 Catagnola, Massagno, Paradlso and 
 Pregassona. This investment Is held 
 by the Banca d'America e d'ltalia, 
 97% owned by BofA. 
 Zurich: One branch. 
 
 Societe Financiere pour les Pays 
 d'Outre Mer (SFOM). BofA through 
 BOANY and Banca d'America t d'ltalla, 
 Milan, owns 36% of SFOM, SFOM 
 owns United Overseas Bank, Geneva, 
 which operates several banks In Africa. 
 
 TAIWAN 
 Taipei: One branch. 
 
 THAILAND 
 Bangkok: One branch. 
 
 Bamerical Financial Corp. (Thailand) 
 Ltd. Is a wholly-owned subsidiary of 
 BIFC. 
 
 Asian 4 Euro-American Capital — 
 ASEAM — Corp. (Thailand) Ltd, a BIFC 
 affiliate. 
 
 TOGO 
 
 Lome: Banque Pour le Commerce et 
 I'lndustrle du Togo, an affiliate of 
 SFOM, In which BOANY It a share- 
 holder. 
 
 TRUK ISLANDS 
 Truk: One branch. 
 
 TUNISIA 
 
 Tunis: Union Internationale de Bariques, 
 with branches in Sfax and Sousse, Is 
 a BOANY affiliate. 
 
 TURKEY 
 
 Istanbul: Turkish Foreign Trade Bank, 
 with two branches In Istanbul and 
 others In Ankara, Izmir and Sisll, Is a 
 BOANY affiliate. 
 
 UNION OF SOVIET SOCIALIST 
 REPUBLICS 
 Moscow: Representative office. 
 
 UNITED ARAB EMIRATES 
 Bank of Credit and Commeroe Inter- 
 national S.A. of Luxembourg, an affiliate 
 of BofA, has branches In Abu Dhabi, 
 AJman and Al-Ain, Abu Dhabi; Dubai 
 and Delra, Dubai, and Sharjah, Sharjah. 
 The affiliate also maintains branches in 
 the U.K., Germany, Jordan, Mauritius, 
 Bahrain, and North Yemen. 
 
 UPPER VOLTA 
 Ouagadougou: Banque Internationale 
 pour le Commerce et ('Industrie de la 
 Haute Volta, an affiliate of SFOM, In 
 which BOANY Is a substantial share- 
 holder. 
 
 URUGUAY 
 Montevideo: One branch. 
 
 VENEZUELA 
 Caracas: Latin America Divisional head- 
 quarters; Representative office. 
 1 Metro-America, C.A, an affiliate In 
 which BIFC holds 40% Interest, is an 
 
 pany. 
 
 VIRGIN ISLANDS 
 Christiansted: Two branches. 
 Frederiksted: One branch. 
 Charlotte Amaliei One branch. 
 Correspondent balance relationships: 
 
 Bank of America NTtSA has corre- 
 spondent balances with approximately 
 2,400 foreign and domestic banks. 
 
 BANK OF CALIFORNIA N A, 
 SAN FRANCISCO 
 (A Subsidiary of BanCal Tri-State 
 Corporation, San Francisco) 
 
 International banking policy: 
 
 "As the oldest incorporated commer- 
 cial bank in the West, the scope of our 
 international banking policy was set 
 forth in our 1864 certificate of incorpo- 
 ration: 'For the purpose of carrying on 
 the banking and exchange business in 
 all its branches, in this City and within 
 this State, the neighboring States and 
 
 the Atlantic cities, Europe, China and 
 the East Indies.' For well over a cen- 
 
 tury our policy hat been to most af- 
 fectively serve our domestic and foreign 
 customers and correspondents, a policy 
 that is enhanced by our network of of- 
 fices in California, Oregon, Washington 
 and our Edge Act subsidiary In New 
 York. While we find our long-established 
 network of foreign correspondents of In- 
 creasing value to our customers, our 
 policy hat kept abreast of the continuing 
 multinationalization of world business 
 and finance to include direct branches in 
 major Eurocurrency centers abroad and 
 representatives In key geographical 
 areas. We are thus able to effectively 
 assist internationally-oriented companies 
 with financial packages tailored to their 
 individual requirements." 
 
 U . S. Subsidiary: 
 
 BANK OF CALIFORNIA 
 INTERNATIONAL, NEW YORK 
 Representation overseas: 
 BAHAMAS 
 Nassau: One branch. ■ • 
 
 ENGLAND 
 London: One branch. 
 
 JAPAN 
 Tokyo: One branch. 
 
 PHILIPPINES 
 Manila: Representative office. 
 
 TAIWAN 
 
 Taipei: Representative office. 
 Correspondent balance relationships: 
 
 The Bank of California hat corre- 
 spondent relationships with over 2,000 
 banks throughout the world. 
 
 BARCLAYS BANK OF 
 CALIFORNIA, SAN FRANCISCO 
 (A subsidiary of Barclays Bank In- 
 ternational Ltd., London) 
 
 International banking policy: 
 
 "Through two International offices In 
 San Francisco and Los Angeles, Barclays 
 Bank of California providet itt custom- 
 ers with one of the finest International 
 banking services on the west coast of 
 America, offering a wide range of per- 
 sonal services and corporate expertise 
 to Its customers In both the domestlo 
 and foreign markets." 
 
 Representation overseas: 
 
 CAYMAN ISLANDS 
 Grand Cayman: One branch. 
 
 Correspondent balance relationships' 
 
 Barclays Bank of California maintains 
 correspondent relationships with leading 
 banks In 164 countries throughout tht 
 
 CALIFORNIA FIRST BANK, 
 SAN FRANCISCO 
 (A Subsidiary of Bank%f Tokyo, 
 Ltd., Tokyo, Japan) 
 
 International banking policy: 
 
 "Promotion of trade between the 
 United States and Pacific Basin coun- 
 
 
 I types of 
 
 International transactions thr< 
 
 ughout the 
 
 world. Three regional Intern 
 
 ational of- 
 
 fices based in San Francisco, L 
 
 >s Angeles, 
 
 San Diego and a branch offic 
 
 e in Guam 
 
 work closely with a worldwide network 
 of affiliates and correspondents." 
 
 Representation overseas: 
 BAHAMAS 
 Nassau: One branch. 
 
 GUAM 
 Agana: One branch. 
 
 MARIANA ISLANDS 
 Saipan: One branch. 
 Correspondent balance relationship^ 
 
 About 40 foreign banks maintain cor- 
 respondent balances with California 
 First Bank and it maintains correspond- 
 ent balances with about 30 foreign banks. 
 
 CROCKER NATIONAL BANK, 
 SAN FRANCISCO 
 (A Subsidiary of Crocker National 
 Corp., San Francisco) 
 
 International banking policy: 
 
 "With four domestio International 
 facilities In San Francisco, Los Angeles, 
 San Diego, Chicago and New York; full- 
 service branches in London and Tokyo; 
 representative offices in seven major 
 world financial centers; and an offshore 
 office in the Cayman Islands, Crocker 
 has a global network that spans six 
 continents; and as an "E" Award holder, 
 Crocker has a proven export finance 
 expertise and has also actively expanded 
 its project finance, corporate finance and 
 loan syndication capabilities. 
 
 "Crocker utilizes its Edge Acts, Inter- 
 national banking offices, affiliates and 
 its offices In principal money markets 
 throughout the world to service both its 
 corporate and bank clients' needs swiftly 
 (Continued on next page) 
 
80 
 
 4B 
 
 AMERICAN BANKER 
 
 February 22. 1977 
 
 International Activities 
 
 (Continued from preceding- page) 
 and efficiently. Naturally, Crocker rellea 
 heavily on iti vast proven correspondent 
 bank network oversea* (which now num- 
 ber! well over two thoutand) to expedite 
 further IU International banking *erv- 
 
 U. S. Subsidiaries: 
 
 CROCKER INTERNATIONAL 
 INVESTMENT CORP., 
 SAN FRANCISCO 
 
 CROCKER INTERNATIONAL 
 BANK, NEW YORK 
 
 CROCKER BANK 
 INTERNATIONAL 
 (CHICAGO) 
 
 Representation overseas: 
 
 AUSTRALIA 
 Melbourne: Representative office. 
 
 BRAZIL 
 Sao Paulo: Representative office. 
 
 CAYMAN ISLANDS 
 George Town: One branch. 
 
 ENGLAND 
 London: One branch. 
 United International Bank, Ltd. 
 
 HONG KONG 
 Hong Kong: Representative office. 
 
 INDONESIA 
 Jakarta: P.T. Mutual International Fi- 
 nance Corp. Crocker holds a 17% In- 
 terest In this international merchant 
 bank. 
 
 JAPAN 
 
 Tokyo: One branch. 
 
 NETHERLANDS 
 Amsterdam: Representative office. 
 
 PHILIPPINES 
 Manila: Representative office. 
 
 Asian European American Develop- 
 ment Corp. Crocker holds a 6% interest 
 In this bank which engages in money 
 market and merchant banking activity 
 In the Philippines. 
 
 VENEZUELA 
 Caracas: Representative office. 
 
 ZAIRE 
 
 Kinshasa: Banque de Paris et des Pays- 
 Bas Zaire. Crocker holds a 16 l3To 
 direct Interest in this commercial bank. 
 Correspondent balance relationships' 
 
 Crocker National Bank maintains cor- 
 respondent relationships with Important 
 banking Institutions throughout the 
 
 SUMITOMO 
 8ANKT>F CALIFORNIA, 
 SAN FRANCISCO 
 (A Subsidiary of Sumitomo Bank, 
 Ltd., Osaka, Japan) 
 International bonking policy: 
 
 "We have two International banking 
 divisions. In San Francisco and Los 
 Angeles, which are engaging In the In- 
 ternational financing business with a 
 motto of ' Speedy and Accurate Service" 
 for the entire satisfaction of all our cus- 
 tomers. Because of our background of 
 having a parent bank In Japan, we are 
 In a position which enables us to offer 
 advantages and better services to our 
 customers who have intentions of ex- 
 panding their business activities with 
 Japan." 
 
 Representation overseas: 
 BAHAMAS 
 Nassau: On* branch. 
 
 Correspondent balance relationships'- 
 
 In addition to th* direct correspondent 
 relationship with many foreign banks, 
 our Indirect relationship with much more 
 other foreign banks, through our parent 
 bank, helps Sumitomo Bank of Call- 
 form* expand It* International banking 
 f\.tr, to a world- wld* extent In waff 
 • us countries. 
 
 WELLS FARCO BANK NA, 
 SAN FRANCISCO 
 (A Subsidiary of Wells Fargo & Co.. 
 San Francisco) 
 
 International banking policy: 
 
 "Well* Fargo Bank's International 
 banking policy has been and will con. 
 tinue to be on* of providing customers 
 with th* fm**t In International banking 
 service*, whll* continuing to explore and 
 •stabllsh unlqu* and innovatlv* means to 
 meet th* ever changing problems of Inter- 
 national business. It Is wens Fargo 
 Bank's commitment to provid* a port- 
 folio of international services to meet the 
 requirements of a multi-national business 
 climal* with a limited number of over- 
 seas banking offices located In principal 
 money center* The** entitle* work 
 closely with affiliate*, representative *f- 
 ftces and correspondent bank*." 
 
 U. S. SufciioWei: 
 
 WELLS FARCO BANK 
 INTERNATIONAL, NEW YORK 
 WELLS FARCO INTERAMERICAN 
 
 BANK, MIAMI 
 WELLS FARCO INTERNATIONAL 
 INVESTMENT CORP., 
 SAN FRANCISCO 
 
 Representation overseas: 
 
 ARGENTINA 
 Buenos Aires: Representative office. 
 
 AUSTRALIA 
 Sydney: Representative office. 
 
 Martin Corporation Group Ltd. Is an 
 affiliate. 
 
 BAHAMAS 
 
 Nassau: One branch. ' 
 
 BRAZIL 
 Sao Paulo: Representative Office. 
 CANADA 
 
 Toronto: Well* Fargo A Co., Canada, 
 Ltd., i* a subsidiary. 
 
 COLOMBIA 
 Bogota: Representative office. 
 
 DUBAI 
 
 Dubai: Dubai Bank, Ltd. Is an affiliate. 
 ECUADOR 
 
 (Ell 
 
 Ecuatoriana de Financiamento S. A. 
 (ECUFINSA), Guayaquil, is an affiliate. 
 
 ENGLAND 
 London: Western American 
 rope) Ltd. Is an affiliate. 
 Wells Fargo, Ltd., London, a merchant 
 bank, U a subsidiary. 
 
 FRANCE 
 
 Paris: Credit Chemique is an affiliate. 
 
 GERMANY 
 Frankfurt: Representative office. 
 
 Allgemeine Deutsche Credit-Anstalt 
 which has 43 branches. Is an affiliate. 
 
 HONG KONG 
 Hong Kong: Representative office. 
 
 Shanghai Commercial Bank Ltd, 
 which has 12 offices, is an affiliate. 
 WMS Capital Corp. is an affiliate. 
 JAPAN 
 Tokyo: One branch. 
 
 LUXEMBOURG 
 Luxembourg: One branch. 
 
 MEXICO 
 Mexico City: Representative office. 
 Arrendadora Serfin, S.A. is an affiliate. 
 NEW ZEALAND 
 Auckland: Broadbank Corp. Ltd. Is an 
 affiliate. 
 
 NICARAGUA 
 Managua: Representative office. 
 Banco de America I* an affiliate. 
 PANAMA 
 
 Panama City: Empresa Financiers 
 Continental, S.A., PANAMA, la an 
 affiliate. 
 
 SINGAPORE 
 Singapore: Representative office. 
 SPAIN 
 
 Madrid: Representative office. 
 
 VENEZUELA 
 Caracas: Representative office. 
 
 Financier* Nacional S.A. is an affiliate. 
 Correspondent balance- relationships: 
 
 Wells Fargo has correspondent bank- 
 ing relationships with 350 banks around 
 the world. 
 
 Walnut Creek 
 SECURITY NATIONAL BANK, 
 WALNUT CREEK 
 
 International banking policy: 
 
 "Security National Bank ha* a nine- 
 branch banking system. Our interna- 
 tional department performs a support 
 function for our commercial banking 
 activities in the San Francisco Bay 
 Area. International services provided in- 
 ternally Include export -'Import letters 
 of credit, documentary collections and 
 
 COLORADO 
 
 Denver 
 
 CENTRAL BANK OF DENVER 
 (A Subsidiary of D. H. Baldwin 
 Company, Denver) 
 
 International banking policy: 
 
 "To provid* our customer* with thi 
 financial tool* to conduct their Interna 
 tlonal banking transaction*. Specifically 
 thes* service* includ* commercial am 
 clean Utters of credit which are provldee 
 both domestically and overseas In ordei 
 to facilitate commercial transaction* anc 
 to provid* guarantees to overseas banks 
 corporations or governmental entitles. Ir 
 addition, Central Bank provides forelgr 
 currency, wire transfers, collection am 
 
 the Rocky Mountain region w 
 plete range of foreign banking 
 utilizing, wh-re appropriate, our direct I sea 
 contacts with foreign correspondent 
 banks throughout the world." 
 
 Correspondent balance reloiionthipt: 
 
 Colorado National Bank maintains 21 
 account* in foreign bank* and nine for- 
 eign banks maintain accounts with them. 
 
 THE STATE NATIONAL BANK 
 OF CONNECTICUT, BRIDGEPORT 
 
 International bonking policy: 
 
 national bank, is a regional bank serv- 
 ing the need* of our marketing 
 area which include* Fairfield County, 
 where many major national corporations 
 maintain their corporate headquarters. 
 Our International Banking Department 
 Is operated on the philosophy of aug- 
 menting money center operations by pro- 
 vldtng traditional international banking 
 
 FIRST NATIONAL BANK OF 
 
 DENVER 
 (A Subsidiary of First National 
 Bancorp, Inc., Denver) 
 
 International banking policy: 
 
 a* a leading regional bank, provides i| UK innovative and advanced computer 
 complete range of international trade technology while still stresalng per- 
 services for our customer* and cor- MBa ii« d .trvice on a local level." 
 reapondent* located throughout the 
 
 Rocky Mountain West. The International , Correspondent bo/once re/of lOnsAips' 
 
 The State National Bank of Conneetl- 
 
 slon 
 
 area by maintaining a 
 foreign correspondent 
 
 Cayman Island* and 
 
 eed* of It* marketii 
 
 large network of j 
 
 s around the 
 account relatlonshi 
 
 and with 
 
 v.e 
 
 . _ supplement our 
 
 latlon»hips In all major overseas trade correspondent network and thereby pro- 
 centers, thus enabling the bank to pro- v lde working arrangement* with banks, 
 vide the widest possible international even In the most remote area, of th* 
 services in the region, including an ex- w orld. 
 perienced foreign exchange trading op- 
 eration. 
 
 "Recipient during 1976 of the United 
 States President'* "E" award, the first 
 ha* continuously provided Its opera- 
 tional, marketing, and financial support 
 for its international customers. In ad- 
 dition to participating actively under 
 Eximbank's program*. The First also 
 specializes In all kinds of international 
 financing on a worldwide scale." 
 
 UNITED BANK OF DENVER 
 (A Subsidiary of United Banks of 
 Colorado, Inc., Denver) 
 
 International banking policy: 
 "The United Bank of Denv 
 
 broad 
 
 spondent banks in the Rocky Mountain 
 and Western Plains regions. Traditional 
 international banking facilities are pro- 
 vided, including leters of credit, docu- 
 mentary collections, remittances and 
 foreign exchange trading. Direct financ- 
 ing includes short- and medium-term 
 
 Hartford 
 THE CONNECTICUT BANK & 
 TRUST CO., HARTFORD 
 (A Subsidiary of CBT Corp., 
 Hartford) 
 U. S. Subsidiary: 
 CONNECTICUT BANK INTER- 
 NATIONAL, NEW YORK 
 Thi* Edge Act corporation, formed In 
 1971, it capitalized at $2.5 million. 
 Representation overseos. 
 
 BAHAMAS 
 Nassau: One branch. 
 Correspondent balance relationships: 
 The bank maintains an extensive num- 
 
 HARTFORD NATIONAL BANK 
 & TRUST CO. 
 
 Corp., Hartford) 
 
 services are provided utilizing our con- 
 nections with Exlmbank, FCIA, World., . 
 
 Bank and Commodity Credit Corporation International banking policy: 
 programs. Eurodollar financing is han- 
 
 dled by our Nassau branch. 
 U. S. Afnllofe: 
 
 ALLIED BANK INTERNA- 
 TIONAL. NEW YORK 
 
 United Ban 
 banks of Alll< 
 
 of 18 member 
 sting for Allied 
 
 "Hartford National Bank and Trust 
 Company continues to actively support 
 both exporters and Importer* located 
 primarily In Connecticut and Southern 
 New England. Thi* support ha* been 
 provided through It* London represent*- 
 
 ously throughout the world. The bank 
 has taken an active role in the creation, 
 syndication and participation In multi- 
 currency loans to developed and under- 
 developed countries. 
 
 "Throuqh the bank'* affiliation with 
 Equator Bank Limited It ha* increased 
 its activity and placed a greater em- 
 has dollar accounts from P"asis on expanding its activities In sev- 
 countries and maintains j «'»' « h « ■*"«* emerged countries In 
 -y account* with banks in Africa. Working with various banks 
 20 "countries." The network of correspon- 'broad and with syndicat. manager* 
 
 Representation overseas: 
 BAHAMAS 
 Nassau: On* branch. 
 Correspondent balance relationships: 
 United Bank ha* dollar account* froi 
 
 (90 
 
 CldU 
 
 participaln 
 
 COLORADO NATIONAL BANK, 
 DENVER 
 
 IA Subsidiary of Colorado National 
 Banksharcs, In 
 
 International bonking policy 
 "To provid* our customer* 
 
 CONNECTICUT 
 Bridgeport 
 
 THE CITY NATIONAL BANK OF 
 CONNECTICUT, BRIDGEPORT 
 (A Subsidiary of Connecticut 
 Financial Services Corp., Bridgeport) 
 
 International bonking policy: 
 
 "It Is our policy to accommodate our 
 clients worldwide and to provide the 
 best possible service to our domestic 
 business clients In Connecticut. We rely 
 on New York. Los Angeles, Boston and 
 Montreal correspondents because of the 
 superior service w* receive. 
 
 CONNECTICUT NATIONAL 
 BANK, BRIDCEPORT 
 
 International bonking policy: 
 
 "Connecticut National Bank has re- 
 cently expanded Its emphasis In the In- 
 ternational banking field CNB i* proud | 
 
 of It* ability to develop Innovative and 
 
 •peclaliied services In helping its cus- . , 
 
 tomers achieve their personal goals. CNB New noren 
 
 \IJSS^^SS baking"':..'.. njarww haven 
 
 In preparing letter* of credit, arranging NATIONAL BANK 
 
 transfers, ofltring efficient for- . . _ .. ill- jt . 
 
 Election, and conducting credit Internat.onal bank.ng po/.cy: 
 
 o csmbln* the finest In International 
 Ing service* with Imaginative fl- 
 ing to «*sist our corporate cus- 
 
 with 
 
 within the United State*, 
 been able to provide the larger exporter 
 with financial assistance that ha* enabled 
 the client to compete with worldwide sup- 
 pliers. Thus, It ha* been an active *up- 
 porter of export expansion programs In 
 the United States and has offered to its 
 clients Innovative and Imaginative solu- 
 tion* to their export financing requlrc- 
 
 U. S. Alt Hate: 
 
 ALLIED BANK INTERNA- 
 TIONAL, NEW YORK 
 
 Hartford National I* on* of 18 member 
 bank* of Allied. See lilting for Allied 
 International under New York. 
 Representation overseas: 
 BAHAMAS 
 Nassau: One branch. 
 
 Equator Bank Limited, Nassau, k» a 
 joint venture with Royal Bank of Canada 
 and Helmboldt and Co. 
 Correspondent balance relationships: 
 
 Hartford National maintain* corre- 
 spondent balances In 38 foreign bank* 
 
 47 
 
 conducting 
 investigations. CNB can also arra 
 short and medium term export rtnanc 
 provide foroign t 
 
 nllfy 
 
 cut Na 
 
81 
 
 February 22, 1977 
 
 AMERICAN BANKER 
 
 International Activities- 
 
 FIRST HAWAIIAN OVERSEAS 
 CORP., HONOLULU 
 Representation overseas: 
 GUAM 
 
 NEW HEBRIDES 
 Vila: One branch. 
 
 JAPAN 
 
 Tokyo: International Credit & Finance 
 Co, Ltd. First Hawaiian hat a minori- 
 
 Cor, 
 
 ispondent balance relationships: 
 st Hawaiian Bank maintains ac 
 s in all major trading currencie! 
 a global network of foreign cor- 
 
 ILLINOIS 
 
 Chicago 
 AMERICAN NATIONAL BANK 
 
 & TRUST CO., CHICACO 
 (A Subsidiary of Walter E. Heller 
 International. Chicago.) 
 International bonking policy: 
 "Through an expanded network of In- 
 
 Bank and Trust Company continues te 
 provide a growing number of customer! 
 a complete and unique range of Inter, 
 national banking services. The network 
 of International locations, coupled wi 
 the capabilities provided internationally 
 by our commercial finance and factoring 
 affiliate. Walter E. Heller A Company 
 and Walter E. Heller Overseas Corp, 
 plus our vast correspondent banking net 
 work, gives the bank a capacity for serv 
 log the total needs of our United States 
 customers abroad as well as dome 
 of foreign countries. The bank and 
 Heller organization have also developed 
 a number of centralized services, such ai 
 a collections capability, providing econ 
 omies which are passed along to oui 
 customers. The Bank has also been In- 
 strumental in developing Individual!) 
 
 Representation overseas: 
 
 CAYMAN ISLANDS 
 George Town: One branch. 
 Correspondent balance relationships 
 Central National Bank has 37 accoui 
 with foreign banks in 21 countries and 
 71 foreign correspondents from 31 ( 
 tries have accounts with Central 
 
 CONTINENTAL ILLINOIS NA- 
 TIONAL BANK & TRUST CO 
 CHICACO 
 (A Subsidiary of Continental Illinois 
 
 Corp., Chicago) 
 U. S. Subsidiaries: 
 
 CONTINENTAL BANK INTERNA 
 
 TIONAL, NEW YORK 
 CONTINENTAL BANK INTERNA 
 TIONAL (PACIFIC), LOS ANGELES 
 CONTINENTAL BANK 
 INTERNATIONAL (TEXAS), 
 HOUSTON 
 
 The i 
 
 trade I GREECE 
 Athens: One branch. 
 Piraeus: One branch. 
 I Thessaloniki: One branch. 
 
 HONG KONG 
 Hong Kong: Underwriters Bank (Ove 
 seas) Ltd. CINB has majority owne 
 ship of this commercial bank. 
 
 U. S. Subsidiaries: 
 AMERICAN NATIONAL OVER- 
 SEAS CORP., CHICACO 
 
 WALTER E. HELLER 
 OVERSEAS CORP., CHICACO 
 
 A holding company subsidiary which 
 
 Representation overseos: 
 
 AUSTRALIA 
 Sydney: Representative office. 
 
 BRAZIL 
 
 Sao Paulo: Representative office. 
 
 CANADA 
 Toronto: Representative office. 
 
 CAYMAN ISLANDS 
 George Town: One branch. 
 
 COLOMBIA 
 Bogota: Representative office. 
 
 ENGLAND 
 London: One branch. 
 
 GERMANY 
 Mainz: Representative office. 
 
 HONG KONG 
 Hong Kong: Representative office. 
 MEXICO 
 
 Mexico City: Representative office. 
 
 NETHERLANDS 
 Utrecht: Representative office. 
 
 PERU 
 
 Lima: Representative office. 
 
 VENEZUELA 
 Caracas: Representative office. 
 
 Correspondent bolonce relationships: 
 American National maintains accoui 
 relationships in it countries. Over 11 
 foreign banks, representing 41 oountrie 
 
 CONTINENTAL INTERNATIONAL 
 FINANCE CORPORATION, 
 CHICACO 
 
 Representation overseos: 
 
 ARGENTINA 
 Buenos Aires: Representative office. 
 
 Banco Shaw S.A. CINB has a minority 
 interest In this commercial bank which 
 has 24 banking offices. 
 
 AUSTRALIA 
 Brisbane: Lease Industrial Finance Ltd., 
 an affiliate of Continental Illinois Cor- 
 
 Sydney: Representative office. 
 
 Commercial Continental Ltd. CINB 
 
 has a substantial minority interest in 
 
 this merchant banking affiliate. CCL also 
 
 has offices In Melbourne. 
 
 AUSTRIA 
 
 Vienna: Conlll Bank A.G.. a commer- 
 cial bank. Is a wholly-owned subsid- 
 iary of CINB with deposits of (109 
 
 CENTRAL NATIONAL BANK, 
 
 CHICACO 
 (A Subsidiary of Central National 
 Chicago Corp.) 
 
 International banking policy: 
 
 "The purpose of our Internationa 
 banking group, is to expertly a n c 
 
 BAHAMAS 
 
 Nassau: One branch. 
 
 BAHRAIN 
 Manama: Continental Bank Ltd. Is i 
 
 commercial banking subsidiary ol 
 
 CINB. 
 
 BELGIUM 
 Brussels: Continental Bank S.A./N.V. 
 a 1247 million deposit commercial 
 bank, is a wholly-owned subsidiary of 
 CINB. It has a network of local agen- 
 cies. Including branches in Antwerp 
 and Liege. 
 
 BRAZIL 
 
 Sao Paulo: Representative office. 
 
 CANADA 
 Toronto: Builders Financial Co. 
 and its subsidiaries. Builders Ca 
 Ltd. and Western Builders Capital 
 Limited, are Joint ventures of Contli 
 ental Illinois Corporation with The 
 Royal Trust Company, Montreal. 
 Continental Illinois (Canada) Ltd.. a 
 wholly-owned subsidiary of Continental 
 Illinois Corp. 
 
 Sovereign Mortgage Insurance Com- 
 pany, an affiliate of Continental Illinois 
 Corporation. 
 
 CAYMAN ISLANDS 
 George Town: Caribbean Bank (Cay- 
 man) Ltd. CINB is part owner of this 
 merchant bank. 
 
 COLOMBIA 
 Bogota: Representative office. 
 Call: Corporaclon Financlera del Valle 
 is a private development bank in 
 which CINB has a minority interest. 
 
 Ecuatorl- 
 
 ana de Desarrollo S.A. is a private de- 
 velopment bank in which CINB holds 
 a minority interest Office also in 
 Guayaquil. 
 
 ENGLAND 
 London: Two branches. 
 
 Continental Illinois Ltd., a merchant 
 banking subsidiary of Continental Illinois 
 Corporation. 
 
 H. 4 H. Factors Ltd. CINB has a 
 minority interest in this factoring firm. 
 
 FRANCE 
 Paris: One branch. 
 
 Credit Commercial de France is a 
 M-billion deposit commercial bank op- 
 erating over 200 branches 
 Ihe country. In which C 
 minority interest. 
 
 GERMANY 
 Ousseldorf: Representative office 
 Frankfurt: One branch. 
 Munich: One branch. 
 
 Teh 
 
 INDONESIA 
 akarta: Representative office. 
 P. T. Inter-Pacific Financial Corp 
 INB has an important Interest in this 
 nancial service institution. 
 
 IRAN 
 
 Bank Dariush, CINB has 
 minority interest in this commerci; 
 bank. 
 
 Industrial & Mining Development Ban 
 of Iran. CINB has a minority interest i 
 this private industrial development ban 
 
 ITALY 
 Milan: One branch. 
 Rome: Representative office. 
 
 JAMAICA 
 
 Crown Continental Merchant Bank 
 Jamaica Limited. Kingston. CINB It 
 part owner of this bank. 
 
 JAPAN ' 
 Osaka: One branch. 
 Tokyo: One branch. 
 
 Century Greyhound Financial Corp. 
 CINB holds a minority interest in this 
 leasing co. 
 
 KENYA 
 
 Nairobi: Regional representative office 
 
 KOREA 
 Seoul: Representative office. 
 
 LEBANON 
 Beirut: Representative office. 
 
 Continental Development Bank SAL 
 CINB has majority ownership of this 
 commercial bank which has eight bank- 
 ing offices. 
 
 LUXEMBOURG 
 Luxembourg: Continental International 
 Finance S.A. Is a holding company 
 subsidiary of CINB. 
 
 MALAYSIA 
 Kuala Lumpur: Malaysian International 
 Merchant Bankers Berhad. CINB has 
 an Important minority interest in this 
 merchant bank. It has a branch in 
 
 MEXICO 
 
 Mexico City: Representative office. 
 
 MOROCCO 
 Casablanca: Societe de Banqu* et de 
 Credit. CINB holds a minority Inter- 
 est in this commercial bank. Branch 
 also in Rabat 
 
 NETHERLANDS 
 Amsterdam: One branch. 
 Rotterdam: One branch. 
 
 PAKISTAN 
 Karachi: Pakistan Industrial Credit A 
 nvestment Corp. Ltd. is a private 
 nk in which CINB 
 
 Lima: ADELA Investment Co. S.A. 
 
 an investment company for L a t 
 
 America in which CINB has a mils 
 
 ity ownership. 
 
 PHILIPPINES 
 Manila: Representative office. 
 
 House of Investments Inc. CINB has 
 a minority interest In this investment 
 company. 
 
 Private Development Corp. of 
 Phillippines is a private development 
 bank In which CINB has a minority in 
 
 I n g Corp. 
 
 in thii 
 
 SCOTLAND 
 Representative office. 
 SINGAPORE 
 Singapore: One branch. 
 
 Singapore International Merchant 
 Bankers Ltd. CINB holds a substantial 
 minority Interest in this merchant bank- 
 Private Investment Co. for Asia S.A. 
 (PICA) is an investment company In 
 which CINB owns a minority interest. 
 SPAIN 
 
 Barcelona: Banco* Atlantico. CINB has 
 a minority interest in this $1.25 bil- 
 lion deposit bank with 60 branches 
 throughout Spain, 
 
 TAIWAN 
 Taipei: One branch. 
 
 China Investment and Trust Company. 
 CINB has a minority Interest In this 
 investment trust company. 
 
 THAILAND 
 Bangkok: Continental Illinois Thailand 
 Ltd. is a wholly-owned merchant bank- 
 ing subsidiary of CINB. 
 
 VENEZUELA 
 Caracas: Representative office. 
 
 EXCHANCE NATIONAL BANK 
 OF CHICACO 
 (A Subsidiary of Exchange Interna- 
 tional Corporation, Chicago) 
 
 International banking policy: 
 
 "Exchange National Bank Is Involved 
 in all major international banking func- 
 tions, including issuance of letters of 
 credit, export 'import financing, foreign 
 currency trading, etc. Exchange Bank's 
 affiliate In Israel, American Israel Bank 
 Ltd.. maintains 17 full service branches 
 and serves as the official depositary and 
 fiscal agent tor the U. S. government 
 there. From Its Chicago headquarters 
 and through Its affiliate operations. Ex- 
 change Bank provides U. S. and foreign 
 businessmen with market research, eco- 
 nomic guidance and financial expertise 
 needed to capitalize on business and in- 
 vestment opportunities in Israel. 
 
 "Exchange Bank maintains a represen- 
 tative office in Mexico City In order to 
 participate In the financing of business 
 ventures in Mexico. Offshore financing of 
 business ventures in other Central and 
 South American countries, as well as 
 Europe. Is handled through our Nassau, 
 Bahamas branch. Our correspondent 
 banking relationships include more than 
 250 banks In all major foreign countries." 
 Representation overseas: 
 BAHAMAS 
 
 ISRAEL 
 
 American Israel Bank Ltd. has Its 
 head office and four branches in Tel Aviv, 
 three branches In Ramat-Gan, four In 
 Jerusalem, and one each In Haifa, Herz- 
 Beer-Sheva, Rishon-Lezion and Bnel- 
 
 OfflCC. 
 
 position 
 
 Madrid: Representativi 
 Interleasing, S.A. C 
 portant minority owne 
 leasing company, 
 mon Industrial Bancarla Is an 
 rial development bank in whi 
 B holds a minority interest. H 
 es in Barcelona and throughc 
 
 SWITZERLAND 
 Geneva: Representative office, 
 ig: Greyhound Financial & 
 Corp. A G. CINB holds a min 
 terest in this leasing compar 
 has important financing subsic 
 
 Leasing 
 
 (Switzerland), ; 
 Ing subsidiary 
 
 FIRST NATIONAL BANK, 
 CHICACO 
 (A Subsidiary of First Chicago Corp.) 
 
 International banking policy: 
 
 The First National Bank of 
 Chicago are committed to continuing 
 efforts to offer truly world-wide 
 eial services through our expanding 
 branches, representative of- 
 fices, wholly-owned 
 
 U. S. Subsidiaries: 
 
 FIRST CHICACO INTERNA- 
 TIONAL BANKINC CORP , 
 NEW YORK 
 An Edge Act subsidiary, with current 
 capitalization of $12.5 million. Carries 
 on a complete foreign banking operation. 
 Date organized: June 1962. 
 
 FIRST CHICACO INTERNA- 
 TIONAL FINANCE CORP., 
 CHICACO 
 
 An Edge Act subsidiary with current 
 capitalization of $23.4 million. Organized 
 June. 1962. 
 
 FIRST CHICACO INTERNA- 
 TIONAL, LOS ANGELES 
 An Edge Act subsidiary with current 
 capitalization of $4.9 million. Organized 
 May, 1973. 
 
 FIRST CHICAGO 
 INTERNATIONAL, 
 SAN FRANCISCO 
 
 An Edge Act subsidiary with current 
 vcapitalization of $5.9 million. Organized 
 lov., 1973. 
 
 FIRST CHICAGO INVESTMENT 
 CORP., CHICAGO 
 
 A wholly-owned subsidiary of Plrst 
 Chicago Corp. engaged in making equity 
 investment in foreign business. 
 
 lotion overseas: 
 ABU DHAB 
 Abu Dhabi: One branch. 
 
 AUSTRAL!/ 
 Sydney: Representative of 
 First Chicago Austral 
 wholly-owned finance com 
 
 1972. 
 
 Bridgetown: One branch. 
 
 BELGIUM 
 Antwerp: One branch. 
 
 BRAZIL 
 Sao Paulo: Representative office. 
 
 (Co,. 
 
 pags 
 
82 
 
 AMERICAN BANKER 
 
 International Activities 
 
 February 22, 1977 
 
 (Continued from preceding page) 
 CANADA 
 
 Toronto: First Chicago Investment! of 
 Canada Ltd., a leasing subsidiary or- 
 ganized Oct., 1973, wholly owned by 
 First Chicago International Finance 
 
 CHANNEL ISLANDS 
 Guernsey: First National Bank of Chi- 
 cago (Channel Islands) Ltd, a wholly- 
 owned subsidiary. Organized Jan , 
 1974. 
 
 COLOMBIA 
 Bogota: Representative office. 
 
 DUBAI 
 Dubai: One branch. 
 
 EGYPT 
 
 Cairo: Misr International Bank Is 20% 
 owned by First National Bank of Chi- 
 cago and 51% Bank Misr. Organized 
 Sept. 4, 1975, 29% of the bank la 
 owned by others. 
 
 ENGLAND 
 Bristol: One branch. 
 Leicester: One branch. 
 London: One branch. 
 
 First Chicago, Ltd. Is a wholly-owned 
 merchant banking subsidiary. Organized 
 July, 1970. 
 
 International Commercial Bank, Ltd 
 Jointly owned by First National; Irving 
 Trust Co., New York; Commerzbank 
 A.G, Duesseldorf; the Hongkong £ 
 Shanghai Banking Corp, Hong Kong 
 Banco di Roma, Rome; and Credit Lyon 
 nais, Paris. FNB has a 22% direct In 
 terest in this, commercial bank. Organ 
 ized July, 1967. 
 Newcastle: One branch. 
 
 FRANCE 
 Paris: One branch; one sub-branch. 
 
 GERMANY 
 Duesseldorf: One branch. 
 Frankfurt: One branch 
 Munich: Representative office. 
 
 GREECE 
 Athens: Two branches. 
 Piraeus: One branch. 
 
 HONG KONG 
 Hong Kong: First Chicago Hong Kong 
 Ltd. Is a wholly-owned merchant bank- 
 ing subsidiary. Organized Jan, 1973. 
 INDONESIA 
 Jakarta: Representative office. 
 
 FNB of Chicajo h? 3 a 35% Interest 
 In P. T. Indonesian Investments Interna- 
 tional, a merchant bank. Other partners 
 Include Bank Deg ng Negara, Jakarta, 
 The National Rank of Australasia, Ltd, 
 Melbourne, The Nikko Securities Co, 
 Ltd, Tokyo, The Mitsubishi Bank Ltd, 
 Tokyo. Organized Oct, 1973. 
 
 IRAN 
 
 Teheran: Representative office. 
 
 IRELAND 
 Dublin: One branch. 
 
 ITALY 
 Milan: One branch. 
 Rome: One branch. 
 
 JAMAICA 
 Kingston: First National Bank of Chi- 
 cago (Jamaica) Ltd, Is a commercial 
 banking affiliate of FNB, with a main 
 j ranC 1971 d 10 ,ub " bri,ncne •• Organized 
 First Chicago 
 maica) Ltd, la an 
 ganlzed Jan, 1971 
 
 NIGERIA 
 
 Lagos: First National Bank of Chicago 
 (Nigeria) Ltd, la a 40%-owned for 
 eign banking subsidiary. Organlzei 
 May, 1974. 
 
 PANAMA 
 
 Panama City: One branch, one aub 
 branch. 
 
 Flrat Chicago Panama S.A, a wholly 
 owned banking subsidiary, organize* 
 Oct, 1973. 
 
 PHILIPPINES 
 Manila: Representative office. 
 
 POLAND 
 Warsaw: Representative office. 
 
 8COTLAND 
 Edinburgh: One branch. 
 
 SHARJAH 
 Sharjah: One branch. 
 
 SINGAPORE 
 Singapore: One branch. 
 
 First Chicago (Asia) Merchant Bank 
 Limited, a 70%-owned merchant bank- 
 ing subsidiary, organized March, 1974. 
 SPAIN 
 
 Madrid: Representative office. 
 
 First Chicago Popular, a finance com- 
 pany jointly owned by Banco Popular 
 and FNB with 50% each. Organized 
 Aug, 1973. 
 
 SWEDEN 
 Stockholm: Representative office. 
 
 SWITZERLAND 
 Geneva: One branch. 
 Flrat Chicago S.A. (Geneva) Is a 
 merchant banking aub- 
 
 elopment flnanca actlvM 
 
 tlonal financial and services activities.! 
 Emphasis was placed on Increasing trade 
 related financing with our network of _ 
 
 foreign correspondent banks and domes- Co/reioondenf balance relationships- 
 
 C " enU - Fi "" C "' • UP(Wrt ! The Northern Trust Co. The North- 
 
 correspondent banking rela- 
 *IUi Important banking Insti- 
 tutions throughout the world. 
 
 growing role In 
 
 sidiary of FNB. 
 
 THAILAND 
 Bangkok: Slam Credit Corp, Ltd, a 
 40% participation In this finance com- 
 pany. Organized April, 1970. 
 VENEZUELA 
 Caracas: Representative office. 
 
 WALES 
 
 Cardiff: Commercial Bank of Wales, Ltd. 
 FNB has a 20% interest through First 
 Chicago International Finance Corp 
 Jointly owned with the Hodge Group 
 and others. Organized Feb, 1971. 
 Correspondent balance relationship! 
 The First National Bank of Chicago 
 banking relationships with 
 king Institutions throughout 
 
 and affiliates of U.S. corporations. The 
 success of these efforts is reflected In a 
 39% growth in division loans outstand- 
 ing and a 42% increase in division fee 
 Income. Utilizing the capabilities of the 
 bank's London representative office and 
 the Eurocurrency funding capacity 
 the Cayman Islands branch, the b 
 continues to 
 international i 
 
 Representation overseas: 
 
 CAYMAN ISLANDS 
 George Town: One branch. 
 
 ENGLAND 
 London: Representative office. 
 
 Correspondent balance relationsh : ps: 
 
 La Salle National Bank maintains 
 :orrespondent relationships with major 
 banks throughout the world. 
 
 THE NORTHERN TRUST CO., 
 
 CHICACO 
 (A Subsidiary of Nortrutt Corp., 
 Chicago) 
 
 International banking policy: 
 
 "Supplementing our direct presence In 
 the major money centers, Northern Trust 
 relies on close relationships with well es- 
 tablished foreign correspondent banks. 
 Because these institutions are thoroughly 
 
 INDIANA 
 Fori Wayne 
 
 FORT WAYNE NATIONAL BANK 
 
 International banking policy: 
 
 "Fort Wayne National Bank's objec- 
 t ve and policy are to promote interna- 
 tional trade throughout our northeastern 
 Indiana marketing area and provide the 
 various international banking services 
 vely engaged In 
 anging foreign 
 negotiating let- 
 Iding credit In- 
 active In and 
 
 transferring 
 collections, 1st 
 ters of credit 
 
 We 
 
 s. 
 
 finan 
 
 tains 
 foreign b. 
 the world. 
 
 fers 
 
 HARRIS TRUST & SAVINCS 
 BANK, CHICACO 
 (A Subsidiary of Harris Bankcorp, 
 Inc., Chicago) 
 
 International banking policy: 
 
 t work closely with correspondent 
 s adding our own facilities, as 
 *ary, to provide full service In- 
 ternational banking throughout the 
 world. Additional services and Invest- 
 ment opportunities are being studied." 
 
 U. S. Subsidiary: 
 
 HARRIS BANK INTERNATIONAL 
 CORP., NEW YORK 
 
 Representation overseas: 
 
 KENYA 
 Nairobi: One branch. 
 
 First Ch.cago Kenya Ltd, a wl 
 * w 7 n 4 td ,ub » id '» r y office. Organized 
 
 KOREA 
 Seoul: Representative office. 
 
 LEBANON 
 Beirut: First National Bank of Chicago 
 (Lebanon) 8. A. L, Is a fully con 
 trolled subsidiary, engaging In all com 
 merclal banking activities, In whlcl 
 FNB holds direct ownership. It serve 
 as regional headquarters for the East 
 «rn Mediterranean countries, a n i 
 operates two satellite retail facilities 
 Organized April, 1967. 
 
 MEXICO 
 Mexico City: Representative offlca. 
 
 Arrendadora a Inverslonista Latlna 
 • A. de C.V. Is a wholly-owned leasing 
 subsidiary of FNB. Organized April. 
 
 NETHERLANDS 
 Amsterdam: Representative office. 
 Rotterdam: N. V. Slavenburg's Bank. 
 First National has a 20% direct inter- 
 est In this commercial bank. The bank, 
 with branches In the Netherlands, has 
 various subsidiaries engaging In trust 
 and real estate operations, term fi- 
 nancing and trading on the Amster- 
 dam Stock Exchange. It also has In- 
 Uresis In banks in West Germany. 
 Belgium and Greece. Organized Sept, 
 1925. 
 
 BRAZIL 
 
 Sao Paulo: Representative office. 
 
 Harris Trust has a minority Invest 
 ment in Banco de Investlmento d< 
 Brasil. 
 
 ENGLAND 
 London: One branch. 
 
 JAPAN 
 Tokyo: Representative office. 
 
 MEXICO 
 
 Mexico City: Representative office. 
 
 SINGAPORE 
 Singapore: Representative office. 
 
 LAKE VIEW TRUST and SAVINCS 
 BANK, CHICACO 
 
 International banking policy: 
 
 "Lake View Bank's International 
 policy is based on the single premise of 
 serving all the International banking 
 needs of our customers. Wo have and 
 
 correspondents 
 1 to enable us to serve not only our 
 U. S. clients but others active In the field 
 ' iternatlonal banking and finance." 
 Correspondent balonce relationships: 
 
 ka View Bank maintains corre- 
 spondent relationships with major banks 
 throughout the world. 
 
 LA SALLE NATIONAL BANK, 
 CHICACO 
 
 International banking policy: 
 
 nd enjoy widespread branch coverage of 
 heir own countries, they are In the best 
 osltion to handle our customers' busl 
 ess overseas. Their services ara aug 
 lented by the active calling program of 
 
 our international banking officers.' 
 
 U. S. Subsidiaries: 
 
 THE NORTHERN TRUST INTER- 
 NATIONAL BANKING CORP., 
 NEW YORK 
 
 This Edge Act corporation, organized 
 1968 and capitalized at $5 million, of- 
 plete range of International 
 banking services and holds several of the 
 equity Investments of The Northern 
 Trust Co. Private Export Funding Corp, 
 New York, la an affiliate whlcli finances 
 
 NORTHERN TRUST 
 I NTERAMER ICAN BANK, 
 MIAMI 
 
 This Edge Act corporation, organized 
 1974 and capitalized at »2.5 million, 
 offers a complete range of international 
 banking services. 
 Representation overseas: 
 CANADA 
 
 St. Johns: Transatlantic Trust Corp. Is 
 a Nortrust affiliate offering interna- 
 tional trust and investment manage- 
 ment services. 
 
 CAYMAN ISLANDS 
 
 George Town: One branch. , 
 Security Trust Co. (Cayman) Ltd. Ii 
 Nortrust Corp. subsidiary offering In 
 
 vestment and trust services for non-U. S 
 
 Individuals. 
 
 ENGLAND 
 London: One branch. 
 
 London Multinational Bank Ltd 
 The Northern Trust Co. holds a 20% In 
 terest In this bank, which has equity 
 capital of £8.2 million. Partners In 
 International merchant bank, organized 
 In 1970 are Baring Bros. A Co, 
 London, Chemical Bank, New York and 
 Credit Suisse, Zurich. Multlbank ha 
 filiates In Hong Kong, Malaysia, 
 
 this region. We it 
 diverse needs of our many" customers 
 the employment of Innovative and 
 traditional banking techniques and In 
 I transaction we stress efficient, 
 nalized service." 
 
 Indianapolis 
 
 AMERICAN FLETCHER NA- 
 TIONAL BANK, INDIANAPOLIS 
 (A Subsidiary of American Fletcher 
 
 Corp., Indianapolis) 
 International banking policy: 
 
 "In order to meet the objective of full 
 service banking, the international divi- 
 sion Is committed to providing complete 
 financial services for Its customers and 
 correspondent banks domestically and 
 throughout the world." 
 
 U. S. Affiliate: 
 
 ALLIED BANK INTERNA- 
 TIONAL. NEW YORK 
 American Fletcher has 103 due to ac- 
 counts In 36 countries and 62 due from 
 Bank International under New York. 
 
 Representation overseas: 
 BAHAMAS 
 Nassau: One branch. 
 
 LUXEMBOURG 
 embourg: One branch. « 
 
 SWITZERLAND 
 eva: American Fletcher Bank 
 
 Correspondent balance relationships: 
 American Fletcher has 103 due to a< 
 unts in 36 countries and 62 due froi 
 25 countries. 
 
 FRANCE 
 
 Brit: Banque Rivaud is a TNTIBC af 
 filiate engaged In commercial am 
 merchant banking services. 
 
 HONG KONG 
 Hong Kong: Representative office. 
 
 SINGAPORE 
 Singapore: Private Investment Co. for 
 Asia iPICA) Is a TNTIBC afflllata en- 
 gaged In development finance actlvl- 
 
 SWITZERLAND 
 Geneva: Banque Scandlnava an Suisse. 
 The Northern Trust Company holds 
 a 25% Interest In this bank, capitalized 
 at 71.3 million Swisa franca. Partners 
 art Bergen Bank, Den Danaka Land, 
 mansbank. Den Danske Provlnsbank, 
 Skandinavlska Enskllda B a n k a n, 
 Skanska Banken and Union Bank of 
 Finland. 
 
 INDIANA NATIONAL BANK, 
 
 INDIANAPOLIS 
 (A Subsidiary of Indiana National 
 Corp., Indianapolis) 
 
 International bonking policy: 
 
 Ing policy Is based on the premise that 
 a major reglor ' 
 sophisticated an 
 
 benefit of Its customers. Through our 
 foreign offices and affllllatc banks, wo 
 have been successful in serving the In- 
 ternational needs of our foreign and 
 domestic customers International Divi- 
 sion services, such as domestic and Euro- 
 currency loans, foreign exchange, ex- 
 port and Import financing, trade devel- 
 opment, letters of credit, and collections 
 and remittances, complement. Indiana 
 National's full rangt of domestic aerv- 
 
 U. S. Subsidiary: 
 
 INDIANA NATIONAL OVERSEAS 
 CORP, INDIANAPOLIS 
 
 BAHAMAS 
 
 One branch. 
 CAYMAN ISLANOS 
 Town: Euratlantit Maritime 
 Ltd. INOC has a 20% interest 
 I bank which specializes in ship 
 
 ENGLAND 
 London: Representative office. 
 
 London Interstate Bank. Ltd. INOC It 
 a 16.7% shareholder In this medium- 
 term consortium bank which was estab- 
 
 is an TNTIBC affiliate engaged In de- llshed In February, 1971. 
 
83 
 
 February 22, 1977 AM t RICA N BANKER 9B 
 
 International Activities 
 
 MEXICO 
 
 Mexico City: Representative office. 
 Correspondent bo/once relationshios: 
 
 Indiana National maintaini reciprocal 
 correspondent balance relationships with 
 23 banks in 16 foreign countries. 
 
 MERCHANTS NATIONAL BANK 
 & TRUST CO., INDIANAPOLIS 
 (A Subsidiary of Merchants National 
 Corp., Indianapolis) 
 
 International banking policy: 
 
 activities on trade-related business, we 
 actively assist our customers with all of 
 their international requirements which 
 includes the financing of their Imports 
 and exports. We also emphasize the 
 utilization of government programs such 
 as FCIA and Eximbank. All Interna- 
 tional banking transactions entrusted to 
 us are given the professional, innovative, 
 and personal attention that has been a 
 tradition in our international division." 
 Correspondent balance relationships' 
 
 "Citizens Fidelity Bank maintains di- 
 rect accounts and agency agreements 
 with leading banks throughout the world 
 to service our needs and those of our 
 customers." 
 
 dollar financing, foreign exchange and 
 international funds transfers. Through 
 our extensive network of overseas cor- 
 respondents we provide worldwide as- 
 sistance and advice to domestic and for- 
 elgn clients. Located In the largest port 
 on the Gulf Coast, we have developed 
 particular expertise In Latin America 
 and are active lenders In that area. 
 
 Representation overseas: 
 
 CAYMAN ISLANDS 
 George Town: One branch. 
 
 MEXICO 
 Mexico City: Representative office. 
 Correspondent balance relationships: 
 
 The bank maintains balances In 25 
 foreign banks and 95 foreign banks 
 maintain balances with the First Na- 
 
 HIBERNIA NATIONAL BANK, 
 
 NEW ORLEANS 
 (A Subsidiary of Hibernia Corp., 
 New Orleans) 
 
 International bonking policy: 
 
 "Our primary objective is to provide 
 our commercial clients and correspon- 
 dent banks with all the services that 
 are necessary in order for them to trade 
 competitively throughout the world. 
 
 "In-bank seminars for exporters and 
 importers, organized campaigns to inter- 
 est new firms in International trade and 
 the means to finance their exports and 
 imports, the publishing of timely world 
 marketing reports, are just a few of the 
 'special servies' which have helped us 
 earn the Presidential 'E' award for a 
 significant role in promoting the growth 
 of International trade through the port of 
 New Orleans. We are the first bank in 
 our three-state area to have ever re- 
 ceived this award. It gives recognition 
 to the tremendous growth in our Inter- 
 national business and services over the 
 past decade." 
 
 Representation overseas: 
 
 CAYMAN ISLANDS 
 George Town: One branch. 
 Correspondent balance relationships: 
 
 Hibernia National Bank maintains 
 correspondent balances In oviritli 
 banks In various countries of the world, 
 thereby offering Its customers remit- 
 tance, collection and other full Interna- 
 tional banking services In every corner 
 of ths globe. In addition, 75 foreign 
 
 with Hibernia National Bank's main of- 
 fice and an average of 25 banks have 
 deposits In our Cayman branch. 
 
 MARYLAND 
 Baltimore 
 
 EQUITABLE TRUST CO., 
 
 BALTIMORE 
 (A Subsidiary of Equitable 
 Bancorp., Baltimore) 
 
 International banking policy: 
 
 "Our purposes are threefold: First, to 
 service the Middle Atlantic region of the 
 United States In its banking needs 
 around the world. Second, to provide 
 services that will facilitate the relation- 
 ships of foreign banks with the U. S., 
 and third to finance various Interna- 
 tionally oriented trade and lending op- 
 portunities." 
 
 Representation overseas: 
 BAHAMAS 
 Nassau: One branch. 
 Correspondent balance relationships: 
 
 Twenty-eight foreign banks have cor- 
 respondent balances with Equitable 
 Trust Co.; Equitable Trust has 30 cor- 
 respondent balances with foreign banks. 
 
 FIRST NATIONAL BANK OF 
 
 MARYLAND, BALTIMORE 
 (A Subsidiary of First Maryland 
 Bancorp, Baltimore) 
 
 International banking policy: 
 
 "Over fifty years old, the International 
 banking division of the First National 
 Bank of Maryland provides a full range 
 of International banking services for 
 companies located in the trading region 
 served by the port of Baltimore. We will 
 maintain our efforts to encourage the 
 rapid growth of foreign commerce flow- 
 ing through the port and to develop fur- 
 ther our position as the region's major 
 International bank." 
 
 Representation overseas: 
 
 CAYMAN ISLANDS 
 George Town: One branch. 
 
 PERU 
 
 Lima: Representative office. 
 
 Correspondent balance relationships: 
 
 First National Bank of Maryland 
 maintains 62 correspondent accounts In 
 23 countries and 136 accounts from 39 
 countries are held by FNBM. 
 
 MARYLAND NATIONAL BANK, 
 
 BALTIMORE 
 (A Subsidiary of Maryland National 
 Corp., Baltimore) 
 
 International banking policy: 
 
 "Maryland National follows a flexible 
 international policy designed to maxi- - 
 mize profits, to promote international 
 trade in the Middle Atlantic States and 
 
 correspondent banks and customers. 
 While the bank has worked exclusively 
 through foreign correspondents prior to 
 1969, and will continue to work primar- 
 ily through them In the future, the bank 
 recognizes the possibility that it may 
 open overseas branches or Initiate other 
 forms of foreign representation as the 
 requirements of the bank and its cus- 
 tomers may dictate." 
 
 U. S. Subsidiaries: 
 
 MARYLAND NATIONAL 
 OVERSEAS INVESTMENT 
 CORP., BALTIMORE 
 This Edge Act corporation, with au- 
 thorized capital of $5 million and paid-in 
 capital of $2.5 million, holds shares of 
 the bank's overseas affiliate, London In- 
 terstate Bank. - 
 
 Representation overseas: 
 BAHAMAS 
 
 Nassau: One branch. 
 
 ENGLAND 
 
 London: Representative office. 
 
 London Interstate Bank Ltd.: Maryland 
 National holds a minority position In 
 this bank. It specializes In medium- 
 term Eurodollar loans and merchant 
 banking services and has an Initial 
 capitalization of $12 million equally 
 divided between four American, one 
 British, and one German partner. 
 ^ : MEXICO 
 
 Mexico City: Representative office. ' 
 
 Correspondent balance relationships' 
 Maryland National Bank maintains 
 
 correspondent balance relationships with 
 
 more than 100 banks In more than 40 
 
 UNION TRUST CO. OF 
 MARYLAND, BALTIMORE 
 (A Subsidiary of Union Trust 
 Bancorp, Baltimore) 
 
 International banking policy: 
 
 "Our international banking policy will 
 continue to maintain emphasis on the 
 existing services being offered to the 
 corporate and individual customer alike; 
 however, with the further sophistication 
 of all aspects of international banking, 
 new areas will be explored to ascertain 
 whether they will be compatible with 
 Union Trust's commitment. Development 
 and growth can only increase our con- 
 tribution to the economic well-being of 
 the Port of Baltimore and surrounding 
 regions." 
 
 Correspondent balance relationships'- 
 
 Union Trust Co. maintains correspon- 
 dent balances with 19 banks in 13 coun- 
 tries and 38 foreign banks in 23 coun- 
 tries maintain correspondent balances 
 with Union Trust Co. 
 
 MASSACHUSETTS 
 Boston 
 
 THE FIRST NATIONAL BANK OF 
 BOSTON 
 (A Subsidiary of First National 
 Boston Corporation) 
 
 International banking policy: 
 
 "The First National Bank of Boston 
 continues, through its international 
 operations, to meet the needs of its 
 multinational customers.- Our operations 
 Include branches and subsidiaries sup- 
 plemented by representative offices and 
 foreign affiliates to provide a wide 
 range of banking and non-banking fi- 
 nancial services. This widespread or- 
 ganization gives our customers full 
 benefit of Bank of Boston's leadership 
 in certain specialized services, its 190 
 years of experience in international fi- 
 nance, combined with the extensive 
 knowledge and experience of our foreign 
 partners and correspondents." 
 
 (Continued on next page) 
 
 "Our International division Is struc- 
 tured to provide efficient trade-related 
 international services for Indiana ex- 
 porters and importers as well as for 
 approximately 150 correspondent banks 
 throughout the state. Our foreign draft 
 and remittance service for these domestic 
 correspondent banks was implemented in 
 1976. We concentrate on export lending, 
 acceptance financing and Eurodollar fi- 
 nancing of foreign subsidiaries of In. 
 diana-connected companies. In addition 
 we supplement efforts of the state In 
 attracting foreign Industry to Indiana. 
 As with many regional international 
 banks, we emphasize high Quality per- 
 formance of the usual foreign depart- 
 ment activities, e.g. letters of credit, 
 collections, funds transfers, etc." 
 
 Representation overseas: 
 
 Correspondent balance relationships: 
 
 Thirty-one foreign banks maintain 
 working balances with Merchants and 
 Merchants maintains working balances 
 with 29 foreign banks. 
 
 IOWA 
 
 Des Moines 
 
 IOWA DES MOINES 
 NATIONAL BANK, 
 DES MOINES 
 (A Subsidiary of Northwest 
 Bancorp., Minneapolis) 
 International banking policy: 
 
 lowa-Oes Moines National Bank offers 
 all International banking services either 
 through its own facilities or In coopera- 
 tion with the principal subsidiary of the 
 holding company, Northwestern Na- 
 tional Bank of Minneapolis. See the list- 
 ing of NWNB, Minneapolis. 
 
 KANSAS 
 
 Wichita 
 
 FOURTH NATIONAL BANK & 
 
 TRUST CO.. WICHITA 
 (A Subsidiary of Fourth Financial 
 Corp., Wichita 
 
 International banking policy: 
 
 "The Fourth National Bank & Trust 
 Company established an international 
 department to service the growing needs 
 of our customers for international bank- 
 ing services. Our centralized location in 
 Kansas allows us to fully serve the 
 domestic and international needs of the 
 Important, growing industries of Kansas 
 and their expanded foreign trade. We 
 emphasize traditional international bank- 
 ing services such as export and Import 
 financing, letters of credit, purchase and 
 sale of foreign exchange and foreign 
 collections. Building on our longstanding 
 relationships with our many customers 
 from our marketing area, the depart- 
 ment recently expanded its capabilities." 
 Correspondent balance relationships'- 
 
 The Fourth National Bank * Trust 
 Company maintains a number of corre- 
 spondent relationships with major banks 
 throughout t he world. 
 
 KENTUCKY 
 Louisville 
 
 CITIZENS FIDELITY BANK & 
 TRUST COMPANY, LOUISVILLE 
 (A Subsidiary of Citizens Fidelity 
 Corp.) 
 
 correspondent banks (over 90% of Ken- 
 tucky banks look to us as their corre- 
 spondent). We are dedicated to fully 
 service the foreign trade needs of the 
 businesses and Individuals in our region, 
 which we define as Kentucky and sur- 
 rounding states. To support our philoso- 
 phy of concentrating our international 
 
 FIRST NATIONAL BANK OF 
 LOUISVILLE 
 (A Subsidiary of First Kentucky 
 National Corporation)' 
 
 International bonking policy: 
 
 "First National Bank pursues a policy 
 of offering full international banking 
 services. Domestically, we have geared 
 ourselves to handle all international 
 banking needs of c 
 
 us to serve not 
 others active in 
 the field of international banking and 
 finance. During the coming year we will 
 place particular emphasis on our pro- 
 grams for trade development, export fi- 
 nancing and international lending." 
 
 Representation overseas: 
 BELGIUM 
 Brussels: Representative office. 
 
 BRAZIL 
 
 Rio de Janeiro and Sao Paulo: The bank 
 has a special consultant for Brazil- 
 N. M. Rothschild oV Sons. 
 
 CAYMAN ISLANDS 
 George Town: One branch. 
 
 VENEZUELA 
 Caracas: Sociedad Financiera Credival 
 C A. is a commercial finance company 
 affiliate of the bank. 
 Correspondent balance relationships: 
 First National maintains reciprocal 
 relationships with lead- 
 
 LIBERTY NATIONAL BANK AND 
 
 TRUST CO., LOUISVILLE 
 International banking policy: 
 
 "Liberty National Bank's international 
 department, representing the regional 
 bjec- 
 
 full 
 
 to 
 
 continuing efforts for Increased foreign 
 trade and investment thus encouraging 
 the economic growth of our state and 
 region and 3.) continued exploration of 
 foreign lending and International In- 
 vestment opportunities." 
 
 Union Trust Co. maintains correspon- 
 dent balances with 20 banks In 15 coun- 
 tries and 44 foreign banks In 23 coun- 
 tries maintain correspondent balances 
 with Union Trust Co. 
 Correspondent balance relationships: 
 
 Liberty National Bank maintains 
 correspondent balance relationships 
 : world's principal money 
 rect foreign relationships 
 
 60 
 
 LOUISIANA 
 New Orleans 
 
 THE BANK OF NEW ORLEANS 
 AND TRUST CO. 
 (A Subsidiary of New Orleans 
 Bancshares, Inc., New Orleans) 
 
 International banking policy: 
 
 "The principal objective of the Interna- 
 tional department of The Bank of New 
 Orleans and Trust Company Is to pro- 
 vide a wide range of International bank- 
 ing services to its domestic and overseas 
 customers and correspondent banks 
 through the use of Its worldwide facili- 
 ties. The result of these services In turn 
 contributes to the growth of the port 
 and city of New Orleans." 
 Correspondent balance relationships: 
 
 The Bank of New Orleans maintains 
 reciprocal correspondent relationships 
 with leading banks 
 
 FIRST NATIONAL BANK OF 
 COMMERCE, NEW ORLEANS 
 (A Subsidiary of First Commerce 
 Corp., New Orleans) 
 
 International bonking policy: 
 
 "First National Bank of Commerce 
 offers a broad range of international 
 services Including letters of credit, for- 
 eign collections, export financing, Euro- 
 
84 
 
 AMERICAN BANKER 
 
 February 22. 1977 
 
 International Activities 
 
 (Continued from preceding page) 
 U. S. Subsidiaries: 
 BANK OF BOSTON INTERNA- 
 TIONAL—NEW YORK 
 BBI It an Edge act lubsldlary which 
 w» established In 1918. It provides a 
 full rang* of International financial 
 services. 
 
 BANK OF BOSTON INTER- 
 NATIONAL — LOS ANGELES 
 
 Thli Edge Act subsidiary was estab- 
 lished In 1973 to provide a full range of 
 International financial services on the 
 West Coast with emphasis on trade with 
 the Far East. 
 
 BANK OF BOSTON INTERNA- 
 TIONAL OF MIAMI 
 
 Thla Edge Act subsidiary provides a 
 full range of international financial serv- 
 ices, directing special attention to trade 
 flow through Miami between Central and 
 South America. 
 
 BOSTON OVERSEAS FINANCIAL 
 CORPORATION, BOSTON 
 BOFC Is a wholly-owned Edge Act 
 subsidiary with the purpose of making 
 equity investments overseas. Through 
 BOFC'i affiliates. First National Bank 
 of Boston offers factoring and leasing 
 services, consumer and corporate sales, 
 financing and consulting and unusual fi- 
 nancial assistance through Its affiliates 
 around the world. 
 
 Representation overseen: * 
 
 ARGENTINA 
 Avellaneda: One branch. 
 Buenos Aires: Eight branches. 
 
 International Factors, S. A, wholly 
 owned by BOFC, provides eaport and lm. 
 port services for Interested companies. 
 Rosarlo: On* branch and two teller 
 
 branches. 
 
 8A8IN — Socledad Anonlma de Ser- 
 vices * Inverslones, wholly owned by 
 BOFC. provides specialized financial 
 services. 
 
 AUSTRALIA 
 Melbourne: Representative office. 
 
 Boston Financial Ltd, It a merchant 
 bank wholly owned By BOFC. 
 
 First Leasing and Finance, Ltd. Is 50% 
 owned by BOFC and has a branch In 
 Sydney. 
 
 General Credits Ltd. Is a BOFC fac 
 torlng affiliate. 
 
 Sydney: Branch of First Leasing and Fl 
 nance Ltd, Melbourne. 
 
 AUSTRIA 
 
 Vienna: Factor Bank-International Fac 
 tors-Austrla GmbH. Is a BOFC fac- 
 toring affiliate 
 
 BAHAMAS 
 Nassau: Bank of Boston Trust Co. (Ba- 
 hamas), Ltd. la a wholly-owned tub- 
 tidlary of FN B, handling trust and In- 
 vestment administration and Eurocur- 
 rency deposits and financing for nsn- 
 U. S. citiiens. 
 _ Ont branch (First National Bank of 
 handling Eurocurrency deposits 
 
 COSTA RICA 
 an Jose: Representative office for Ce 
 tral America. 
 
 Corporacion Internaclonal de Boston 
 
 :igium 
 
 Em pre 
 
 BOLIVIA 
 La Pax: One branch. 
 
 Corporacion Flnanclera de Boston, 
 S -A, a wholly-owned subsidiary of BOFC, 
 provides retail financing, export import 
 services and leasing. 
 
 BRAZIL 
 Complnat: One branch. 
 Porto Alegre: One branch. 
 Rio de Janeiro: Ont branch. 
 Sao Paulo: One branch. 
 
 Boston S. A. Admlnlttracao 
 denimentos Is a wholly-ow 
 Ing company of BOFC which engages In 
 Investment management, money market 
 and other ipeclalized services. 
 
 Boston Distributors de Tltulot t Va 
 sores Mobilanos Ltda. Is wholly-owned 
 by BOFC through Boston S.A, the 
 holding company Boston Distributors 
 engages In marketing of commercial 
 six othtr 
 
 Boston Flnancelrt S.A, wholly owned 
 by BOFC through Boston S. A. engages 
 In csnsumtr and corporatt talet financ- 
 ing. 
 
 Botton Leasing Arrendamentt Repre- 
 eentacoet a Services Ltda, owned by 
 BOFC through Bolton S. A, engaget In 
 letting. " * 
 
 CANADA 
 
 Montretl: Botton Factors International 
 Inc. It a subsidiary of BOFC. 
 CHANNEL ISLANDS 
 
 subsidiary of the bank, •ffcrlng bank 
 Ing, trust, Investment management 
 and custody services. 
 
 corporate sales financing and is 80% 
 
 owned by BOFC. 
 
 DENMARK 
 
 Copenhagen: International Factors Ltd. 
 Danish branch. 
 
 DOMINICAN REPUBLIC 
 
 Santo Domingo: Banco de Botton Dom 
 Inicano, S.A, owned 30% by FNB of 
 Botton, provides full banking services 
 ENGLAND 
 
 Brighton: International Factors, Ltd 
 Is an affiliate of BOFC. 
 
 London: Two branches. » 
 
 First National Boston I Imlted, Invest 
 
 ment banking, is a subsidiary of BOFC 
 
 Watford: Boston Trust A Savings, Lim- 
 ited, retail banking, Is a subsidiary of 
 Bank of Boston S.A, Luxembourg. 
 FINLAND 
 
 Helsinki: Soumen Interactors Oy h) I 
 factoring affiliate of BOFC. 
 
 FRANCE 
 
 Paris: One branch. 
 Soclete Francaise de Factoring-Inter 
 
 national Factors France, is a BOFC af 
 
 fillete. 
 
 Boston Credit-Bail S.A. Is a BOFC 
 subsidiary engaged In leasing. 
 
 GERMANY 
 Frankfurt: One branch. 
 
 Botton Leasing G m b H. It a wholly- 
 owned tubsidiary of FNB of Boston. 
 Malni-Mombach: Inter-Factor Bank, 
 A.G. Is an affiliate of BOFC. 
 GUATEMALA 
 Guatemala City: Servicios Comerclales 
 e Industries Is a 50% J( 
 of BOFC. It engages in leasing 
 consumer and corporate sales financ- 
 ing. 
 
 HAITI 
 
 Petionvllle: One branch. 
 Pert-au-Prlnce: One branch. 
 
 HONDURAS 
 San Pedro Sula: Companla de Credito 
 
 S.A. Is 50% owned by BOFC. It er 
 
 gages In leasing and consumer an 
 
 corporate sates financing. 
 
 HONG KONG 
 Hong Kong: Representative office. 
 
 First National Boston (Hong Kong 
 Ltd. Is a merchant bank 100% owned 
 by BOFC. 
 
 INDIA 
 
 Bombay: Industrial Credit 4 Investment 
 Corp. of India la a BOFC affiliate, 
 IRAN 
 
 Teheran: Representative office. 
 
 IRELAND 
 Dublin: International Factors (Ireland) 
 Ltd. Is a BOFC affiliata. 
 
 ITALY 
 
 JAPAN 
 
 Tokyo: On* branch. 
 
 Pacific Lease Co, Ltd. It a Joint ven 
 ture Icaaing company of BOFC. 
 
 Orient Factors Ltd, factoring services, 
 Is a BOFC affiliate. 
 
 LEBANON 
 Beirut: Representative office. 
 
 LUXEMBOURG 
 Luxembourg: One branch of FNB of 
 
 Bank of Boston S A, commercial and 
 Invettmcnt banking, It a subsidiary of 
 BOFC. 
 
 MEXICO 
 Mexico City: Representative office. 
 NORWAY 
 
 Oslo: Norlnvett, AS it a BOFC affiliate. 
 
 PANAMA 
 Panama City: One branch. 
 
 PHILIPPINES 
 Manila: Private Development Corp of 
 the Philippine*, an Industrial develop 
 ment financing company, it an affili- 
 ata of BOFC. 
 
 PORTUGAL 
 Lisbon: International Factor* (Portu- 
 gal) SARL It a BOFC affiliate. 
 SINGAPORE 
 Singapore: Representative office. 
 
 SOUTH AFRICA 
 Johannesburg: Standard Bank Factors 
 Ltd. Is a factoring am 
 finance affiliate of BOFC. 
 
 SPAIN 
 
 Madrid: Representative office 
 
 International Factar* 
 a BOFC affiliate 
 
 SWEDE! 
 Stockholm: Skandic Fl 
 a BOFC affiliate. 
 
 ng. AB I* 
 
 SWITZERLAND 
 Geneva: Boston investment and Finan- 
 cial Servlcca, S-A. offers trust and asset 
 management services and I* wholly 
 owned by BOFC. 
 
 irlch: Factor* AC it t BOFC affiliate 
 VENEZUELA 
 Caracal: Representative office. 
 
 Arrcndadora Industrial Venezolana 
 
 Correspondent bo/once relationships' 
 
 First National Bank of Botton main, 
 taint account balance* with 152 corre- 
 spondent bankt and 498 corretpondent 
 bank* maintain account balances with 
 FNB. 
 
 NEW ENGLAND MERCHANTS 
 NATIONAL BANK, BOSTON 
 (A Subsidiary of New England Mer- 
 chants Co. Inc., Boston) 
 International banking policy: 
 
 "To facilitate the ever Increasing 
 needs of our clients, both at home and 
 abroad. New England Merchants main- 
 tains close relationship* with major 
 bank* and Institution* throughout 
 world. To expand our foreign c 
 
 Correspoadenf balance relationships; 
 
 Shawm ut maintains account! with 60 
 overseas banks and 175 oversea* bank* 
 maintain accounts with ShawmuL 
 
 need* of our domestic client!, and mai 
 tain a close relationthip with client! 
 abroad, plant for 1977 call for an 
 gressive overseas calling program. Our 
 International department maintair 
 constant liaison with approximately 200 
 foreign banks which together with 
 Nassau branch and other Investments, 
 put us in a position to advise our clients 
 regarding the constantly changing situa 
 tlon in any specific country. 
 
 U. S. Subsidiary: 
 
 NEW ENGLAND MERCHANTS 
 BANK INTERNATIONAL, 
 
 BOSTON 
 The Edge Act corporation was incor 
 perated In 1965 and on Dec. 31, 1976 
 had S2 million capirUI stock. It has In 
 vestment* In Western Europe and ths 
 Cayman Islands. 
 
 Representation overseas; 
 
 BAHAMAS 
 
 Nassau: One branch. 
 
 CAYMAN ISLANDS 
 
 George Town: Euralantlt Maritime 
 Bank Ltd. It 20% owned by Now 
 England Merchants and primarily en 
 gages in ship financing. Other partner* 
 In the venture arc British and Dutch 
 banks. 
 
 Correspondent balance relationships: 
 
 New England Merchanta maintain 
 balances with 55 foreign banks in 2 
 countries and 82 foreign institutions 
 from 34 countries maintain balances 
 with New England Merchant!. 
 
 SHAWMUT BANK OF BOSTON 
 NA, BOSTON 
 
 (A Subsidiary of Shawmut 
 Corporation, Boston) 
 
 International banking policy: 
 
 "It is our bank's International policy 
 to work closely with correspondents 
 throughout the world and to supplement 
 these relatiomhlpl for particular pur- 
 poses In specific locations by Investment 
 n International financial organizations." 
 
 U S. Subsidiary: 
 SHAWMUT INTERNATIONAL 
 CORP , BOSTON 
 
 Feb. 25, ° 1966, 
 million. 
 
 Rtpreitnlalion 
 
 ENGLAND 
 indon: Atlantic International Bank, 
 Limited. Shawmut hold* a 29% direct 
 Interest In thli bank formed In 1969 
 at f 72 million. 
 LUXEMBOURG 
 : ADELA Investment Co, 
 S.A. Shawmut International Corpora- 
 tion ownt 2.500 shares of thlt Invest- 
 ment company which hat flvt branches 
 snd assists In tha development of 
 Latin American businesses. 
 European Enterprise* Development 
 Company S.A. Shawmut International 
 Corporation owns 25.000 *harrl of this 
 capital company which sup- 
 plies capital and managerial assistance 
 companies or develop ex- 
 
 PANAMA 
 
 Panama: Private Investment Company 
 for Asia (PICA) S.A. Shawmut Inter- 
 national Corporation ownt 40 tharrl of 
 thli multinational investment company 
 whole primary objective It to promote 
 Allan economic development. 
 
 STATE STREET BANK 1 TRUST 
 
 CO., BOSTON 
 (A Subsidiary of State Street Boston 
 Financial Corporation) 
 
 International bonking policy: 
 
 "Our International business ponty fol- 
 lows the general strategy of cur tank 
 and holding company. While we continue 
 to emphasize traditional patterns of 
 trade financing, we also service the In- 
 ternational needt of our cuttomcn In 
 the area* of capital management and 
 banking system* In market* which w* 
 have Identified as those where our special 
 expertise In these fields I* most appli- 
 cable. Our overseas facilities are strate- 
 gically designed and located to maximize 
 our ability to assist our customers when 
 experience ha* cemenitrated that cur 
 abilities best meet market requirements." 
 U. S. Subsidiary: 
 
 STATE STREET BANK BOSTON 
 INTERNATIONAL, NEW YORK 
 
 This wholly-owned Edge Act corpora- 
 tion was incorporated In 1964 and has 
 capital and surplus of »7J million. 
 
 Representation oversees: 
 BAHAMAS 
 Nassau: One branch. 
 
 ENGLAND 
 London: Representative office. 
 
 GERMANY 
 Munich: State Street GmbH I* a wholly- 
 owned subsidiary of State Street Bank 
 Boston International. 
 
 KUWAIT 
 Kuwait City: Representative. 
 
 PANAMA 
 
 Panama: State Street Bank (Panama) 
 Corp. Is a wholly-owned subsidiary *f 
 Bank Boston Intcma- 
 
 State Sir 
 
 SINGAPORE 
 Singapore: Representative efflee. 
 Correspondent bolance relationships; 
 
 St*te Street Bank A Trust C*. main- 
 tains correspondent baaince* with 65 
 banks In 24 countries and 194 foreign 
 banks from 49 countries maintain c*r- 
 baiance* with State Street 
 A Trust Co. 
 
 Dedham 
 BAY BANK/NORFOLK COUNTY 
 TRUST CO., DEDHAM 
 
 International banking policy: 
 
 "In line with Norfolk's unosaslng ef- 
 forts to provide broad and efficient bank- 
 ing services, our International depart- 
 ment standi ready to meet the ever 
 increaung requirement! of our domettlo 
 customers engaged In oversea! opera- 
 tions Whether It be setter* of credit, 
 foreign exchange, foreign collection!, or 
 any other International transaction. It 
 ii our objective to give personalized 
 service of the highest quality. In addi- 
 tion, by maintaining very close corret- 
 pondent banking relationships, wl aim 
 to continue to promote the growth of 
 international trade in our marketing 
 area In the coming year." 
 
 Quincy 
 
 SOUTH SHORE BANK, 
 QUINCY 
 
 (A Subsidiary ot Multibank Financial 
 Corp., Botton) 
 
 S. Affiliate: 
 
 MULTIBANK 
 INTERNATIONAL. QUINCY 
 n Edge Act corporation Jointly owned 
 by South Shore National *nd the seven 
 other bank* in Multibank Financial 
 Corp.: Attleboro Tru»t Co.; BMC Durfe* 
 Tru*t Co, Fall River; Falmouth National 
 Bank; First Agricultural Bank Pltl*- 
 field; Mechanics Bank, Worcester; 
 Northampton National Bank; and Secur- 
 ity National Bank, Springfield. 
 
 Representation 
 
 CANADA 
 
 Montreal: Shorehaven Leasing cf Cana- 
 da, a wholly-owned tubudlary of MBI. 
 
 Correspondent balance relationships: 
 South Shore maintain* over 20 foreign 
 
85 
 
 12B 
 
 AMERICAN BANKER 
 
 February 22, 1977 
 
 International Activities 
 
 (Continued from preceding page) 
 FIRST NATIONAL BANK 
 OF JACKSON 
 
 International banking policy: 
 
 "The First National Bank of Jackson 
 has a policy of providing a complete in- 
 ternational service to accommodate our 
 customers and our correspondent banks 
 ■nd their customers. 
 
 Correspondent balance relationships: 
 
 The First National Bank of Jackson 
 maintains relationships through Its cor- 
 respondent banks and other sources and, 
 has access to banks in the major finan- 
 cial centers of the world. 
 
 MISSOURI 
 Kansas City 
 
 COLUMBIA UNION NATIONAL 
 BANK & TRUST CO., 
 KANSAS CITY 
 
 International banking policy: 
 
 "Columbia Union National Bank and 
 Trust Co. established its international 
 banking department in 1970 to provide 
 a full range of international services to 
 f.ccommodate the needs of our customers 
 in the Midwest. These services Include 
 commercial letters of credit, documen- 
 tary collections, issuance of foreign 
 drafts and payment orders, foreign ex- 
 change trading and the financing of 
 short and medium term export loans 
 under the programs of Eximbank and 
 FCIA." 
 
 Correspondent balance relationships: 
 
 Columbia Union NB4T maintains 19 
 correspondent balance relationships with 
 foreign banks and 28 foreign banks 
 
 COMMERCE BANK 
 OF KANSAS CITY, NA 
 (A Subsidiary of Commerce 
 Bancshares, Inc., Kansas City) 
 International banking policy: 
 
 UNITED MISSOURI BANK OF 
 
 KANSAS CITY NA 
 (A Subsidiary of United Missouri 
 
 Bancshares, Inc., Kansas City) 
 International banking policy: 
 
 "Our policy concerning all of our in 
 ternational transactions on behalf o 
 our domestic customers is to worl 
 through our foreign correspondents over 
 seas. In addition to our 118 foreign ac 
 count relationships listed below, we share 
 agency arrangements with 437 b 
 through which we are able to offer let- 
 ters of credit, payment and eollectloi 
 services, export financing and interna 
 tional credit information. In addition to 
 these correspondent services, we offer 
 foreign exchange and travelers chec 
 in the most common foreign currencies. 
 We are vitally interested In assisting 
 our domestio customers' in every way 
 possible whenever the subject concerns 
 exports, imports or the financing of In 
 ternational transaction*." 
 
 Correspondent relationships: 
 
 posit accounts with 43 foreign banks ; 
 70 foreign banks maintain accounts m 
 UMB of Kansas City. 
 
 St. Louis 
 
 BOATMEN'S NATIONAL BANK, 
 
 ST. LOUIS 
 (A Subsidiary of Boatmen's Banc- 
 shares, Inc., St. Louis) 
 
 International banking policy: 
 
 "Personal service Is the objective we 
 pursue in our banking endeavors and our 
 foreign department makes every effort 
 to maintain this standard. The Boat- 
 men's National Bank Is the oldest bank 
 west of the Mississippi River and over 
 e years has created close relationships 
 th banks both domestically and 
 abroad. Through this network of cor- 
 respondents In major U. 8. money cen- 
 ters as well as through foreign banks 
 ach year to grow in serv- 
 stomers. Being a regional 
 
 national corporations withlr 
 
 Correspondent balance relationships: 
 
 "Commerce Bank of Kansas City, NA 
 the largest bank in the greater Kansas 
 City area, offers a full range of inter- 
 national banking service* to both com- 
 mercial and correspondent bank cus- 
 tomers throughout the Midwest and 
 Rocky Mountain states. The primary 
 emphasis of the international department 
 is the promotion of international trade 
 In this region through import-export fi- 
 nancing, FCI A-Eximbank programs, 
 direct overseas financing, and complete 
 foreign exchange capabilities. Our cen- 
 tral location in the United States has 
 been a major factor in the expansion of " ' 
 our foreign correspondent and agency main 
 relationships. We work closely with our bank 
 foreign correspondents, including an P |ete 
 active international calling schedule by I ooer> 
 department officers. | A _ m * 
 
 "As the lead bank of Commerce Bane- 
 shares, Inc.. we assist the other 31 
 affiliate* within the holding company to 
 provide international banking services. 
 Of particular importance Is our policy 
 
 Boatmen's National Banl 
 nine account* in major overseas banks 
 and the nine foreign banks maintain ac- 
 count* with Boatmen'* NB. 
 
 FIRST NATIONAL BANK IN 
 ST. LOUIS 
 (A Subsidiary of First Union Ban- 
 corporation, St. Louis) 
 
 International banking policy: 
 
 nk In St. Loui* 
 
 iolicy, designed to provide corn- 
 innovative international credit, 
 il, and trading services to mid- 
 i corporate 
 
 MERCANTILE TRUST CO., 
 
 ST. LOUIS 
 (A Subsidiary of Mercantile 
 Bancorporation, Inc., St. Louis) 
 
 Internaiional banking policy: 
 
 "Mercantile Trust was among tl 
 first banks throughout the mid-west r 
 gion to realize the increasing significance 
 of International trade. Consequently 
 Mercantile now offer* the largest am 
 most active International function withli 
 it* market area. In its commitment t< 
 growth, Mercantile has established ex 
 pertise In a complete range of Interna' 
 tional services — an expertise augmented 
 and refined through automation. Mercan- 
 tile Trust Company continues Its regional 
 expansion as well a* maintaining a 
 strong position in the world market- 
 place." 
 
 U. S. Subsidiary: 
 
 MERCANTILE INTERNATIONAL 
 
 CORP., ST. LOUIS 
 This Edge Act corporation, capitalized 
 at $5 million, is a subsidiary of Mercan- 
 tile Trust and serve* primarily an In- 
 vestment function. 
 
 Representation overseas: 
 
 CAYMAN ISLANDS 
 George Town: On* branch. 
 
 PANAMA 
 
 Panama City: Union de Banco*. MIC has 
 an equity interest in this bank. 
 
 Correspondent balance relationships: 
 We maintain relationships with banks 
 
 located in more than 
 
 to coordinate 
 
 International department of our as 
 sociate, Commerce Bank of St. Louis. 1 
 
 Correspondent balance 
 
 relationships' 
 City i 
 
 NEBRASKA 
 
 Lincoln 
 
 FIRST NATIONAL BANK & TRUST 
 CO. OF LINCOLN 
 (A Subsidiary of First National 
 Lincoln Corp., Lincoln) 
 
 International banking policy: 
 
 "The First National Lincoln, as a 
 leading bank in the state of Nebraska Is 
 committed to the policy of providing In- 
 ternational banking service* and extend- 
 ing credit oversea* and throughout th* 
 Great Plains— a major agricultural and 
 industrial growth area." 
 Correspondent balance relationships: 
 
 First National Lincoln ha* five ac- 
 count* from bank* in four countries 
 maintain* eight foreign currency 
 h bank* in seven countries. 
 
 NATIONAL BANK OF COMMERCE 
 
 T&SA, LINCOLN 
 (A Subsidiary of NBC Co., Lincoln) 
 International banking policy: 
 
 "The National Bank of Commerce Is 
 located in the heart of a highly capital- 
 intensive, agro-industrial region and ben- 
 nsive experience and ex- 
 /e are committed 
 
 foreign. In support of these services, the I t0 provide leadership in our tra 
 bank has area specialists, regularly 1 •>/ bringing reliable information 
 
 calling in Latin America, Europe, Cana-| ll 9" markets 
 
 da, A.la, the Mid-East and Africa. On | »<""er», by arranging »hort- and medium 
 July I. 1976, a representative office was 
 
 Comi 
 
 Bank of Kansas City. Over 450 agency 
 relationships are maintained with banks 
 
 FIRST NATIONAL BANK 
 OF KANSAS CITY 
 
 opened in London. 
 
 "Much of the ban 
 activities are related to servicing its 
 domestic customers' needs, both at 
 home and abroad. The special emphasis 
 placed on serving the Midwest's major 
 ith major foreign corporations reflect* the bank'* large 
 ,J and 51 foreign [ portfolio of customer* with multi-na- 
 tional operation*. Increased international 
 credit activities include continued use 
 of the Eximbank/ FCI A program, but 
 also Involve direct credit to overseas 
 borrowers for a variety of purposes. For- 
 eign exchange trading continues to grow 
 rapidly In support of the requirements 
 and opportunities for our Midwest multi- 
 national corporations and financial Instl- 
 
 by prov 
 
 (A Subsidiary of First National 
 Charter Corp., Kansas City) 
 International banking policy: 
 
 "Our purpose in the International de- 
 partment of First National Bank of 
 Kansas City Is to supply the firm* en- 
 gaged in International business in the 
 Midwest with the best and most com- 
 plete services presently available, what- 
 ever their need. We also provide the 
 flexibility necessary to adapt to the con- 
 stantly changing international market- 
 place. By doing this, we are not only 
 fulfilling the present needs of our cus- 
 tomers but providing a foundation tor 
 the future." 
 
 Correspondent balonce relationships: 
 
 U. S. Affiliate: 
 
 ALLIED BANK INTERNA- 
 TIONAL, NEW YORK 
 First National Bank In St. Louis is 
 one of 18 member banks of Allied. See 
 listing for Allied International under 
 New York. 
 
 Representation overseas: 
 
 BAHAMAS 
 Nassau: One branch. 
 
 ENGLAND 
 London: Representative office. 
 Correspondent balance relationships: 
 
 port finar 
 a full range of 
 services for both commercial and con- 
 sumer customers. NBC maintains cor- 
 respondent relationships with *ix foreign 
 banks and agency relationships with 
 many more. Our Intention Is to expand 
 these relatii 
 trade expani 
 
 out the world. These direct ac 
 complemented by numerous 
 spondent relationships with o 
 
 Omaha 
 
 OMAHA NATIONAL BANK 
 (A Subsidiary of Omaha National 
 Corp., Omaha) 
 
 International banking policy: 
 
 "Policy Is to be the International bank- 
 ing leader in the multi-state region that 
 the bank serves. International expansion 
 of correspondent and agency relation- 
 ships as well as Increased emphasis on 
 export financing and financing of agri- 
 culture and agriculture related Indus- 
 tries. Substantial benefits are generated 
 overseas by consulting services offered 
 by the bank and Its parent in the field 
 of agriculture." 
 
 Representation overseas: 
 BAHAMAS 
 Nassau: One branch. 
 Correspondent balance relationships: 
 
 Omaha National has correspondent 
 balances with 14 foreign banks in 11 
 countries and holds correspondent bai- 
 lor 19 foreign banks in 16 coun- 
 Omaha National Bank has over 
 25 agency relationships. 
 
 THE UNITED STATES 
 NATIONAL BANK OF OMAHA 
 (A Subsidiary of Northwest 
 Bancorp., Minneapolis) 
 
 International banking policy: 
 
 "The United States National Bank of 
 Omaha's policy is to endeavor to serve 
 the growing need for international bank- 
 ing services and financing in the Mid- 
 west, a primary contributor to the world 
 food market basket. Import/export vol- 
 umes are growing constantly. The ap- 
 proval of a Foreign Trade Zone for 
 Omaha holds great promise for further 
 
 "Flexibility is key to the policy. By 
 working independently, through North- 
 western National Bank of Minneapolis, 
 the holding company's principal subsid- 
 iary, or New York correspondent*, wo 
 are able to bring truly first class service* 
 to our market area. The facilities of 
 NWNB are listed under Minneapolis." 
 
 NEW JERSEY 
 Elizabeth 
 
 NATIONAL STATE BANK, 
 ELIZABETH 
 
 International banking policy: 
 
 "The National State Bank conduct* 
 practically all foreign transactions di- 
 rectly and maintains relationships with 
 many banks all over the world. We are 
 endeavoring to provide full international 
 services to all our customers and pro- 
 spective customers, domestic as well as 
 foreign." 
 
 Hackensack 
 
 UNITED JERSEY BANK, 
 HACKENSACK 
 (A Subsidiary of United Jersey 
 Banks, Princeton) 
 International banking policy: 
 
 "United Jersey Bank, as well as th* 
 holding company, United Jersey Banks, 
 prefers to transact its International busl- 
 ess directly with correspondents abroad 
 rather than through foreign branches, In- 
 asmuch a* we feel that the local bank 
 ■nd Its staff I* better equipped to deal 
 with any financial and commercial prob- 
 lem* th*t our customer* may encounter 
 In their respective countries. We also be- 
 lieve that the cost of establishing a full 
 service branch abroad Is excessive for a 
 regional bank." , 
 
 Representation overseas: 
 
 Correspondent balance relationships: 
 
 United Jersey Bank maintains cor- 
 respondent relationships worldwide and 
 reciprocal account relationship* with a 
 number of foreign bank*. 
 
 Jersey City 
 
 FIRST JERSEY NATIONAL BANK, 
 
 JERSEY CITY 
 (A Subsidiary of First Jersey Na- 
 tional Corp., Jersey City) 
 
 International banking policy: 
 
 "First Jersey provides comprehensive 
 International banking services including 
 foreign remittances and collections, for- 
 eign exchange and currencies, letter* of 
 credit and acceptances, utilizing our net- 
 work of correspondents strategically lo- 
 cated throughout the world. Loans ar* 
 made on direct and Indirect basis to 
 foreign banks and businesses. 
 
 "Main emphasis is on the financing of 
 foreign transactions for corporations In 
 th* New Jersey-New York market" 
 
 Correspondent balance relationships: 
 
 First Jersey maintains accounts at 25 
 foreign banks while 17 foreign banks 
 have account* at First Jersey. 
 
 Morristown 
 
 AMERICAN NATIONAL BANK & 
 TRUST OF NEW JERSEY, 
 MORRISTOWN 
 (A Subsidiary of Horizon Bancorp., 
 
 . Morristown, N. J.) 
 International banking policy: 
 
 "The international department aim* 
 to provide international banking serv- 
 ices to customers and prospects of the 
 
 and improve the profitability of the bank 
 by broadening its loan and deposit base. 
 Towards these goals we have aggres- 
 sively expanded our international opera- 
 tions with major emphasis on import and 
 export financing. Our overseas exposure 
 is considerable but v, 
 
86 
 
 February 22. 1977 
 
 AMERICAN BANKER 
 
 International Activities - 
 
 Representation overseas: 
 BAHAMAS 
 Nassau: One branch. 
 Correspondent balance relationships: 
 
 spondent balance! 
 banks and 7 oversea 
 maintain balances 
 
 with 15 overseas 
 ith American Na 
 
 Newark 
 
 FIDELITY UNION TRUST 
 COMPANY, NEWARK 
 (A Subsidiary of Fidelity Union 
 Bancorporation, Newark) 
 U. S. AtHliate: 
 
 ALLIED BANK INTERNATIONAL, 
 NEW YORK 
 Fidelity Union Is one of 18 member 
 bank 
 Inter 
 
 Representation overseas: 
 BAHAMAS 
 Nassau: One branch. 
 
 FIRST NATIONAL STATE BANK 
 OF NEW |ERSEY, NEWARK 
 (A Subsidiary of First National 
 State Bancorporation, Newark) 
 
 International bonking policy: 
 
 "With a worldwide network of pre 
 eminent correspondent banks in 10' 
 countries. First National State Banl 
 of New Jersey as the largest bank li 
 the State is able to serve its customer 
 with the entire spectrum of interna 
 tlonal banking services. Our philosoph] 
 has been that regional banks can mon 
 readily transact 
 
 effective basi- 
 
 Representaiion overseas: 
 
 CAYMAN ISLANDS 
 George Town: One branch. 
 
 MEXICO 
 Mexico City: Representative office. 
 
 Correspondent balance relationships: 
 First National State Bank of Ne 
 Jersey maintains 40 active trading a 
 counts abroad In the major currencies 
 and 55 banks maintain dollar balances 
 on its books. 
 
 MIDLANTIC NATIONAL 
 
 BANK, NEWARK 
 (A Subsidiary of Midlantic 
 Banks Inc., West Orange, 
 
 International banking policy: 
 
 "Midlantic continues to pursue a policy 
 of offering fast, efficient and full-fledged 
 International services and financings t< 
 Its domestic and overseas customers 
 This Is accomplished with the assistant 
 of an experienced operational and terrl 
 torial staff which travels frequently 
 throughout the world and works in con 
 Junction with an ever-increasing networl 
 of overseas correspondents. As needs die 
 tate and opportunities arise, Midlantic 
 will continue to expand Its direct repre 
 sentation and investments abroad." 
 
 U. S. Subsidiary: 
 
 MIDLANTIC INTERNATIONAL 
 INC., NEWARK 
 
 This wholly. owned 
 
 ubudiarr of Mid 
 lantic Banks Inc. has authorized capital 
 of »2S million and was established for 
 the purpose of acquiring and ow 
 shares of foreign banks and/or other 
 financial institutions. 
 Representation overseas: 
 BRAZIL 
 
 Sao Paulo: Midlantic Servlcloe • Ad 
 Istracao Ltda., wholly owned by 
 
 ENGLAND 
 London: Representative office. 
 
 PANAMA 
 
 Panama City: Union de Baneos. Mldlan 
 tic International Inc. has a minor. t) 
 Interest In this ban 
 trs Include M 
 
 Louis: First National Ban 
 
 ville; WFC Corp. 
 
 Correspondent balance retain 
 
 inipi: 
 
 B.ilances are maintained with 32 for. 
 Sign banks In IS countries and 47 foreign 
 banks from 2\ different countries main 
 tain baljnc-s with Midlantic National 
 Bank. 
 
 Paramus 
 
 CARDEN STATE NATIONAL 
 BANK, PARAMUS 
 
 International banking policy: 
 
 "We are continuing to expand our In- 
 ternational banking operations at the 
 rapid growth pace of the multinational 
 corporate community In northern New 
 Jersey. The functions of our International 
 department have been developed to pro- 
 vide these corporations with closeat- 
 hand personal services of high efficiency 
 and effectiveness. For this purpose, we 
 maintain relationships with more than 
 125 highly qualified banks worldwide 
 and we work directly with those banks. 
 A full range of International banking 
 services Is available." 
 
 Correspondent balance relationships: 
 
 Through the facilities of our global 
 banking correspondent relationships we 
 continue to effectively administer the 
 broad spectrum of International services 
 such as letters of credit, collections, 
 money transfers, bank drafts and for- 
 eign exchange for our multinational and 
 Individual customers. As required, the 
 number of such relationships is increas- 
 ing steadily so that we can better serve 
 the business Interests of our customers. 
 
 Rutherford 
 
 NATIONAL COMMUNITY 
 BANK, RUTHERFORD 
 
 International banking policy: 
 
 "Our international banking policy is 
 to offer a complete line of international 
 services to our customers and to per- 
 form all functions with maximum Speed 
 and efficiency." 
 
 Correspondent balance relationships: 
 
 The bank has correspondent balances 
 with 15 banks in 13 countries. Three 
 banks in two countries maintain ac- 
 counts on our books. 
 
 Trenton 
 
 NEW JERSEY NATIONAL BANK, 
 TRENTON 
 (A Subsidiary of New jersey 
 National Corporation, Trenton) 
 
 International banking policy: 
 "New Jersey National Bank provides 
 
 services specifically directed to the needs 
 
 tional corporations In the state of New 
 
 Jersey." 
 
 Correspondent balance relationships: 
 
 Several due from accounts are main- 
 tained with banks abroad and several 
 
 tained with New Jersey 
 
 penetration from Long Island to central 
 New York. The First Commercial Banks 
 Inc. network now Includes reprsenta- 
 tion in 24 New York counties through 
 132 branch offices. Corporate policy 
 dictates that the full range of Interna- 
 tional services be made available com- 
 bining profitability with customer need. 
 Relationships abroad numbering 85 have 
 been established to facilitate business to 
 
 basis. Strong emphasis is placed on fast, 
 flexible and personalized service." 
 
 Correspondent balance relationships: 
 
 Reciprocating accounts are maintained 
 with 14 foreign banks in eight countries. 
 
 NATIONAL COMMERCIAL 
 BANK & TRUST CO., ALBANY 
 
 Buffalo 
 
 MANUFACTURERS & TRADERS 
 TRUST CO., BUFFALO 
 AND NEW YORK CITY 
 (A Subsidiary of First Empire 
 State Corp., Buffalo) 
 
 International banking policy: 
 "To provide a comprehensive 
 banking services to its custi 
 eluding: export financing throi 
 Bank and F.C.I.A. programs 
 
 CHANNEL ISLANDS 
 Guernsey: Allied Bank International 
 
 NETHERLANDS ANTILLES 
 Curacao: Allied International, N.V. Is a 
 wholly-owned banking subsidiary of 
 Allied. 
 
 Correspondent balance relationships' 
 Allied Bank International has 54 ao- 
 
 AMERICAN EXPRESS INTERNA- 
 TIONAL BANKINC CORP., 
 NEW YORK 
 
 International banking policy: 
 
 range of 
 gh Exim 
 
 vices for businesses, fin 
 
 Institu- 
 te Is of- 
 Express 
 poratlon 
 26 coun- 
 
 iffectively on a 
 iroximity to C 
 ndustnal secto 
 cing Canadian 
 
 WIFT and CHIPS 
 gn correspondent ban 
 pled with our foreign 
 diaries, enables us t 
 
 (AEIBC) and its subsK 
 tries outside the U. S. Services 
 loans, overdrafts, advances and letten 
 of credit, acceptances, discount financing 
 
 rchant 
 
 with 
 
 West Paterson 
 
 NEW JERSEY BANK NA, 
 WEST PATERSON 
 (A Subsidiary of Creater Jersey 
 Bancorp., West Paterson) 
 International banking policy: 
 
 "The reception of the President's "E" 
 award evidences New Jersey Bank's 
 dedication to providing professional in- 
 ternational banking services to greater 
 numbers of New Jersey corporations. 
 An ever-expanding network of cor- 
 respondent banks affords access to world- 
 wide markets." 
 Representation overseas: 
 
 CAYMAN ISLANDS 
 George Town: One branch. 
 
 COLOMBIA 
 Bogota: Representative office covering 
 •o Ecuador, Panama and Venezuela. 
 MEXICO 
 Mexico City: Representative office. 
 PERU 
 
 Lima: Representative office. 
 Correspondent balance relationships: 
 New Jersey Bank maintains accounts 
 th 69 foreign banks in 26 countries; 
 112 foreign banks In 34 countries havs 
 spondent balances with NJB. 
 
 NEW YORK 
 Albany 
 
 FIRST COMMERCIAL BANKS 
 INC., ALBANY 
 
 International banking policy: 
 
 strong I 
 
 U. S. Subsidiary: 
 
 FIRST EMPIRE OVERSEAS CORP., 
 BUFFALO 
 
 Representation overseas: 
 CANADA 
 
 Toronto: First Empire Financial Services 
 Ltd. Is a subsidiary of the Edge cor- 
 poration. This company is engaged in 
 a broad range of financial services in- 
 cluding leasing, term financing, equip- 
 
 through Its subsidiaries, 
 s Financial Services and 
 s Development 
 
 FRANCE 
 Paris: One branch. 
 
 NETHERLANDS ANTILLES 
 Curacao: M4T Bank International. N.V 
 Curacao is a wholly-owned subsidiary 
 
 Correspondent balance relationships: rjul 
 
 The MAT maintains accounts wi 
 banks in 16 countries and 101 banks 
 31 countries maintain accounts wil 
 
 don, Beirut. Amman and Cairo. The New 
 York agency of AEIBC s North Ameri- 
 can region provides financial services 
 
 ness. An exclusively International orienta- 
 tion, broad geographical representation 
 in the form of branches and wholly-own- 
 ed subsidiaries and some 2.000 corre- 
 spondent relationships throughout t h • 
 world provide unique advantages to the 
 international customer." 
 
 f?epresen/ofion overseoi: 
 AUSTRALI A 
 
 Sydney: Representative sffl-». 
 
 AUSTRIA 
 Vienna: One branch. 
 
 BAHRAIN 
 Manama: One branch. 
 
 BANGLADESH 
 Chittagong: One branch. 
 
 BELGIUM 
 Antwerp: One branch. 
 Brussels: One branch. 
 
 CAYMAN ISLANDS 
 George Town: One branch. 
 
 DENMARK 
 Copenhagen: American Express A 3, an 
 AEIBC subsidiary. 
 
 DUBAI 
 
 MARINE MIDLAND BANK, 
 BUFFALO 
 
 See Marine Midland Bank, New York 
 
 New York 
 
 ALLIED BANK INTERNA- 
 TIONAL, NEW YORK 
 
 International bonking policy: 
 
 "Allied Bank International Is a con- 
 sortium bank established In 1968 and 
 wholly-owned by 18 shareholding banks 
 whose aggregate assets exceed (JO bil- 
 lion. Allied Bank International Is a 
 United States banking corporation char- 
 tered and regulated by the Federal Re- 
 serve Board, conducting a full service 
 international, wholesale business with 
 banks and corporations In the United 
 States and around the world. 
 
 "Shareholders are: American Fletcher 
 National Bank and Trust Co., Indiana- 
 American Security A Trust Co., 
 ngton, D. C.; Bank of the South- 
 N.A., Houston: Equlbank N. A., 
 Pittsburgh: Fidelity Union Trust Co., 
 Newark: First Hawaiian Bank, Hono- 
 lulu: First National Bank of Fort Worth: 
 First National Bank in St. Louis; First 
 National Bank o( Saint Paul; First Ten- 
 nessee Bank, NA, Memphis; Hartford 
 Bank and Trust Company. Albany; I National Bank A Trust Co.; Liberty N»- 
 Trust t Deposit Company. Syr-lilonal Bank A Trust Co.. Oklahoma 
 Ij Kingston Trust Company, Kings- > City; Michigan National Bank, Lansing; 
 The Homer National Bank, Homer; f Trust Company Bank. Atlanta; United 
 The Oyslcrmcn's Bank and Trust Com- . Bank of Denver, N. A.; United Stales 
 ly. Sayville. and The Chester Na- 1 National Bank of Oregon, Portland; 
 rial Bank. Chester. Valley National Bank of Arizona. 
 
 Cooperative efforts among holding I Phoenix ; and Virginia National 
 company 
 
 nal services are giver 
 isis at all First Commercla 
 Include National Commer 
 d Trust Company, Albany 
 y. Syr 
 
 nbers insure further market 1 Norfolk.' 
 
 East Devel- 
 
 Ono branch. 
 
 EGYPT 
 Cairo: One branch. 
 
 Egyptian- American Banl 
 owned affiliate of AEIBC. 
 
 American Express MiddU 
 opment Co. S A L. is a l 
 AEIBC. Headquarters is in 
 
 ENGLAND 
 Birmingham: Representative office. 
 London: Two branches. 
 
 Amex Bank Ltd.. London, Is a mer- 
 chant bank subsidiary of AEIBC. 
 Manchester: Representative office. 
 
 FRANCE 
 Antibes: One branch. 
 Cannes: One branch. 
 Nice: One branch. 
 Paris: Two branches. 
 
 GERMANY 
 American Express Bank GmbH, Frank- 
 furt, a subsidiary of AEIBC, has branches 
 in Cologne. Ousseldorf, Hamburg, Heidel- 
 berg, and two In Munich. 
 
 GREECE 
 Athens: Three branches. 
 Piraeus: One branch. 
 Salomca: One branch. 
 
 HONG KONG 
 Hong Kong: Two branches. 
 Kowloon: Three branches. 
 
 INDIA 
 
 Bombay: Two branches. 
 Calcutta: One branch 
 New Delhi: One branch. 
 
 INDONESIA 
 Jakarta: One branch. 
 Jakarta Kota: One branch. 
 
 ITALY 
 
 American Express Bank SpA, Rome, a 
 subsidiary of AEIBC, has 'iranches In 
 Florence, Mcstre, Milan, Naples and 
 
 Venice. 
 
 (ContmnoJ on ne\t pjgc) 
 
87 
 
 14B 
 
 AMERICAN BANKER 
 
 February 22, 1977 
 
 International Activities 
 
 East 
 
 (Continued fr 
 
 JORDAN 
 imman: American Expre 
 Development Co. S. A. L. Is a sub- 
 sidiary of AEIBC. It has a branch in 
 Cairo, Egypt. 
 
 MONACO 
 lonte Carlo: One branch. 
 
 NETHERLANDS 
 
 Karachi: One branch. 
 Lahore: One branch. 
 
 PHILIPPINES 
 Makatl: Representative office. 
 
 The Bancom Group, Inc., Is a 29% 
 owned affiliate of AEIBC. 
 
 SCOTLAND 
 Edinburgh: Representative office. 
 
 SINGAPORE 
 Singapore: One branch. 
 
 SWITZERLAND 
 American Express Bank (Switzerland) 
 A.G., Zurich, a subsidiary of AEIBC, has 
 branches in Basle, Geneva and Lausanne. 
 
 TAIWAN 
 Taipei: One branch. 
 
 ATLANTIC BANK OF NEW YORK 
 (A Subsidiary of National Bank of 
 
 Creece, S.A., Athens) 
 International bonking policy: 
 
 "Services offered by the international 
 department include commercial letters of 
 credit, documentary collections, import 
 and export financing, reimbursement 
 orders, money transfers, foreign credit 
 Information, advisory services for Greece, 
 foreign lending in the form of ship fi- 
 nancing and participation in syndicated 
 foreign loans. There are correspondent 
 
 "The parent bank is Greece's largest 
 commercial bank with over 300 branches 
 In the country plus branches In Chicago, 
 London, Cyprus, the Netherlands and 
 West Germany: representative offices In 
 Paris, Cairo and Sydney: and affiliated 
 banks In Canada, France, and South 
 Africa." 
 
 BANK LEUMI TRUST COMPANY 
 OF NEW YORK 
 
 Bm* Uumi T f usl Company of New 
 York Is majority owned by Bank Leumi 
 le-lsrael B.M., Tel-Aviv. 
 
 International banking policy: 
 
 "8ank Leuml Trust Company of New 
 York has a close orientation to Israel 
 commerce and is particularly well- 
 cqulpped to serve American business in 
 Its trade relations with Israel. In addi- 
 tion, we are engaged in the full spectrum 
 of financing the movement of goods and 
 services throughout the world and are 
 active In the International money mar- 
 kets." 
 
 Representation overseas: 
 
 ARGENTINA 
 Buenos Aires: Representative office. 
 
 BAHAMAS 
 Nassau: One branch. 
 
 BRAZIL 
 
 Sao Paulo: Representative office. 
 
 respondents and our overseas banking 
 offices to provide them with the fastest, 
 most intelligent counsel possible." 
 
 U. S. Subsidiary: 
 
 BANK OF NEW YORK INTERNA- 
 TIONAL CORP., INC., NEW YORK 
 Representation overseas: 
 BAHAMAS 
 Nassau: Bahamas International Trust 
 Co., Ltd. Bank of New York has a 
 direct minority interest In this insti- 
 tution which is engaged primarily in 
 trust business. 
 
 CAYMAN ISLANDS 
 George Town: One branch. 
 
 Cayman International Trust Co. Ltd. 
 Bank of New York International Corp. 
 has a minority interest 
 
 ENGLAND 
 
 Singapore: One branch. 
 Correspondent balance relationships: 
 
 The bank maintains correspondent 
 balances in 92 banks in 25 countries and 
 354 foreign banks in 65 countries main- 
 tain correspondent balances with us. 
 
 London: Bank Leuml Le-lsrael (U. K.) 
 Ltd. Is an affiliate. 
 
 FRANCE 
 
 Paris: Bank leumi Le-lsrael (France) 
 Is an affiliate. 
 
 GERMANY 
 Frankfurt: Representative office. 
 
 HONG KONG 
 Hong Kong: Representative office. 
 ITALY 
 
 Milan: Representative office. 
 
 SOUTH AFRICA 
 Johannesburg: Representative offlcs. 
 
 SWITZERLAND 
 Geneva: Bank Leuml le-lsrael (Switzer- 
 land) It an affiliate. 
 Zurich: Bank Leuml le-lsrael (Switzer- 
 land) Is an affiliate. 
 
 VENEZUELA 
 Caracas: Representative office. 
 
 BANK OF NEW YORK 
 (A Subsidiary of Bank of 
 New York Co., Inc. N. Y.) 
 
 International banking policy: 
 
 "The bank has always held to Its 
 policy of maintaining close working re- 
 lationships with the top correspondent 
 banks around the world. In this way, 
 whenever our customers have overseas 
 banking problems, we can utilize the 
 appropriate facilities both of theso cor- 
 
 BANK OF TOKYO TRUST CO., 
 NEW YORK 
 (A Subsidiary of The Bank of Tokyo 
 Ltd., Tokyo, Japan) 
 
 International banking policy: 
 
 "As the global operations of business 
 and International trade continue to grow 
 and proliferate, we find many of our 
 valued customers and prospects In the 
 vanguard of progressive expansion. Our 
 international policy Is to continue to 
 meet the needs of our 
 
 Representation overseas: 
 
 CAYMAN ISLANDS 
 George Town: The Bank of Tokyo 
 Trust Co. (Cayman) Ltd., specializing 
 in International and .-.ffsltore banking 
 and trust services, is a wholly-owned 
 subsidiary of The Bai.k of Tokyo 
 Trust Co. (New York). 
 
 ENGLAND 
 
 BANKERS TRUST CO., 
 NEW YORK 
 (A Subsidiary of Bankers Trust 
 New York Corp.) 
 
 International banking policy: 
 
 throughout the world, principally trans- 
 national corporations, foreign govern- 
 ments and their agencies, and foreign 
 central and commercial banks. In addi- 
 tion to making loans, the bank handles 
 deposit accounts, places funds on deposit 
 with other banks, buys and sells foreign 
 currency, engages in project finance and 
 syndicated loan activities, Issues and con- 
 firms letters of credit, offers a rapid col- 
 lection system for checks and drafts, 
 transfers funds and offers various cus- 
 todian, advisory and training services. 
 These services are provided through the 
 New York offices and our domestic Edge 
 Act subsidiaries, as well as through an 
 
 sisting of nine branches, 25 representa- 
 tive offices, nine subsidiaries and 10 
 equity investments in banking and finan- 
 cial institutions, and through more than 
 1.200 correspondent banks In 123 coun- 
 tries abroad." 
 
 U. S. Subsidiaries: 
 
 B. T. INTERNATIONAL 
 (DELAWARE) INC., NEW YORK 
 Formerly Bankers International (Lux- 
 embourg) Societe de Participations Fl- 
 nancleres, a Luxembourg holding com- 
 pany, which was wholly-owned by Bank- 
 
 BANKERS TRUST 
 INTERNATIONAL (MIDWEST) 
 CORP., CHICAGO 
 BANKERS TRUST 
 INTERNATIONAL (PACIFIC) 
 CORP., LOS ANGELES 
 BANKERS TRUST 
 INTERNATIONAL (SOUTHWEST) 
 
 CORP., HOUSTON 
 Representation overseas: 
 
 ARGENTINA 
 Buenos Aires: Representative office. 
 
 Eullco, S.A., an insurance brokerage 
 firm Is an affiliate of BIC. 
 
 Bullrich S.A. de Inversiones, an Invest- 
 ment banking affiliate specializing In 
 short-term and project financing, la an 
 affiliate of BIC. 
 
 AUSTRALIA 
 Melbourne: Office of Crd BT Co. 
 Sydney: Representative office. 
 
 Ord-BTCo is an investment banking 
 affiliate of BIC. 
 
 BAHAMAS 
 Nassau: One branch. 
 
 BELGIUM 
 Antwerp: Head office of Banque du 
 Benelux S.A., a commercial banking 
 affiliate of BIC. 
 Brussels: Representative office. 
 
 Office of Banque du Benelux S.A. 
 Ghent: Office of Banque du Benelux S.A. 
 Liege: Office of Banque du Benelux S.A. 
 BRAZIL 
 
 Rio de Janeiro: Representative office. 
 Sao Paulo: Representative office. 
 
 a BIC subsidiary. 
 
 CANADA 
 Toronto: Representative office. 
 
 Capital Services, Ltd., a wholly- 
 
 owned 
 
 npany, is a BIC affi 
 
 CapH 
 
 $12.1 
 
 BANKERS INTERNATIONAL 
 CORP., NEW YORK 
 This Edge Act Corporation Is capi- 
 talized at $33.4 million. It makes invest- 
 ments In banks and financial Institutions 
 In key areas around the world. There are 
 four other domestic Edge Act subsidiar- 
 
 BANKERS TRUST 
 INTERNATIONAL (MIAMI) CORP 
 
 COLOMBIA 
 Bogota: Representative office. 
 M;dellin: Corporacion Financeria Na- 
 cional, a finance company specializing 
 In medium- to long-term lending, is 
 a BIC affiliate. 
 
 DENMARK 
 Copenhagen: Representative office. 
 
 ENGLAND 
 Birmingham; One branch. 
 
 Bankers Trust International Ltd. Is 
 a wholly-owned subsidiary of BIC. 
 A merchant bank which participates In 
 commercial and Investment banking 
 activities, it also facilitates mergers 
 and underwriting operations. 
 Manchester: Representative office. 
 
 FRANCE 
 Paris: One branch. 
 
 GERMANY 
 Ouesseldorf: Branch of Deutsche Union- 
 bank, GmbH, Frankfurt. 
 Frankfurt: Representative office. 
 
 Deutsche Unlonbank GmbH la major- 
 wned by BIC. It is a full-service 
 
 GmbH. 
 
 Branch of Deutsche Unionban 
 HONG KONG 
 
 Hong Kong: Representative office. 
 
 BT Asia, Ltd., a merchant bank, is 
 subsidiary of BIC. 
 
 B.T. Asia, Ltd., a merchant bank, is 
 wholly- owned by BIC. 
 
 INDONESIA 
 Jakarta: Representative office. 
 
 IRAN 
 
 Teheran: Representative office. 
 
 ITALY 
 Milan: One branch. 
 Rome: Representative office. 
 
 Bankers Trust Finanziaria S p A. Is 
 a wholly owned Investment banking affil- 
 iate of BIC. 
 
 IVORY COAST 
 Abidjan: Societe Generale de Banques 
 en Cote d'lvoire, a commercial bank 
 with branches throughout the country. 
 Is an affiliate of BIC. 
 
 JAPAN 
 Tokyo: One branch. 
 
 KOREA 
 Seoul: Representative office. 
 
 Korea Investment and Finance Corp. 
 Is an affllate of BIC. 
 
 MEXICO 
 
 Mexico City: Representative office. 
 
 NETHERLANDS 
 Amsterdam: Representative office. 
 
 NIGERIA 
 Lagos: Representative office. 
 
 United Bank for Africa, Ltd., a com- 
 mercial bank with offices throughout the 
 country, Is a BIC affiliate. 
 
 PANAMA 
 Panama City: One branch. 
 
 PHILIPPINES 
 Manila: Representative office. 
 
 SENEGAL 
 Dakar: Societe General de Banque* au 
 Senegal, a commercial bank, is a BIC 
 
 SWITZERLAND 
 Zurich: Bankers Trust A.G. I* a wholly- 
 owned commercial banking affiliate of 
 BIC. 
 
 TAIWAN 
 Taipei: Representative office. 
 
 THAILAND 
 Bangkok: Representative office. 
 
 Thai Investment A Securities Co., Ltd. 
 is an investment banking affiliate of BIC. 
 
 TUNISIA 
 Tunis: Representative office. 
 
 Banque de Tunisie, a commercial bank, 
 It an affiliate of BIC. 
 
 VENEZUELA 
 Caracas: Representative office. 
 
 BROWN BROTHERS HARRIMAN 
 & CO., NEW YORK 
 
 Representation overseas: 
 
 CAYMAN ISLANDS 
 George Town: One branch. 
 
 ENGLAND 
 
 Brown Harriman A. International 
 Banks Ltd., international merchant 
 bankers, is 20% owned by Brown Broth- 
 ers Harriman & Co. The other owners 
 are First National Bank of Minneapolis, 
 Pittsburgh National Bank, The Pruden- 
 tial Assurance Company Ltd., London, 
 and The Inter-Alpha Group of Banks. 
 Capital authorized Is £4.1 million, ef 
 which £3.9 million Is Issued and fully 
 paid. Total footings. Including deposits 
 were £83.1 million, as of September 
 30, 1976. 
 
 SWITZERLAND 
 Zurich: Brown Brothers Harriman Serv- 
 ices A G, a communication center for 
 Europe.™ Institutional investors actlv* 
 In the U. S. securities market. It I* 
 wholly owned by Brown Brother* Har- 
 riman 4 Co. 
 
 Correspondent balance relationships: 
 
 Brown Brothers Harriman & Co. main- 
 tains correspondent balances in over 100 
 foreign banks and over 500 foreign bank* 
 maintain correspondent balances with 
 Brown Brothers Harriman 4 Co. 
 
 CHASE MANHATTAN BANK 
 NA, NEW YORK 
 (A Subsidiary of Chase Manhattan 
 Corp., N. Y.) 
 
 U. S. Subsidiaries ond Affiliates: 
 CHASE INTERNATIONAL 
 INVESTMENT CORP., 
 NEW YORK 
 CMC is a wholly-owned subsidiary 
 organized under the Edge Act to provide 
 Investment funds for economic develop- 
 ment projects, with emphasis on new cr 
 expanding enterprises In developing 
 
 CHASE MANHATTAN CON- 
 SULTING, INC., NEW YORK 
 CMCI provides management consult- 
 ing services relating to international and 
 foreign operations and services of tho 
 International Cash Management Division. 
 
 CHASE BANK 
 INTERNATIONAL— CHICAGO 
 CBI, Chicago, Is a wholly-owned sub- 
 sidiary organized under the Edge Act 
 to engage In International banking ac- 
 tivities. 
 
 CHASE BANK 
 INTERNATIONAL— HOUSTON 
 CBI, Houston, Is a wholly-owned sub- 
 sidiary organized under the Edge Act 
 to engage In International banking ac- 
 tivities. 
 
 CHASE BANK 
 INTERNATIONAL— LOS ANCELES 
 
 CBI, L. A 
 sidiary orga 
 to engage ir 
 tlvities. 
 
 Is a wholly-owned tub- 
 zed under the Edge Act 
 international banking ac- 
 
 CHASE BANK 
 INTERNATIONAL— MIAMI 
 CBI, Miami, Is a wholly - owned 
 ubsidiary organized under the Edgt Act 
 
88 
 
 February 22. 1977 
 
 AMERICAN BANKER 
 
 International Activities- 
 
 International banking 
 
 activities. 
 CHASE MANHATTAN OVER- 
 SEAS BANKING CORP., 
 NEW YORK 
 CMOBC la a wholly-owned subsidiary 
 organized under the Edge Act to hold 
 Investments In overseas corporations. 
 
 CHASE MANHATTAN OVER- 
 SEAS CORP., NEW YORK 
 
 CMOC provides management personnel 
 and consulting services to the foreign 
 banks in which Chase Manhattan directly 
 
 CHASE WORLD INFORMATION 
 
 CORP., NEW YORK 
 Cwic provides corporate customers 
 with custom designed research to enable 
 them to identify tf-rific P'otit oppor 
 tumties in the East-West trade. 
 
 Representation overseas: 
 
 ARGENTINA 
 Buenos Aires: Representative office. 
 
 AUSTRALIA 
 Melbjurne: N.B.A.. Group Ltd. Chase 
 N.B.A. Group, Ltd. was established as 
 a merchant banking firm In 1970 by 
 Chase National Bank of Australasia 
 Ltd. and the Australian brokerage 
 firm of A. C. Goode & Co. The Group 
 Includes All-States Commercial Bills 
 Ltd.. Chase-N.B.A. Group Depository 
 Ltd., Managed Deposits Ltd., and 
 Bourke Street Nominees Pty Ltd. 
 Perth: Chase-N.B.A. Group Ltd. 
 
 (See Melbournel 
 Sydney:: Alliance Holdings, Ltd. CMOBC 
 acquired an interest .n Alliance Hold- 
 ings, a finance company. In 1972. 
 Chase-N.B.A. Group Ltd. (See Mel- 
 bourne) 
 
 AUSTRIA 
 
 Vienna: Oesterrelchltche Kommerzial- 
 bank A.G. Is an associated bank of 
 Chase which operates two offices In 
 Vienna. 
 
 BAHAMAS 
 Eleuthera: One branch. 
 Freeport: One branch. 
 Great Abaco: One branch. 
 Nassau: Three branches. 
 
 Chase Manhattan Trust Corp. Ltd. Is 
 a subsidiary of Chase. The Chase Man- 
 
 hlttln Trust Corp. Ltd. Is a wholly 
 
 owned subsidiary of CCtOOC 
 
 BAHRAIN 
 
 Manama: Ona branch. 
 
 BARBADOS 
 Bridgetown: One branch. 
 
 BELGIUM 
 Antwerp: Fifteen branches of Banque 
 de Commerce. S A.. Brussels, an as- 
 sociated bank of Chase. 
 Brussels: Banque de Commerce S.A. has 
 
 three offices In Brussels. 
 Ghent: One branch of Banque de Com- 
 merce S.A, Brussels. 
 Liege: One branch of Banque de Com- 
 merce S.A. Brussels. 
 
 BELIZE 
 
 Belize: Atlantic Bank. Ltd, an asso- 
 ciated bank of Chase, has one branch. 
 BRAZIL 
 
 Rio do Janeiro: Representative office. 
 
 Banco Lar Brasilelro, S.A. Is an asso- 
 ciated bank of Chase with 36 offices In 
 Brazil, including nine In Rio. 
 Sao Paulo: Nino offices of Banco Lar 
 
 Brasilelro, Rio de Janeiro, S.A. 
 CANADA 
 
 Toronto: CMB Holdings Ltd, a subsidi- 
 ary of CMOBC. 
 
 CAYMAN ISLANDS 
 
 Ceorge Town: The Chase Manhattan 
 Trust Cayman Ltd, a subsidiary of 
 CMOBC. 
 
 CHANNEL ISLANOS 
 
 Jersey: Standard A Chase Bank C.I. 
 Ltd, Is associated with Chase. 
 COLOMBIA 
 
 Bogota: Representative office. 
 Banco del Comsrclo Is an associated 
 
 bank of Chase and has 111 offices In 
 
 Colombia and three in the Republio of 
 
 Pinjmm. 
 
 COSTA RICA 
 San Jose: Chase Manhattan Costa Rica. 
 S.A, Is an affiliated corporation of 
 Chase. 
 
 DENMARK 
 
 Copenhagen: One branch. 
 
 OOMINICAN REPUBLIC 
 Santiago de los C iballerot: One branch. 
 Santo Domingo: Five branches. 
 
 DUBAI 
 
 Dubai: The Commercial Bank of Oubal 
 Ltd. la associated with Chase. 
 EGYPT 
 
 Cairo: Representative offlc* of CMOC 
 Chase National Bank of Egypt S.A.E. 
 Is a Joint banking venture with National 
 Bank of Egypt. 
 
 ENGLANO 
 
 Chaaa Manhattan Ltd. Is a merchant 
 bank subsidiary of Chaw. 
 
 Equipment Leasing Co, Ltd, Is an 
 affiliated corporation. 
 
 Libra Bank Ltd. is an associated bank 
 established In 1972 by the participants 
 in the Orion Group, the Banco Esplrito 
 Santo e Comerclal de Lisboa, the Swiss 
 Bank Corporation. Banco do Comerclo 
 S.A. Group of Mexico Joined Libra In 
 1973. 
 
 Orion Banking Group of banks. Chase 
 Manhattan, together with the Royal 
 Bank of Canada. Montreal: National 
 Westminster Bank Ltd, London, and 
 West Deutsche, Landesbank Girozentrale. 
 Duessetdorf. formed this group In Octo- 
 ber, 1970. Credlto Itallano, Milan, joined 
 the Group in 1971, The Mitsubishi Bank 
 Ltd. Joined the Group In 1972. The group 
 includes Orion Multinational Services 
 Ltd, which acts as a coordinating and 
 marketing unit for the Orion Group; 
 Orion Bank Ltd, a merchant bank; Orion 
 Termbank Ltd, a medium-term credit 
 Institution, Orion Leasing Holdings Ltd, 
 and Multinational Orion Leasing Hold- 
 ings N.V. 
 
 FRANCE 
 
 Lyon: One branch. 
 Paris: One branch. 
 
 struction Immobiliere is a subsidiary. 
 
 Union Immobiliere Internationals la 
 an affiliated corporation. 
 
 GERMANY 
 Ouesseldorf: One branch. 
 Frankfurt: One branch. 
 Hamburg: One branch. 
 Munich: One branch. 
 Stuttgart: One branch. 
 
 Famllienbank, A.G. a consumer bank 
 located In Ousseldorf which Is a wholly- 
 owned subsidiary of Chaae, started oper- 
 ations In 1973 with branohes through- 
 out Germany. 
 
 GREECE 
 Athens: One branch. 
 Piraeus: One branch. 
 Salonlca: One branch. 
 
 The National Investment Bank of In- 
 dustrial Development S.A, Athens Is an 
 associated development and finance 
 institution. 
 
 GUADELOUPE 
 Potnle-a Pltre: One branch. 
 
 GUAM 
 Agana: One branch. 
 
 GUYANA 
 Georgetown: One branch. 
 
 HONDURAS 
 Tegucigalpa: Banco Atlantlda, S.A. is an 
 associated bank of Chase. It has 46 of- 
 fices in Honduras. 
 
 HONG KONG 
 Hong Kong: Twelve branches. 
 
 Chase Asia Ltd. Is a wholly-owned 
 merchant bank subsidiary of Chase. 
 
 Diamond Lease (H.K.) Ltd, an af- 
 filiated corporation of Chase. 
 Regional office for Southeast Asia. 
 INDIA 
 
 Bombay: Representative office. 
 
 INDONESIA 
 Jakarta: One branch. 
 Jakarta Kola: One branch. 
 
 IRAN 
 
 Teheran: Representative office of the 
 Chase Manhattan Overseas Corp, New 
 York. 
 
 The International Bank of Iran la a 
 Joint banking venture with Industrial 
 Credit Bank, Teheran, and Iranian 
 
 IRELAND, NORTH 
 Belfast: Chase and Bank of Ireland (In- 
 ternational) Ltd, Is an associated bank 
 of Chase. 
 
 IRELAND. REPUBLIC 
 Dublin: Chase and Bank of Ireland (In 
 tematlonal) Ltd. is an associate bank 
 of Chase. 
 
 Shannon: One branch of Chase and Bank 
 of Ireland (International) Ltd, Dub- 
 lin. 
 
 ITALY 
 Barl: One branch. 
 Milan: One branch. 
 Rome: One branch. 
 
 Representative office of Chase Manhat- 
 tan Overseas Banking Corp. 
 
 Orion Leasing Italia, a leasing com- 
 pany owned by the Orion Banking 
 Group. London, a banking consortium 
 of which Chase Is a member. 
 
 IVORY COAST 
 
 Abidjan: Banque ...» de Oevelopps- 
 
 ment Induslrlel Is an associated de- 
 velopment and finance Institution. 
 JAMAICA 
 Kingston: Chase Merchant Bankers Ja- 
 maica Ltd. Is a Chase subsidiary. 
 JAPAN 
 Osaka: One branch. 
 
 Oilice of Diamond Lease Co. Ltd, of 
 Tokyo, an affiliated corporation of Chase. 
 
 Tokyo: One branch. 
 
 The Chartered Bank Ltd, London, an 
 associated bank of Chase operates four 
 
 Diamond Lease Co, Ltd, an affiliated 
 corporation of Chase. 
 
 Mitsubishi Chase Manhattan Consult- 
 -, Is an affiliated corpo- 
 
 Kltta Nlhon Shlnyo Hanbal, a con- 
 sumer finance company Is 10% owned by 
 Chase. 
 
 KOREA 
 Pusan: Representative office. 
 Seoul: One branch. 
 
 LEBANON 
 Beirut: One branch. 
 
 Regional office for the Middle East 
 and North Africa. 
 
 LIBERIA 
 Harbel: One branch. 
 Monrovia: One branch. 
 
 LUXEMBOURG 
 Luxembourg: Chase Manhattan Bank 
 Luxembourg S.A, a Chase subsidiary. 
 MALAYSIA 
 Kuala Lumpur: One branch. 
 
 Amanah Chase Merchant Bank In 
 which Chase holds a 31% Interest and 
 Orion Banking Group, London, a banking 
 consortium of which Chase Is a member, 
 holds a 5% Interest. Is an affiliated bank. 
 
 MARTINIQUE 
 Fort de France: One branch. 
 
 MEXICO 
 
 Mexico City: Representative office. 
 
 NETHERLANDS 
 Amsterdam: Nederlandse Credietbank. 
 N.V. Is an associated bank of Chase. 
 It has 100 offices In the Netherlands. 
 NETHERLANDS ANTILLES 
 St. Maarten: One branch In Mullet Bay. 
 
 NEW ZEALAND 
 Auckland: Chase-N.B.A. New Zealand 
 Group Ltd. Is an affiliated corporation. 
 NIGERIA 
 
 Lagos: Nigerian Industrial Development 
 Bank Ltd, an associated development 
 and finance institution. 
 
 PANAMA 
 Balboa: One branch. 
 Chltre: Four 
 Colon: Two 
 David: One branch. 
 La Concepclon: One branch. 
 Panama City: Five branches. 
 Penonome: One branch. 
 
 Banco del Comercio of Bogota. Co- 
 lombia, an associate bank of Chase has 
 three branches In Panama. 
 
 ssarollo Industrial. S.A, la an as- 
 sociated development and finance Institu- 
 tion affiliate. 
 
 PHILIPPINES 
 Phllllplne American Investment Cor- 
 poration, Manila, is an affiliated corpo- 
 ration. 
 
 Philllplnes Commercial Bank eV Trust 
 Co, Manila. Is 30% owned by Chase. 
 
 PUERTO RICO 
 Bayamon: One branch. 
 Caguas: One branch. 
 Caparra: One branch. 
 Carolina: One branch. 
 Hato Rey: One branch. 
 Mayaguez: One branch. 
 Ponce: One branch . 
 Rio Piedras: One branch. 
 San Juan: One branch. 
 Santurce: One branch. 
 
 Housing Investment Corp, Hato Rey, 
 Is an affiliated corporation of Chase. 
 QATAR 
 
 Qatar: Commercial Bank of Qatar 
 Ltd. -Chase Manhattan operates under 
 advisory agreement. 
 
 CastrK 
 
 ST. LUCIA 
 One branch. 
 
 SHARJAH 
 Sharjah: One branch of the Commercial 
 Bank of Dubai, Ltd. 
 
 SINGAPORE 
 Singapore: Three branches and one 
 representative office of the bank. 
 United Chase Merchant Bankers Ltd. 
 was established In 1972 by Chase and 
 United Overseas Bank of Singapore. 
 
 SOUTH AFRICA 
 Johannesburg: Representative office 
 SPAIN 
 
 Madrid: Representative office. 
 
 Llga Flnanclera, S.A, an Investment 
 company affiliated with Chase. 
 
 Transleaalng S.A. is an associated cor- 
 poration. 
 
 SWITZERLAND 
 
 Geneva: Chase Manhattan Bank (Switz- 
 erland) Is a subsidiary of Chasa. 
 CMOBC Institutional Banking Division 
 
 has Its representative office for France 
 
 and Switzerland In Geneva. 
 
 Zurich: Branch of Chase Manhattan 
 Bank (Switzerland), Geneva. 
 TAIWAN 
 
 Taipei: One branch. 
 
 THAILAND 
 
 Bangkok: One branch. 
 
 Chase Manhattan Investment Co 
 
 (Thailand) Ltd. is a subsidiary of Chase 
 Industrial Finance Corp. 
 
 is an associated development and finance 
 
 Institution. 
 
 TRINIDAD AND TOBAGO 
 Port of-Spaln: Two branches. 
 San Fernanda: One branch. 
 
 UNION OF SOVIET SOCIALIST 
 REPUBLICS 
 Moscow: Representative office. 
 
 VENEZUELA 
 Caracas: Representative off.ee. 
 
 Banco Mereantil y Agricola, C.A. Is 
 an associated bank of Chase and has 30 
 offices In Venezuela. 
 
 Arrendaclma. C.A, an affiliated leas- 
 ing company. In which Chasa has ■ 
 24.S% share. 
 
 VIRGIN ISLANDS (U.S.) 
 St. Croix: Five branches. 
 St. John: One branch. 
 St. Thomas: Three branches. 
 
 VIRGIN ISLANOS. BRITISH 
 Tortola: One branch. 
 
 Correspondent balance relationships: 
 
 Chase Manhattan has over 2.000 car- 
 respondent banks overseas 
 
 CHEMICAL BANK, NEW YORK 
 (A Subsidiary of Chemical 
 New York Corp., N. Y.) 
 
 International banking policy: 
 
 "The policy of Chemical Bank Interna- 
 tionally ia to serve its customers with 
 a mix of selected money center overseas 
 branches, close correspondent bank re- 
 lationships around the world, affiliated 
 foreign banks and related financial in- 
 stitutions." 
 
 U. S. Subsidiaries: 
 
 CHEMCO INTERNATIONAL 
 LEASING, INC , NEW YORK 
 
 CHEMICAL BANK 
 INTERNATIONAL, CHICAGO 
 CHEMICAL BANK INTERNA- 
 TIONAL OF SAN FRANCISCO 
 
 CHEMICAL INTERNATIONAL 
 FINANCE LTD., NEW YORK 
 In addition to equity interests In de- 
 velopment banks, regional development 
 institutions and participations In non- 
 bank financial institutions. Chemical 
 international Finance. Ltd. has mads 
 equity investments In a variety of non- 
 financial foreign enterpriees- 
 
 Representation overseas: 
 
 ARGENTINA 
 Buenos Aires: Representative office. 
 
 AUSTRALIA 
 Sydney: Representative office. 
 
 Development Underwriting, Ltd. CIF 
 holds an equity interest In this institu- 
 tion. 
 
 AUSTRIA 
 
 Vienna: Brelsach Pinschof Schoeller. 
 CIF has an equity interest in this 
 Austrian bank. 
 
 BAHAMAS 
 Nassau: One branch. 
 
 Bank of New Providence, Ltd. CIF 
 holds an equity Interest in this bank. 
 
 BAHRAIN 
 Manama: One branch. 
 
 BELGIUM 
 Brussels: One branch. 
 
 Chemco Leasing SA NV, a wholly- 
 owned leasing subsidiary. 
 
 BRAZIL 
 
 Rio de Janeiro: Representative office. 
 Sao Paulo: Representative office. 
 
 Banco Noroeste de Investimento S.A. 
 CIF holds an equity Interest In this 
 Brazilian Investment bank. 
 
 Chemco Leasing Llmltada. a leasing 
 affiliate. 
 
 Noroeste— Chemical S.A. Leasing— 
 Planejamento e Arrendamento. CIF 
 holds an equity interest In this leasing 
 
 company. 
 
 CANADA 
 Toronto: Representative office. 
 
 Chemco Leasing. Ltd, Is a wholly- 
 owned leasing subsidiary. 
 
 CHANNEL ISLANDS 
 Guernsey: Chemical Bank and Howard 
 
 LtJ. 
 which CIF 
 
 iritl 
 
 COLOMBIA 
 Bogota: Representative office. 
 
 DUBAI 
 Delra: Representative office. 
 
 EGYPT 
 Cairo: Representative offlct. 
 
 ENGLANO 
 Birmingham: Representative office. 
 London: Ona branch. 
 
 don. A wholly owned subsidiary of 
 Chemical Bank. 
 
 London Multinational Bank. CIF 
 holds an equity interest In this Institu- 
 tion.' 
 
 (Continued on next pag-o) 
 
89 
 
 16 B 
 
 AMERICAN BANKER 
 
 February 22, 1977 
 
 International Activities 
 
 (Continued from preceding page) 
 AUSTRALIA 
 Chemco Financial Services, Ltd., Is a 
 wholly-owned subsidiary. 
 
 FINLAND 
 Helsinki: Industrialization Fund of Fin- 
 land. CIF has an equity interest in 
 this development bank. 
 
 FRANCE 
 Paris: One branch. 
 
 GERMANY 
 Frankfurt: One branch. 
 
 Chemco Leasing GmbH Is a wholly 
 Owned leasing subsidiary. 
 
 Chemco Mietfinanz GmbH. CIF has 
 an equity Interest in this leasing com- 
 pany. 
 
 HONG KONG 
 Hong Kong: Representative office. 
 
 Chemical Asia Finance Corp., Ltd. is 
 a wholly-owned subsidiary of CIF. 
 
 Chemco Finance (Hong Kong) Ltd. is 
 a wholly-owned leasing subsidiary. 
 
 INDONESIA 
 Jakarta: Representative office. 
 
 P. T. Multinational Finance Corp. 
 CBISF holds an equity interest in this 
 company. 
 
 IRAN 
 
 Teheran: Representative office. 
 
 ITALY 
 Milan: One branch. 
 
 Chemco Leasing s.p.A. is a wholly- 
 owned leasing subsidiary. 
 Rome: Representative office. 
 
 JAPAN 
 Tokyo: One branch. 
 
 PICA Investment Co. CIF has a mi- 
 nority equity interest in this develop- 
 ment institution for Asia. 
 
 LEBANON 
 
 Chemical Bank (Middle East) S. A. 
 Chemical Bank owns majority intere 
 In this Lebanese bank. 
 
 LIBERIA 
 
 Monrovia: Bank of Liberia. CIF hoi 
 an equity interest in this Liberii 
 bank. 
 
 LUXEMBOURG 
 Luxembourg: ADELA Investment C 
 CIF has a minority equity interest 
 this development institution for Lat 
 
 MEXICO 
 
 Mexico City: Representative office. 
 
 Arrendadora del Atlantico, S.A. CIF 
 has an equity interest in this Mexico 
 City leasing company. 
 
 NETHERLANDS 
 The Hague: Chemco Leasing B.V. Is a 
 
 wholly-owned subsidiary. 
 
 PHILIPPINES 
 Makati: Representative office. 
 Manila: Private Development Corp. of 
 
 the Philippines. CIF has an equity 
 
 Far East Chemco Leasing 4 Finance 
 Corp. CIF has an equity interest in this 
 Philippine leasing company. 
 
 SCOTLAND 
 Edinburgh: Representative office. 
 
 SINGAPORE 
 Singapore: One branch. 
 
 SPAIN 
 
 Madrid: Representative office. 
 
 SWITZERLAND 
 Zurich: One branch. 
 
 C. N. Y. Finanz A. G , Zurich, Is 
 wholly-owned by CIF. 
 Zug: Chemco Leasing und Finanz A.G. 
 a wholly-owned leasing subsidiary. 
 TAIWAN 
 Taipei: One branch. 
 
 VENEZUELA 
 Caracas: Representative office. 
 
 Sociedad Financiera Exterior, C.A., a 
 local finance company in which CIF has 
 
 has a i 
 
 Correspondent bo/once relationships: 
 
 More than 1,400 foreign banks have 
 correspondent balances with Chemical 
 Bank, while Chemical maintains cor- 
 respondent balances with 280 foreign 
 banks throughout the world. 
 
 CITIBANK, NAT NEW YORK 
 (A Subsidiary of Citicorp, 
 New York) 
 
 Internotionol bonking policy: 
 
 "Citibank provides comprehensive 
 banking and financially-related services 
 through a world-wide system of 
 branches, subsidiaries and affiliates, 
 functioning as integral parts of the bank. 
 
 "On January |, 1977, It had 1.423 
 branch, affiliate, representative and sub- 
 aldiary offices in 101 foreign countries." 
 
 U. S. Subsidiaries: 
 
 CITIBANK INTERNATIONAL 
 
 — CHICAGO 
 CITIBANK INTERNATIONAL 
 
 —HOUSTON 
 CITIBANK INTERNATIONAL 
 
 — LOS ANCELES 
 CITIBANK INTERAMERICA 
 
 — MIAMI 
 CITIBANK INTERNATIONAL 
 
 —SAN FRANCISCO 
 These Edge Act subsidiaries are wholly- 
 owned by Citibank, except the Chicago 
 subsidiary which is owned by Citicorp. 
 
 •CITIBANK OVERSEAS 
 INVESTMENT CORPORATION 
 A Citibank subsidiary which holds and 
 manages certain overseas subsidiaries 
 and affiliates is indicated in the following 
 listing by an asterisk. 
 
 CITICORP LEASING INTER- 
 NATIONAL. NEW YORK 
 
 sidiary 
 
 A wholly-owned 
 corp. Citicorp Lea 
 in operating leasing and equipment fi- 
 nancing company with offices and aff ilia- 
 Canada, Italy, Mexico, the Netherlands, 
 Puerto Rico, West Germany, United 
 Kingdom, and affiliates in Japan, Mexico, 
 
 Representation overseas: 
 
 ABU DHABI 
 Abu Dhabi: Two branches. 
 
 Grindlays Bank, Ltd., London, a Citi- 
 bank affiliate, has three branches in Abu 
 Dhabi. 
 
 ARGENTINA 
 Buenos Aires: Twelve branches. 
 
 "C'ticard S.A. Comercial Financiera de 
 Servicios, wholly-owned, operates an all- 
 purpose credit card facility. 
 
 Ripco S.A. C. I. y F., wholly-owned 
 operates a computer service in Argen- 
 tina, factoring and travel services. 
 
 'Servicios Integrate*, S.A., wholly- 
 owned, engages in general equipment 
 
 AUSTRALIA 
 
 Brisbane: Office of FNCB Waltons Corp. 
 Ltd , Sydney. 
 
 Melbourne: Citibank representative of- 
 fice; office of FNCB-Waltons Corp., 
 Ltd., Sydney. 
 
 •Arnott First City Permanent Build- 
 ing Society is a mortgage lending, 50% 
 
 •Credivit-Finaneia SA, 99% owned, Is 
 a Belgian-based financial services com- 
 plex, specializing In consumer lending 
 and savings through its 42 branches 
 throughout Belgium. 
 Hasselt: One branch of Citibank (Bel- 
 gium) S.A. 
 Liege: One branch of Citibank (Belgium) 
 S.A. 
 
 BOLIVIA 
 La Paz: One branch. 
 
 BRAZIL 
 Bahia (Salvador): One branch. 
 Belo Horizonte: One branch. 
 Brasilia: One branch. 
 Campinas: One branch. 
 Curltiba: One branch. 
 Porto Alegre: One branch. 
 Recife (Pernambuco) : One branch. 
 Rio de Janeiro: One branch. 
 Santos: One branch. - 
 Sao Paulo: Two branches 
 
 ♦Banco Crefisul de Investimento SA, a 
 50% affiliate, engages In consumer fi- 
 nance and merchant banking through its 
 52 offices throughout Brazil. 
 
 •Citybank Credlto, Financiamento e 
 Investimento S.A. is a wholly-owned 
 subsidiary specializing in consumer lend- 
 
 Distrlbuidora de Titulos I 
 niliarios S. A., is a wholly 
 diary which handles special 
 
 itati 
 
 of Citi( 
 
 Ban 
 
 Lon 
 
 'Citicorp Leasing, S.A., Comercio e 
 Arrendamento, wholly-owned engages in 
 general equipment leasing. 
 
 •Companhia de Turismo, Promocoes e 
 Administracao, an affiliate, operates the 
 bank's credit card activities In Brazil. 
 
 FNC Corretora de Titulos e Valores 
 Mobiliarios. S.A., wholly-owned, provides 
 investment advisory services and brok- 
 ers securities through its seat on Rio 
 Stock Exchange. 
 
 ♦Omnia Empreendimentos e Partici- 
 padoes Ltda., wholly-owned, provides 
 fiduciary services and factoring. 
 
 BRUNEI 
 
 Bandar Seri Begawan: One branch. 
 Kuala Belait: One branch. 
 
 ♦Citicorp Finance Company Ltd. is a 
 wholly-owned consumer finance and leas- 
 ing company. 
 
 CAMEROON 
 Yaounde: I. A. Cameroun, 65% owned 
 by Banque Internationale pour I'Afri- 
 
 Citiban 
 
 Sydr, 
 
 itional Capital Corp., Ltd., 
 y of Citinatlonal (Holdings 
 Iffillatc engages in a wide rang 
 ial services in Australia, includ 
 al market development, under 
 
 ational Holdings Ltd., 44° 
 s a short-term money marke 
 operating through separate sub 
 s In both the official and un 
 
 •FNCB Waltons Corp., Ltd. Is a 50% 
 owned Australian finance company. 
 
 ♦Industrial Acceptance Corporation 
 Ltd., 51% owned, is a financial services 
 complex and is Australia's second larg- 
 est finance company with 57 olfices. 
 
 AUSTRIA 
 Vienna: Interbank A.G. is 54.5% owned 
 by Citibank. It has one office in Vien- 
 na. 
 
 BAHAMAS 
 
 Freeport: One branch. 
 
 Cititrust (Bahamas) Ltd. wholly- 
 owned by Citibank. 
 Oakes Field: One branch. 
 
 BAHRAIN 
 
 don. has a 
 Grindlay 
 bank aff a 
 
 alt. 
 
 lional Bank Ltd., Lon- 
 > representative office. 
 
 Ltd., London, a Citl- 
 i one branch In Bah- 
 
 BANGLADESH 
 Dacca: Grindlays Bank, Ltd., London, a 
 Citibank affiliate, has ten branches in 
 Bangladesh. 
 
 BARBADOS 
 
 Bridgetown: Two branches. 
 
 Holetown (St. James): One branch. 
 BELGIUM 
 
 Antwerp: One branch of Citibank (Bel- 
 gium) S.A., wholly-owned by Citibank. 
 
 Brussels: One branch. 
 One branch of Citibank (Belgium) 
 
 S.A. 
 
 ♦Citicorp Inter 
 
 Securities SA 
 
 rency securities issued abroad and 
 gages in underwriting in Belgium. 
 
 •Citilease S A, wholly-owned engages 
 in general equipment leasing. 
 
 CANADA 
 
 Montreal: The Mercantile Bank 
 da, an affiliate of Citibank 
 
 out Canada. * 
 •international Trust Co. Is a wholly- 
 owned subsidiary and conducts a general 
 
 •Citicorp Ltd., Is a wholly-owned sub- 
 sidiary offering a broad range of cor- 
 porate commercial and consumer lend- 
 
 ♦Citicorp Leasing Canada Ltd., 60% 
 owned by Citicorp Leasing International, 
 engages in equipment lease financing 
 through wholly-owned subsidiaries: Di- 
 rect Leasing Ltd.; Medi-Dent Services 
 
 i 19 offices 
 ices (Canada) 
 
 Equipment Ltd. 
 throughout Canada 
 Grindlays Financi 
 Ltd. is a wholly-owned subsidiary of 
 Grindlays Bank Ltd., London, a Citibank 
 affiliate. It offers a broad range of fi- 
 
 CAYMAN ISLANDS 
 George Town: One branch. 
 
 Cititrust (Cayman) Ltd., a wholly 
 owned subsidiary of Citibank, engages 
 in general trust business. 
 
 CENTRAL AFRICAN REPUBLIC 
 Bangui: Banque Internationale pour 
 
 I'Afrique Occidentale, Paris, is an af- 
 
 Central 
 CHAD 
 
 Air 
 
 Rcpu 
 
 N'Jamene: Banquo Internationale pour 
 I'Afrique Occidentale, Paris, Is an af- 
 filiate of Citibank which operates two 
 branches in Chad. 
 
 CHANNEL ISLANDS 
 
 Jersey: One branch. Citibank (Channel 
 Islands) Ltd., a wholly-owned subsidi- 
 ary of Citibank, operates one office in 
 St. Helier. 
 
 National and Grindlays Bank (Jersey) 
 Ltd. is a subsidiary of Grindlays Bank, 
 Ltd., London, a Citibank affiliate. 
 
 CHILE 
 Santiago: One branch. 
 
 ♦Adelantos y Creditos, S.A.F., is a 
 wholly-owned subsidiary and engages 
 In short-term money market transac- 
 tions, personal and commercial lending, 
 debt and equity securities underwriting, 
 and investment advisory services. 
 
 COLOMBIA 
 Bogota: Banco Internacional de Colom- 
 
 Bogota, four in Barranquilla, two In 
 Bucaramanga, three In Call, three In 
 Cartagena, one in Cucuta, four In 
 Medellin, one in Mcta, one in Pereira, 
 and one in San Diego. 
 ♦Arrendadora y Administradora City- 
 col S.A. is a wholly-owned money market 
 company. 
 
 ♦Compania Colombiana de Financla- 
 mlentos S.A., wholly-owned, it* a con- 
 sumer finance company. 
 
 ♦Compania Exportadora Cityexport 
 S.A., 95% owned, provides advisory 
 services to exporters In Colombia and 
 engages In the short-term money market. 
 
 ♦Corporacion Financiera de Desarrollo 
 Agrope.uario, 40% owned, is a Colom- 
 bian development bank specializing In 
 agricultural lending. 
 
 COSTA RICA 
 San Jose: 'First National City (Costa 
 Rica) S.A. is a broadly chartered fi- 
 nance company wholly-owned. Its ac- 
 tivities Includes operation of Citl- 
 credito. a consumer credit card opera- 
 tion in Costa R ca. 
 
 CYPRUS 
 
 Nicosia: Grindlays Bank, Ltd., London, 
 
 an affiliate of Citibank, operates 28 
 
 offices in Cyprus. 
 
 DENMARK 
 Copenhagen: One branch. 
 
 DOMINICAN REPUBLIC 
 Santiago de los Caballeros: Two branches. 
 Santo Domingo: Five branches. 
 
 •Financiera Citicorp S.A., is a wholly- 
 owned development bank. 
 
 DUBAI 
 Bander Taleb: One branch. 
 Dubai: One branch. 
 
 ♦Citicorp Gulf Finance Ltd. la • 
 wholly-owned finance company. 
 
 Grindlays Bank, Ltd., London, a Citi- 
 bank affiliate, operates two branches in 
 Dubai. 
 
 Riqa: One branch. 
 
 ECUADOR 
 Ambato: One branch. 
 Cuenca: One branch. 
 Guayaquil: Three branches. 
 Quito: Five branches. 
 
 EGYPT 
 Cairo: One branch. 
 
 Grindlays Bank Ltd., London, a Citi- 
 bank affiliate, operates one branch in 
 Egypt. 
 
 El SALVADOR 
 
 San ijiv-uor: One branch. 
 
 ENGLAND 
 London: One branch. 
 
 •Citibank Financial Trust Ltd. is 
 wholly-owned and operates a wide range 
 
 instalment credit personal loans, mort- 
 gage lending and savings. It has 38 
 offices in the United Kingdom. 
 
 Citicorp International Bank Ltd. Is a 
 merchant bank wholly-owned by Citicorp 
 with representative offices in Bahrain, 
 
 Dao Heng Bank, a subsidiary of 
 Grindlays Bank, Ltd., Londi n, a Citibank 
 affiliate, operates one branch. 
 
 Grindlays Bank, Ltd.. Is 49% owned 
 by Citibank. It has 193 banking offices 
 and an extensive network of subsidiaries 
 and affiliates in Europe, the Middle East, 
 the Far East and East and Central 
 Africa. It has a merchant banking sub- 
 sidiary, Grindlay Brandts Ltd., operat- 
 ing in London. Grindlays Bank has its 
 head office plus three branches In Lon- 
 
 New York London Finance Co., Ltd. 
 is wholly-owned by Citibank and pro- 
 vides trust and investment services In- 
 cluding management of employer pen- 
 sion funds for British companies. 
 FIJI 
 
 Ba: One branch. 
 Lautoka: One branch. 
 Nadl: One branch. 
 Suva: One branch. 
 
 FRANCE 
 Paris: One branch. 
 
 Banque Grindlay Ottomane S.A., a 
 subsidiary of Grindlays Bank, Ltd., Lon- 
 don, a Citibank affiliate, has its head of- 
 fice and eight branches in Paris, one in 
 Monaco and one In Switzerland. 
 
 Banque Internationale pour I'Afrique 
 Occidentale is 49% owned by Citibank. 
 It has 15 offices In France, one In 
 Athens, one in Monaco, and 52 through- 
 out West Africa. It has six subsidiaries 
 and affiliiates in West Africa and one 
 affiliate, Hamburg Afnka Bank A. G. In 
 Germany. 
 
 •Citibail S.A., is a wholly-owned leas- 
 ing company. 
 
 ♦Citicorp Location (France) S A. is a 
 wholly-owned leasing company. 
 
 ♦Citicorp Credit Multiple "CREDIM", 
 92.5%-owned, is a personal finance com- 
 pany operating through eight branches 
 
 •Socictc de Credit Pour I' Acquisition 
 et I'Amelioration des Immeubles 97.5% 
 owned, is a mortgage lending company 
 operating through 10 branches in France. 
 
90 
 
 February 22. 1977 
 
 AMERICAN BANKER 
 
 International Activities 
 
 GABON 
 
 Libreville: One branch of Citibank. 
 Banque Internationale pour le Gabon 
 owned by Banque Internationale 
 pour I'Afrique Occidentale. Pans, a 
 Citibank affiliate, operates three of- 
 fices In Gabon. 
 
 GERMANY 
 Berlin: One branch of Citibank A.G. 
 Ouesseidorf: One branch of Citibank 
 
 branch of Citil 
 
 Hamburg Afnka Bank, an affiliate o 
 Banque Internationale pour I'Afriqui 
 Occidentale. Paris, an affiliate of Citi 
 bank, has one office m Hamburg. 
 Stuttgart: One branch of Citibank A. G 
 • Kundenkreditbank Kommanditgesell 
 Aktien. a commercial banl 
 
 IVORY COAST 
 Abidjan: One branch. 
 
 Banque Internationale poi 
 Occidentale, Pans, an affiha 
 
 •chart 
 
 •pecia 
 «9.4% 
 cities. 
 
 ' Trlnka 
 
 Investment bank 
 
 6V Burkhardt. a 
 
 JAMAICA 
 Kingston: Four branches. 
 
 Caribbean Merchant Bank. Ltd., Is a 
 wholly-owned subsidiary of Citibank. 
 
 'First National Finance Ltd., Kings- 
 ton, is 75% owned consumer finance 
 
 company. 
 
 Mandeville: One branch. 
 May Pen: One branch. 
 Montego Bay: One branch. 
 Ocho Rios: One branch. 
 
 JAPAN 
 Nagoya: One branch. 
 Osaka: One branch. 
 Tokyo: One branch. 
 
 First National Nippon Shinpan Co. 
 Ltd., 40% owned affiliate of Citicorp, 
 operates as a consumer finance and 
 mortgage banking company. 
 
 Fuji National City Consulting Ltd.. 
 S0"a-owned affiliate of Citicorp, provides 
 general consulting services and related 
 
 II Fuyo General Lease Co. Ltd., 33'/j%- 
 
 51% owned and has' owned 
 rour ornces .n tour cities. general 
 
 GHANA ; Grindlays Bank, Ltd.. Londe 
 
 Accra: Merchant Bank Ghana Ltd, an bank affiliate, has one branch, 
 associate of Grindlays Bank, Ltd., Lon- Yokohama: One branch, 
 don, a Citibank affiliate, operates two 
 branches. 
 
 GREECE 
 Athens: Two branches. 
 
 Grindlays Bank. Ltd . London, a Citi- 
 bank affiliate, has two branches Banque 
 Internationale pour I'Afrique Occidentale 
 Paris, an affiliate of Citibank, has one 
 
 p engages 
 
 a Citi 
 
 Kypseli: One branch. 
 Piraeus: Two branches. 
 Thessalomki: One branch. 
 
 GUAM 
 
 JORDAN 
 Amman: Two branches. 
 
 Grindlays Bank, Ltd., London, a Citi- 
 bank affiliate, operates 13 branches In 
 
 KENYA 
 
 Nairobi: One branch. 
 
 Grindlays Bank International (Kenya) 
 Ltd., a subsidiary of Grindlays Bank, 
 Ltd.. London, an affiliate of Citibank, op- 
 erates two branches In Kenya. 
 
 KOREA 
 Pusan: Representative office. 
 Seoul: One branch. 
 
 LEBANON 
 Beirut: One branch. 
 
 and Kuwait S.A.L., 
 Citibank, offers corn- 
 
 Representative office of Citicorp Inter 
 national Bank, Ltd., London, a wholly 
 owned subsidiary of Citicorp. 
 
 Representative office of Grindlayl 
 Bank, Ltd., London, a Citibank affiliate 
 
 Monrovia: 
 
 First National City Bank 
 . wholly-owned by Citibank, 
 :ommercial offices in Liberia. 
 
 has its 
 
 Agana: Ore branch. 
 
 Tamuning: Citicorp Credit, which op- 
 erates a consumer finance and leasing 
 company, is wholly owned. 
 
 GUATEMALA 
 Guatemala City: Representative office. 
 HAITI 
 
 Port >u Prinre: One branch. 
 
 HONDURAS 
 Tegucigalpa: Banco de Honduras S.A. 
 
 la 97 , owned by Citibank. It has six 
 
 branches throughout Honduras. 
 HONG KONG 
 Hong Kong: Nine branches. 
 
 Asia Pacific Capital Corporation Ltd. 
 Is a regional merchant bank owned 70% 
 by Citibank with an office In Singapore. 
 
 Citicorp International Ltd., wholly- 
 Owned by Citicorp, engages in selected 
 merchant banking activities. 
 
 Oao Heng Bank Ltd., a subsidiary of 
 
 Citibank. 
 
 MALAYSIA 
 
 Far East" Bank Ltd. 7s" 76% owned by j KuJla Lumpur: Tv , branches. 
 Citibank. It is a commercial bank which Rakyat First Merchants Bankers Ber- 
 operates 19 branches in the Crown Col- had, 45% owned. Is a Merchant Bank, 
 ony. Asian International Merchant Bankers 
 
 •FNC8 Financial Ltd. Is a finance Berhad. an associate of Grindlays Bank, 
 company, wholly owned, with three of- 1 L,d - L ° n <>° n . • Citibank affiliate, has its 
 flees in Hong Kong. head office In Kuala Lumpur. 
 
 Grindlays Finance Ltd, a subsidiary ! Representative office of Grindlays 
 of Grindlays Bank Ltd, London, an af- 1 Bank. Ltd, London, a Citibank affiliate, 
 filiate of Citibank, engages In hire pur- 
 chase and medium term lending. 
 
 INDIA 
 Bombay: Three branches. 
 Calcutta: Two branches. 
 Madras: Two branches. 
 New Delhi: One branch. 
 
 Grindlays Bank, Ltd, London, an af- 
 filiate of Citibank, operates 57 branches 
 In India and its merchant banking divi- 
 sion has offices in Bombay and Calcutta. 
 
 INOONESIA 
 Jakarta: Two branches. 
 
 Grindlays Bank, Ltd, London, a Citi- 
 bank affiliate, has a representative office 
 In Jakarta. 
 
 IRAN 
 
 Teheran: Representative office. 
 
 'Citicorp Financial Advisory Service. 
 Inc . wholly owned, engages In brokering 
 •f money market transactions and tman 
 clal advisory services. 
 
 Iranians' Bank Is 35% owned by Cltl 
 bank it operates four branches In Iran 
 
 Repreientative office of Grindlays 
 Bank, ltd. London, a Citibank affiliate 
 
 IRELAND 
 Cork: One branch. 
 Dublin. One branch. 
 
 ITALY 
 Milan: One branch. 
 Rome One branch. 
 
 •Citicorp Finamiarla SpA which 
 makes personal, consumer and finance 
 loans, it wholly owned. 
 Turin. One branch. 
 
 owned and engages principally In com- 
 mercial and corporate finance. 
 
 •Citicorp Leasing Nederland, B.V., 
 wholly- owned, engages In general equip- 
 
 •Citicorp Financial Ltd, 
 
 One branch. 
 
 MALI 
 
 Mali. 
 
 MAURITANIA 
 Nouakchott: Banque Internationale 
 pour La Mauntanie. a 30%-owned af- 
 filiate of Banque Internationale Pour 
 I'Afrique Occidentale, Paris, an af- 
 filiate of Citibank operates nx 
 branches in Mauritania. 
 
 MAURITIUS 
 Port Louis: One branch. 
 
 MEXICO 
 Mexico City: Five branches. 
 
 •Arrendadora Finac, S A. do C.V, 
 wholly owned, engages In lease financing. 
 
 •Arrendadora Banamex. S A. de C V , 
 a 40% affiliate of Citicorp Leasing In- 
 ternational, engages In general equipment 
 
 MONACO 
 Monte Carlo: One branch. 
 
 Banque Grindlay Ottomans S.A, 
 France, a subsidiary of Grindlays Bank 
 Ltd. London, a Citibank affiliate, has 
 
 MOROCCO 
 Casablanca: First National City Bank 
 
 sidiary of Citibank with two branches. 
 NETHERLANDS 
 Amsterdam: One branch. 
 Rotterdam: One branch. 
 •Citicorp Finance B. V. la wholly 
 
 to non-residents. 
 
 NETHERLANDS ANTILLES 
 Aruba: One branch in Oranjestad. 
 Curacao: One branch in Willemstad. 
 
 NICARAGUA 
 Managua: Two branches. 
 
 NIGER 
 
 I'Afrique Occidentale. Pans, an affiii. 
 ate of Citibank operates five branches 
 
 NIGERIA 
 
 Lagos: international Bank for West Af- 
 rica Ltd, Lagos, a 40%-owned affiliate 
 of Banque Internationale pour I'Afrique 
 Occidentale. Paris, which is 49% owned 
 by Citibank, operates 10 branches in 
 Nigeria. 
 
 NORTHERN IRELAND 
 Belfast: One branch. 
 
 NORWAY 
 Oslo: Representative office. 
 
 OMAN 
 Muscat: One branch. 
 
 Grindlays Bank, Ltd, London an af- 
 filiate of Citibank operates five branches 
 in Oman. 
 
 Ruwi: One branch. 
 
 PAKISTAN 
 Karachi: One branch. 
 Lahore: One branch. 
 
 Grindlays Bank, Ltd, London, an af- 
 filiate of Citibank, operates 15 branches 
 in Pakistan and a merchant banking 
 division In Karachi. 
 
 PANAMA 
 Balboa: One branch. 
 Colon: One branch. 
 David: One branch. 
 Las Tablas: One branch. 
 Panama City: Five branches. 
 Veraquas: One branch. 
 
 PARAGUAY 
 Asuncion: One branch. 
 
 •El Chaco S.A. Flnanciera Is a wholly- 
 owned finance company. 
 Puerto Stroessner: One branch. 
 
 PERU 
 Lima: Two branches. 
 
 PHILIPPINES 
 
 Clark Air Force Das:: Oi.c iiiil.Uiy 
 
 banking facility. 
 Makati: One branch. 
 Manila: One branch. 
 
 Feati Bank and Trust Co, 40%-owned 
 by Citibank, engages in general commer- 
 cial banking through its 17 branches. 
 
 •Investors' Finance Corporation, 40% 
 owned, provides personal loans, commer- 
 cial financing and leasing services 
 
 •Orient Pacific Capital Investment 
 Corporation. 49% owned. Is a money 
 market and investment bank providing 
 underwriting equity and term financing 
 services to industry 
 
 PUERTO RICO 
 Arecibo: One branch. 
 Bayamon: One branch. 
 Caguas: One branch. 
 Carolina: One branch. 
 Mayaguez: Two branches. 
 Ponce: One branch. 
 San Juan: Six branches. 
 
 •Citicorp Leasing of Puerto Rico, Inc . 
 wholly-owned, engages in general equip- 
 
 •ervice packaging. 
 
 SOUTH AFRICA . 
 Johannesburg: Citibank N.A. Ltd. a 
 wholly-owned subsidiary of Citibank, 
 operates four commercial banking of- 
 fices throughout South Africa. 
 SPAIN 
 
 Madrid: Representative office 
 
 •Citilease Internacional. S.A. 50% 
 owned affiliate of Citicorp Leasing In- 
 ternational engages in general equip- 
 ment leasing. 
 
 SRI LANKA 
 Colombo: Grindlays Bank, Ltd, Lo-cen, 
 
 an affiliate of Citibank, operates two 
 
 branches In Sri Lanka. 
 
 Hatton National Bank. Ltd, an af- 
 filiate of Grindlays Bank, Ltd, London, 
 a Citibank affiliate, has 23 branches in 
 Sri Lanka. 
 
 SWEDEN 
 Stockholm: Representative office. 
 
 SWITZERLAND 
 Geneva: One branch. 
 
 Banque Grindlay Ottomane, France, a 
 subsidiary of Grindlays Bank, Ltd, Lon- 
 don, a Citibank affiliate, has an office In 
 Geneva. 
 
 •Compagnie Pour le Placement et le 
 Flnancement, S.A, wholly-owned acta as 
 a principal In placing funds of Investors 
 and lenders. 
 
 Citicorp International Finance S » , 
 wholly-owned by Citicorp International 
 Bank, Ltd, London, performs financial 
 services In Europe. 
 Lausanne: One branch. 
 Lugano: One branch. 
 Zurich: One branch. 
 
 TAHITI 
 
 Tahiti: La Banque de Polynesie, 8 A, 
 47.5% owned by Citibank has four 
 branches. 
 
 TAIWAN 
 
 Taipei: One branch. 
 
 •Taiwan First Investment 4 Trust 
 
 Co, Ltd. provides trust and investment 
 
 services in the Republic of China, and 
 
 is 40% owned. 
 
 THAILAND 
 
 Bangkok: 'First National City Develop- 
 ment Finance Corp. (Thailand) Ltd. is 
 
 Ltd 
 
 ICU 
 
 a com- 
 OftKCS. 
 
 owned by Citibank, witl 
 TOGO 
 
 Lome: Banq 
 I'Afrique Occidentale. Paris, an affili- 
 ate of Citibank, operatea two branch** 
 In Togo. 
 
 TRINIDAD ANO TOBAGO 
 
 Port-of Spain: Two branches: 
 •Tnnfinance Ltd, S0% owned, provide* 
 
 personal and commercial leading and 
 
 San Fernando: One branch. 
 
 TURKEY 
 Istanbul: Representative office. 
 
 UGANDA 
 
 Kampala: Grindlays Bank (Uganda) 
 Ltd . a 51 '.-owned subsidiary of Grind- 
 
 lays B.> 
 
 i Ltd, 
 
 •Prestan 
 
 Presto de Puerto Rico. Inc. 
 . is a consumer finance 
 Puerto Rico 
 
 company with 19 offic 
 
 QATAR 
 Doha: One branch. 
 
 Grindlays Bank, Ltd . London, an affili- 
 ate of Citibank, operates two branches 
 In Qatar 
 
 RAS AL KHAIMAH 
 Ras Al Khaimah: One branch. 
 
 Grindlays Bank. Ltd, an affiliate af 
 Citibank, has three branches. 
 
 SAMOA (AMERICAN) 
 Pago Pago: One branch. 
 
 SAUDI ARABIA 
 Jeddah: One branch. 
 Riyadh: One branch. 
 
 SENEGAL 
 Dakar: One branch. 
 
 Banque Internationale pour I'Afrique. 
 Occidentale. Pans, a Citibank af- 
 filiate, operates eight branches in 
 Senegal. 
 
 SHARJAH 
 Sharjah: One branch. 
 
 Crmdlays Bank, Ltd, London, a Citi- 
 bank affiliate, operates two branches in 
 »har t ali. 
 
 SINGAPORE 
 
 Jurong: One branch. 
 Singapore: Two branches. 
 
 Asia Pacific Capital Corporation Ltd 
 is a regional merchant bank owned 70% 
 by Citibank with an office In Hong Kong. 
 
 •First Oversea Credit Ltd . 40% owned, 
 finances consumer and Industrial pur- 
 
 of G 
 
 --i.il (Ugan- 
 Indlays Bank, 
 affiliate, haa 
 
 .1ST 
 
 Grindlays Bi 
 
 da) Ltd . a subi 
 
 Ltd, London. 
 
 one office in Uganda. 
 
 UNION OF SOVIET SOCM 
 REPUBLICS 
 
 Moscow: Representative office. 
 
 UPPER VOLTA 
 
 Ouagadougou: Banque Internationale 
 des Voltas. 49-. owned by Banque In- 
 ternational pour I'Afrique Occiden- 
 
 tal, Par 
 
 CitH 
 
 Upper 
 
 URUGUAY 
 Montevideo: Four branchea. 
 
 VENEZUELA 
 Caracas: Two branches. 
 
 •Adelantos y Creditos C A. ha a con. 
 sumcr finance affiliate. 
 
 •Arrendequipos. C.A, la a wholly- 
 owned leasing company. 
 
 •Cltldala C.A, which offers data proc- 
 essing services. Is wholly-owned. 
 
 •Inversiones y Adelantos C.A. h> 
 wholly-owned. It offers all types af fi- 
 nancing, including credit card services, 
 consumer and retail financing in Vene- 
 zuela. 
 
 Maracaibo: One branch. 
 Valencia: One branch. 
 
 VIRGIN ISLANDS 
 Charlotte Amalie: One branch, 
 Chnstiansted: One branch. 
 Sunny Isle: One branch. 
 
 YEMEN 
 Sana'a: One branch. 
 
 ZAIRE 
 
 Kinshasa: Citibank (Zaire) S A R L . 
 wholly-owned by Citibank, ha* cne 
 office 
 
 (Continued on next r S«> 
 
91 
 
 AMERICAN BANKER 
 
 February 22, 1977 
 
 International Activities 
 
 (Continued from preceding page) 
 Banqua Grindlay Internationale at 
 aire S.A.R.L, a subsidiary of Grindlayj 
 
 Banque Internationale pour L'Afrique 
 Au Zaire, wholly-owned by Banque In- 
 ternationale pour L'Afrique Occider 
 Paris an affiliate of Citibank, has 
 office. 
 
 ZAMBIA 
 
 Lusaka: Grlndlays Bank International 
 (Zambia) Ltd., a subsidiary of Grind 
 lays Bank, Ltd., London, a Citibank af 
 filiate, has eleven branches in Zambia. 
 
 EUROPEAN AMERICAN BANK 
 & TRUST CO., NEW YORK 
 
 International banking policy: 
 
 "European American Bank A Trust 
 like European American Banking Corp 
 listed below, is owned by Amsterdam 
 Rotterdam Bank N.V.; Creditanstalt 
 Bankverein, Vienna; Deutsche Ban) 
 A.G.. Frankfurt; Midland Bank Ltd., Lon 
 don; Societe Generale, Paris; and So 
 olete Generale de Banque, Brussels. Thest 
 six shareholder banks have more thar 
 9,300 branches and affiliates throughout 
 the world. Their combined resources ex 
 ceed $100 billion. 
 
 "European American Bank & Trust i 
 a commercial bank chartered under th< 
 banking laws of New York State and I: 
 ■ member of the FOIC and Federal Re 
 serve System. It has 99 branche 
 throughout the New York City-Lorn 
 Island area and specializes in consume 
 and corporate services." 
 
 The nins representative offices listed 
 below are of both European Amei 
 Bank & Trust and European American 
 Banking Corp. 
 
 Representation overseas: 
 
 Rio de 
 
 BRAZIL 
 
 : Representative office. 
 CAYMAN ISLANDS 
 George Town: One branch of E A B AT. 
 CHILE 
 
 Santiago: Representative office. 
 
 COLOMBIA 
 Bogota: Representative office 
 EGYPT 
 
 C*lro- St»r,r.,-nt»livr offir- 
 IRAN 
 
 Teheran: Representative office. 
 
 LEBANON 
 Beirut: Representative office. 
 
 MEXICO 
 
 Mexico City: Representative office. 
 
 TURKEY 
 Istanbul: Representative office. 
 
 VENEZUELA 
 Caracas: Representative office. 
 
 EUROPEAN AMERICAN BANKINC 
 CORP., NEW YORK 
 
 International banting policy: 
 
 "European American Banking Corp. is 
 an Investment company chartered under 
 the banking laws of New York State and 
 having banking power*. It specializes in 
 International services and foreign ex- 
 ohanga through its headquarters and 
 branches in San Francisco and Los 
 
 "It Is owned by the same six Euro- 
 pean banks that own European Amerl- 
 oan Bank «. Trust Co. listed above. The 
 nine foreign representative offices of 
 EAB&T Co. also are offices of European 
 American Banking Corp." 
 
 Representation overseos: 
 
 BERMUOA 
 
 Hamilton: European American Finance 
 (Bermuda) Ltd. Is a wholly-owned 
 subsidiary of the banking corporation. 
 It takes offshore deposits and makes 
 offshore loans but Is not licensed to 
 do local banking In Bermuda. 
 
 U. S. Subsidiary: 
 FRENCH AMERICAN CAPITAL 
 CORP., NEW YORK 
 
 FACC was formed In 1970 and provides 
 
 individuals with portfolio manage 
 and investment research. 
 
 U. S. Affiliate: 
 FRENCH BANK OF CALIFORNIA, 
 SAN FRANCISCO 
 
 A subsidiary of Banque Nationale de 
 Paris. BNP also has a branch in Chicago 
 Representation overseas: 
 FRANCE 
 Paris: One branch. 
 
 Correspondent balance relationships: 
 French American Banking Corp. main- 
 
 THE FUJI BANK AND TRUST CO. 
 NEW YORK 
 (A Subsidiary of The Fuji Bank, 
 Ltd., Tokyo) 
 
 International banking policy: 
 
 "The Fuji Bank and Trust Company 
 offers banking, financing services to meet 
 customer needs throughout the world 
 ded througT 
 
 These services ; 
 
 Ban 
 
 Ltd., Tokyo. 
 
 The Fuji 
 affili 
 
 the world's financial centers. 
 
 "Financing of multinationa 
 and world trade is our long-i 
 porate policy." 
 
 IRVINC TRUST CO., 
 NEW YORK 
 (A Subsidiary of Charter 
 New York Corp., N. Y.) 
 
 International banking policy: 
 
 "With a long-established, world- 
 correspondent banking network, Ir 
 Trust Co. in recent years has si 
 tured a variety of activities to bro 
 cooperation with local enterprises 
 abroad, with multinational corporations 
 and with the U. S. world-trade sector. 
 Through its London, Frankfurt, Taipei, 
 Singapore, Tokyo, and George Town 
 branch offices, through direct affiliations 
 
 :s, participations in local develop, 
 t and financing institutions, its perm 
 t representatives in principal centers 
 its Edge Act subsidiaries, Irving 
 Trust's policy is to assure ready avail- 
 ability of experienced international bank- 
 lg ser 
 
 Close liaison 
 
 lending age 
 
 :ign correspondents further enable 
 : to introduce financial arrangements 
 ored to its corporate clients' indi- 
 jai requirements." 
 
 S. Subsidiaries: 
 
 IRVINC INTERAMERICAN 
 
 BANK, MIAMI 
 IRVINC TRUST COMPANY 
 INTERNATIONAL/PACIFIC, 
 
 LOS ANCELES 
 IRVINC INTERNATIONAL 
 FINANCING CORP , NEW YORK 
 IRVING INTERNATIONAL 
 REPRESENTATIVE OFFICE 
 CHICACO 
 Representation overseas: 
 ARGENTINA 
 res: Representative office. 
 AUSTRALIA 
 Melbourne: Representative office. 
 
 Australian International Finance Corp , 
 i. (AIFC). Irving International Fi 
 nancing Corp. holds a substantial minor- 
 ty interest in this company which was 
 ormed in 1970. Owners include Austra- 
 ia & New Zealand Banking Group, Ltd., 
 rtelbourne: Bank of Montreal; Crocker 
 
 Bank, Ltd 
 Irving Trust Co. holds a substantia 
 minority interest in this bank formed If 
 1967. The other partners are Banco □ 
 Roma, Rome: Credit Lyonnals, Paris 
 First National Bank, Chicago; Com 
 merzbank A.G., Duesseldorf, and th< 
 Hongkong & Shanghai Banking Corp. 
 Hong Kong. ICB, which has capital re 
 sources of approximately $50 million anc 
 additional substantial standby facilities 
 from its member banks, specializes Ir 
 medium- and long-term financing ol 
 multinational corporations and othei 
 
 Irving Trust Co. (Nominees), Ltd. Il 
 a subsidiary of Irving International FI 
 
 FRANCE 
 Paris: Representative office. 
 
 HONG KONG 
 g: Representative office. 
 Hang Bank, Ltd, in which 
 sst Co. acquired majority 
 in 1973. Founded In 1937. 
 g engages In a full range of 
 I banking activities. 
 IRAN 
 
 Teheran: Representative office. 
 
 JAPAN 
 Tokyo: One branch. 
 
 LEBANON 
 Beirut: Representative office. 
 
 SINGAPORE 
 Singapore: One branch. 
 
 TAIWAN 
 Taipei: One branch. 
 
 China United Trust and Investment 
 Corp. Irving International Financing 
 
 commerci; 
 
 Corp. has a 207° investment I 
 which provides equity and loan funds to 
 Taiwan operations. 
 
 VENEZUELA 
 Caracas: Representative office. 
 
 Sociedad Financlera Del Centro, C.A.. 
 an investment banking and finance com- 
 pany in which Irving International Fi- 
 nancing Corp. has an equity interest, 
 affords a wide range of local serv- 
 to Venezuelan and U. S. companies. 
 
 espondent bolanct relationships: 
 
 MANUFACTURERS HANOVER 
 
 TRUST CO., NEW YORK 
 (A Subsidiary of Manufacturers 
 Hanover Corp., N. Y.) 
 
 International banking policy: 
 
 "We believe Manufacturers Hanovei 
 Trust's high rank among banking's 
 leaders In the world can be maintainec 
 improved only by offering the broad 
 possible spectrum or quality financia 
 services at reasonable cost. 
 
 Experience has taught us that Ir 
 many areas of the world we can provide 
 these services best by cooperating with 
 foreign correspondents through our 
 ensive representative network, rathei 
 n by competing with them througr 
 branch or subsidiary operations. How 
 this does not preclude our direct 
 operation abroad in major financial and 
 less centers when it becomes appar- 
 that our customers' needs can be 
 r served in this fashion.'' 
 
 BAHAMAS 
 
 assau: Ons branch. 
 
 BELGIUM 
 russels: Manufacturers Hanover Bank/ 
 Belgium. Manufacturers Hanover 
 lirect majority Inter- 
 
 Trust holds 
 
 rtually 99.5' 
 
 agency 
 
 offices throughout Belgium. 
 
 BRAZIL 
 
 Rio de Janeiro: Representative office. 
 
 Santo Andre: Poliolefinos, S.A. Indus- 
 tria e Comercio. MHIFC has a minor- 
 ity interest. 
 
 Sao Paulo: Representative office. 
 
 MHT-Servicios e Administracao, Ltda. 
 
 MHIFC has 100% equity. 
 
 CHANNEL ISLANDS 
 
 Guernsey: Manufacturers Hanover Bank 
 (Guernsey) Ltd.. is a wholly -owned 
 
 3 ry , 
 
 IFC. 
 
 CHILE 
 
 Santiago: Banco Unido de Fomento, 
 MHIFC holds a minority interest in 
 this private development bank. 
 COLOMBIA 
 Bogota: Representative office. 
 
 Corporacion Financiera Columbiana. 
 MHIBC holds a minority interest in this 
 private development banking Institution. 
 
 DOMINICAN REPUBLIC 
 Santo Domingo: Compania Financiera 
 Oominicana S.A. MHIFC holds a mi- 
 nority interest in this institution. 
 ECUADOR 
 Guayaquil: Banco de Guayaquil. MHIBC 
 has a minority interest in this com- 
 mercial banking institution. 
 
 EGYPT 
 
 Cairo: One branch and representative 
 office. 
 
 EL SALVADOR 
 San Salvador: Representative office. 
 
 ENGLAND 
 London: Two branches. 
 
 Anglo Romanian Bank Ltd. Is a 
 MHIBC affiliate. 
 
 Iran Overseas Investment Bank Ltd. 
 MHIBC has a minority interest. 
 
 Manufacturers Hanover, Ltd. Is an af- 
 filiate of MHIFC. Other partners in the 
 merchant bank are Rothschild Nominees 
 Ltd., London, Riunione Adriatica dl 
 Sicurta. a Milan-based insurance com- 
 pany, and the Long-Term Credit Bank of 
 ' pan, Tokyo. 
 
 Manufacturers Hanover Export Fl- 
 nce Ltd. is a wholly-owned subsidiary 
 MHIBC. 
 
 Manufacturers Hanover Property Serv- 
 :s Ltd., London, is a wholly-owned sub- 
 lary of Manufacturers Hanover Prop- 
 erty Services A.G.. Zurich. 
 
 Ocean Acceptances (London) Ltd. Is 
 a subsidiary wholly-owned by Manufac- 
 Guernsey) Ltd, 
 
 INC., 
 
 National Bank, San Fra 
 Mitsubishi Bank, Ltd., 
 
 IFC 
 
 FRENCH AMERICAN BANKINC 
 CORP., NEW YORK 
 (A Subsidiary of Banque 
 Nationale de Paris, France) 
 
 International banking policy: 
 
 "The French American Banking Corp 
 was Incorporated In New York State in 
 1919 and has as its principal activities 
 International banking and the financing 
 of foreign trade. It is active in the Euro- 
 ourrency market through Its Parii 
 branch, and extends its activities wo 
 wide via the network of the Banque N 
 tlonale de Paris. 
 
 "As specialists In International bank- 
 ing. FA8C works closely with European. 
 Asian and American companies, offering 
 a full range of loan. Investment and cor- 
 respondent banking services." 
 
 I mately 8 milli 
 and additional 
 facilities from 
 
 substantial standby 
 ts member banks, 
 specializes in medium- and long-term fi- 
 nancing and also provides usual merchant 
 banking facilities. 
 
 BRAZIL 
 
 Rio de Janeiro: Representative office. 
 
 Banco De Investimento Credibanco 
 S.A., an affiliate of Irving Trust Com- 
 pany, via Irving International Financing 
 Corp. Crertibanco is engaged in short- 
 and medium-term lending operations, 
 and is particularly interested in provid- 
 ing financial assistance to the Brazilian 
 subsidiaries and branches of major 
 American companies. 
 
 U. S. Subsidiaries: 
 
 THE GALLATIN CO , 
 
 NEW YORK 
 his Agreement corporation is capi- 
 talized at $100,000. 
 MANUFACTURERS HANOVER 
 INTERNATIONAL BANKING 
 CORP., NEW YORK 
 This corporation is capitalized at $7.5 
 union. 
 
 MANUFACTURERS HANOVER 
 INTERNATIONAL FINANCE 
 CORP , NEW YORK 
 
 This is a wholly owned subsidiary of 
 le Trust Company, capitalized at $12.5 
 
 MANUFACTURERS HANOVER 
 BANK INTERNATIONAL 
 LOS ANCELES 
 This corporation is capitalized at $10 
 
 r?eprcsen/ofi< 
 
 ARGENTINA 
 Buenos Aires: Representative office. 
 
 AUSTRALIA 
 Sydney: Representative office. 
 
 Development Finance Corp. Ltd. ai 
 Oelfin Industrial Finance Ltd. MHIF 
 holds 3 substantial minority Interest 
 these Australian companies. 
 
 turers Hanove 
 
 Channel Islands. 
 
 FINLAND 
 
 Helsinki: Industrialization Fund of Fin- 
 land. MHIFC has a minority equity 
 interest in this development bank. 
 FRANCE 
 
 Paris: Representative office. 
 
 Manufacturers Hanover Banque Nor- 
 
 dique. Manufacturers Hanover Trust 
 
 holds a 60% interest in this eommer- 
 
 Frankfurt: One branch and representa- 
 tive office. 
 Hamburg: One branch. 
 Munich: Representative office. 
 
 GREECE 
 
 Athens: National Investment Bank for 
 Industrial Development. S.A. and 
 Credit Bank. Both banking institution* 
 are MHIBC affiliates. 
 
 HAITI 
 
 Port-au-Prince: Banque de I'Unlon Hal- 
 tiennc. S.A. MHIBC has a minority 
 Interest in this commercial bank. 
 HONG KONG 
 Hong Kong: Manufacturers Hanover 
 (Asia) Ltd. Is a wholly owned subsid- 
 iary of MHIFC. 
 
 INDONESIA 
 Jakarta: Representative office. 
 
 P.T. Finconesia Jakarta Indonesia. 
 MHIFC has a minority interest. 
 
 IRAN 
 
 Teheran: Representative office. 
 
 ITALY 
 
 Rome: Representative office. 
 
 JAPAN 
 
 Tokyo: One branch: 
 
 Tokyo Lease Co., Ltd MHIFC has a 
 minority equity interest in this Japanese 
 leasing company. 
 
 Private Investment Company of Asia. 
 MHIFC has a minority equity Interest 
 in this development institution for Asia. 
 
 KENYA 
 Nairobi: Representative office. 
 
 LEBANON 
 Beirut: Representative office. 
 
 Arab Finance Corp.. S.A.L. MHIFC 
 has a minority interest. 
 
 25-605 O - 78 - 7 
 
92 
 
 February 22 1977 
 
 AMERICAN BANKER 
 
 19B 
 
 International Activities- 
 
 (Continue, I nom pte<-rc1ing page) 
 LUXEMBOURG 
 Luxembourg: Adtll Investment Co. 
 MHIFC hold! a minority Interest In 
 thit multinational private Investment 
 company operating In South America 
 to develop private enterprises and 
 capital markets. 
 
 Arab Finance Corp. (International). 
 MHIFC has a minority Interest as In 
 Arab Finance Corp. of Beirut, Lebanon. 
 
 Soclete Internationale Financier* pour 
 let tnveatissments et le Developpement 
 en Afrique (SIFIDA). MHIFC has a mi- 
 nority Interest In this multinational In- 
 vestment company organized to make 
 and promote capital Investment In 
 Africa. 
 
 MALAYSIA 
 Kuala Lumpur: Representative office. 
 
 Malaysian Industrial Development Fi- 
 ance, Ltd. Is a private development bank 
 In which MHIFC has a minority Interest. 
 
 South East Asia Development Corp. 
 
 Ltd. Is 
 
 l BC 
 
 ate. 
 
 office. 
 
 MEXICO 
 Mexico City: Representatii 
 
 NORWAY 
 Oslo: Representative office. 
 
 PERU 
 
 Lima: Representative office. 
 
 PHILIPPINES 
 Manila: Representative office. 
 
 Private Development Corporation 
 the Philippines. MHIFC holds a mini 
 lly Interest In this private developm< 
 
 Bucharest: O 
 
 ROUMANI 
 SCOTLAN 
 
 SINGAPORE 
 Singapore: One branch. 
 
 SPAIN 
 
 Madrid: Representative office. 
 
 SWITZERLAND 
 Zurich: One branch. 
 
 GATX International Finance Inc. la an 
 MHIFC affiliate. 
 
 Manufacturers Hanover Property 
 Services A G. MHIFC holds a 60% Inter- 
 est In this financing company. 
 
 THAILANO 
 Bangkok: Representative office. 
 
 Slam Cement Co. Ltd. MHIFC and 
 MHIBC have a minority equity intrrett 
 in this industrial company. 
 
 Industrial Finance Corporation of 
 Thailand. MHIFC haa minor equity In- 
 terest. 
 
 VENEZUELA 
 Caracas: Representative office. 
 
 C. A. Venezolano de Oetarrollo la a 
 private development finance company In 
 which MHIFC has a minority equity In- 
 terest. 
 
 Correspondent bo/once reloiiomhipt: 
 
 Manufacturers Hanover Trust main, 
 talna accounts with about 251 Interna- 
 tional banks while more than 1,600 for- 
 eign banks have correspondent balances 
 with Manufacturers Hanover Trust Co. 
 
 MARINE MIDLAND BANK, 
 NEW YORK 
 (A Subsidiary of Marine Midland 
 Banks, Inc., Buffalo) 
 
 International bonking policy: 
 
 "Marine Midland Bank and Its sub- 
 sidiaries, Marine Midland International 
 Corp. and Marina Midland Western In- 
 ternational Corp. carry on a complete 
 International banking business through a 
 combination of overseas branches, repre- 
 sentative offices and a group of affiliated 
 
 792 
 
 correspondent 
 verseas. Each 
 pabilitles that 
 
 New York Stat* 
 
 of these operation! 
 may be especially 
 
 and the facilities of Mj 
 statewide banking aysten 
 to overseas customers." 
 
 U. S. Subiidioiin: 
 MARINE MIDLAND INTERNA- 
 TIONAL CORP (MMIC), 
 NEW YORK 
 An Edge Act subsidiary with author 
 
 1,'d 
 
 1IC 
 
 of $5 million Marina Mid- 
 leas Corp. (MMOC), New 
 wholly owned subsidiary of 
 
 MARINE MIDLAND WESTERN 
 INTERNATIONAL CORP, 
 BUFFALO 
 MMWIC is an Edge Act subsldlarj 
 with authorised capital of 17 i million. 
 
 Rtprtunfofiof! overseas. 
 
 ARGENTINA 
 Buenos Aires: Representative efllca. 
 
 AUSTRALIA 
 Sydney! Representative office. 
 
 Intermarine Australia Ltd." a mer- 
 chant bank in which MMOC hoist* 
 Marine Midland's interest. Other share- 
 holders are Tokal Bank. Nagoya. and 
 Algema (Pty), Ltd., Sydney. 
 
 Midland Credit Ltd, a finance com- 
 pany. MMOC hold* a ••>■; Interest and 
 an additional minority Interest through 
 Intermarine Australia. 
 
 BAHAMAS 
 Nassau: One branch. 
 
 BRAZIL 
 
 Rio de Janeiro: Representative office. 
 Sao Paulo: Representative office. 
 CANADA 
 
 Montreal: RoyMarine Leasing Ltd., an 
 equipment financing and leasing com- 
 pany equally owned by MMOC and The 
 Royal Bank of Canada. 
 
 Toronto: MarMId Financial Services. 
 Ltd., is a -vholly-owned subsidiary of 
 MMWIC, engaged In commercial fi- 
 nancing. MM Builder* Funds. Ltd., • 
 90% subsidiary of MarMId Financial 
 Services, is engaged in Interim con- 
 struction financing. 
 
 CAYMAN ISLANDS 
 
 George Town: Arawak Trust Company 
 (Cayman) Ltd. is a trust company 
 with chartered bank status of which 
 the principal shareholders are MMOC 
 (28%), together with Kleinwort Ben- 
 son Ltd., London, and the Bank of Ber- 
 muda. Subsidiaries in Nassau and Isle 
 of Man. 
 
 COLOMBIA 
 
 Barranquilla: Corporaclon Financiers del 
 Norte (COFINORTE), a development 
 finance company. MMOC (17.9%) 
 and International Finance Corporation, 
 
 . Washington, D. C, are the two largeat 
 minority shareholders. Branch offices 
 in Cartagena and Bogota. 
 
 Bogota: Representative office. 
 
 COSTA RICA 
 
 San Jose: Almacenadora, S.A., a ware- 
 housing company. MMOC has a 22% 
 interest. Other shareholders are In- 
 versiones Gurdian, S.A, San Jose, and 
 rollo, S.A., Panama (FICENTRO). 
 Banco de Bogota and Albofisa, S.A, 
 Panama. 
 
 are Inversiones Gurdian, Banco de 
 gota and Ficentro, Panama. 
 
 ENGLAND 
 London: One full service branoh. 
 International Marine Banking 
 
 Ltd. (INTERMARINE) 
 
 ancicra Union C. A., Car 
 
 FRANCE 
 Paris: One full service branch. 
 
 Banque de I'Union Europeenne (BUE), 
 a commercial bank, 19.1% owned by 
 MMOC. Shareholders include Compagnie 
 Fmanclere de lUnlon Europeenne, Pari* 
 (67%); Westdeutsche Landesbank Clro- 
 zentrale, Duesseldorf. and other Euro- 
 pean financial establishment*. Several 
 branches and banking affiliates In and 
 
 Interumon-Banque, Paris, a merchant 
 bank operating particularly In the me- 
 dium- to long-term Eurocurrency loan 
 and bond market*. MMOC holds a 45% 
 equity Interest. Other shareholders are 
 Royal Bank of Canada, Montreal; 
 Banque de I'Union Europeenne, Paris; 
 Tokal Bank Ltd., Nagoya, and Bayer- 
 ische Vereinsbank, Munich. 
 
 Union Auxiliaire de Financement S A. 
 (UNIMAR), an Investment company 
 equally owned by MMOC and Omnium 
 de I'Union Europeenne. 
 
 GERMANY 
 Frankfurt: Representative office. 
 
 HONG KONG 
 Hong Kong: Representative office. 
 
 Marmld Finance Ltd., a merchant 
 bank, wholly owned by MMOC. 
 
 INDONESIA 
 Jakarta: Representative office. 
 
 IRAN 
 
 Teheran: Rtpreientatlv* office. 
 
 IRELAND 
 Dublin: Irish Inte continental Bank Ltd., 
 a merchant bank who** principal 
 shareholder* are MMOC (41.5%) and 
 Irish Llf* Assurance Co. Ltd., which 
 directly and Indirectly own* 38.2%. 
 ITALY 
 
 Milan: Sitalfln S.p.A, a finance com- 
 pany. MMOC owns 24.9%. and Gener- 
 alfln S.p.A, Milan, 75.1%. 
 
 Rome: Representative office. 
 
 JAPAN 
 
 Nagoya: MMOC hold* a 9.9% Interest 
 in Central L*a*e Ce. Ltd.. an equip- 
 ment leaking company. Other ehare- 
 holder* Include Tokal Bank Ltd., 
 Nagoya, and the Standard Chartered 
 Bank Group, London. 
 Tokyo: One branch. 
 
 KOREA 
 Seoul: Representative office. 
 
 LEBANON 
 Beirut: Representative office 
 
 ArinH S A , with subsldiarlas In Ber- 
 muda, th* United Kingdom and Llech- 
 tenslem, provide* financial and invest 
 
 ment facilifts In th* Middle East. MMOC 
 own* 25%. 
 
 LUXEMBOURG 
 
 Luxembourg City: Interna 
 
 t)" 
 
 i all phaic* of Investment bank- 
 I ing with branche* In major c It lee. 
 I Financial Leasing Cerp. Australia 
 ve*t-|Ltd. MGIFC ha* a minority Intcreit s* 
 lavia this lease financing company. 
 
 si joint venture* 
 
 trie*. MMOC ha* a 3 7% 
 MALAYSIA 
 Kuala Lumpur: Malaysia 
 nance Corporation Brrhad (MIFC). 
 a finance company, MMOC ha* a 13.3% 
 equity Interest. 
 
 MEXICO 
 
 Mexico City: Representative office. 
 
 NETHERLANDS ANTILLES 
 Curacoa: Interunion Bank Antille*. N.V. 
 
 MMOC holds 
 
 union Banque 
 a direct minority interest. 
 
 NEW ZEALAND 
 Auckland: Bremner- Intermarine (NZ) 
 Ltd.. MMOC owns 20% and W. R. 
 Bremner Ltd. owns 80% of title finance 
 company which engage* In leasing, and 
 consumer finance. 
 
 PANAMA 
 
 Panama City: One branch and a repre- 
 sentative office for Central America. 
 PHILIPPINES 
 
 Ine* regional office, 
 ance Corporation, equip. 
 
 Man, I 
 
 Euro ■ cle 
 MGIFC ha* 
 management 
 
 consumer credit. 
 Subsidiaries engaged In factoring, auto- 
 mobile finance. Industrial leasing, etc. 
 MMIC has a 10% equity Interest. 
 
 IFC Leasing A Acceptance Corpo- 
 ration: equipment leasing company 
 owned 20% by MMOC and 50% by In- 
 dustrial Finance Corporation. 
 
 SINGAPORE 
 Singapore: One branch. 
 
 SPAIN 
 
 Madrid: Representative office. 
 
 SWITZERLAND 
 
 Geneva: Sifida Investment Company 
 S.A. provides Investment banking serv- 
 ice* and direct financial support to 
 private sector of developing African 
 countries. Shareholders Include numer- 
 ous banks, financial Institutions and 
 some Industrial and commercial or- 
 ganization* In various countries. I 
 MMOC ha* a 16":. equity intercut. | 
 TURKEY 
 
 Istanbul: Uluilararasl EndustH ve Tl- 
 caret Bankasi AS. (UTE Bank), a 
 privately owned commercial bank 
 Other partner* Include Yapl v* Kredi 
 Bankail. Banque de I'Union Euro- , m i noI .j, v 
 
 peenne and Banque de Tlndochine et j 
 
 de Zuer. MMOC own* a 24% Interest 
 Nine branch office* in Turkey. 
 
 Ltd, Melbourne. 
 
 BELGIUM 
 Antwerp: One branch. 
 Brussels: One branch. 
 
 Soclete Nationale de Investl** 
 MGIFC ha* a minority Interest 
 
 Hj- 
 
 BERMUDA 
 Morgan Guara 
 
 Ltd. MGIFC wneny own* this special 
 purpose financial company. 
 
 BRAZIL 
 
 Sao Paulo: Representative office. 
 
 Banco Finaaa de Investimcnto 6 A. 
 MGIFC has a minority Interest In this 
 Inveetment and development bank. 
 
 Morgan Services e Partidpacces Ltda. 
 MGIFC owns this limited liability com. 
 pany. 
 
 CAMEROON 
 Yaounde: Societe Camereunaise ste 
 Banque. MGIFC has a minority In- 
 terest in this commercial bank which 
 has nine offices throughout the coun- 
 try. 
 
 CANADA 
 
 Toronto: J. P. Morgan of Canada Ltd. 
 MGIFC owns this financial services 
 
 CONGO 
 
 Brazzaville: Banque Commerclate Cen- 
 gelaise. MGIFC holds a minority In- 
 terest In this commercial bank which 
 has branche* In Pointe Nolr anal 
 
 ENGLAND 
 
 C lea ran 
 rrty 
 
 System Ltd. 
 terest In and 
 act for this Interna- 
 i clearance system, 
 gan Grenfell 4 C*. Ltd. MGIFC 
 minority interest In this merchant 
 which functions as a commercial 
 
 Saudi 
 
 • Al-Banl 
 MGIFC 
 
 ernatlonal Bank Limited 
 -Saudi Al-Alaml Limited), 
 a minority Interevt In thks 
 
 VENEZUELA 
 Caracas: Representative office. 
 
 Socledad Flnanclera Union C.A, a fi- 
 nance company owned 60% by the Banco 
 Union group of Caracas and 20% by 
 MMOC through Intermarine of London. 
 
 Correspondent bo/once relotionihipt: 
 
 Marine Midland maintains corre- 
 spondent balances with 200 banks in 30 
 countries and 736 foreign banks in 85 
 countries maintain them with Marine 
 Midland. 
 
 MORCAN GUARANTY TRUST 
 COMPANY OF NEW YORK 
 (A Subsidiary of |. P. Morgan & Co. 
 Inc., New York) 
 
 U. S Subtidioritt: 
 MORCAN CUARANTY INTER- 
 NATIONAL FINANCE CORP. 
 NEW YORK 
 MORCAN CUARANTY INTER- 
 NATIONAL BANK OF HOUSTON 
 
 MORCAN CUARANTY INTER- 
 NATIONAL BANK OF MIAMI 
 MORCAN CUARANTY INTER- 
 NATIONAL BANK OF 
 SAN FRANCISCO 
 
 MORFROP INCORPORATED 
 NEW YORK 
 
 Rtpmrnta'ion overleos: 
 ARGENTINA 
 
 Buenos Aires: Banco Frances del Rio de 
 la Plata. MGIFC has a minority in- 
 terest In this commercial banking 
 
 Industrie* Reconquleta 8 A. MGIFC 
 ha* a minority inter**t in thl* holding 
 company for Robert* S.A. de Ftnaazae. 
 Buono* Aire*, a financial company which 
 conduct* Invrttment banking actlvitie* 
 a* well a* a money brokerage operation 
 
 AUSTRALIA 
 Melbourne: Australian United Cerp, 
 Ltd. MGIFC kae a minority interest 
 In this merchant bank which Is ac- 
 
 Calsse de G est, on Mob, Here. MGIFC 
 h-j a minority interest in the* discount 
 
 Epargne-lntercssement. MGIFC ha* a 
 In this Investment 
 management company. 
 
 Morgan A Cle S.A MGIFC owns this 
 banque d'affaires. 
 
 GABON 
 
 Libreville: Union Gabonalae de Banque, 
 a commercial bank In which MGIFC 
 holds a minority interest, has a 
 branch In Port Gent. I 
 
 Port-Gcntil: Branch of Union Gabona.se 
 de Banque. Libreville 
 
 GERMANY 
 
 Duesseldorf: One branch. 
 
 Frankfurt: One branch. 
 
 Munich: One branch. 
 
 GHANA 
 
 Accra: National Investment Bank. 
 MGIFC holds a minority Interest In 
 this development bank. 
 
 HONG KONG 
 Hong Kong: Representative office. 
 
 INDONESIA 
 Jakarta: P. T. Merchant Investment 
 Corp. MGIFC has a minority Interest 
 In this Investment bank. 
 
 ITALY 
 
 Milan: One branch to open In 1977. 
 Rome: One branch to open In 1977. 
 
 IVORY COAST 
 Abidjan: Societe Ivoiricnne de Banque 
 MGIFC ha* a minority Interest In this 
 commercial bank. 
 
 JAPAN 
 Tokyo: On* branch. 
 
 LEBANON 
 Beirut: Representative office. 
 
 Bank Almaehrck. S.A.L. MGIFC ha* 
 a minority interest in thl* commercial 
 
 Kuala 
 
 Development Finance Berhed. MGIFC 
 
 ha* a minority Interest In thl* private 
 
 Rabat: Ban 
 
 on ale pour le De- 
 veloppement Economique (BNOE). 
 MCIFC ha* a minority interest in thl* 
 development bank formed by the Mo- 
 roccan government in 1949. 
 
 NETHERLANDS 
 Amsterdam: Bank Morgan L a Douche, e 
 N.V. MGIFC hae a 50% Interest In this 
 commercial bank which offers a wide 
 range of financial services, Including 
 securities transaction* and leasing. 
 (Continued on nr\t page) 
 
93 
 
 February 22. 1977 
 
 AMERICAN BANKER 
 
 International Activities 
 
 DAUPHIN DEPOSIT BANK AND 
 TRUST COMPANY 
 HARRISBURC 
 (Subsidiary of Dauphin Deposit 
 Corporation) 
 International bonking policy: 
 
 "Dauphin Deposit Is prepared to offer 
 wr customers a full range of Interna- 
 tional banking services through our 
 correspondent bank relationships in 
 either New York or Philadelphia. 
 
 "Our staff of experienced perse 
 has provided personalized service 
 guidance to our customers for n 
 years. We are constantly analyzing 
 procedures and policy within the ii 
 
 FIDELITY BANK, PHILADELPHIA 
 (A Subsidiary of Fidelcor, Inc. 
 Philadelphia) 
 
 U. S. Suojid/ories: 
 
 FIDELITY INTERNATIONAL 
 BANK, NEW YORK 
 
 changed Its 
 3ank 
 in 1971. 
 
 efficient 
 
 rket 
 
 order to meet the 
 
 This Edge Act cor 
 name from America 
 to Fidelity International Ban 
 In combination with its p 
 wholly-owned subsidiary "offe 
 and specialized international 
 
 Lancaster 
 
 NATIONAL CENTRAL BANK, 
 
 LANCASTER 
 (A Subsidiary of National Central 
 Financial Corporation, Lancaster) 
 
 International banking policy: 
 
 services to co-respondents and customers 
 in New York, Philadelphia, through th« 
 United States and all over the world.' 
 
 DAVIS, ELLIOTT 
 INTERNATIONAL, INC. 
 
 FIB holds 20r„ of this combination ex- 
 port-management firm. 
 
 Representation overseos: 
 
 AUSTRALIA 
 Sydney: Computer Resources Pty, Ltd. 
 
 10.16% 
 
 computer softv* 
 
 National Central Bank, ar a regional] Hooker Corporation, a land develop- 
 k serving South-Central Pennsyl- ment and real estate company of which 
 iia, meets the growing needs of our j Trefoil Capital Corporation owns U%. 
 tomers for international banking fa- Network Finance, Ltd. FIB has a 
 ties by providing all the traditional 7.1 ■ stake in this Australian real estate 
 s on a local basis finance company. 
 
 our foreign 
 
 the ports of Philadelphia, Baltimore and 
 Harrisburg with complete export and im- 
 port services. National Centrals direct 
 fcreign lending activity is tailored to the 
 needs of our multi-national customers 
 while also providing U. S. financing fa- 
 cilities to our foreign correspondents." 
 
 Representation overseas: 
 
 CAYMAN ISLANDS 
 George Town: One branch. 
 
 Correspondent balance relationships: 
 NatK 
 
 !n all 
 
 sal Central Bank maintains l 
 agency relationships with ban 
 ajor cities of the world. 
 
 Philadelphia 
 
 CENTRAL PENN NATIONAL 
 BANK, PHILADELPHIA 
 
 (A Subsidiary of Central Penis 
 Financial Corp., Philadelphia) 
 International bonking policy: 
 
 "The policy of Central Penn National 
 Bank Is to continue to expand our inter- 
 national banking facilities with the ob- 
 jective of increasing overall profitability 
 of the bank and offering customers, both 
 domestio and international, a wider range 
 of international banking services. 
 
 "We offer a full range of international 
 services including commercial letters of 
 credit, documentary collections, pay- 
 ment orders and provide financing for 
 Importers and exporters- Our overall 
 strategy remains flexible and will be 
 adjusted in response to change in the 
 International financial environment." 
 Representation overseas: 
 
 CAYMAN ISLANDS 
 George Town: One branch. 
 Correspondent balance relationships: 
 
 Central Penn Intends to strengthen its 
 present network of correspondent rela- 
 tionships with its existing 400 banks and 
 branches in 98 countries. By established 
 representative offices and or branches 
 In strategio financial centers abrcad 
 Central Penn Intends to supplement the 
 relationships with its correspondents as 
 the need arises to serve customers. It 
 may also include participations or joint 
 ventures In order to get established in a 
 particular area or market. 
 
 CONTINENTAL BANK, 
 NORRISTOWN AND 
 PHILADELPHIA 
 
 International banking policy: 
 
 "At present our policy is limited to 
 Such basic functions as letters of credit 
 In their various forms including financ- 
 ing thereof, foreign exchange, remit- 
 tances, collections and their financing 
 under FCIA and other services directly 
 those already 
 
 or Indirectly rel. 
 mentioned. Curre 
 of Continental Bank not to enter Into 
 foreign loans whether directly or on a 
 participation basis to companies, indi- 
 viduals or governments- Wo enjoy a 
 good worldwide relationship with our 
 International corespondent and agency 
 banks." 
 
 Correspondent balance relationships: 
 "Continental Bank has 11 due to ac- 
 
 BAHAMAS 
 Nassau: One branch. American Interna- 
 tional Bank (Bahamas) Ltd. is a 
 wholly-owned subsidiary of Fidelity 
 International Bank. 
 Fidelity International Corp. (Bahamas) 
 Ltd, a wholly-owned finance and Invest- 
 ment company formed in 1969. 
 
 BRAZIL 
 Sao Paulo: Representative office. 
 
 COLOMBIA 
 Manizales: Corporaclon Flnanclera de 
 Caldas. FIB owns 2.63% of this Co- 
 lombian regional development com- 
 pany. 
 
 ENGLAND 
 London: One branch. 
 
 FRANCE 
 
 Paris: The Fidelity Bank (France) ! *, 
 formerly Banque Europeenne de Fl- 
 nancrment. Is a commercial tank 
 wholly owned by I- IB. 
 Banque de la Mediterraneo (France) 
 S.A, Pans, which offers a complete line 
 of International and commercial bank- 
 ing services, is 22.*% owned by FiB. 
 GABON 
 
 Libreville: Sogafinex — Soclete Gabonalse 
 de Flnancement et DExpanslon — FIB 
 has a 10<\i interest In this government- 
 Supported investment banking firm. 
 HONG KONG 
 Hong Kong: Representative office. 
 INDIA 
 
 Bombay: Industrial Credit eV Investment 
 Corp. of India, Ltd. FIB owns 0.22% 
 of this private industrial development 
 Institution. 
 
 JAPAN 
 Tokyo: Representative office. 
 
 LEBANON 
 Lebanon: Representative office. 
 
 Banque de la Mediterranee. Fidelity 
 Bank has a 22.6% interest In thi, bank. 
 
 LUXEMBOURG 
 Luxembourg: ADELA Investment Co. 
 FIB holds 1.1% of this multinational 
 investment company which operates in 
 
 MEXICO 
 Mexico City: Representative office. 
 
 PHILIPPINES 
 Manila: House of Investments. FIB holds 
 3 751- of this Philippine Investment 
 banking firm. 
 
 Industrial Finance Corp., Is 1.56"; 
 held by FIB. 
 
 SENEGAL 
 Dakar: Sofisedit - Societe Financiers 
 Senegalaise pour le Development In- 
 dustrie! et Tourlstlque — FIB has a 
 134% Interest in this newly-formed 
 development bank. 
 
 SWITZERLAND 
 Geneva: Business Associations S.A. Is 
 wholly-owned by FIB. It is a mergers 
 and acquisition tirm. 
 Greyhound Financial & Leasing Corp., 
 A.G. an international leasing and finance 
 company, is 4.7S% held by FIB. 
 
 TAIWAN 
 
 Taipei: United Nylon Corp. is a nylon 
 manufacturing co. FIB holds 3.042%. 
 TURKEY 
 
 Istanbul: Turkey Smal Kalkinma Bank- 
 asi AS FIB holds 0.77% of this Turk 
 
 FIRST PENNSYLVANIA 
 BANK NA, PHILADELPHIA 
 (A Subsidiary of First Pennsylvania 
 Corp., Philadelphia) 
 
 International banking policy: 
 
 "First Penn has chosen to operate In- 
 ternationally through a combination of 
 correspondent relationships, branches, 
 representative offices and International 
 affiliations. The choice as regards partic- 
 ular marketing areas Is based upon our 
 own managerial capacity, the needs of 
 
 developing new patterns of International 
 business for the bank. Our policy is flex- 
 ible and reviewed constantly in light 
 
 Overseas 
 
 ) 
 
 U. S. Subsidiary: 
 FIRST PENNSYLVANIA OVER- 
 SEAS FINANCE CORP., 
 PHILADELPHIA 
 First Pennsylvania Overseas 
 
 Corp. is an Edge Act subsidiar 
 
 Representation overseas: 
 BRAZIL 
 
 Sao Paulo: First Pennsylvani 
 Development Company (Ciy 
 Ltd., a subsidiary of FPOFC, 
 50% Interest In Penco Lev 
 Ltda. S. C, which acts as a repre 
 tentative office for First Pennsylvania 
 Bank N. A. 
 
 CAN AOA 
 Montreal: Representative office: 
 
 First Northamerica Investments Ltd, 
 a subsidiary of First Pennsylvania Cor- 
 poration, is engaged in medium term 
 equipment financing and leasing. It also 
 has an office in Toronto. 
 
 CAYMAN ISLANDS 
 George Town: First Pennsylvania Over- 
 seas Development Co., (Cayman) Ltd. 
 I* a subsidiary of FPOFC. 
 
 COSTA RICA 
 San Jose: First Pennsylvania Overseas 
 Development Company (Cayman), 
 Ltd.. a subsidiary of FPOFC, holds a 
 majority Interest In Financiers del 
 First Pennsylvania, a consumer fi- 
 nance company. The company concen- 
 trates on dealer discounts financing for 
 
 customers. A broad correspondent net- 
 work would provide for us and our cus- 
 tomers the best Information and service 
 in any particular geographic area. Our 
 London branch was opened to give us 
 direct access to the foreign mcney mar- 
 kets, and to aid us In the development of 
 what we feel to be the bulk of the fu- 
 ture needs of our multi-national cus- 
 tomers, that being our ability to obtain 
 
 funds for them." 
 
 U. S. Subsidiary: 
 
 CIRARD INTERNATIONAL 
 BANK, NEW YORK 
 I GIB Is capitalized at 16 million. 
 Representation overseas: 
 
 CAYMAN ISLANDS 
 George Town: One branch. 
 
 ENGLAND 
 London: One branch. 
 
 Penn Investments (London) Ltd. Is a 
 subsidiary of GIB. 
 
 Penn Sharp Associates. Ltd , London. 
 Penn Investments Ltd. has an Interest In 
 this tax consulting firm. 
 
 FRANCE 
 Paris: Representative office. 
 
 MEXICO 
 
 Mexico City: Representative office. 
 
 SINGAPORE 
 Singapore: Representative office. 
 
 SWITZERLAND 
 " ch: Girard Zurich AG. 
 
 I 
 
 ENGLAND 
 Lonoon: une orancn. 
 
 GERMANY 
 Frankfurt: Representative office. 
 
 ISRAEL 
 
 Tel Aviv: First Pennsylvania Corp. Is a 
 major shareholder In F.I.B.I. Holding 
 Company, an Israeli financial holding 
 company which owns The First Inter- 
 national Bank of Israel. 
 
 Tokyo: Regional representative office 
 which also serves Hong Kong, Taiwan 
 and South Korea. 
 
 LUXEMBOURG 
 
 Luxembourg: FPOFC has a minority 
 equity interest In ADELA Investment 
 Co, S. A., a multinational private In- 
 vestment company operating through 
 
 MEXICO 
 
 Mexico City: Representative office. 
 
 PUERTO RICO 
 Santurce: CommoLoCo Inc, the third 
 largest consumer finance company In 
 Puerto Rico, is owned by First Penn- 
 sylvania Corporation. 
 
 SINGAPORE 
 Singapore: Regional representative of- 
 fice which also serves Indonesia. 
 Malaysia, the Philippines and Thailand. 
 FPOFC has a minority equity Interest 
 in Private Investment Co. for Asia 
 (PICA), a multinational private Invest- 
 ment company operating in Asia and the 
 Far East 
 
 VIRGIN ISLANDS 
 Charlotte Amalie: First Pennsylvania 
 Bank NA's Caribbean Region consists 
 of eight branches. They are located 
 here, on St. Thomas, St. Croix, and St. 
 John (U. S. Virgin Islands), en Tortola 
 (British Virgin Islands) and on An- 
 tigua, West Indies. 
 
 Correspondent balance relationships: 
 
 First Pennsylvania Bank N. A. main- 
 tains 152 accounts with foreign banks 
 and 232 balances from foreign banks are 
 maintained by First Pennsylvania Bank 
 
 iih 
 
 ENEZUELA 
 
 Venezolano de Desarrollo, 
 lopment finance com- 
 
 Caracas: C 
 
 pany It i 2 5 . held by FIB. 
 Correspondent balonce relationships: 
 
 Correspondent balances are maintained 
 with foreign banks and 435 fcreign 
 
 CIRARD BANK, 
 PHILADELPHIA 
 
 (A Subsidiary of Girard Co., 
 Philadelphia) 
 
 International bonking policy: 
 
 "The development of a correspondent 
 bank network was the choice made by 
 Girard Bank over a branch system be- 
 cause we felt that through an efficient 
 foreign bank network we could best 
 serve the netds of our multi-national 
 
 INDUSTRIAL VALLEY 
 BANK AND TRUST CO., 
 PHILADELPHIA 
 
 International banking policy: 
 
 "IVB provides International banking 
 services to its customers through cur 
 Cayman Islands branch and through the 
 facilities of our principal domestic and 
 foreign correspondents. 
 
 Representation oversees: 
 
 CAYMAN ISLANDS 
 George Town: One branch. 
 
 PHILADELPHIA NATIONAL 
 BANK 
 
 (A Subsidiary of Philadelphia 
 National Bank Corp.) 
 
 International bonking policy: 
 
 c( Its clients through associated and cor- 
 respondent banking Institutions abrcad. 
 The bank maintains at the same time a 
 flexible response to the International 
 banking problems of today with Its for- 
 eign branch offices In Nassau and Lux- 
 embourg and Its representative offices In 
 London, Sydney, Sao Paulo, Panama and 
 Bangkok." * 
 U. S. Subsidiaries: 
 
 PHILADELPHIA INTERNA- 
 TIONAL BANK, NEW .YORK 
 •MB, which commenced business In 
 1967. performs a full range of Interna- 
 tional banking services, with emphasis 
 on efficient dollar clearing tr?nsfcrs. 
 
 PHILADELPHIA INTERNATIONAL 
 INVESTMENT CORP., 
 PHILADELPHIA 
 
 Established In 1960, PIIC holds debts 
 and equity investments In 69 enterprises 
 in 29 countries and specializes In financ- 
 ing developing businesses around tre 
 world. Forty-eight percent owned Clave- 
 American Corp. New York, arranges fi- 
 nancing for the exportation of U. 8. 
 manufactured equipment. 
 Representation overseas: 
 
 AUSTRALIA 
 Sydney: Representative office. 
 
 Australian Finance and Investment 
 Co. Ltd. PIIC has a 20% participation 
 In this diversified finance company. 
 PNB International Finance Ce, Aus- 
 tralia Ltd, Sydney, a commercial finance 
 company, is a wholly owned subsidiary 
 of PIB. 
 
 AUSTRIA 
 
 Vienna: Internationale Bank fur Aus- 
 senhandel A.G. PIIC hat a 10% equity 
 investment In thlt Jointly sponsored 
 banking firm formed to specialize In 
 financing East-West trade and com- 
 
 BAHAMAS 
 
 Nassau: One branch. 
 
 New World Development Corp., Ltd. 
 la a wholly-owned subsidiary cf PIIC. 
 
 Rawson Trust Co, Ltd, New World 
 Development Corp., Ltd. owns a 2C% In- 
 terest In this Nassau firm. 
 
 BRAZIL 
 
 Rio de Janeiro: Banco de Investlmento 
 do Brasil S.A. PIIC hold! a 5% equity 
 
 investment in this Brazilian investment 
 
 Sao Paulo: Representat 
 COLOMBI 
 
 PIIC holds a 7.08% equity 
 
 office. 
 
 7X8% i 
 Corporacion Financiera 
 
 investment 
 Del Norte. 
 
 (Continued on next pafe) 
 
94 
 
 AMERICAN BANKER 
 
 February 22. 1977 
 
 International Activities 
 
 (Continued from preceding page) 
 DENMARK 
 Copenhagen: R. Henrique* Jr. Bank. 
 
 Met, the oldest private bank In 
 
 Copenhagen, le 16>S% owned by PIIC. 
 ENGLAND 
 London: Representative office. 
 
 Arbuthnot Latham A Co., Ltd. PIIC 
 hat a 5% equity Investment In this 
 British merchant bank. 
 
 Conoord Leasing Services Ltd. la a 
 subsidiary or Concord International S.A. 
 of Luxembourg. 
 
 Philadelphia International Company 
 Ltd., offering specialized financial serv- 
 
 Holdlngs 
 
 Ltd. PIIC owns a 78% Interest in this 
 oompany whose chief operating sub- 
 sidiary Is Western Trust <Y Savings 
 Ltd, • bank specializing in consumer 
 finance. 
 
 International investment Corporation 
 for Yugoslavia is a PIIC affiliate. 
 FRANCE 
 
 Paris: Banque Worms 4 Cle S.A. PIIC 
 hat a 7.5% equity investment in this 
 French banque d'affaires. 
 Concord Equipment, Paris, Is a sub- 
 sidiary of Concord International S.A. 
 •f Luxembourg, 
 
 GERMANY 
 Hamburg: Joh. Berenberg. Gossler A. 
 Co. PIIC holds a 15% equity invest- 
 ment in this private banking partner- 
 ship. 
 
 Tehe 
 
 Representative office. 
 IRELAND 
 Dublin: Trinity Bank Limited. PIIC holds 
 a 22% equity Investment in this Irish 
 merchant bank. 
 
 KUWAIT 
 
 Kuwait City: PIIC Is a 6% founding 
 shareholder in Arab Financial Con- 
 sultants Co. 
 
 LUXEMBOURG 
 Luxembourg City: One branch. 
 
 Concord International S.A. PIIC holds 
 a 26% equity Investment In this Luxem- 
 bourg-based leasing company. 
 
 NICARAGUA 
 Managua: Banco Caley-Dagnall S.A. 
 PIIC hat a 20% equity Investment 
 In this private merchant bank. 
 PANAMA 
 Panama City: Representative office. 
 
 Banco tnternacional de Panama, a 
 commercial bank and Primer Banco de 
 Ahorrot, a tavlngt bank, are both 20% 
 owntd by PIIC. 
 
 PHILIPPINES 
 Makatl: Private Development Corp. ol 
 
 the Philippines is a PIIC affiliate. 
 Manila: Southeast Asia regional repre- 
 sentative office. 
 
 PIB has a 6% equity Investment In 
 AEA Development Corp., Manila. 
 
 SPAIh 
 
 16% equity Interest 
 a holding company 
 itments in Spanish 
 
 Madrid: PIIC has i 
 In Eurcom S.A., 
 with major Invi 
 financial instituti 
 
 THAILAND 
 Bangkok: Multi-Credit Corp.. a E 
 commercial finance company, 
 owned by PNB. 
 
 ZAIRE 
 
 n.has 
 
 5oc« 
 
 PIIC 
 
 Is primarily used for eqult 
 
 Representation overseas: 
 
 AUSTRALI A 
 Sydney: Provident International Corp, 
 Ltd. Is a majority owned subsidiary 
 of PIC, Philadelphia, and hat a wholly- 
 owned subsidary, P.I.C. Leasing, Ltd. 
 BAHAMAS 
 Nassau: Provldent's branch office which 
 Is used for our Euro-currency trans- 
 
 MEXICO 
 Mexico City: Representative offico. 
 
 PIC, Phila., holds an equity Interest 
 In Prodolmex, S.A, a subsidiary which 
 receivable financing along with 
 forms of secured financing 
 
 Pittsburgh 
 
 EQUIBANK N.A., 
 PITTSBURGH 
 (A Subsidiary of Equimark 
 Corp., Pittsburgh) 
 International banking policy: 
 
 "Through Its International Depart- 
 ment, Equlbank serves its clients world- 
 wide by: providing short term trade fi- 
 nancing; granting medium term loans 
 and project financing especially for plant 
 and equipment exports on a turnkey 
 basis; accepting demand accounts, time 
 accounts and Eurodollar!; making avail- 
 able all of the usual international bank- 
 ing services related to collections, letters 
 of credit and development of trade and 
 direct investment opportunities." 
 
 U. S. Affiliate: 
 
 ALLIED BANK INTERNA- 
 TIONAL, NEW YORK 
 Equibank N.A. is one of 18 member 
 bankt of Allied. See listing for Allied In- 
 ternational under New York. 
 
 ENGLAND 
 London: Representative office. 
 
 HONG KONG 
 Hong Kong: Representative office. 
 Correspondent balance relationships: 
 
 Equibank N.A. maintains correspond- 
 ent balances with 47 foreign banks and 
 
 tlonal division of Pittsburgh National Is 
 to contribute to the bank s earnings, both 
 directly and Indirectly, by providing 
 Imaginative and financial assistance to 
 its clients around the world. Emphasis Is 
 placed on the maintenance and growth 
 of meaningful relationships with indus- 
 trial and financial institutions both In 
 the U. S. and abroad." 
 U. S. Subsidiary: 
 
 PITTSBURGH INTERNATIONAL 
 FINANCE CORP., PITTSBURGH 
 Representation overseas: 
 
 AUSTRALIA 
 Sydney: Representative office. 
 
 PIFC holds a 20% Interest in Seldon 
 4 Attociatet Pty, Ltd. 
 
 BAHAMAS 
 Nassau: One branch. 
 
 PIFC holds a amall Interest In Deltec 
 Panamenca, S.A. 
 
 Sao Paulo: 
 office. 
 
 ENGLAND 
 London: PIFC holds a 10% Interest In 
 Brown Harriman «V International 
 Banks, Ltd. 
 
 Correspondent balance relationships: 
 
 Pittsburgh National maintains corre- 
 spondent balances with 73 foreign banks 
 and 129 foreign banks maintain balances 
 with Pittsburgh National. 
 
 sentation overseas: 
 DOMINICAN REPUBLIC 
 
 ganized as a joint venture between In- 
 vertiones I ntemaclonales and Domin- 
 ican businessmen. Inversions* Inter, 
 nacionales. an offshore investment 
 company belonging to the stockhold- 
 ers of Banco Popular de Puerto Rico, 
 maintains an investment in Banco 
 Popular Dominicano. 
 
 HAITI 
 
 Port Au Prince: Banque da lUnlon 
 Hatienne S.A. is a private commercial 
 bank organized as a joint venture be- 
 tween Inversibnes Internacionals II, 
 Ltd, Banco Popular Dominicano, Fl- 
 naneiera Dominican* S.A, Manufac- 
 turers Hanover Trust Co, and Banqut 
 Canadienne Nationale. 
 
 Correspondent balance relationships' 
 Banco Popu 
 
 RHODE ISLAND 
 Providence 
 
 INDUSTRIAL NATIONAL BANK, 
 PROVIDENCE 
 (A Subsidiary of Industrial 
 National Corp., Providence! 
 
 International bonking policy: 
 
 "Industrial National Bank actively 
 promotes foreign trade and International 
 development through a complete range 
 I of international banking service* and 
 close relationships with a worldwide net- 
 work of correspondent banks." 
 
 U. S. Subsidiaries: 
 
 AMBASSADOR FACTORS CORP., 
 NEW YORK 
 
 intam balances 
 
 Equ 
 
 MELLON BANK NA, 
 PITTSBURGH 
 (A Subsidiary of Mellon National 
 Corp., Pittsburgh) 
 
 International banking policy: 
 
 "The main purpose of Mellon Bank'i 
 International activities Is to render In 
 ternatlonal banking services to Its cut 
 tomert located in the United States am 
 abroad." 
 
 U. S. Suosicf/'oWei: 
 
 MELLON INTERNATIONAL 
 FINANCE CORP , 
 PITTSBURGH 
 
 Reading 
 
 AMERICAN BANK AND TRUST 
 CO. OF PA., READINC 
 
 International banking policy: 
 
 "American Bank provides the full 
 range of International financial service] 
 to our domestic and multinational cus- 
 tomers in our exceptionally diversified Provides a broad range of factoring, 
 seven county trading area. Due to our receivables financing and other secured 
 domestic growth to 54 branches, we are ' lending services, 
 the largest regional bank in Pennsyl- imi CACiKir moo 
 
 vanla — excluding tht citiet of Pitts- INLEA5ING CORP , 
 
 burgh and Philadelphia. Our interna- PROVIDENCE 
 tional growth has been through corre- Thll full „ rwlce i eaiinn MmB1BV ora . 
 pondent relationships 
 banks in Europe and 
 continuing to expand 
 correspondents accord! 
 
 .ate. 
 
 Correspondent balance relationships 
 
 Correspondent balances are main- ! 
 talned with 146 foreign banks and 819 1 
 foreign bank* maintain correspond- 1 
 ont balances with the Philadelphia In 
 ttrnatlonal Bank and the Philadelphia 
 National Bank. 
 
 | Representation 
 
 PROVIDENT NATIONAL BANK, 
 PHILADELPHIA 
 (A Subsidiary of Provident 
 National Corp., Philadelphia) 
 
 International banking policy: 
 
 "Provident'* international banking pol 
 loy la to render full services t< 
 
 posits with Euro-currency transactions 
 channeled through our Nattau branch; 
 export financing with utt of Extm-Bank, 
 FCIA, and other government agencies; 
 full documentary service* Including let- 
 ter* of credit, remittance* and foreign 
 collection*; foreign exchange Including 
 • pot and forward transaction* along with 
 advisory tervic* to corporation* with 
 International exposure, credit informa- 
 tion for foreign buyer*; economlo and 
 political Information on foreign coun- 
 trie*: trade development Information and 
 tourist related service*. 
 
 U. S. S.fc.icWy: 
 PROVIDENT INTERNATIONAL 
 CORPORATION (PIC), 
 PHILADELPHIA 
 PIC I* a wholly owned Edge Act *ub- 'nferiiofiono/ banking policy: 
 •Idiary of Provident National Bank and' "The bat.c objective of the Interna 
 
 AUSTRALIA 
 Network Finance 
 (AurtValla). Mellon ha* a 24.8% equity 
 
 Melbourne: Repreientative office. 
 BRAZIL 
 
 Rio de Janeiro: Repreientative office. 
 Mellon ha* a 25% equity interest Ir 
 
 Banco Bozano, Simonien de luvtltl 
 
 mento, S.A. 
 
 CAYMAN ISLANDS 
 George Town: One branch. 
 
 ENGLANO 
 London: One branch. 
 
 First Boston (Europe) Ltd. Mellon hai 
 a i3'/s% equity Interest In thi* m*r 
 chant bank. 
 
 GERMANY 
 Frankfurt: One branch. 
 
 minority interest in thi* bai 
 JAPAN 
 Tokyo: One branch. 
 
 MEXICO 
 Mexico City: Representative i 
 
 PHILIPPINES 
 Manila: Representative office 
 SWITZERLAND 
 Zug: First Boston, A. G. 
 
 tidiar 
 
 of Fl 
 
 Boston (Europe) Ltd 
 
 PITTSBURCH NATIONAL BANK 
 (A Subsidiary of Pittsburgh 
 National Corp., Pittsburgh) 
 
 Canada. We 
 
 Our 
 
 for major capital u 
 assist lease plans 
 manufacturers. 
 
 investment leasing 
 ertakings and sales 
 capital equipment 
 
 is to continue to provide, on a INTERNATIONAL APPRAISAL 
 personal basis, the most ef- 1 _ 
 xpert and comprehensive In- CO, FAIRLAWN, NEW JERSEY 
 available to our cu«- Thi* company I* active In the field of 
 ppraisal of real property, machinery 
 nd equipment for insurance, taxation, 
 minent domain and condemnation value 
 purposes. 
 
 Correspondent balance relationshi\ 
 
 from accounts with forei( 
 
 PUERTO RICO 
 Son Juan 
 
 BANCO DE PONCE, SAN |UAN 
 
 International banking policy: 
 
 "Our international policy is based on 
 the bank's theme: 'With People in 
 Mind.' We serve our customers through 
 a centralized International department: 
 33 branches in Puerto Rico and 10 
 branches in New York City. We offer 
 facilities for incoming and outgoing col- 
 lections, cables and transfers, sale of 
 gold coins and bar* upon individual re- 
 quests, purchase and sale of foreign cur- 
 rencies, commercial letters of credit, im- 
 port financing, and some other impor- 
 tant services for travelers and foreign 
 negotiations. Our facilities and apoclal- 
 ized personnel are always available and 
 willing to supply the very best In our 
 area. The careful (election of corre- 
 spondent banks In all the corners of the 
 world serves as the key that opens the 
 door to our international operations." 
 
 Correspondent balance relationships: 
 
 Banco de Ponce maintain* balance* 
 with 53 correspondent bank* in five coun- 1 
 trie*, and 46 foreign bank* from tlx 
 
 BANCO POPULAR DE PUERTO 
 RICO, SAN |UAN 
 
 International banking policy: 
 
 "Banco Popular d* Puerto Rico It a 
 commercial bank operating under a 
 charter granted by the Commonwealth of 
 Puerto Rico with 74 branchet in Puerto 
 Rico, eight branchet In New York, one 
 branch in Lo* Angele* and four affiliate 
 banks In Florida. Our International 
 bankinf policy la to provide our cus- 
 tomer* and correspondent* with a com- 
 plete range of international banking 
 services In order to facilitate their over- 
 Our policy r* to eo- 
 
 Representotion overseas: 
 CANADA 
 
 Toronto: INB Appraisal Co. of Canada, 
 a wholly-owned subsidiary of Inter- 
 national Appraisal Co. 
 
 CAYMAN ISLANDS 
 George Town: One branch. 
 
 ENGLANO 
 London: Representative office. 
 
 EGYPT 
 Cairo: Representative office. 
 
 SINGAPORE 
 Singapore: Representative office. 
 
 Correspondent balance relationships' 
 
 Industrial National Bank maintains 
 accounts in 44 overseas banks and S3 
 foreign banks maintain accounta with 
 INB. 
 
 OLD STONE BANK, 
 PROVIDENCE 
 (A Subsidiary of Old Stone 
 Corporation, Providence) 
 
 International banking policy: 
 "We are oriented primarily to the 
 
 RHODE ISLAND HOSPITAL 
 TRUST NATIONAL BANK CO., 
 PROVIDENCE 
 (A Subsidiary of Hospital Trust 
 Corp., Providence) 
 
 International banking policy: 
 
 "In the Northeast market which we 
 serve, we prefer pursuing our interna- 
 tional banking activities through foreign 
 correspondent banks. As a matter of 
 policy, we strictly limit the number of 
 correspondents who represent us in each 
 
95 
 
 Question 4. Wettern writes "it is felt that interest payments will be possible 
 only if Panama has access to profits from Canal dues." Does the Administration 
 agree with this observation? 
 
 Question 5. If not, from what sources will Panama be able to pay interest 
 coming due in the near future? 
 
 Answer. The Administration does not agree with this observation. Taking 
 into account servicing requirements of existing debt along with currently plan- 
 ned loans plus other projected new borrowing, interest payments on public sector 
 debt should rise from about $111 million in 1977 to $132 million in 1981. The 
 Government of Panama has undertaken a number of domestic policy measures 
 in conjunction with a stand-by program with the IMF which should help to 
 establish the basis for sustained economic growth in the future. Additionally, 
 alleviation of uncertainty over the Canal through prompt ratification and im- 
 plementation of the treaty will bring renewed inflows of foreign capital. This 
 renewed economic vitality alone, arising from domestic policy action and in- 
 creased foreign investment, should enable the Government of Panama to fi- 
 nance interest payments on its debt. 
 
 While the increased payments to Panama under the new treaty arrangements 
 will strengthen Panama's financial condition, they were negotiated not as a 
 means of financing Panama's debt service obligations but rather as a means of 
 assuring that Panama would receive "a just and equitable return on the na- 
 tional resources which it has dedicated to the efficient management, operation, 
 maintenance, protection, and defense of the Panama Canal" (see Article XIII of 
 the proposed Panama Canal treaty). 
 
 Question 6. After Panama has complete control of the Canal and its opera- 
 tion, what will its expected annual income from the waterway be? 
 
 Question 7. Compare this anticipated figure with the $243,000,000 which 
 Panama received from the United States in 1976 in direct and indirect pay- 
 ments, including spending by United States personnel, adjusted for expected 
 continuing inflation. 
 
 Answer. Under the proposed treaty arrangements, Panama will assume com- 
 plete control of the Canal and its operation in the year 2000. In order to 
 estimate Panama's expected annual income from the Canal at that point, some 
 22 years from now, projections for a number of key variables would be needed, 
 including the number of transits, the level of tolls, and the cost of operating 
 the Canal. Since meaningful projections for these variables cannot be made for 
 a period beginning in 22 years, it is not possible to estimate Panama's expected 
 annual income from the Canal in the year 2000. 
 
 [Subcommittee note: Question 8 was inadvertently omitted when Mr. Snyder's 
 questions were submitted to Treasury. See Appendix D.] 
 
 VI 
 
 [From the Washington Post, Dec. 14, 1976] 
 Otheb Nations' Debts May Plague U.S. 
 
 (By Hobart Rowen) 
 
 "International economic problems," President-elect Jimmy Carter told one of 
 his staff advisers, "are going to give me my biggest headache in the next four 
 years." 
 
 Indeed, as Carter and his advisers look down the road, they see an accumula- 
 tion of foreign economic hazards that seem overwhelming. 
 
 The chief threat, dramatically symbolized by near-crisis situations in Great 
 Britain and Italy, is the accumulation of an enormous debt by industrial and 
 less-developed countries (I.DCs) alike. 
 
 The poorer nations will have borowed about $190 billion by the end of this 
 year, including about $70 billion from private banks, and repayment has become 
 a burden. Moreover, the steadily increasing price of oil exacerbates the situation. 
 
 The fear, spoken of only in whispers at gatherings such as the International 
 Monetary Fund meeting last October in Manila, is that some major nation 
 might be forced into asking for a debt moratorium. One small country, Zaire, 
 has already obtained a rescheduling of its debt payments. 
 
 A highly pessimistic assessment comes from New York banker Felix Rohatyn, 
 who says the growing debt situation "could lead to disaster because the political 
 structures aren't there to cope with it." 
 
96 
 
 Western financing of the deficit would be inflationary, Rohatyn says, leading to 
 the conclusion that only the oil cartel, with enormous money reserves, has the 
 available resources. . - 
 
 The magnitude of the problem cannot be precisely measured. But the chair- 
 man of a multinational corporation based in Europe has told colleagues in New 
 York that there may be as much as $200 billion in "bad loans" (to private 
 borrowers as well as governments) made through the Euro-dollar market. 
 
 "It would be something like dealing with the New York City crisis on an in- 
 ternational basis." 
 
 The parallel is not overdrawn. The problems of less developed countries, and 
 of Great Britain and Italy, is that their internal resources have been outstripped 
 by commitments made by their political leaders. The gap — the deficits — has been 
 financed externally, in part by international institutions, and in part by private 
 
 banks. 
 
 U.S. multinational banks account for an estimated half of the total volume 
 of private lending to the poorer nations. Of the U.S. share, six banks account 
 for two-thirds of the business, according to the Federal Reserve Board. 
 
 These are the First National City Bank (the largest lender), the Bank of 
 America, the Chase Manhattan Bank, Manufacturers Hanover Trust Co., the 
 Chemical Bank, and Morgan Guaranty Trust Co. 
 
 An accompanying problem is that Eastern bloc countries have also been major 
 borrowers. Unofficial estimates of loans to them run $25 billion to $35 billion. 
 
 Alan Greenspan, the outgoing administration's chief economic adviser, believes 
 that some nations have just about reached the outer edge of their borrowing 
 capacity. 
 
 Carter and other heads of state plan an economic summit meeting to try to 
 find ways of dealing with this and related problems. Because of the advance 
 preparations necessary, the meeting is not likely to take place before mid-year. 
 
 In addition, Carter and other Western leaders must deal with no-so-subtle 
 pressure from the Organization of Petroleum Exporting Countries (OPEC) 
 linking its decision on further price increases to Western acquiescence in meet- 
 ing demands from the poorer countries, including the suggestion that much of 
 their debt to private banks be postponed. 
 
 So far, the richer nations have said that this is just as unthinkable as LDC 
 demands for free transfer of technology, elaborate commodity price supports, 
 and wide-scale reduction of tariff and non-tariff barriers. 
 
 But an effort will be made to revise the North-South dialog in a Paris meeting 
 toward the end of December. The Westerners will attempt to hold off the LDCs, 
 arguing there is little point in doing serious bargaining before Carter takes 
 office. 
 
 If Greenspan and other analysts are right, a number of debt renegotiations 
 could have an impact on foreign exchange markets, as well as an adverse impact 
 on that elusive element called "confidence." 
 
 What the experts really fear is the great pressure of debt rescheduling, to say 
 nothing of actual defaults, that could lead to money market turmoil. Banks that 
 were unable to collect on their loans could have a problem of their own. 
 
 Some foreign banks also appear to have become overextended in loans for the 
 construction of huge oil tankers, which are in over-supply. 
 
 But as large a problem as the tanker loans are likely to be for German, British, 
 and Hong Kong banks, it pales along side that posed by the dimensions of the 
 LDC debt. 
 
 Simply to service the debt, the cost to the LDCs has risen from an estimated 
 $10.5 billion in 1975 to $12.5 billion in 1976. Because the total debt is likely to 
 grow, a report by the New York firm of Solomon Bros, says, "The burden of debt 
 payment will continue to enlarge." 
 
 Carter has been so impressed by the complicated and awesome international 
 financial problems that he said a week ago, to a group of economists meeting in 
 Plains : "My Secretary of the Treasury has to be a man of major international 
 experience." 
 
 But some outsiders suggest that the job facing the next Treasury Secretary, 
 regardless of his experience, may be well nigh impossible. 
 
 While the poorer countries' massive debt looms as a bomb that can go off at 
 any time, specific difficulties, showing the interdependence of international eco- 
 nomics, will confront Carter almost from the start. 
 
97 
 
 First, there is the clear prospect that real economic growth in the major 
 industrial nations, including the United States, will be less in 1977 than in 1976. 
 
 A continuation of slow growth in the industrial world means increasing trouble 
 for the poorer countries, which depend on export sales to sustain their own 
 economies. 
 
 Second, Great Britain and Italy have specific problems that require immediate 
 international assistance. They may be joined next year by France, where double- 
 digit inflation and rising unemployment spell trouble. 
 
 Third, OPEC may increase the world's oil bill, already $125 billion a year. A 
 10 percent increase would add more than $12 billion annually to the cost of oil. 
 While the rise would be absorbed fairly easily in the United States, it would be 
 a sharp blow to less developed countries and to industrial nations such as Italy, 
 France, and Japan. 
 
 Fourth, the United States has failed to evolve an energy policy, which means 
 that the nation has become more rather than less dependent on imported oil. 
 Before the embargo, the United States imported less than 20 percent of its oil. 
 Today it imports 44 percent — and the figure may approach 50 percent by 1980. 
 
 Fifth, as William Rogers, under secretary of state for economic affairs, has 
 pointed out, the world's food supply remains a major problem, but good harvests 
 this year have made almost everyone complacent. Experts such as Democratic 
 adviser John Schnittker agree with Rogers that development of international 
 food reserves must become a top priority. 
 
 Sixth, nowhere has international interdependence become more apparent than 
 in foreign trade. The United States is heavily dependent on imports for many 
 materials and supplies other than oil. Against the historic figure of 4 percent of 
 the U.S. GNP represented by exports, today's $115 billion export level is closer 
 to 7 percent. Yet, the urgent need to gain export earnings is pushing all industrial 
 nations into protectionist postures. 
 
 Already, Common Market nations complain bitterly about the "invasion" of 
 Japanese cars and color television sets. In the United States, Carter will face 
 major demands for protection from television manufacturers and the steel 
 industries. He will be saved from a third decision — on shoes — because the Inter- 
 national Trade Commission apparently will complete an investigation in time 
 for President Ford to act on it. 
 
 Questions 1 wnd 2. By "political structures" did Mr. Rohatyn probably mean 
 lending institutions other than the private banks? If not, what did he likely 
 mean? Were they in being, (a) how would they cope with the growing debt 
 situation? (b) what would their relationship be to the U.S. taxpayer? 
 
 Answer. It is difficult to know precisely what Mr. Rohatyn meant by "political 
 structures." It is likely that Mr. Rohatyn was not referring to the need for a 
 new international institution to deal with the developing country debt situation 
 but was rather referring to "political structures" within the debtor nations 
 themselves. Debtor countries require strong political institutions to implement 
 effective economic stability programs, since these programs are often unpopular 
 domestically as a result of the short-term social and economic costs they entail. 
 
 The deveioping countries have a number of policy options available as a means 
 of coping with an increasing debt servicing burden. Most of these options, which 
 include various fiscal and monetary policies, have little effect upon the U.S. 
 taxpayer. However, in rare instances when a particular country is unable to 
 avoid default on its service payments to the U.S. Government, and these debts 
 have to be rescheduled, there is a marginal cost to the Treasury and the taxpayer 
 due to the deferral of payments. «■ , ■ 
 
 Question 3. a. Do U.S. multinational banks still account for roughly half of the 
 total volume of private lending to poorer nations? 
 
 b. Submit annual totals of those banks since 1968. 
 
 Question 4. a. Do the same six banks mentioned by Rowen still account for 
 some two-thirds of that business? . • 
 
 b. Submit annual totals of each of the present top twenty U.S. banks since 
 1968 
 
 Answer. Consistent data on the claims of banks of other developed countries 
 (as reported to the Bank for International Settlements [BIS]) are availab e 
 onlv for the period December, 1975 through June, 1977. The /oUowing table 
 shows the proportion of outstanding claims on non-oil LDCs of U.S. banks i to 
 claims reported to the BIS of all banks in G-10 countries and Switzerland 
 
98 
 
 (including claims of branches of U.S. banks in Hong Kong, Singapore, Panama, 
 Bahamas, and the Cayman Islands). 
 
 COMMERCIAL BANK CLAIMS ON NONOIL DEVELOPING COUNTRIES 
 [Dollar amounts in billions] 
 
 
 U.S. banks 
 
 
 U.S. bank 
 
 
 including 
 
 
 claims as 
 
 
 foreign 
 
 BIS 
 
 percent of 
 
 
 branches 
 
 total 
 
 BIS total 
 
 December 1975 
 
 $34. 
 
 $63. 
 
 54 
 
 June 1976 
 
 38. 8 
 
 70.2 
 
 55 
 
 December 1976 
 
 43. 4 
 
 80.9 
 
 54 
 
 June 1977 
 
 - 45.8 
 
 83.2 
 
 55 
 
 
 
 Note: The G-10 countries are: Belgium-Luxembourg, Canada, France, Germany, Italy, Japan, the Netherlands, Sweden, 
 United Kingdom, and United States. 
 
 We do not have the information on individual banks requested. 
 Question 5. What is the total of U.S. bank loans to : 
 
 (a) "Eastern bloc?" 
 
 (b) Cuba? 
 
 Question 6. Is Castro's Cuba included within the so-called "Eastern bloc?" 
 
 Question 7. Identify which, if any, U.S. banks that have made loans to Panama 
 have also made loans to Castro's Cuba and what is the total amount loaned by 
 each to Cuba? 
 
 Answer. As of June 30, 1977, U.S. bank claims on East European countries and 
 the Union of Soviet Socialist Republic amounted to $5.6 billion. U.S. banks re- 
 port no outstanding loans to Cuba. 
 
 Question Sum up briefly any OPEC pressure over the last two years on 
 Western powers, especially the U.S., to postpone payment of the debt of LDCs, 
 and the reactions to date to such proposals. 
 
 Question 9. Did the Republic of Panama figure specifically by name in any 
 such OPEC proposal? 
 
 Answer. There has been no "pressure" from the OPEC as a group for an 
 LDC debt moratorium, nor have there been an increasing or significant number 
 of developing countries which have sought debt reschedulings. Panama has paid 
 its debts on time. Although the developing-country bloc in the U.N. (which in- 
 cludes the OPEC countries) has advocated a number of debt relief proposals in 
 recent years, Panama has not figured specifically in any of these proposals, and 
 the U.S. and many of the other developed countries have steadfastly opposed all 
 proposals for generalized debt relief. 
 
 Question 10. Would you agree with Rowen that the "poorer countries' massive 
 debt looms as a bomb that can go off at any time"? 
 
 Answer. The Treasury does not concur with Mr. Rowen's assessment that 
 "the poorer countries' massive debt looms as a bomb that can go off at any 
 time." While the external indebtedness of the developing countries is large 
 in absolute terms, it is the Treasury's belief that these countries as a group 
 possess the capacity to meet their repayment obligations. Indeed, the repayment 
 record of the developing countries is excellent, and only in a few isolated in- 
 stances have developing countries sought to reschedule their foreign debts. For 
 a more detailed discussion of the international debt situation, please refer to the 
 statement of Under Secretary of Treasury Solomon attached to Question 12 in 
 this section. 
 
 It should also be noted that the economic situation of the developing countries 
 has improved considerably since Mr. Rowen wrote his article in December, 
 1976. In particular, the aggregate current-account deficit of the developing coun- 
 tries declined in 1977, while holdings of international reserves increased. 
 
 Question 11. In its conclusion, the Church Report spoke of the fear that some 
 debtor nation would default and this would start a domino effect that would 
 "set the multinational banking system teetering". What precisely would be the 
 likely chain of events and effect on that system if Panama defaulted on 
 
 ( a ) its present debt ? 
 
 (b) any subsequent debt even if present debt were rolled over and/or addi- 
 tional private loans were to be forthcoming? 
 
9a 
 
 Answer, (a) There is no reason to believe that Panama will default on its 
 foreign debt obligations to either public or private obligors. Despite a relatively 
 heavy debt burden, the Panamanian Government has made its debt-service pay- 
 ments on time, and it is expected to continue to do so in the future. Furthermore, 
 even if Panama were to experience difficulty in meeting its debt service payments 
 we would expect that it would be more likely to seek a rescheduling of its foreign 
 debts than to default. However, in the unlikely event that Panama did default 
 on its present debt, this would be expected to have very minimal effects on the 
 international banking system. Panama's debt to the commercial banks, some 
 $650 million, represents a very small fraction of the banks' total exposure in 
 developing countries and only one-tenth of G-10 bank claims on foreigners. 
 According to information supplied by the Federal Reserve Board and the Comp- 
 troller of the Currency to Senator Proxmire, no bank is more heavily exposed 
 in total claims with maturities over one year in Panama than it is authorized 
 to be exposed to a single domestic corporate borrower. Only two banks, both 
 State banks, had claims on capital equal to more than 10 percent of capital. 
 
 (b) Given current trends, it is not expected that any additional debt incurred 
 by Panama will change the outcome suggested in 11 (a) . 
 
 Question 12. What would be the effects on : 
 
 (a) U.S. private banks 
 
 (b) The U.S. economy in a situation in which 
 
 (i) Non-industrial, developing countries like Panama all were to default on 
 their debt to those banks? 
 
 (ii) In addition to such default, the Communist dominated socialist bloc 
 countries also defaulted? 
 
 (iii) Beyond (ii), the OPEC nations also withdrew all their short-term de- 
 posits from those banks? (According to the Church Report "of the $18.2 billion 
 in OPEC deposits at the 21 largest U.S. banks here and at their overseas 
 branches, nearly half had a maturity of 30 days or less.") 
 
 (iv) What steps would be available in each of the above situations (a) for 
 the banks to take? (b) for the government to take? 
 
 Answer. The Treasury Department does not believe that the scenario en- 
 visioned in this question is likely to be realized. The Treasury's analysis of the 
 international debt situation is provided in the attached statement of Under 
 Secretary Solomon to the Senate Committee on Banking, Housing and Urban 
 Affairs. 
 
 It is always possible to postulate a "worst-case" scenario, such as the one posed 
 in this question. However, this appears so remote that we find it analytically 
 meaningless to speculate about its policy implications. The generally excellent 
 repayment record of the developing countries, their improved economic perform- 
 ance in 1976-77, the desire of the middle- and upper-income developing coun- 
 tries to preserve their access to private capital markets, the self-interest of the 
 OPEC countries in preserving the stability of the international financial system, 
 and the lack of adequate alternative repositories for their funds, all suggest that 
 the scenario posed by this question is not likely to be realized. 
 
 Statement of the Hon. Anthony M. Solomon, Under Secretary for Monetary 
 Affairs, U.S. Department of the Treasury 
 
 The Subcommittee is performing a valuable service by providing this oppor- 
 tunity for public discussion of the rapid growth of international debt in recent 
 years, and the questions this may raise for world monetary stability. 
 
 The structure of international debt in large measure reflects the structure of 
 the international balance of payments. Thus, a description of the pattern of 
 world payments sets the proper framework for considering the questions which 
 the Subcommittee is addressing. 
 
 The five-fold increase in oil prices in 1973-74 not only transformed profoundly 
 the pattern of world payments, it also altered traditional attitudes toward pay- 
 ments deficits and surpluses. With OPEC countries suddenly accumulating 
 export revenues far beyond their capacity to spend, it became obvious that the 
 oil importing countries had to accrue large and unprecedented deficits as the 
 counterpart. The industrial nations as a group had to accustom themselves to 
 running payments deficits and borrowing capital, in contrast to their usual 
 role of running surpluses and lending capital, while the developing nations had 
 to adapt themselves to much larger deficits and much larger borrowing thai* 
 they had previously experienced. 
 
100 
 
 In the initial phases of these wrenching changes in the world payments pat- 
 tern, there were deep-rooted fears that the oil importing nations, trying indi- 
 vidually to balance their own payments positions, would all harm each other by 
 external restrictions and excessive domestic retrenchment, as they tried to 
 eliminate deficits which as the counterpart of the OPEC surplus were collectively 
 irreducible. Recognizing these dangers, the IMF membership agreed in January 
 1974 in the Rome Communique to forswear such self-defecting actions. 
 
 Accordingly, in the early aftermath of the oil price increases, emphasis was 
 placed — and appropriately placed — on assuring the adequacy of resources for 
 financing the balance of payments costs of higher oil prices. Nations were en- 
 couraged, at least temporarily, to "accept" the oil deficit and finance it, rather 
 than to try individually to eliminate their deficits at the expense of other oil 
 importing countries. To facilitate the financing, the IMF established a temporary 
 "Oil Facility," which channeled nearly $8 billion to member nations, allocated 
 largely in relation to the increase in oil import costs, and with much less than 
 the usual emphasis on the IMF's traditional requirement that its financing be 
 linked to carefully negotiated adjustment programs on the part of the borrowers. 
 
 In the circumstances, nations therefore borrowed very heavily in the years 
 1974-76 to finance large payments deficits — deficits swollen not only by high 
 oil costs but also by severe world inflation and recession, by inappropriate 
 domestic policies in some cases, and by a variety of other factors. The borrow- 
 ing took many forms. While official financing through the IMF during this 
 period was far above historical levels, private markets provided about three- 
 quarters of total financing during the three year period. 
 
 Conditions on the supply side of the market were also conducive to a rapid 
 growth in private financing during that period. Huge OPEC surpluses, of course, 
 brought large deposits and placements to the banks and other financial inter- 
 mediaries, and greatly expanded the liquidity of those institutions. In addition, 
 the period was one of rapid secular expansion of the international banking sys- 
 tem. Many institutions were competing eagerly for new customers, as they sought 
 to establish themselves in new activities and new geographic areas, and endeav- 
 ored to broaden their scope of operations so as to spread risks and diversify 
 portfolios at a time when domestic loan demand was less buyant than in im- 
 mediately preceding years. 
 
 Using such data as are available — unrealiable, inexact and incomplete — we 
 can sketch out a pattern of world payments in the period 1974 through 1976 
 with roughly the following dimensions : 
 
 The cumulative current account deficits financed equaled about $225 billion 
 Or so (after the receipt of grant aid), representing the counterpart of the 
 lendable surpluses of OPEC plus those of certain industrial countries registering 
 surpluses during the period. 
 
 About $15 billion of these deficits or 7% of the total was financed through 
 the IMF, the bulk of it through the temporary "Oil Facility" and the "Compen- 
 satory Finance Facility," both of which provide financing largely on the basis 
 of "need" with relatively little emphasis on "conditionally" or the adoption of 
 corrective adjustment measures by the borrower. 
 
 About $40 billion of the deficits or 18% of the total was financed through a 
 variety of other official sources — development lending by industrial countries 
 and OPEC by the IBRD and regional development banks and other sources. 
 
 The remaining current account deficits some $170 billion plus about $40 bil- 
 lion of debt repayments were financed largely through market-oriented borrow- 
 ing. Most of these funds were obtained through banks and securities markets. 
 Some came from governments seeking investment outlets for their surpluses or 
 as export financing. 
 
 As these numbers suggest the accumulations of debt, especially debt owed to 
 private lenders, have been large, by historical standards extremely large. While 
 the above estimates extend only through 1976 the pattern has probably con- 
 tinued this year 
 
 It is the purpose of these hearings to examine whether this rapid and un- 
 precedented enlargement of lending activity and debt has reached a danger 
 point for the monetary system — either in the sense that large numbers of 
 countries have borrowed beyond their capacity to service debt or in the sense 
 that our banks and other institutions are overextended 
 
 My own assessment is that the system is not in any such position of danger, 
 either as a result of excessive borrowing by large numbers of debtor nations — 
 
101 
 
 though some have doubtlessly approached or reached the limits of financial 
 prudence — or as a result of our financial institutions being over-stretched. 
 
 In formulating its judgments on the "burden" of these debts on borrowers, the 
 Subcommittee should be aware of certain reasons why the burden may not be 
 as severe as the numbers suggest. Let me mention several such reasons : 
 
 First, economic growth and expanding trade tend to increase a nation's capacity 
 to service debt. Some continuing increase in debt can thus be accommodated 
 without added burden. Some of the debt increase is simply the increase in trade 
 financing that accompanies the increase in the value of imports. For instance, 
 the debt service ratio for developing countries as a group was no higher at the 
 end of 1976 than it was in 1973. 
 
 Second, inflation has substantially reduced the burden of previously incurred 
 debt measured in real terms. Furthermore, in real terms interest rates which 
 countries are paying on funds they borrow are substantially less than the 
 nominal rates. 
 
 Third, the borrowing is not being undertaken on balance by the poorer less 
 developed group of nations. IMF studies show that as a group non-oil developing 
 nations are borrowing little or no more at present — adjusted for inflation and 
 real growth — than they borrowed in the years before the oil price increases of 
 1973-1974. The main structural change in world payments since that time is 
 that the industrial nations, as a group, now borrow large sums from OPEC — 
 sums which finance both the current account deficits of the industrial countries 
 and their exports of capital to the developing nations. The developing countries 
 now obtain some capital directly from OPEC while continuing to obtain the 
 bulk of their credit from industrial nations. 
 
 Fourth, statistics often exaggerate debt servicing needs, by listing as "short- 
 term" loans for which there are commitments or understandings to extend or 
 roll-over. Also, the most commonly used aggregated data on foreign loans by 
 banks involve a substantial amount of double counting because they include 
 loans to other banks in major industrial countries. An accurate appraisal re- 
 quires the elimination of most inter-bank loans. 
 
 Fifth, many of the countries which have increased their debt have also in- 
 creased their official reserves. 
 
 On the question of whether the banks are getting over-extended, you will 
 receive testimony from commercial bankers and from the Federal Reserve 
 through Governor Wallich. I will offer only a few comment* which might be 
 relevant : 
 
 Historical data on loan losses incurred through international lending by U.S. 
 banks do not support the view that such loans jeopardize bank stability. Various 
 studies indicate that the loan losses from foreign loans have been considerably 
 less than for domestic loans in recent years. 
 
 The statistics on the volume of bank credit overstate the extent of bank 
 exposure since some of these credits are guaranteed either by a government 
 agency or by a multinational corporation whose head office is in the lending 
 country. 
 
 Statistics on the maturity structure of international loans by banks also provide 
 some encouragement. A high percentage of loans to foreigners represents self- 
 liquidating trade credits with a maturity of less than one year. 
 
 In his appearance April 5 before a House Committee the Acting Comptroller 
 pointed out that the extensive examinations his agency performs on national 
 banks engaged in international lending did not reflect cause for serious concern. 
 He also said that the loan problems of major banks were concentrated in the real 
 estate field and in various domestic industries. 
 
 I am encouraged that as our international banking system grows and evolves, 
 both the institutions themselves and the government regulators are developing 
 more sophisticated procedures, and gathering more detailed information, to 
 increase understanding and to protect depositors. A number of banks are devot- 
 ing more care and more resources to analysis of individual borrowing countries. 
 Both the Comptroller of the Currency and the Federal Reserve have introduced 
 major new measures to obtain more timely and more useful information. These 
 moves will improve and strengthen the system. 
 
 But it is not good enough, clearly not good enough, simply to assure that 
 debtor nations, as a group have not thus far overborrowed, or that our private 
 credit institutions as a group are not at present overextended. Combining all 
 borrowers in a group or all banks in a group can conceal major differences in 
 individual cases. 
 
102 
 
 The poorer countries which have never had significant access to the private 
 markets will, no doubt, continue to be dependent primarily on bilateral aid and 
 loans from international development lending institutions. They will no doubt 
 have to continue to limit their deficits basically to the amount of the new flow 
 of funds which they can expect from these official sources. If the flow of aid 
 increases steadily as now expected they should be able both to service their 
 accumulated debt and run somewhat larger current account deficits. 
 
 There are other countries — certainly not a large number but a significant 
 number — that have reached or are approaching the limits of their ability to 
 borrow. These are countries that are beset by economic distortion, that still 
 face large payments deficits, where the need for corrective measures and adust- 
 ment is compelling. 
 
 We must assure ourselves that such countries, and others which may in future 
 face similar difficulties, are encouraged, and permitted, to adjust their economies 
 in ways that are compatible with our liberal trade and payments objectives, in 
 ways that avoid discrimination against others and disruption of the world 
 economy. We must assure ourselves that our monetary system will foster such 
 adjustment, and that it will be able to cope with new stresses that may arise in 
 the future. 
 
 While our international monetary system is at present strong and functioning 
 effectively, we do not have in place all the machinery needed to insure against 
 such future risks. It is for that reason that the Administration is proposing 
 that the United States and other strong industrial nations join with major 
 OPEC creditors to establish within the IMF a new facility — the Witteveen 
 facility — to fill that critical need. We will shortly be proposing legislation to 
 authorize United States participation in this facility, and I would like to describe 
 its main features today. 
 
 The rationale for the Witteveen facility — its formal name is the IMF Supple- 
 mentary Financing Facility — rests on three main premises : 
 
 First, that large payments imbalances will continue for the next several years. 
 Certainly our expectation is that the OPEC surplus will diminish only gradually, 
 in line with the growth of OPEC spending and with the implementation of 
 effective energy conservation programs in the United States and elsewhere. 
 
 Second, that there will be a need for greater emphasis on "adjustment" of 
 imbalances, rather than simply "financing" imbalances, especially by those coun- 
 tries facing relatively large payments deficits. With the passage of time, the 
 need for countries to adapt to higher energy costs and other economic develop- 
 ments has been increasingly recognized. At the Manila IMF meeting last fall, 
 it was recognized that : adjustment should be symmetrical ; deficit countries 
 should shift resources to the external sector and bring current account positions 
 into line with sustainable capital inflows ; countries in strong payments positions 
 should maintain adequate demand consistent with anti-inflationary policies : 
 exchange rates should play their proper role in adjustment. 
 
 Third, that the resources of the IMF must be adequate both to enable it to 
 foster responsible adjustment policies by members facing severe payments dif- 
 ficulties, and also to provide confidence that it can cope with any potential 
 problems that may arise. 
 
 There is concern that without additional funds the IMF's resources may not 
 be adequate to meet demands which may be placed on it over the next several 
 years. With the relatively large amount of use in the past three years, the 
 IMF's usable resources are at present extremely low at about $5 billion. These 
 usable resources will be increased by about $6 or $7 billion with the coming 
 into effect of the sixth quota review approved in 1976 and now being ratified, 
 and about $3 billion remains available under certain conditions through the 
 General Arrangements to Borrow. Even with those additions, and the repay- 
 ments which may be expected, the IMF's resources look sparse in a world in 
 which total imports are running at an annual level of nearly a trillion dollars, 
 and in which OPEC surpluses are likely to decline only gradually from the 
 current $40-45 billion level. 
 
 In order to provide the added resources, at a meetincr in Paris earlier this 
 month, the United States agreed with six other industrial countries and seven 
 OPEC countries on an arrangement which would assure the availability of 
 about $10 billion to the IMF for the proposed Witteveen facility. The industrial 
 countries would provide $5.2 billion, of which the U.S. share — subject to Con- 
 gressional authorization— would be about $1.7 billion. The OPEC members 
 
103 
 
 would provide about $4.8 billion, or nearly half the total, with Saudi Arabia 
 the largest single participant at $2.5 billion. * 
 
 This $10 billion would be used for a special facility in the IMF. It is a tem- 
 porary facility— countries could apply within the next 2 to 3 years, and could 
 draw 'down funds over a period of 2 to 3 years, though the total period of dis- 
 bursements could not exceed 5 years. It would be available for use by members 
 only in clearly defined circumstances. Specifically, a member drawing under 
 
 the facility : ■«•■•■*•* 
 
 Must have a balance of payments financing need that is large m relation to 
 its IMF quota and exceeds the amount available to it under the IMF's regular 
 policies ; , . _ ^ ' _ . . 
 
 Requires a period of adjustment that is longer than provided for under regular 
 IMF policies; a ;■ ■ . 
 
 Must enter into a standby agreement with the IMF in which it undertakes 
 to adopt corrective economic policy measures adequate to deal with its balance 
 of payments problem. 
 
 The facility, in short, is designed to encourage those countries with particu- 
 larly severe payments problems to adopt internationally responsible adjustment 
 programs — and to avoid the unwelcome alternatives of resort to the controls, 
 trade restrictions, and beggar-thy-neighbor policies which can be so harmful 
 to world prosperity and so disruptive to our liberal trade and payments order. 
 It is not a device for augmenting development assistance. The IMF provides 
 only balance of payments support. The member drawing on the facility receives 
 more financing than is otherwise available from the IMF: a longer period of 
 adjustment (a 2 to 3 year program as compared with the 1 year normally 
 applicable in the IMF) ; and a longer period of repayment (3 to 7 year maturity, 
 as compared with the IMF's normal 3 to 5 year maturity). Since interest on the 
 financing provided to the Fund is market-related, the borrowing country would 
 also pay a somewhat higher charge. 
 
 Participation in the facility is also advantageous to the United States and 
 others who are providing the financing. In addition to our interest in assuring 
 a strong and smoothly functioning international monetary system, we receive 
 in exchange for our participation a strong, liquid and interest-earning monetary 
 asset. Technically, the United States (or other participant) agrees to provide 
 currency to the IMF in exchange for an automatic drawing right on the IMF, 
 which is counted as part of our international reserve assets and which can be 
 drawn down at any time the United States can sell or transfer the asset to 
 others if there is agreement to do so. The interest rate we receive is linked to 
 U.S. Treasury issues of comparable maturity, so there is no net cost to the 
 Treasury. As the drawings are repaid by the borrower, the IMF returns the 
 dollars to the U.S., U.S. reserve assets are reduced, and the transaction is 
 reversed. 
 
 The Witteveen facility will make a major contribution to strengthening the 
 international monetary system against the problems the Subcommittee is ad- 
 dressing. First, it encourages countries to initiate needed adjustment measures 
 before their debts become too large for them to handle or credit is no longer 
 available, and it encourages them to adjust through sound and internationally 
 responsible policies. Second, the fact that the facility is available will improve 
 the creditworthiness of the international monetary system and confidence in 
 the system. It is not constructed and will not be used to help any banks that 
 may have lent excessively or unsoundly. It will help countries that are in need, 
 not financial institutions. Nor will it be used to take over the private banks' 
 regular lending activities. For one thing, the amounts involved are far, far below 
 the levels of private lending — although the IMF may in the period ahead ac- 
 count for a share of total balance of payments financing larger than the 7 
 percent provided in 1974^76, it will remain small in comparison with the share 
 channeled through the private market. For another, experience indicates that 
 after the IMF enters into a standby agreement with a borrowing country, pri- 
 vate lending tends to expand rather than contract. The banks will benefit from 
 the Witteveen facility, but only indirectly — through an improved international 
 environment and stronger monetary system that will benefit all parties, includ- 
 ing American industry, workers and farmers. 
 
 The Subcommittee has asked whether consideration should be given to other 
 new forms of cooperation between public and private institutions to improve 
 assessments of creditworthiness. The Federal Reserve has shown considerable 
 interest in this question and I know Governor Wallich will want to discuss it, 
 so I will comment only briefly. 
 
104 
 
 I think we must be receptive to new ideas along these lines, and be willing 
 to explore the prospects for closer interaction. The IMF is at present examining 
 its procedures, and considering whether the provision of more information about 
 individual economies would be of value to both borrowers and lenders and thus 
 facilitate the continued flow of private capital. Looking beyond the question of 
 providing more information, the idea of cooperation between the IMF and 
 private banks, through joint loans to country borrowers, or IMF guarantees of 
 private loans, has been mentioned. There is great reluctance on the part of many 
 IMF members to move in this direction— which they see as a fundamental shift 
 in the character of the IMF— and it is not realistic to expect such moves in the 
 foreseeable future. Nonetheless we must, as Secretary Blumenthal has said, 
 be prepared to review old premises and consider innovations, to assure that 
 our institutions grow and adapt, and are used with maximum effectiveness. 
 
 A final question raised by the Subcommittee relates to formalizing procedures 
 for debt reschedulings. Under Secretary Cooper will discuss this issue in greater 
 detail. I merely want to say that it is not in the interest of either debtors or 
 creditors to undermine the basic principle that reschedulings should be ac- 
 cepted only in absolutely unavoidable cases. I think the arrangements by 
 creditor clubs have worked well, although there is room for some improvement. 
 Presently the IMF role, in actual creditor club negotiations, is limited to that of 
 a technical observer and supplier of statistical information. I have an open 
 mind as to whether a greater IMF role in rescheduling than presently exists 
 would be helpful, but in general I think there is some advantage in keeping 
 these cases ad hoc and informal. 
 
 CONCLUSION 
 
 The conclusions I would like to leave the Subcommittee with are as follows : 
 
 1. Debt is not necessarily bad. As shown by the experience of the United 
 States in the nineteenth century, and Canada and others at present, borrowed 
 money, if productively invested, provides the capacity to service the underlying 
 debt, and need not represent a serious burden. 
 
 2. The large growth in international debt is a natural consequence of the 
 pattern of world payments of recent years, and of the recognized need to 
 finance the imbalances resulting from the oil price increases, while we put in 
 place energy policies needed to reduce the imbalances. 
 
 3. There is no evidence that the international monetary system is presently 
 in danger either from general overborrowing by uncreditworthy countries or 
 general overextension of the banking system. Several countries have niade en- 
 couraging progress in their adjustment efforts. 
 
 4. Several oil producing countries will continue to run substantial payments 
 surpluses with some resultant strain on the world payments system, for some 
 years to come. 
 
 5. A few countries are approaching or have reached the limits of prudence in 
 borrowing and may experience considerable difficulties in financing their current 
 account deficits. The countries experiencing such difficulties should pursue poli- 
 cies which will reduce their deficits and preserve their creditworthiness so that 
 
 private lenders may, without undue risk, continue to provide the bulk of the 
 needed financing. 
 
 6. Adequate conditional financing should be made available through the IMF 
 to encourage the adoption of stabilization programs by countries which need to 
 take such steps and to give such countries the financing needed to permit them 
 to adjust at a politically tolerable pace by policies acceptable to the world 
 community, and without an undue impact on world growth. 
 
 7. Bank supervisory agencies should continue to exercise surveillance over 
 external lending, as they do with domestic lending, to preserve the soundness 
 of banking systems. 
 
 8. And, finally, counntrles should resist pressures for domestic protection and 
 keep their markets open for international trade. 
 
 In sum, Mr. Chairman, the system has performed well under difficult circum- 
 stances. Yet it contains some weaknesses and we are moving on a number of 
 fronts to strengthen it. Your Subcommittee will shortly be considering legislation 
 to authorize U.S. participation in a central aspect of this effort — the supple- 
 mental IMF facility — and I hope you will give it your strong support. 
 
105 
 
 VII 
 
 In 1976, Nicolas Arditto Barletta, Planification Minister, submitted a memo- 
 randum to Eng. Demetrio B. Lakas, Panama's President of the Republic, regard- 
 ing the financial perspectives for 1977. In this memorandum, which was inserted 
 by Senator Helms 1 of North Carolina in the Congressional Record for February 
 22, 1977, (S2819ff ), Mr. Barletta said the following : 
 
 "We feel it will be extremely difficult to syndicate loans with the commercial 
 banks in the amounts previously mentioned, taking into account that during the 
 present fiscal period we must contract for a total of B/823.6 million with those 
 sources, who in turn have become more demanding each time that an accord has 
 to be finalized. Besides, the relation between servicing the debt and current 
 revenues of between 38.9 percent and 39 percent suggest a deteriorated capacity 
 to service this debt and thus will increase the risk as realized by the lending 
 institutions." 
 
 Question 1. Specify how the banks have become more demanding with Panama 
 with each new transaction. 
 
 Answer. We have no information as to what Mr. Barletta may have been 
 referring. 
 
 Question 2. What is the average relation between debt service and current 
 revenues of all debtor countries outside the Soviet bloc ? 
 
 Question 3. Name those countries whose debt service percentage is equal to or 
 greater than Panama's 38.9% to 39%. 
 
 Answer. Due to the wide diversity among countries of governmental struc- 
 tures and budgetary reports, it is not meaningful to provide the international 
 comparisons which have been requested. 
 
 One major problem is that the level of total central government receipts 
 depends on the division of budgetary responsibility between the central and 
 local governments for matters such as roads, education, health, and police. Also 
 many governments own or operate railways, power plants, etc. which in other 
 countries are in the private sector. Furthermore, budget accounts may be shown 
 on either a gross or net basis, i.e., receipts before or after deductions of certain 
 refunds and transfers. 
 
 Finally, when figures for different countries are compiled, interest paid on 
 total public debt is not reported by all countries, and amortization payments 
 are almost never reported. 
 
 Question 4- Detail how Panama's debt service percentage compares to that of 
 New York City. 
 
 Answer. New York City's debt service for its 1978 fiscal year, which ends on 
 June 30, 1978, is $1.6 billion for its general obligation bonds and $437 million for 
 bonds issued by the Municipal Assistance Corporation. The City's total expense 
 budget is $13.8 billion. 
 
 It is misleading, however, to compare New York City's debt service on its ob- 
 ligations (as a percentage of revenues) with other jurisdictions or with Panama 
 for a variety of factors. One such factor is that debt service on City bonds, which 
 is $1.6 billion in the current year as noted above and for certain short-term in- 
 debtedness, is paid out of an unlimited tax on real estate. If the City had no gen- 
 eral obligation debt, it could not levy or use that portion of the real estate tax 
 for operating purposes. Thus, the City is not using for debt service revenues 
 which would otherwise be used for budgetary expenditures. 
 
 MAC debt service, however, which is $437 million, is paid out of general fund 
 revenues. 
 
 Question 5. If the present economy of Panama does not improve, can that 
 country repay interest and principal coming due on loans of the commercial 
 banks? 
 
 Answer. At year end 1976, Panama owed $650 million to commercial banks in 
 disbursed external debt. Although the Panamanian economy has stagnated dur- 
 ing the past three years, all debt service payments to the commercial banks are 
 being made on time. In connection with an IMF stand-by, the Panamanian gov- 
 ernment has : undertaken steps which will ensure prompt repayment, placed ceil- 
 ings on the government deficit and borrowing for 1977, and postponed public in- 
 vestment in order to reduce expenditures. Even if the economic situation does 
 not brighten immediately, we expect these measures will improve Panama's abil- 
 ity to service its debts. 
 
 At the same time, ratification of the Canal treaties would help to improve the 
 economic outlook by significantly improving investor confidence. 
 
 1 See Appendix I, B (Exhibit 3). 
 
106 
 
 Question 6. If Planification Minister Barletta has submitted a similar memo- 
 randum for 1978, please submit a copy for the record. 
 
 Answer. We are not aware of the existence of any such memo for 1978. 
 
 Question 7. Specify how Panama's loans have been secured. 
 
 Answer. Please see the response to Question 17 concerning the London Times 
 article. 
 
 Question 8. Detail how the annuity and the method by which it is paid to Pan- 
 ama by the United States relates to payments by Panama on its indebtedness to 
 U.S. banks. 
 
 Answer. In compliance with the provisions of Article XIV of the Convention 
 of 1903, as amended by Article VII of the Treaty of 1936 and Article I of the 
 Treaty of 1955, the U.S. pays Panama a yearly annuity of $2,328,200. In 1962, the 
 Republic of Panama requested and irrevocably authorized the Government of the 
 United States henceforth to pay from the annual annuity payments the sum of 
 $500,000 to Chase Manhattan Bank, $1,000,000 and $828,200 to the First National 
 City Bank of New York as Fiscal Agents for disposition as provided in the Fiscal 
 Agency Contract between said banks and the Republic of Panama. Remittance 
 of these checks makes possible annual payments on loans of the Republic of 
 Panama to U.S. banks. 
 
 VIII 
 
 The New York Times on February 5, 1974, carried this story datelined Panama 
 City by H. J. Maidenberg titled, "The Gnomes of Panama are Creating A Mush- 
 rooming 'Latindollar' Market". 
 
107 
 
 The Gnomes of Panama Are Creating 
 A Mushrooming' Latindollar' Market 
 
 By H. J. MAIDENBERG 
 
 Sp*cl»l to Tht Nt» York Tlnua 
 
 PANAMA CITY— Whether 
 one's dollars are hc<t or cold, 
 an increasing number of 
 friendly bankers in this new 
 tropical Switzerland are 
 waiting to receive them — 
 with interest instead of a 
 service charge. 
 
 Numbered accounts, ordi- 
 nary deposits or however the 
 money is designated — its 
 combined flow here jumped 
 61 per cent to $2-billio"> by 
 official reckoning last year. 
 But many bankers hold that 
 the total may have been 
 understated by half. 
 
 It is known that the num- 
 ber of banks here mush- 
 roomed from only four a few 
 years ago to 58 at last count, 
 and the Panama Banking 
 Commission is constantly 
 processing new applications. 
 Of the total banks, 45 are 
 foreign, and they represent 
 almost all the leading names 
 in international banking. 
 
 By its hospitality to for- 
 eign banks, Panama has be- 
 come the center of the boom- 
 ing "Latindollar" market. 
 Bankers here estimate that 
 the volume of such trading 
 in the Caribbean Basin may 
 approach $10-billion, or ,a 
 tenth of the Eurodollars held 
 in Europe and other areas. 
 
 And if the current talks 
 between Panama and Wash- 
 ington over the disputed 
 Canal Zone are successful, 
 the Latindollar volume is ex- 
 pected to soar. 
 
 Panama's chronic dispute 
 over the waterway doesn't 
 worry the bankers because, 
 as one explained the other 
 day: "A few Telex messages 
 and most of the money could 
 be out of the country in min- 
 utes." But he added: "The 
 solution to the long dispute 
 over the Zone's sovereignty 
 would encourage less sophis- 
 ticated holders of dollars to 
 bring them here." > 
 
 Most of the Latindollars 
 that flow in and out of Pan- 
 ama represent dollars owned 
 by Latin Americans, although 
 an .increasing number of Eu- 
 ropeans and v Asians are 
 
 bringing their funds here as 
 well. 
 
 A typical depositor could 
 be a Colombian businessman 
 who does not want to bother 
 getting his Government's ap- 
 proval for funds with which' 
 to Import goods. Such delays 
 can be costly. By keeping a 
 supply of dollars here, he 
 avoids such expensive red 
 tape. Seven Colombian banks 
 operate branches' here main- 
 ly to serve these business- 
 men. 
 
 And others have untaxed, 
 illegal or other funds they 
 Want to hide. However, no 
 American bank will accept 
 numbered accounts, which 
 are illegal in the United 
 States. 
 
 The borrowers of Latin- 
 dollars may be oil wildcat- 
 ters financing a venture in 
 the Persian Gulf or they may 
 be entrepreneurs buying 
 goods here that they hope to 
 smuggle into a Central or 
 South American country. 
 
 Other borrowers, for one 
 reason or another, will not 
 or cannot obtain funds from 
 banks closer to home. 
 
 As a ruL, the interest rates 
 on deposits and loans are set 
 at one-half to three-quarters 
 of i percentage point above 
 the Eurodollar rate on any 
 given day. 
 
 About one-fourth of the 
 Latindollars reported to be 
 held by the banking system 
 here is owned by Panaman- 
 ians. Although all "paper" 
 monies used here are termed 
 balboas, the only legal tend- 
 er is the United States dollar. 
 All United States coins and 
 , their Panamanian equivalents 
 are widely used here as well. 
 
 Panama's traditional wide- 
 open business climate and 
 her unusual geographic posi- 
 tion have long made this na- 
 tion of 1.5 million a major 
 trading center for legftimate 
 and contraband goods. In the 
 absence of a central bank or 
 Federal Reserve, the bankers 
 police themselves under the 
 watchful eyes of the State 
 Banking Commission, upon 
 whose board many of them 
 sit. 
 
 However, the rapid growth 
 of the banking community is 
 a result of the currency con- 
 trols that have been imposed 
 in most Latin American coun- 
 tries. In South America, for 
 example, only Venezuela and 
 Paraguay permit the free en- 
 try and exit of dollars. 
 
 Basically, the banks here 
 are divided into three groups. 
 Most hold Class 1 licenses, 
 which e*nable them to engage 
 in all lines of banking. About 
 a dozen, including the Swiss 
 Bank Corporation, have Class 
 2 permits that restrict them 
 to non-Panama or offshore 
 operations. And three have 
 Class 3 licenses — Banque Na- 
 tional de Paris, the Korea 
 .Exchange Bank and the Ma- 
 rine Midland Bank of New 
 York — that allow them to 
 maintain a representative of- 
 fice that refers business to 
 their headquarters. 
 
 Panama's banking com- 
 munity has benefited not only 
 from the nervousness sweep- 
 ing European and Asian 
 money markets, but also 
 from the growing national- 
 istic fevers in many Carib- 
 bean islands. These tradition- 
 al havens for legal and illegal 
 money are now growing 
 hostile to foreign banks. 
 
 The foreign bankers have 
 contributed to the current 
 building boom here as bank 
 buildings have sprouted 
 around the city and have 
 helped provide jobs and busi- 
 ness loans. , t 
 
 The First National City 
 Bank of New York, recently 
 raised $1 15-milIion to help 
 refinance Panama's foreign 
 debts. And the Chase Man- 
 hattan has financed low-cost 
 public housing and other 
 needed social improvements. 
 
 All told, banking is fast 
 becoming Panama's ■ long 
 sought economic catalyst. 
 
 25-605 O - 78 - 8 
 
108 
 
 Question 1. Does Treasury think, as the writer indicates, that the combined 
 flow of dollars to Panama banks is actually double what is reported? 
 
 Answer. Published data on capital flows to Panama are presented in terms 
 of net flows or in terms of changes in assets and liabilities. Data are not available 
 on gross flows. Thus the Treasury is not in a position to evaluate the accuracy 
 of the writer's statement. The most recent data on bank flows to Panama are 
 contained in the answer to Representative Snyder's third question relating to 
 the London Times article. 
 
 Question 2. The article indicates that seven (at that time) Colombian banks 
 operate in Panama to aid Colombian businessmen who want to avoid red tape of 
 their own country's government regulations on business. How does this serve 
 the best interest of the Colombian government and the people as a whole? 
 
 Question 3. What is the attitude of that government towards this practice? 
 
 Answer. These questions were checked with the State Department and neither 
 Treasury nor State has any information on the operation of Colombian banks 
 in Panama. We are therefore not in a position to provide an informed answer 
 to these questions. 
 
 Question 4- What other nations' banks have been set up in Panama for sim- 
 ilar purposes and what is the attitude of those nations' governments? 
 
 Answer. The Treasury and State Departments do not have information on 
 banks of third countries set up in Panama "to avoid red tape of their own coun- 
 try's government regulations on business," and cannot comment on the attitude 
 of their governments. 
 
 Question 5. The article states "the borrowers . . . may be entrepreneurs buying 
 goods here that they hope to smuggle into a Central or South American country." 
 Is the U.S. another destination? 
 
 Question 6. Since, as Maidenberg states, "Panama's traditional wide-open busi- 
 ness climate and her unusual geographic position have long made this nation of 
 1.5 million a major trading center for legitimate and contraband goods," 
 
 (a) List the major items of contraband known over the years to have been 
 smuggled in and out of Panama. 
 
 (b) Cite those, and their estimated annual amounts, destined for the U.S. 
 Question 7. What role has the Panama Canal played in contraband traffic to the 
 
 United States? 
 
 Answer. We will attempt to respond to these questions for the record as soon 
 
 as possible. 
 
 [Subcommittee note : Answers to Question 5, 6 and 7 were not forthcoming. See 
 Appendix D, cover letter.] 
 
 IX 
 
 Murray N. Rothbard, Professor of Economics at the Polytechnic 
 Institute of New York, wrote an article in "Inquiry" dated Decem- 
 ber 5, 1977, entitled, "The Treaty that Wall Street Wrote". 
 
 The Treaty that Wall Street Wrote 
 
 (By Murray N. Rothbard) 
 
 If You Think the New Panama Canal Treaty Means an End to the Big 
 Stick and Dollar Diplomacy — Think Again 
 
 The Panama Canal question has already established itself as the hottest 
 political issue for the coming year. Ronald Reagan, who almost rode to the 
 Republican nomination last year on a promise to keep the canal, is back again, 
 leading the powerful forces opposing the new Carter treaties with the government 
 of Panama. Alert to the polls that show Americans overwhelmingly opposed to 
 giving up the canal, the Republican National Committee and most Republicans 
 across the country have gleefully seized upon this issue, thus going flatly against 
 the counsel of former President Ford, who vigorously supports the treaty. 
 
 In the liberal and "moderate" press, the contending forces are lined up in an 
 all-too-familiar morality play. Opposed to the treaty are reactionaries and jin- 
 goists, emotionally and irrationally devoted to the mystique of American "sov- 
 ereignty" in a foreign land ; in its favor are sensible and moderate international- 
 ists, people who believe in friendly cooperation between the United States and 
 Third World nations, and who wish to jettison the last remnants of a naive 
 and outdated American imperialism left over from the innocent if clumsy swag- 
 gering of Theodore Roosevelt. What could be a more clear-cut moral lineup : for 
 
109 
 
 the treaty all the Good Guys, from Carter to Ford to the New York Times 
 and the Washington Post ; against, all the certified Bad Guys from Reagan to the 
 American Conservative Union to the John Birch Society ? 
 
 But you can't always tell all about the game from a list of the players ; and 
 there is more to be said than the standard account in the Establishment media. 
 
 The Reaganite bluster about sovereignty can easily be dismissed; there is, 
 however, a more important question about the new Panama treaty : Does it really 
 abandon U.S. imperial domination of the canal and the Canal Zone? Does the 
 treaty really turn this area of Panama back to the Panamanins? If we consider 
 the treaty in the light of these questions rather than in relation to jingoist 
 notions, we will come up with a very different view of the big political issue of 
 the year. 
 
 Particularly revealing are the statements of high American officials and other 
 advocates in assuring the American public of the fallacy of right-wing fears about 
 the treaty. Thus, Henry Kissinger announced his "strong view" that the treaty 
 "is in the national interest of the United States." Kissinger went on to explain 
 that "the new treaty marks an improvement over the present situation in that 
 it assures continuing, efficient, nondiscriminatory, and secure access to the Pan- 
 ama Canal with the support of the countries of the Western Hemisphere instead 
 of against their opposition and eventually their harassment." (New York Times, 
 August 18, 1977. ) In short, it is better to stay in more subtly and induce Panama 
 and the rest of the world to support our dominion, than to stay in nakedly and 
 face the hostility of the Panamanians and most other nations. 
 
 In his public statement announcing the agreement on the basic elements of 
 the Panama treaty, President Carter stressed that he and the Joint Chiefs of 
 Staff agreed that the pact will be "important to our long-term national interests." 
 Specifically, the United States will formally continue in charge of the canal until 
 the year 2000 : "We will have operating control and the right to protect and de- 
 fend the Panama Canal with our military forces until the end of the century." But 
 even after that, "we will have the right to assure the maintenance of the perma- 
 nent neutrality of the canal as we may determine necessary. Our warships are 
 guaranteed the permanent right to expeditious passage without regard to pro- 
 pulsion or cargo." (New York Times, August 13, 1977.) Or, as the Carter admin- 
 istration's summary of the Panama agreement put it: "The U.S. will have the 
 permanent right to defend the neutrality of the canal from any threat, for an 
 indefinite period." President Carter himself has stated flatly, "If it is attacked 
 by any means, I will defend it" He has assured the public that "if we ever have 
 to go into Panama, there will be no legal question under these treaties." (Los 
 Angeles Times, October 23, 1977.) In short, there are no limits in this treaty on 
 the actions that the United States will be able to take, even after the year 2000, 
 to preserve what it deems to be the "neutrality" of the canal. 1 
 
 Thus, in exchange for the mystique of sovereignty and formal national owner- 
 ship, the United States has acquired the agreement of the Panamanian govern- 
 ment in its perpetual ultimate control of the canal. Or, as Ellsworth Bunker, one 
 of the two American negotiators of the treaty — the other was Sol Linowitz — 
 admonished the critics: "It is not ownership but use that is important." He 
 could have added the fact that ability to use and control property is precisely the 
 function of ownership. 2 
 
 When the new treaty was announced, Bunker and Linowitz spelled out one of 
 its major advantages to U.S.. dominion. As the August 13 New York Times 
 phrased it, Bunker and Linowitz "said they thought that continued operation 
 of the canal was threatened more by possible Panamanian sabotage or disorders 
 that might follow a failure to carry out the agreement than by external threats 
 that they asserted the United States would be free to curb." 
 
 But particularly fascinating is the argument on behalf of the Panama treaty 
 by the most sophisticated of American conservative organs, National Review. 
 National Review begins its editorial by assuaging the hurt to the "national pride" 
 
 1 For a confirming view, see the report on the broadcast by Sol Linowitz over the Voice 
 of America, in Harry B. Ellis, "Carter Still Presses for Canal Treaty," Christian Science 
 Monitor, August 31, 1977. 
 
 2 Actually, it is unclear that even our existing status in Panama is one of sovereignty 
 and ownership over the Canal Zone. The 1903 treaty with Panama merely grants to the 
 United States "in perpetuity the use, occupation, and control of a zone. . . ." The Supreme 
 Court of the Canal Zone on May 6, 1907, in the case of Canal Zone v. Coulson, ruled, quite 
 in the spirit of the treaty, that "the United States is not owner in fee of the Canal Zone ; it 
 has only the use and occupation as long as it complies with the terms of the treaty." It is 
 true, however, that the U.S. Supreme Court chose to disregard such limits in the same year, 
 
 asserting fhat "the title of the United States to the Canal Zone is not imperfect. . . ." 
 (Wilson v. Shaw.) 
 
110 
 
 of conservatives, and assuring their conservative followers that it understands 
 their "soul-searing" pain. Then, NR proceeds to instruct its constituency in the 
 realities of today's world. "Conservatives are realists, and here is a test of 
 realism." Specifically, and echoing Kissinger, Linowitz, and Bunker, NR points 
 out that "our own military men support the treaty on the ground that the canal 
 can be better defended with the treaty than without." First of all, under the new 
 treaty Panama agrees that the United States may continue to use its air and sea 
 forces to defend the Panama Canal against an external attack. NR then turns 
 to the "most realistic kind" of military threat to U.S. rule over the canal, namely 
 "guerrilla warfare, and defense against that is very difficult under any circum- 
 stances." And then NR adds the clincher : "One thing is sure — it could be done far 
 better together with Panama than without it ; or worse, against it." In short, the 
 Panamanian government would now be ranged against such guerilla warfare 
 rather than overtly or covertly supporting it. 
 
 Addressing a common fear of the treaty critics, NR supposes that Panama 
 violates the treaty. In that case, the magazine concludes, "we will still be in a 
 position to act if and when necessary. And what is most important, we would 
 almost surely be in a stronger position to act at some later time in response to an 
 actual threat or violation of the treaty than we would be now in defense of our 
 own refusal to ratify." ("The Proposed Treaty : Preliminary Thoughts." National 
 Review, September 2, 1977.) In other words, far better for the United States 
 to exercise its power in defense of a treaty — and therefore in command of wide 
 international support — than in isolation after refusing to ratify. 
 
 In a similar vein, Carter's national security adviser, Zbigniew Brzezinski, 
 told a White House meeting of prominent Georgians and Floridians that "if he 
 were in the Kremlin and he could think of anything that . . . might alienate 
 countries against the United States even further, it would be defeat of these 
 treaties." (Don Irwin, "Rusk Sees Chance of War in Panama," Los Angeles 
 Times, August 31, 1977.) 
 
 A common conservative charge is that the treaty will hand over the canal to a 
 "Communist" Torrijos regime in Panama. Far from being a "Communist," how- 
 ever, General Torrijos is in hot water in his own country, especially among the 
 antiimperialist critics on the Left. 3 
 
 Panamanian newspapers were highly reluctant to reveal to their readers 
 the details of the agreement with the United States. The New York" Times 
 reported that "rather than expressing joy at the culmination of the long negotia- 
 tions, most Panamanians appeared today to be uncertain and confused. . . ." 
 Addressing a meeting of the Panamanian Student Federation, that country's chief 
 negotiator of the agreement, Dr. Romulo Escobar Bethancourt, admitted that 
 many aspects of the treaty were "bad" and even "ugly" ; in defense, Escobar 
 demagogically posed the only alternative to the treaty as a "confrontation" 
 with the United States and the "massacre of the best of our youth." 
 
 The Panama government announced its intention to hold an early national 
 plebiscite to decide on ratification of the treaty, but it is clear that the plebiscite, 
 which endorsed the treaty by 2 to 1, was held in the midst of a propaganda 
 campaign branding any criticism of the treaty as "treason against our father- 
 land." More important, it was held while many of the leading opponents of the 
 treaty were languishing in exile. For, over the past three years, the Torrijos 
 regime has systematically deported its most outspoken critics, including likely 
 opponents of the new treaty, to Miami, Mexico, and Venezuela. (New York Times, 
 August 11.) 
 
 Indeed, one of the major unsuccessful demands of the Panamanian Left was 
 that Torrijos keep his promise to declare a general amnesty for political pris- 
 oners, and that he allow all the exiles to return to Panama and challenge the 
 treaty. In the light of this situation, it must be considered a joke in questionable 
 taste for Dr. Escobar to condemn the Panamanian exiles in Miami for urging 
 U.S. senators vote against the treaty. Obviously, a simple way for Panama to 
 put a stop to this activity would be to allow the exiles to return to their Panama- 
 nian homeland. 
 
 'The other major charge by the Right is that Torrijos is a "dictator." This is true 
 enough, but the charge comes with peculiar ill-grace from a movement that has expressed 
 its devoted admiration for every dictatorial and fascist regime in the world, from South 
 Africa to Chile, South Korea, and the Philippines. 
 
Ill 
 
 Moreover, a full and fair debate over the plebiscite was precluded by the 
 Torrijos regime's iron control of the media. Every one of the newspapers and 
 television stations is owned or controlled by the government, and the radio 
 stations are also effectively ruled by the regime. 
 
 Press censorship and restrictions on public assembly were officially lifted 
 during the 40 days prior to the plebiscite, but Torrijos refused to grant any addi- 
 tional time for public debate. As Marlise Simons reported in the Washington 
 Post of October 13, "Officials say that Panamanians know enough about the 
 treaties and only troublemakers want more time." 
 
 Mounting criticism of the treaty has come from conservative as well as leftist 
 critics of the Torrijos regime. The conservative Movement of Independent Law- 
 yers of Panama has denounced the treaty for approving the "first American 
 intervention in our country of the twenty-first century." The MILP went on to 
 assert that "the ordinary Panamanian will easily understand that . . . there will 
 be a new version — perhaps slightly less grotesque than before — of the hated 
 American perpetuity on the canal issue. Both the Christian Democratic and 
 Social Democratic parties also came out against the treaties, "pointing out that 
 in 1926 and again in 1947, Panama had rejected drafts attempting to legalize 
 the U.S. military bases [there]." (Washington Post, October 13.) And Panama's 
 Trotskyist Revolutionary Socialist League made the significant statement that 
 the present would be a particularly auspicious time to confront American Im- 
 perialism : "Today we have the eyes of the world on us, today we have inter- 
 national support, today imperialism has been weakened by Watergate and 
 Vietnam." (New York Times, August 11.) 
 
 On September 6, the Panamanian Left made known its displeasure with the 
 treaty; 1500 students demonstrated in Panama City against the "dirty treaty" 
 and its provisions for maintaining American military bases and perpetual rights 
 of American intervention. The protest was stamped out by Torrijo's National 
 Guard, which injured dozens of demonstrators and arrested over 30 students. 
 
 If the Panama treaties merely provide a sophisticated fig-leaf for continued 
 American domination of the canal, why then did the Torrijos regime sign the 
 accord, in face of the domestic troubles that would predictably ensue? One 
 answer to this question might be that venerable motive, money — a vital aspect 
 of the treaty is U.S. agreement to sugarcoat the pill by multiplying many fold 
 the annual revenues going into the coffers of the Panamanian treasury. Cur- 
 rently, the U. S. government pays $2.3 million a year to Panama for use of the 
 canal. The treaty proposes to increase this amount by giving Panama $0.30 per 
 ton out of the current canal toll of $1.29 per ton. With corrections for inflation, 
 this share is expected to amount to a revenue of $40-$50 million per year. In 
 addition, operational revenues will be paid for such services as ship repair and 
 dockage ; this is expected to amount to $20 million per year. 
 
 But this is far from all. The United States also pledges to undertake a five-year 
 program of supplying financial goodies to Panama: $200 million of Export- 
 Import Bank credits ; $75 million in Agency for International Development hous- 
 ing credits ; and $20 million in loan guarantees from the Overseas Private Invest- 
 ment Corporation. This amounts to a five-year boodle of nearly $300 million, 
 which, added to $70 million per annum, makes a handsome subsidy package, and 
 perhaps worth the risk of a few student demonstrations. 
 
 Apparently, the Carter administration feels that it cau sell this package to 
 the American public with the argument that none of this money will come di- 
 rectly out of taxes ; the annual sum will initially come out of the toll revenues of 
 the U.S. -government-owned Panama Canal Company, and later out of the budget 
 of the new, frankly governmental American agency which is scheduled to replace 
 the Panama Canal Company in running the canal. The five-year plan, too, con- 
 sists of loans and loan guarantees. While all this is ultimately guaranteed by 
 the U.S. taxpayer, the subsidy package, being long-run and indirect, might be 
 slipped by the American taxpayer without causing an outcry. 
 
 Focusing on the money enables us to ponder the seemingly curious phenomenon 
 that American big business, unlike our conservative ideologues, is overwhelm- 
 ingly in favor of the Panama treaty. The advocates include such influential 
 business leaders as Irving S. Shapiro of du Pont, head of the Business Round- 
 table, and such groups as the National Association of Manufacturers. One gen- 
 eral reason for this support is that these sophisticated business groups under- 
 stand and welcome the treaty as a more subtle and acceptable form of American 
 
112 
 
 imperialism. iA more specific reason is the effect the treaty will have for those 
 firms with trade and investment in Latin America. Rejection of the treaty might 
 mean anti-U.S. unrest throughout the region and might have a "destabilizing" 
 effect on American investments there. Private U.S. investment in Latin America 
 is estimated at .$24 billion, while total two-way U.S. trade there amounted to 
 $34 billion in 1976. As John M. Goshko reported in the August 22 Washington 
 Post: 
 
 "These economic factors could produce some startling surprises about where 
 different interest groups line up in the battle. 
 
 "There is the strong likelihood that the normally conservative, Republican- 
 leaning business establishment will be solidly on the side of a Democratic 
 president. . . . 
 
 "Where the business community is concerned, Carter administration strate- 
 gists contend, the case for supporting the treaties seems ironclad. In fact, the 
 administration privately is counting on big business to provide some potentially 
 crucial help in getting the treaties past the hurdle of Senate ratification." 
 
 Already, Henry R. Geyelin, president of the Council of the Americas, a non- 
 profit business association comprising every major U.S. firm doing business in 
 Latin America, has testified in behalf of such a treaty before the House Panama 
 Canal Subcommittee. 
 
 But explanations in terms of groups or classes are never as rewarding as the 
 concrete unveiling of specific monetary interests. Thus, there needs to be further 
 investigation of which U.S. business or financial groups might be benefiting 
 specifically from the hundreds of millions of dollars that the U.S. government 
 will be pouring into Panama. One clear group of beneficiaries is the American 
 exporters who will receive orders from the $300-million package. U.S. foreign 
 aid is a clever mechanism by which American taxpayers and the U.S. govern- 
 ment subsidize American export firms : The dollars are extracted from the tax- 
 payer and are then funneled by the U.S. government to the foreign recipients, 
 who in turn spend the dollars on American exporters. In this case the process is 
 clear: The Panama treaty explicitly applies "Buy American" provisions to the 
 aid, making sure that the lAmerican exporters receive the dollars as rapidly as 
 possible. 
 
 But there is another use that the Panamanian government will have for the 
 U.S. aid, one that may prove to be a more intimate lead to the underlying reason 
 for concluding this treaty. Panama is heavily in debt to U.S. banks, and the 
 influx of hundreds of millions of dollars will certainly ease its burden in paying 
 the interest and principal on the debt ; it may even save Panama from bank- 
 ruptcy — and the American banks from severe embarrassment. We must there- 
 fore contemplate the possibility that the nub of the Panama treaty is a covert 
 bail-out operation, by which the American taxpayer is being gulled into sub- 
 sidizing, and even salvaging, a handful of U.S. banks. 
 
 This suggestion does not seem very outrageous if we consider the history of 
 how the United States got involved with the Panama Canal in the first place. 
 It's not just, as Senator Hayakawa (R.-Cal.) said, that "we stole it [the canal] 
 fair and square." Or that President Theodore Roosevelt engineered a phony 
 "revolution" in 1903, by which employees of the American-owned railroad de- 
 clared the Panama section of Colombia independent and American ships pre- 
 vented Colombia from putting down the rebellion. The similarity with the present 
 theme comes from the hidden motive behind Teddy Roosevelt's flamboyant 
 actions. 
 
 In order to build the canal, the United States felt that it had to purchase the 
 right to do so from the bankrupt French-owned company that had failed in its 
 attempt to dig the canal. Teddy Roosevelt explained that he acted out of indig- 
 nation at the Colombian government's insisting on a $10-million "holdup" of 
 American taxpayers for the right to build a canal in Panama. Actually, the U.S. 
 government was perfectly willing to pay $40 million to the French Panama Canal 
 Company. The $10 million to Colombia would have come, not from the taxpayers, 
 but out of the $40-million cut going to the French company. 
 
 Why, then, did Teddy Roosevelt swing the big stick and foment a phony 
 revolution in Colombia, in order to save $10 million for the coffers of a bank- 
 rupt French-owned company? The answer, which came out years later, is that 
 the "French" company was French no longer : its shares had been secretly 
 bought up shortly before by a syndicate of Wall Street bankers, headed by J. P. 
 
113 
 
 Morgan and Company. The syndicate hired the eminent Wall Street lawyer, 
 William Nelson Cromwell, to get the American money, and it was Cromwell, 
 sitting in the White House itself, who wrote TR's dispatches and orders, and 
 engineered the entire operation. After the syndicate got the $40 million, they 
 were able to sell their shares to the U.S. government for twice what they had 
 paid. 
 
 Moreover, one of the syndicate members was none other than Teddy Roose- 
 velt's brother-in-law, Douglas E. Robinson. Not only did Robinson benefit as a 
 syndicate member, but most of the $40 million from the U.S. taxpayers was 
 funneled by Cromwell into the New York real estate firm of the same Douglas 
 Robinson. 
 
 And so we should not be surprised to discover that U.S. government action 
 in Panama today is for the purpose of subsidizing the Wall Street bankers. 
 Judging from the facts available to us, the current treaty may well be a rerun 
 of the original bail-out. 
 
 Commercial banks refuse to make public the details of specific loans, like 
 those to Panama, and the Panamanian government is not exactly generous with 
 such information, either. However, some broad information is available. When 
 General Torrijos seized power in the 1968 coup, Panama's national debt abroad 
 was $167 million; its estimated total current debt is more than $3.5 billion. 
 More pertinently, the total debt of the Panama government to U.S. banks is 
 reported by the Library of Congress at $1.7 billion. In a memorandum to the 
 president of Panama, the Department of Planning stated that no less than 39 
 percent of Panama's budget is being used to service its foreign debt, which 
 amounts to $42 million per year and includes $25 million in interest and $17 
 million in amortizing principal. 
 
 Leading the parade of American banks involved in Panama are the First 
 National City Bank and the Chase Manhattan Bank, the flagship bank for the 
 far-flung Rockefeller financial interests. Both of these banks serve as fiscal 
 agents for the government of Panama. In one advertisement for a $115-million 
 loan to Panama, for example, the First National City Bank is listed as the agent 
 for the loan. Other participating banks included the Bank of America. Bankers 
 Trust, Chase Manhattan, the First National Bank of Boston, the First National 
 Bank of Chicago, the Republic National Bank of Dallas, and the Marine Midland 
 Bank. 
 
 We might well ask, Why did the New York banks pour all these loans into 
 Torrijos' Panama? It seems clear that the money was a quid pro quo for Tor- 
 rijos' decision — on the advice of leading New York banks — to reorganize 
 Panama's banking laws in July 1970. This reorganization provided a favorable 
 haven, free of taxes and onerous regulations, for foreign banks in Panama, much 
 as Panama has long provided a flag of convenience for world shipping. Since 
 the 1970 legal change, total banking assets in Panama have expanded enormously 
 from a few banks with a few million dollars to 73 banks with total assets of 
 $8.6 billion, conducting transactions throughout the world. Prominent among the 
 U.S. banks expanding rapidly in Panama since the 1970 legislation are the First 
 National City Bank, the Bank of America, Chase Manhattan, and the Marine 
 Midland Bank. 
 
 It was a deal that benefited the U.S. banks and the Torrijos regime, which 
 could thereby expand its wealth as well as its political power in Panama. But 
 now the U.S. taxpayer is being subtly asked to pick up the tab. 
 
 If a handful of large U.S. banks will be the major beneficiaries of the Panama 
 Canal treaty, have they also had any role in lobbying for or negotiating the 
 treaty itself? Or will their gains be merely a lucky windfall from decisions made 
 by the U.S. government for very different reasons? Let us see. While the treaty 
 was being negotiated, then-Senator Gale McGee (D.-Wyo.), one of the leading 
 protreaty people in Congress, held a meeting at the State Department at the end 
 of October 1975 to organize a protreaty lobby. In attendance were lobbyists for 
 the Chase Manhattan Bank, the Bank of America, such large corporations as 
 Gulf Oil and Rockwell International, as well as representatives of the Council 
 of the Americas. A campaign kitty was raised at that meeting, estimates of the 
 size ranging from $100,000 to $500,000. Subsequent meetings brought in lobbyists 
 for other large banks and corporations, including Pan American World Air- 
 ways. Plans wpre made at the«e me^tiners to j>rpssnre the U.S. Chamber of Com- 
 merce into supporting the fufurp treaty. (See Russell W. Howe and Sarah H. 
 Trott, The Power Peddlers, Doubleday, p. 123. ) 
 
114 
 
 who's who for the canal tbeaty 
 
 On November 1, the New York Times carried a large advertisement paid for by 
 a group called the Committee of Americans for the Canal Treaty, Inc. The follow- 
 ing is a partial list of the 200 prominent Americans whose names appeared as 
 members of the Committee, along with pertinent associations : 
 
 Stephen Ailes — lawyer ; director of Riggs National Bank. 
 
 Hoyt Ammidon — U.S. Trust Co. 
 
 Robert O. Anderson — Atlantic Richfield Co. 
 
 George W. Ball — investment banker ; Lehman Bros. 
 
 Robert S. Benjamin — lawyer ; director of Transamerica Corp. 
 
 Eugene Black — former president of the World Bank. 
 
 Shirley Temple Black — former Ambassador to Ghana ; director of Del Monte 
 
 Corp. 
 
 William McC. Blair, Jr. — investment banker, William Blair Co. 
 
 William Boeschenstein — Owens-Corning Fiberglas Corp. 
 
 Edgar Bronfman — Distillers Corp. — Seagrams Ltd. 
 
 John W. Brooks — Celanese Corp. 
 
 Philip Buchen — counsel to President Ford. 
 
 Henry Catto, Jr. — former U.S. Chief of Protocol. 
 
 Gardner Cowles — Cowles Communications, Inc. 
 
 J. Dewey Daane — Commerce Union Bank. 
 
 Richard Debs — Federal Reserve Bank of New York. 
 
 C. Douglas Dillon — Rockefeller Foundation; director, Dillon, Read & Co.,; 
 
 Secretary of the Treasury for Presidents Kennedy and Johnson (1961-1965). 
 Thomas K. Finletter — former Secretary of the Air Force. 
 Max Fisher — Manufacturer's National Bank of Detroit. 
 Peter Flanagan — investment banker, Dillon, Read & Co. 
 
 Michael V. Forrestal — Wall Street lawyer ; formerly on White House National 
 Security Staff. 
 
 Henry H. Fowler — investment banker, Goldman, Sachs & Co. ; former Secretary 
 of the Treasury. 
 
 J. Wayne Fredericks — Ford Motor Co. 
 
 Orville Freeman — Business International Corp. ; former Secretary of 
 Agriculture. 
 
 Richard M. Furlaud — Squibb Corp. ; American Express Co. ; Chase Man- 
 hattan Bank. 
 W. L. Hadley Griffin— Brown Shoe Co. 
 Armand Hammer — Occidental Petroleum Corp. 
 
 W. Averell Harriman — Brown Bros., Harriman & Co. ; former presidential 
 adviser, Ambassador, Secretary of Commerce, and Governor of New York. 
 Ben Heineman — First National Bank of Chicago. 
 Andrew Heiskell — chairman of the board, Time, Inc. 
 
 Robert H. Knight — Wall Street lawyer, former Deputy Assistant Secretary 
 of Defense. 
 
 Arthur Krim — United Artists Corp. 
 
 R. Heath Larry— U.S. Steel. 
 
 Harding W. Lawrence — Braniff Airways. 
 
 Henry Cabot Lodge — former U.S. Ambassador to UN. 
 
 John Loeb — investment banker, Loeb, Rhodes & Co. 
 
 Peter Loeb — investment banker, Loeb, Rhodes & Co. 
 
 John H. McCloy — Wall Street lawyer; former chairman of the board, Chase 
 Manhattan Bank. 
 C. Peter McColough — Xerox. 
 George Meany — president, AFL-CIO. 
 G. William Miller — Textron. 
 J. Irwin Miller — Cummins Engine Co. 
 Paul Nitze — former Deputy Secretary of Defense. 
 General Lauris Norstad — former Commander of SHAPE. 
 Jane Cahill Pfeiffer— IBM. 
 
 Peter G. Peterson — investment banker, Lehman Bros. ; former Secretary of 
 the Treasury. 
 David Reynolds — Reynolds Metals Co. 
 
 General Matthew Ridgway — former Chief of Staff, U.S. Army. 
 David Rockefeller — Chase Manhattan Bank. 
 Nelson Rockefeller. 
 
 Robert Roosa — Brown Bros., Harriman & Co. 
 
115 
 
 Franklin D. Roosevelt, Jr. 
 
 Theodore Roosevelt IV — investment banker, Lehman Bros. 
 Walt Whitman Rostow — former national security assistant to President 
 Johnson. 
 
 Arthur Schlesinger, Jr. — former special assistant to President Kennedy. 
 Benno Schmidt— J. H. Whitney & Co. 
 
 Irving Shapiro — du Pont ; director, First National City Bank. 
 George P. Shultz — Bechtel Corp. ; director, Inter- American Development Bank ; 
 former Secretary of the Treasury. 
 Arthur Taylor— CBS. 
 
 General Maxwell Taylor — former Chairman, Joint Chiefs of Staff. 
 Walter Thayer — Whitney Communications Corp. 
 
 Alexander Trowbridge — Allied Chemicals Corp. ; former Secretary of Com- 
 merce. 
 
 Lew Wasserman — MCA, Inc. 
 James Wilcock — Mellon Bank. 
 
 The influence of the bankers and the corporations, however, has been even 
 more direct. When Carter took office he appointed the dynamic and highly influ- 
 ential Sol Linowitz, former ambassador to the Organization of American States 
 and long an advocate of a new treaty, to join the octogenarian Ellsworth 
 Bunker on the Panama Canal negotiating team. Bunker himself is a former 
 director of Bankers Trust, and his brother, Arthur Hugh Bunker, is a longtime 
 director of Lehman Brothers. 
 
 Linowitz's connections are more numerous and impressive. He is a member of 
 the powerful Council on Foreign Relations, which is dominated as well as chaired 
 by David Rockefeller, who is also chairman of the Chase Manhattan Bank. More- 
 over, Linowitz is a member of the exclusive and now-famous Trilateral Com- 
 mission, which was founded and is dominated by David Rockefeller and which 
 includes so many foreign-policy and economic-affairs leaders of the Carter admin- 
 istration — from Carter himself to Vice President Mondale, Secretary of State 
 Cyrus Vance, and National Security Advisor Brzezinski. In addition, Linowitz 
 is a trustee and former chairman of the policy committee of the Center for 
 Inter-American Relations, an organization founded and chaired by David Rocke- 
 feller, whose directors interlock heavily with the Council for Foreign Relations. 
 Linowitz was also a member of Nelson Rockefeller's personal vehicle for his 
 abortive presidential run, the National Committee on Critical Choices for Ameri- 
 cans. As a member of the board of directors of Time, Inc., Linowitz also wields 
 a degree of influence on the media. 
 
 Even more pertinently, upon his appointment as negotiator of the canal trea- 
 ties, Sol Linowitz was a member of the board and the executive committee of 
 Marine Midland Bank and of Pan Am. He was also a large stockholder in 
 Marine Midland. The Marine Midland connection is clear and direct; for, as 
 Congressman George Hansen (R-Idaho) has disclosed, the government of 
 Panama owes Marine Midland Bank nearly $8 million. Furthermore, it was only 
 after Hansen and Senator James McClure (R-Idaho) fiiled suit on April 20 for 
 a temporary restraining order against Linowitz as canal negotiator, that Linowitz 
 finally resigned his positions with Marine Midland. The suit sought the restrain- 
 ing order on the ground of conflict of interest on the part of Linowitz, at least 
 until this presidential appointment should be confirmed by the Senate. 
 
 Linowitz, however, insisted on keeping his high positions at Pan Am while 
 negotiating and arguing on behalf of the canal treaty. Pan Am's connection, 
 while intriguing, does not seem as direct as Marine Midland's. Pan Am has for 
 decades been within the Rockefeller financial ambit, as is indicated by James 
 S. Rockefeller's presence on the airline's board of directors. Other directors are 
 Frank Stanton of CBS and Donald Kendall of Pepsico, both of whom are direc- 
 tors at Atlantic Richfield Company, whose president, Robert O. Anderson, is a 
 member of the board of Rockefeller's Chase Manhattan Bank. Until he became 
 secretary of state, Cyrus Vance was also a director of Pan Am. While too much 
 should not be made of a list of corporate interconnections, the above establishes 
 a clear pattern of Linowitz-Rockefeller commonality of interest and action. 
 
 We have already seen that Pan Am participated in the McGee-organized cor- 
 porate lobbying in favor of a Panama treaty. What does Pan Am have to gain 
 from Torrijos? One obvious benefit is the protection of the company's landing 
 rights in Panama. It just might be important that Panama serves as Pan Am's 
 headquarters for Latin America. 
 
 One of the most important influences in the drive toward a treaty was the new 
 Washington-based Commission on U.S.-Latin American Relations. The commis- 
 
116 
 
 sion was organized in 1974 by the Center for Inter-American Relations and was 
 largely financed by Ford Foundation and Rockefeller funds. Its chairman until 
 recently was Sol Linowitz, with Dr. Robert A. Pastor serving as the staff direc- 
 tor. Other members of the Linowitz Commission included such influential Tri- 
 lateral Commission members as W. Michael Blumenthal, who is now secretary 
 of the treasury ; Samuel P. Huntington, now an aide to the National Security 
 Council ; Peter Peterson, chairman of Lehman Brothers ; and Elliott Richardson. 
 
 In December 1976, Pastor wrote a report for the Linowitz Commission, urging 
 a new treaty and substantial funds for Panama; the Council on Foreign Rela- 
 tions promptly held a special colloquium on the subject and endorsed the Lino- 
 witz Report. The next month, Brzezinski, national security adviser to Carter, 
 appointed a special assistant on the Panama question, who turned out to be none 
 other than Dr. Robert Pastor. 
 
 Without delay, Pastor drew up a National Security Council memorandum 
 recommending a new Panama Canal treaty. The paper was approved by Brzezin- 
 ski, and then, after checking with longtime Nelson Rockefeller foreign policy 
 aide Henry Kissinger, endorsed by Carter. As the culmination of the Linowitz- 
 Rockefeller drive, Linowitz then got himself appointed negotiator for the new 
 Panama treaty. 
 
 There are several ironies that emerge from a careful look at the Panama Canal 
 treaty fight — especially the picture of this country's liberals and progressives 
 battling to pour money into the coffers of a handful of Wall Street banks in the 
 name of a treaty they mistakenly believe represents a withdrawal of U.S. power 
 abroad. It doesn't, and those who automatically oppose anything the right wing 
 favors, need to do some hard rethinking of their reflexive support for the new 
 Panama Canal treaties. 
 
 Questions 1 and 2 were referred to the State Department, which provided the 
 following responses : 
 
 Question 1. In view of the former banking connections of Ambassadors Ells- 
 worth Bunker and Sol Linowitz, please submit the following information : 
 
 (a) The involvement of Marine Midland Bank and all its branches, subsidi- 
 aries, and affiliates in loans to the Republic of Panama. 
 
 ( b) The same for Bankers Trust. 
 
 (c) The same for Lehman Brothers. 
 
 Answer. Ambassador Bunker has no connection with any of these banks. 
 Ambassador Linowitz has no connections with Bankers Trust or Lehman 
 Brothers. His connections with Marine Midland Bank and its involvement in 
 Panama are detailed in the attached extracts from the Congressional Record of 
 March 10, 1977. (Attachment provided in Question 5, Twin Circle Series of 
 questions.) 1 
 
 Question 2. Would the connections with banking and other corporate interests 
 in Panama this article shows Sol Linowitz to have had, have made his confirma- 
 tion by the Senate as Ambassador and treaty negotiator much more difficult — 
 perhaps explaining why President Carter appointed him for a limited six-month 
 period instead ? 
 
 Answer. No. See the extract from the March 10, 1977 Congressional Record. 
 
 Question 8. Do any American banks, even if they are not themselves operating 
 in Panama, hold majority ownership in any corporation (») presently operating 
 in Panama or (b) that has indicated plans to operate in Panama which stands 
 to profit from the economic package being offered Panama in connection with the 
 treaties? 
 
 Answer, (a) Treasury knows of no public sources which describe ownership in 
 U.S. banks of corporations operating in Panama, and is precluded by statute 
 from disclosing such information as it may have on this subject that has been 
 furnished by individual taxpayers. We wish to note, however, that several 
 statutes, including the Bank Holding Company Act, severely restrict the ability 
 of banks (themselves or through subsidiaries) to engage in non-financial 
 activities. 
 
 (b) We have no knowledge of any company, including subsidiaries of U.S. 
 banks, that plans to establish a new subsidiary to operate in Panama in order to 
 benefit from the economic cooperation package. We do expect that American 
 exporters and perhaps investors will benefit from the economic cooperation 
 
 package. 
 
 1 See Appendix I, A (Exhibit 2) 
 
117 
 
 HI Question 4- In view of the implications of this article, will you please provide 
 tg a list of leading American international bankers who have publicly announced 
 t- their opposition to the treaties. Please submit copies of their statements, adver- 
 i tisements, or the like. 
 
 7 Answer. This information is not compiled in either the Treasury Department 
 r or the Department of State. 
 
 Hi Question 5. Professor Rothbard says, "We must therefore contemplate the 
 z possibility that the nub of the Panama treaty is a covert bail-out operation, by 
 li which the American taxpayer is being gulled into subsidizing, and even salvaging 
 > a handful of U.S. banks." If you disagree wtih this statement, please explain 
 r ( thoroughly why this possibility is not true, 
 
 e Answer. The Treasury Department does not agree with this allegation, which 
 is not substantiated by any evidence. The payments provisions of the Treaty 
 tt were intended not as a means of financing Panama's debt service obligations but 
 rather as a means of assuring that Panama would receive "a just and equitable 
 return on the national resources which it has dedicated to the efficient manage- 
 ment, operation, maintenance, protection, and defense of the Panama Canal" 
 ; (see Article XIII of the proposed Panama Canal treaty). The sums Panama 
 will receive under the treaties will come from Canal operating revenues. Con- 
 I cerning the economic cooperation arrangements, which are separate from the 
 i treaty, the proposed U.S. assistance to Panama will be in the forms of guarantees 
 ! and non-concessional loans which will be repaid with interest. The largest compo- 
 • nent of the arrangements consists of Export-Import Bank loans, loan guarantees, 
 and insurance. The funding for these Export-Import Bank programs is provided 
 not by tax revenues but by reflows on outstanding loans, borrowing from the 
 Federal Financing Bank, and various fees charged by the Bank. 
 
 Question 6. Submit for the record detailed information on the severe losses 
 suffered by Bankers Trust Company (of which Ellsworth Bunker is supposed to 
 have been a former director), Chase Manhattan, First Chicago, and City Corp. 
 around 1974 and 1975. 
 
 Question 7. Submit information on similar losses, if any, suffered by other 
 banks which have operations in Panama. 
 Answer. The Annual reports of most U.S. banks generally contain data and a 
 , discussion of their loan loss experience. If possible, we will forward to the Sub- 
 committee as soon as possible any information contained in the Annual Reports 
 of the banks named concerning loan losses. 
 See Appendix C. 
 
 Question 8. At the respective times of failure of the Franklin National Bank 
 and the United States National Bank of San Diego, it was rumored that the Fed- 
 eral Reserve System supplied rediscount services in sufficient amounts and for 
 enough period to enable most or all holders of large certificates of deposit to run 
 off their deposits. It is certainly true that the Fed in each case purchased large 
 amounts of paper, for the purpose of permitting time for an orderly disposition 
 of affairs so as to protect all depositors. Congress only intended that deposit in- 
 surance should be available to domestic depositors, and then only to a maximum 
 of $40,000 per account. 
 
 Therefore, the question arises as to whether the Fed has effectively acted as 
 insurer of last report for larger deposits than contemplated by Congress, in the 
 pursuit of its essential objective of being lender of last resort and supplier of 
 liquidity to the banking system as a whole. Looking to the future, we can imag- 
 ine a similar situation arising in the event of widespread defaults on loans to 
 less developed countries. If the loans are made in or through "off-shore" banking 
 centers, such as Panama, the possible problem might be larger or smaller than 
 might be indicated on the face of the banking ledgers. Relevant to this situation, 
 kindly respond to the following questions : 
 
 (a) In the event of serious political instability in the Republic of Panama, 
 what would be the net exposure of U.S. banks to losses in their loan portfolios? 
 
 (b) Is such exposure sufficiently covered by loan loss reserves already 
 established? 
 
 (c) If not, or on the assumption that losses are unexpectedly large, what 
 would be the contingent exposure of the FDIC and the Federal Reserve? 
 
 (d) Please demonstrate through relevant financial statistic that the FDIC or 
 the Federal Reserve will not, in the event of a collapse of loan portfolios in Pan- 
 ama, become effectively lender or insurer of last resort with respect to deposits 
 or loans of U.S. banks and their subsidiaries in Panama. 
 
118 
 
 Answer. It is unclear as to the types of potential losses these questions seek 
 to address. Only a relatively small proportion of total assets on the books of U.S. 
 banks operating in Panama represent claims on Panamanian residents. The hulk 
 of the claims of these banks are on non-residents and, accordingly, would not be 
 subject to the same risks as claims on residents in the event of "political insta- 
 bility" in Panama. One of the elements which U.S. bank examiners watch care- 
 fully is the adequacy of bank reserves available in the event of losses. Examina- 
 tion reports of individual banks are not available publicly. 
 
 X 
 
 Under the Agreed Minute to the new Panama Canal Treaty, the 1901 Monetary 
 Agreement with Panama and subsequent exceptions are abrogated. 
 
 1. What various immediate courses of action could Panama now take regard- 
 ing its currency, and what would be the effect of each in relation to the U.S. 
 dollar? 
 
 2. What might the impact of each be on trade, especially Panama exports, bal- 
 ance of payments, repayment of debts, etc. ? 
 
 3. Which course is Panama most likely to take? 
 
 4. What other steps, if any, might Panama take at a later date if its indebted- 
 ness situation worsens? 
 
 5. What would be the impact of these actions on the UjS. and other banks op- 
 erating in Panama? 
 
 Answer. Under the Agreed Minute to the new Panama Canal Treaty, the 1904 
 Monetary Agreement and its subsequent exceptions are not abrogated. This may 
 be confirmed by referring to the Department of State Bulletin of October 19, 
 1977, page 495. 
 
 XI 
 
 The Wall Street Journal, May 5, 1977, reported on an IRS investigation of the 
 Bahamas branch of a Panama-based bank in the following article : 
 
 Bahamas' Castle Bank Ceases Its Operations, Blames Pbobe by IRS 
 
 New York. — A Bahamian bank ceased its operations, blaming adverse publicity 
 triggered by a U.S. government investigation that has been seeking to determine 
 if certain offshore banks are serving as havens for tax evaders. 
 
 Castle Bank & Trust (Bahamas) Ltd., Nassau, said it voluntarily gave up its 
 Bahamian license last March. It said it intends to move activities to Panama, 
 which is headquarters for its parent bank, Castle Trust Co. The Bahamian 
 government, which revoked the bank's license last month, said the parent bank 
 gave full indemnity against any losses or contingencies that could result from 
 the bank's Bahamian operations. 
 
 Castle Bank was bitter, saying that despite a probe by the U.S. Internal 
 Revenue Service, "not one shred of evidence" has surfaced to show that the bank 
 violated any nation's laws. 
 
 "Mud Sticks" 
 
 "You know how mud sticks," A. J. T. Gooding, managing director of Castle 
 Bank & Trust, said in a phone interview, "How can you do business with this 
 hanging over your head? How can you function? We've got to regroup, re- 
 organize." He said he didn't know if the bank would attempt to do business again 
 in the Bahamas. 
 
 Mr. Goodling wouldn't tell how much was deposited in the Nassau branch. In 
 a 1975 congressional subcommittee hearing on the IRS investigation, called 
 Project Haven, an IRS agent reported that the Bahamian bank had 308 cus- 
 tomers, representing $250 million in assets in various trusts. A purpose of the 
 probe was to see how many businessmen, entertainers and organized crime figures 
 evade taxes by concealing income in offshore banks. 
 
 List of Account Holders 
 
 Castle Bank's activities have been surrounded by controversy since disclosure 
 that the IRS obtained a list of the bank's secret account holders under strange 
 circumstances. A Castle Bank executive had taken a list of the account holders 
 on a trip from Nassau to Miami. In Miami, the banker was introduced to a 
 woman by an IRS informer. The banker left the list of names in a briefcase 
 
119 
 
 in the Miami woman's apartment. While the two went out on a date, IRS agents 
 photographed the list. 
 
 Last week a federal judge in Cleveland ruled that the IRS had acted im- 
 properly and said the evidence obtained by the IRS in its investigation of the bank 
 was inadmissible. The ruling by Judge John M. Manos was in connection with a 
 government case against a Cleveland businessman whose name was allegedly 
 on the list of Castle Bank depositors. The businessman had been indicted on 
 charges he lied on his 1972 tax return when he said he hadn't any foreign bank 
 account. 
 
 Yesterday, Cono R. Namorato, chief of the Justice Department's criminal sec- 
 tion, said a decision whether to appeal the Cleveland judge's ruling is under 
 review. 
 
 Richard Jaffe, an IRS agent in Miami who helped develop the IRS investiga- 
 tion of Castle Bank and other offshore banks, participated in the photographing 
 of the Castle Bank account holders. After Judge Manos suppressed the evidence, 
 Mr. Jaffe was suspended from all operations on the investigation, according to 
 Jack B. Solerwitz, a Mineola, N.Y., attorney representing Mr. Jaffe, Mr. Jaffe, 
 according to the lawyer, has been reassigned to different work for IRS. 
 
 A federal grand jury in Miami last year reportedly investigated Mr. Jaffe's 
 conduct and found no evidence to accuse him of any wrongdoing. 
 
 1. (a) Did this bank have one or more branches in the United States? 
 
 (b) If so, describe the nature of such branch or branches and the size and 
 scope of activity. 
 
 2. What nationalities are the major owners of this Panama-based bank? 
 
 3. Describe any affiliation with any U.S. bank or branch in Panama. 
 
 4. What developments have taken place in this bank's subsequent activities, 
 
 (a) relative to U.S. authorities? 
 
 (b) relative to Panama's authorities? 
 
 5. Sum up the results of 
 
 (a) the IRS probe. 
 
 (b) the Congressional probe. 
 
 6. What percentage of the Bahamas branch bank's accounts were transferred 
 to the Panama parent bank? 
 
 7. Has the same secrecy been afforded those accounts in Panama as was 
 maintained in Nassau? 
 
 8. List all banks that, like Castle Bank and Trust, are based in Panama and 
 afford or seem to afford U.S. citizens secret bank accounts there and/or through 
 branches in the United States or elsewhere. 
 
 9. Provide information on each similar to that requested in Questions 1, 2, 
 and 3 above. 
 
 10. (a) Have any of these banks or their branches run afoul of U.S. law? 
 (b) If so, describe the incidents. 
 
 Question 1. (a) Did this bank have one or more branches in the United States? 
 (b) If so, describe the nature of such branch or branches and the size and 
 scope of activity. 
 
 Answer. According to information available in the Treasury Department, the 
 Castle Bank does not have any branches in the U.S. 
 
 Question 5. Sum up the results of (a) the IRS probe, (b) the Congressional 
 probe. 
 
 Answer, (a) "Project Haven," which grew out of an earlier operation named 
 Operation Tradewinds," was conceived as a broad investigation of interna- 
 tional tax avoidance and tax evasion. The emphasis of the investigation, however 
 has been upon the operations of the Castle Trust Co. and related entities. Allega- 
 tions concerning fraudulent use of these entities were investigated. Indictments 
 have been handed down against lawyers of U.S. citizens utilizing Castle Trust 
 Co., on charges that they conspired to defraud the United States by impeding the 
 internal Revenue Service. To date, there has been one conviction and one acquit- 
 tal of lawyers concerning transactions involving Castle Trust Co Two bank 
 officials have also been indicted to date on various charges and are presently 
 fugitives. The investigation is continuing, and further indictments are possible 
 (b) This information can be obtained from the relevant Congressionai 
 
 CMH Hi 1 L C G£S. 
 
 The Treasury Department does not maintain the information called for bv 
 the remaining questions. * 
 
120 
 
 XII 
 
 The November 1977 issue of West Watch published quarterly by the Counci 
 for Inter-American Security carried the following story titled "Torrijos an« 
 
 Narcotics? The Panama Connection". 
 
 torrijos and narcotics? 
 The Panama Connection 
 
 Is there a connection between the Torrijos regime and the massive narcotic* 
 traffic in Central America and the United States? Much to the embarrassment 
 of the Carter Administration, this is the question being raised by leading Treats 
 opponents, Senators Robert Dole and Jesse Helms. Preliminary evidence suggest* 
 that the Panama Connection is one of the most important in the Western Hemi- 
 sphere, involving hundreds of pounds of heroin and other drugs and millions oi 
 dollars. At issue is nothing less than the activity of a gigantic criminal syndicate, 
 operating extensively throughout the Caribbean and even penetrating into the 
 United States. The issue of narcotics traffic could be the sleeper in the Canal 
 'Treaty debate, and its emergence could be explosive. 
 
 Preliminary reports from Congressional sources suggest a pattern of intrigue 
 and conspiracy reaching into the highest levels of the Panamanian regime. The 
 Merchant Marine Committee of the House of Representatives in 1973 estimated, 
 in a special report on the question, that approximately 20,000 drug addicts in the 
 United States were being supplied from Panamanian sources. It has been further 
 estimated that one twelfth of all heroin and cocaine entering the United States | 
 came through the Panama Connection. 
 
 On October 14, 1977, Representative McDonald of Georgia read into the 
 Congressional Record a 1973 report of the Merchant Marine Committee, detailing 
 the operations of the Panama Connection. 
 
 The facts of Panamanian involvement in the drug traffic are intriguing. 
 Panamanian nationals, Rafael Richard, Nicholas Polanco, and Guillermo Gon- 
 zalez were arrested in New York City on July 8, 1971. Gonzalez, who headed the 
 operation to smuggle two shipments of heroin into New York, weighing 70 kilos, 
 was arrested by Customs Officials after he had been tricked by Federal agents 
 into coming to New York to supervise the dope delivery. 
 
 Found guilty of the narcotics charge, Gonzalez was sentenced to seven years 
 in prison in New York State. It turned out, however, that Guillermo Gonzalez 
 was also, in the language of the Merchant Marine Committee Report, "a long 
 time friend and former bodyguard" of Moises Torrijos, the brother of Panamanian 
 dictator General Omar Torrijos. It was subsequently learned that Rafael 
 Richard's passport was signed by Panamanian Foreign Minister, Juan Tack, as 
 a "diplomatic passport", even though the 23-year-old Richard himself had no 
 qualifications for such a passport. Before his arrest by Customs Officials in 
 New York, Gonzalez had accompanied Richard on four previous smuggling ven- 
 tures into that city, carrying big shipments of 70 kilos each. 
 
 In Dallas in 1971, Federal authorities apprehended Joaquin Him Gonzalez for 
 conspiracy to smuggle a shipment of heroin worth over $1 million. Like Guillermo 
 Gonzalez, Joaquin Gonzalez was closely connected with the Torrijos government, 
 serving as the chief of International Transit at Panama's Tocumen Airport. Ac- 
 cording to BNDD officials, he used his high level position at the airport to 
 facilitate the transportation of drugs. 
 
 Upon his arrest in Dallas, a full scale effort was launched by the Panamanian 
 Government, led by Foreign Minister Juan Tack, to have him released. The 
 Panamanian officials expressed outrage at his arrest. 
 
 On December 3, 1972, Manuel Rojas Sucre, nephew of Panama's Vice President 
 Arturo Sucre, was arrested at Kennedy International Airport with shipments of 
 cocaine and hashish. Like Rafael Richard, young Sucre was carrying a special 
 diplomatic passport". 
 Referring to tho New York arrests and related information, the 1973 Merchant 
 Marine Committee further observed : 
 
 "The briefing team concluded that based on the Customs Investigation this 
 case reached into the highest levels of Panamanian Officialdom and included 
 Moises Torrijos, the brother of General Omar Torrijos, and the Panamanian 
 * oreign Minister, Juan Tack. This involvement was confirmed bv BNDD officers 
 in the Republic of Panama on February 23 during a Subcommittee briefing in 
 that country. • (See Congressional Record. October 14, 1977. E 6318 ) 
 
121 
 
 In the Congressional Record of October 17, 1977, Senator Jesse Helms released 
 what appears to be a "facsimile" of an intelligence report prepared by officials 
 of the Federal Drug Enforcement Agency on Torrijos and the Panama Connection. 
 
 According to the report released by Senator Helms, one Ramiros Rivas, a 
 Panamanian national with bank accounts totaling $750,000 in Miami, Florida, 
 entered into partnership with General Omar Torrijos. The object of their joint 
 venture was to purchase a transportation company in order to facilitate inter- 
 national narcotics traffic. Rivas disclosed to an undercover agent that the Panama 
 Connection is fueled by several different sources of supply, including Peru, 
 Colombia, and Fidel Castro's Cuba. Carried by Panamanian aircraft, narcotics 
 are shipped from these bases to Panama, where they are then transported by 
 various and sundry means to the United States through Mexico and other ports of 
 entry. Rivas further stated that Omar Torrijos brother, Hugo, and a group of high 
 level government and business leaders were involved. As Senator Helms reminded 
 Attorney General Bell, a sealed indictment already exists against Moises Torri- 
 jos, brother of the Panamanian General, for drug trafficking in the United 
 States. 
 
 The files of the FDA have not, as of this printing, been released, though they 
 are alleged by several sources to contain information detailing Torrijos opera- 
 tions, the participations of members of his family, government officials, along 
 with assassination plots and the ubiquitous Cuban involvement. Files are avail- 
 able but they have not been released for public or Congressional scrutiny. CIS 
 has contacted the officials of the FDA, confirming the existence of Panamanian 
 files, and has asked for their release under the Freedom of Information Act. Sen- 
 ator Helms has written Attorney General Griffin Bell, asking him to confirm 
 reports that Torrijos, members of his family and his government, are heavily 
 involved in narcotics traffic. 
 
 In a Senate speech of October 13, 1977, Senator Robert Dole of Kansas stated 
 that there was indeed an attempt by the Drug Administration "to keep informa- 
 tion out of public purview by moving the intelligence files to another location for 
 temporary safekeeping." 
 
 The central ingredient in international agreements is the trust, mutual respect, 
 and integrity of the parties involved if the integrity of a government is of such a 
 calibre that professions of good faith cannot even be considered, let alone in- 
 corporated into normal processes of diplomacy, international agreements are 
 worthless. If the Torrijos government and Torrijos himself is indeed involved 
 in merchandising the destruction of thousands of lives, there is little reason to 
 believe his intentions would be honorable in the interpretation or the enforce- 
 ment of a new treaty. 
 
 1. The Merchant Marine and Fisheries Committee has published information in 
 the past on Panama's drug traffic into the U.S. and the complicity of top Pan- 
 amanian officials in that traffic. 
 
 (a) Expand in detail on drug smuggling into the U.S. from Panama. 
 
 (b) What are the connections with illicit drug traffic on the part of Panamanian 
 Government officials as known by official U.S. agencies? 
 
 (c) Estimate the annual dollar inflow to Panama from drug traffic since 1968. 
 
 (d) Specify which members of the Torrijos family have been and are so 
 implicated. 
 
 (e) How do Panama banks, or how could they, facilitate illicit drug traffic in 
 that country? 
 
 (f ) How could a U.S. bank or other lending institution in this country facili- 
 tate such traffic? 
 
 2. Has the Panamanian Government at any time cracked down on any bank 
 for involvement in financing drug traffic? 
 
 3. Has the U.S. government ever cracked down on any U.S. bank for such a 
 practice? If so, give details. 
 
 4. Has any U.S. banker been indicted for such a practice? If so, give details. 
 
 5. Is such indictment expected in the near future? 
 
 6. How does merchant shipping play a role in Panama's drug traffic? 
 
 7. How could the control of the Panama Canal by Panama enhance interna- 
 tional drug traffic, assuming complicity in such illicit trade on the part of very 
 high level Panamanian officials? 
 
 8. Is the Mafia or other criminal elements known to have an interest, con- 
 trolling or otherwise, in any bank (a) in Panama? (b) in the U.S.? 
 
 9. How does the mushrooming banking system in Panama with its secret 
 accounts, tax advantages to bankers and clients, et cetera (a) benefit the citi- 
 zens of the U.S. as a whole? (b) disadvantage them? 
 
 [Subcommittee note: Answers in large part were not forthcoming. See cover 
 letter, Appendix B. See also Appendix D.] 
 
APPENDIX C 
 
 Department of the Teeasuby, 
 Washington, D.C., January 20, 1918. 
 
 Hon. Ralph H. Metcalfe, 
 
 Chairman, Subcommittee on Panama Canal, Committee on Merchant Marine and 
 Fisheries, House of Representatives, Washington, I).C. 
 Dear Mb. Chatbman: On December 30, I forwarded to the Subcommittee 
 responses to a series of questions submitted for the record following my testimony 
 on the Panama Canal Treaties on November 30, 1977. Enclosed are answers to 
 some of the questions we did not answer at that time. The remainder of the 
 questions require further interagency coordination and will be submitted as soon 
 as possible. 
 
 Sincerely, 
 
 Abnold Nachmanoff. 
 
 Enclosures. 
 
 Questions Based on "The Times" of London Aeticle 
 
 Question 7. Please list and explain the nature of each tax incentive granted to 
 international banks by decree No. 238. 
 
 Answer. Cabinet Decree Number 238 is basically a banking law, and does not 
 itself contain tax incentives. A publication describing Panamanian tax and 
 incentive laws is attached. 
 
 taxation 
 
 Every company operating in Panama is required to file Panamanian income 
 tax returns. Branches of foreign corporations are subject to the same taxes and 
 rates as Panamanian corporations. With the exception of certain statistical 
 reports which may be requested by various government offices, no other financial 
 reports are required. (A Panamanian company which does not operate in the 
 Republic of Panama is not required to file any financial reports or tax returns). 
 A company doing business in Panama must maintain its legal accounting books, 
 correspondence and other supporting data in Panama. 
 
 Income Tax. — Income tax is levied only upon net income derived from opera- 
 tions within Panama. Income not taxed includes: that derived from invoicing 
 the sale of merchandise or products which move solely outside the Republic 
 from an office in Panama ; income from directing transactions which are com- 
 pleted outside the Republic; and dividends from foreign entities derived from 
 income not subject to Panama income tax. A company operating the Colon Free 
 Zone, with sales within the customs territory of the Republic, is treated as a 
 domestic firm and is taxed on the income derived from such sales. 
 
 For Panama-source taxable income, the corporate rate starts at 10 percent on 
 the first $15,000 and increases progressively in four steps to $205,500 on the first 
 $500,000 plus 50 percent on the excess. 
 
 Dividend Tax. — Amounts distributed as dividends, whether in cash or stock, 
 are subject to a 10 percent tax which must be withheld by the company declaring 
 the dividend. The recipient of the dividend is not required to report the dividend 
 as taxable income. A company which does not declare a dividend or declares an 
 amount less than 40 percent of its net income after income taxes is subject to an 
 imputed dividend tax of 10 percent on the first 40 percent. 
 
 Companies operating in the Colon Free Zone are subject to the tax on dividends 
 only on that part of income derived from sales in the Republic. Companies in- 
 corporated in Panama but with no operations in Panama are not subject to a 
 dividend tax. 
 
 (123) 
 
 25-605 O - 78 - D 
 
124 
 
 Capital Gains and Interest. — Capital grains taxes are applicable to the sale of 
 real property, and on securities under limited circumstances. Profits obtained 
 from sales of securities do not constitute taxable income except when such 
 transactions are the usual activity of the seller. 
 
 Interest and royalties are deductible expenses and are tavable income to the 
 recipient. The full amount is taxable, but only one-half of the amount of 
 royalties is subject to tax. When interest and royalties are paid to non-resident 
 individual or corporate entities, Panama income tax must be withheld at ap- 
 plicable corporate or individual tax rates. 
 
 Source. U.S. Department of Commerce, "Overseas Business Reports: Marketing in Pan- 
 ama, July 1976." 
 
 Question S. If it is true, as Wise wrote, that foreign loans and deposits are 
 not required to have a cash or legal reserve, please comment on the various ef- 
 fects of such provisions. 
 
 Answer. Decree No. 238 indicates that Mr. Wise is correct that banks need not 
 maintain a cash or legal reserve in connection with foreign deposits. (See Ar- 
 ticle 36.) The main consequences of this provision are: (1) banks can earn in- 
 terest on total foreign deposits, while they must maintain a partially non-in- 
 terest bearing reserve for "local" deposits; and (2) the absence of reserve re- 
 quirements on foreign deposits, and the possibility of earning interest on all 
 such deposits, may tend to make Panama a more attractive country to deposit 
 funds in than a country which imposes reserve requirements on foreign deposits. 
 
 Questions from Twin Circle Article 
 
 Question 8. What is the current ratio of international earnings to total earn- 
 ings of the 13 (or more) U.S. banks operating in Panama? 
 
 Answer. Information on the proportion of total earnings of individual banks 
 derived from international activities is generally available in the annual reports 
 published each year by the banks. The following information has been taken 
 from the 1976 reports of the major U.S. banks operating in Panama. 
 
 International earnings as a percent of total earnings 1 for 1976 
 
 Percent 
 
 1. Bank America Corp 40. 
 
 2. Chase Manhattan Corp 78. 
 
 3. Citicorp 72.4 
 
 4. Wells Fargo 12. 
 
 5. Marine Midland 32. 
 
 6. Security Pacific 7. 
 
 7. First National Boston Corp 31. 7 
 
 8. Bankers Trust 64. 
 
 1 Total earnings before securities transactions. 
 
 Question 9. In each of those banks, what portion of international earnings are : 
 id) From assets in Panama? 
 
 (&) From assets in other countries earned by way of Panama branches? 
 Answer: Treasury is precluded by statute (in particular, Section 6031 of the 
 Internal Revenue Code) from disclosing such information as it may have on this 
 
 subject. 
 
 Questions Based on Aragon Letter 
 
 On August 28, 1977, Panamanian citizen Leopoldo Aragon sent a letter to 
 President Carter from Sweden where he resided. In that letter, Aragon, who died 
 by self immolation two or three days later, stated the following: 
 
 "In that manner Torrijos had the means to silence the Panamanian people by 
 sheer terror, crushing all freedoms and human rights, including freedom of speech 
 and assembly, and banning all political parties, so he could perpetrate the role 
 assigned to him — the deliverance of the canal treaties — without interference or 
 criticism. Meanwhile, with U.S. connivance, he, with hte sole signature, could 
 Obtain foreign loans in the name of the Republic of Panama, and pocket the pro- 
 ceed! at his discretion. In fact, he has. by name, the constitutional right to do so 
 according to Article 277 of his tailor-made "Constitution" of 1972, approved by 
 his rubber stamp Assembly. Thus Panama is saddled today with the highest per 
 capita foreign debt, again, with the exception of Israel, in the whole world." 
 
125 
 
 (1) Is it true that Torrijos could obtain foreign loans for Panama with his 
 signature alone? 
 
 (2) If not, what individual, or group of individuals, must sign for such loans? 
 
 Answer. Article 277 of the Panama Constitution inter alia provides Brig. Gen- 
 eral Omar Torrijos with the authority "to approve the execution of contract and 
 the negotiation of loans. . . ." In actual practice neither Torrijos nor the Presi- 
 dent signs loans approved by the Cabinet Council. Instead each loan approval by 
 the council is accompanied by a decree authorizing a specific government official, 
 usually the chief of the organization concerned, to sign the loan agreement. The 
 agreement must also be signed by the Minister of Treasury. The Cabinet Council 
 is composed of the ministers of state and the Vice President of the Republic who 
 functions in this capacity under the direction of the President of the Republic. 
 Article 277 also impowers General Torrijos to attend the meeting of the Cabinet 
 Council. 1 
 
 Questions Based on Rothbard Article 
 
 Question 12. Submit for the record detailed information on the severe losses 
 suffered by Bankers Trust Company (of which Ellsworth Bunker is supposed to 
 have been a former director), Chase Manhattan, First Chicago, and City Corp. 
 around 1974 and 1975.. 
 
 Answer. The attached detailed information on loan losses in 1974 and 1975 
 for the four banks specified in the question was obtained from the annual report 
 of these banks. 
 
 Question 13. Submit information on similar losses, if any, suffered by other 
 banks which have operations in Panama. 
 
 Answer. Information on loan losses of any other banks of interest to the Sub- 
 committee may be obtained either from the banks themselves or by requesting a 
 copy of Form 10-K from the Securities and Exchange Commission. 
 
 Annual Report 1974 — First Chicago Corp., The First National Bank of 
 
 Chicago 
 
 Although domestic loans rose somewhat above our plan, we succeeded in hold- 
 ing down the level of our foreign loans. As a result, in December, our average con- 
 solidated loans (domestic and foreign) were $12,372 million, eight-tenths of one 
 percent below our May plan. We are pleased to have been able to accommodate 
 our customers while also maintaining such precise control over our volume. 
 
 The prospect of slower loan growth in the period ahead presents difficult choices 
 to make between priorities. If our national economy is to regain a rising trend 
 in its standard of living, the required increase in our productive facilities and 
 the development of our national energy resources will require massive amounts 
 of capital financing. It is estimated that in the aggregate, over the next decade 
 more than a trillion dollars will be needed. While most of this financing should 
 come from personal savings through purchases of stocks and bonds, it is inevi- 
 table that corporations will turn to the banks for an increased volume of interim 
 financing. This argues for bank loans not being held to serve limits, either in 
 dollar amounts or in relation to capital funds. 
 
 1 This information was provided by the State Department. 
 
126 
 
 Consolidated Loans — 1974 
 (In Billions) 
 $14 
 
 J FMAMJ J AS OND 
 
 Nevertheless, under present circumstances, a more moderate growth rate in 
 our own loans is desirable. Competition among banks to add new business and 
 thereby increase assets had reached excessive proportions, resulting in a pro- 
 gressively lower net return per dollar of assets. 
 
 In the context of the relatively high degree of leverage which has developed 
 In the banking business generally, and the current Tegulatory and market environ- 
 ments, the banking industry is now under some pressure to augment its capital 
 more rnpidly than assets. As of the year-end, your Corporation had a higher 
 ratio of capital (including reserves) to assets than any of the other top ten bank 
 balding companies. Nevertheless, we intend to increase the ratio of our capital to 
 assets still further. We desire to achieve this goal primarily through the reten- 
 tion of earnings. But we recognize the possibility that the nation's need for addi- 
 tional credit later this year or next may dictate a greater increase in loans than 
 DOW seems desirable. If this should develop, our priorities might be changed. In 
 such an event, or in the event that the market for bank stocks improves during 
 the course of the next year or two, as we believe it will, then in either case we 
 may decide to supplement retained earnings with an issue of additional equity- 
 type securities in order to strengthen further our capital position. 
 
127 
 
 To achieve any meaningful increase in our capital through retained earnings 
 necessitates a continued policy of relatively modest dividends. In 1974 we paid 
 out only 34 percent of our earnings (before security gains and losses). We have 
 increased our dividends each year for the past six years in recognition of our 
 obligation to those of our stockholders who rely heavily on dividend income. It is 
 our intention, at least for the immediate future, to continue a policy of increases 
 as warranted, but to limit our payout ratio to about the recent level as a percent- 
 age of earnings. 
 
 Loan quality and provision for loan losses 
 
 It is important to note that the satisfactory growth of our earnings is meas- 
 ured after deducting from income, as a provision for possible loan losses, an 
 amount more than twice the amount deducted in any prior year. We have stepped 
 up the additions to our reserve for bad debts in 1974, and intend to continue to 
 provide sufficient additions to maintain reserves fully adequate to absorb what- 
 ever loan losses might develop in the years ahead. The year 1974 was a period of 
 declining output, rising prices and reduced unit sales. Many businesses experi- 
 enced lessened liquidity. As the economy continues to slide, we can expect a fur- 
 ther deterioration in 1975. 
 
 Our principal assets are our loans to numerous corporations all over the United 
 States (and beyond) engaged in the whole gamut of industry, commerce and 
 merchandising. Our borrowers tend to prosper as the economy prospers, and their 
 income tends to slow as the economy slows. We also have a large volume of loans 
 to customers who invest in real estate. These loans are also of wide diversity : 
 construction financing, residential mortgages, mortgage bankers, real estate in- 
 vestment trusts and the real estate affiliates of large multinational companies. 
 There is a wide geographic distribution of these various types of loans. 
 
 As lending is our principal activity, loan losses are a part of our normal cost 
 of doing business. Such losses tend to increase in periods of economic decline. 
 Our portfolio is under our continuous scrutiny and all known losses have been 
 charged off. 
 
 It has been, and remains, our policy — 
 
 (a) not to accrue interest, and 
 
 (b) to charge against current earnings any prior accrued and unpaid 
 interest, 
 
 on loans which either (i) we regard as of doubtful collectibility as to either 
 principal or interest, or (ii) on which the interest rate has been reduced through 
 agreement with the borrower because of its deteriorating circumstances. 
 Our reserve for bad debts is made up of two components : 
 
 First, the valuation reserve, which since 1969 includes amounts charged to 
 operating expense ; and 
 
 Second, the non-valuation reserve, which, in effect, includes amounts trans- 
 ferred from undivided profits. 
 
 The distinction between the two is that losses charged against the valuation 
 reserve do not directly affect current earnings. In the unlikely event that losses 
 were to exceed the valuation reserve, the excess would be charged directly to 
 current earnings and could not be charged to the non-valuation reserve. This 
 distinction is not as significant as it might seem, however, because if losses 
 charged to the valuation reserve should reduce this reserve to a level in relation 
 to the size and quality of the loan portfolio which the management felt was 
 inadequate, it would make sufficient provisions from earnings to restore the 
 reserve to a level it deemed appropriate. 
 
 At the end of 1973 we had a valuation reserve of $83,269,000 and a non-valua- 
 tion reserve of $73,758,000, a total of $157,027,000. During 1974, we deducted 
 from income and added to our valuation reserve some $52,750,000, and charged 
 net bad debts against this in the amount of $40,253,000. We also transferred 
 $27,937,000 (before tax benefit) from undivided profits to the non-valuation re- 
 serve. Consequently, at the end of 1974, after all charge-offs which we thought 
 appropriate, the valuation reserve amounted to $95,766,000 (an increase during 
 the year of $12,497,000) , and the non-valuation reserve amounted to $101,695,000 
 (an increase of $27,937,000). Total reserves were thus $197,461,000, an increase 
 during the year of $40,434,000. 
 
 As a result of a proportionately more rapid increase in loans (from $9,362,991,- 
 000 to $12,392,684,000) during the year, the ratio of the valuation reserve to loans 
 
128 
 
 declined from .89 percent to .77 percent. This places our ratio about in the middle 
 of those of the top ten bank holding companies. We believe that adequate provi- 
 sion has been made in the loan loss reserves for all anticipated losses, but we 
 intend to continue significant monthly additions in order to preserve and enhance 
 the adequacy of our reserves. 
 
 Pricing 
 
 Our intention to moderate loan growth suggests that our objective of a con- 
 tinued annual rise in earnings will require that we increase the rate of return 
 on our assets. Over the past seven years, our ratio of after-tax earnings to aver- 
 age assets declined from .83 percent in 1968 to .60 percent in 1974. Our return 
 on assets continues to be one of the highest of the top ten bank holding com- 
 panies, but nevertheless an improvement in this respect is a priority objective. 
 Thus, early in 1974, when we shifted our emphasis away from volume, we ad- 
 justed our pricing for both the credit and the services which we offer. 
 
 Since May, 1973, we have generally established our corporate base ("prime") 
 rate on a formula tied to the commercial paper rate. For most of the period since 
 its adoption, the formula has proved to be a useful guide. However, we did not 
 follow the formula last summer when it called for rates above 12 percent. We 
 feared that higher rates would further disrupt securities markets already 
 nearly paralyzed. Later, when rates trended downward, we again followed the 
 direction indicated by the formula, though our rates lagged a bit, as indeed 
 they had during the earlier period when we did not move upward at the rate our 
 formula would have indicated. 
 
 In view of the changed world economic environment, and the dilemma of the 
 authorities in their effort to fight inflation while also stimulating the sagging 
 economy, the determination of appropriate levels of interest rates will require 
 greater judgment than heretofore. As a result, from time to time the applica- 
 tion of our formula may be superseded by a less mechanistic determination of 
 an appropriate corporate base rate level. This will permit taking more fully into 
 consideration not only competitive factors but also Federal Reserve policies. 
 
 In July, 1974, we revised our pricing, putting greater emphasis on commit- 
 ments. Implicit in this decision was the determination that the overall level of 
 our commitments should be under closer management control, and that com- 
 pensation to the Corporation should be reasonably level irrespective of utilization. 
 We reasoned that an overall ceiling on commitments was necessary since it would 
 be related to our capital base. It is not sufficient to consider only the return on 
 assets, the amount of which will vary depending on utilization. By pricing on 
 outstanding commitments, we will be able to maintain an improved stability in 
 the level of our loans and provide a somewhat more predictable level of return 
 to the Corporation. Overall, this change tends to standardize a wide variety of 
 pricing arrangements to a common policy applicable to virtually all classes of 
 customers. 
 
 It is also our objective to put greater emphasis on compensating balances as a 
 part of our program to reduce our dependence on purchased money. Until branch 
 banking is permitted in Illinois, it remains difficult to achieve from one single 
 location our desired growth in retail demand and savings deposits. 
 
 We are convinced that the nation and our customers individually are best 
 served by a strong banking system. This can be achieved only through increasing 
 capital funds. Such increases in capital can best be derived from retained earn- 
 ings, and should be adequate to provide for the capacity and flexibility that is 
 required to meet borrowing needs. We intend to maintain and enhance our posi- 
 tion as one of the most strongly capitalized financed institutions within the 
 banking system. 
 
 Supplementing the price revisions on loans and commitments, for the past 
 several months we have also been improving our pricing of non-credit services. 
 This is the result of a comprehensive review of costs and prices and is the first 
 repricing of such services since early 1971. 
 
 Fund itiff 
 
 It is also our objective to enhance our capacity for effective spread manage- 
 ment. The dollar spread between what we earn on our domestic assets and the 
 cost of the money to fund these assets increased in both the first and second 
 quarters. Although the spread declined slightly in the third quarter — reflecting 
 recurrent tightness in the money market — it was much improved in the fourth 
 quarter, reflecting the decline in short-term interest rates. 
 
129 
 
 Domestic spread income 
 
 1973 Fourth quarter. 
 1974: 
 
 First quarter 
 
 $75, 944, 000 
 
 Second quarter. 
 Third quarter.. 
 Fourth quarter. 
 
 77, 895, 000 
 82, 899, 000 
 82, 797, 000 
 87, 381, 000 
 
 In mid-1974 we adopted the more conservative policy of leveling out and ex- 
 tending the maturities of our outstanding certificates of deposit ("C/D's"). 
 Looking ahead, we believe that the trend toward lengthened maturities in the 
 purchased money portfolio will continue, perhaps accelerating in the months 
 immediately ahead as short-term rates move lower. The Comptroller of the Cur- 
 rency has urged the banking industry to move toward this objective. Federal 
 Reserve practices also encourage the lengthening of maturities by requiring a 
 reserve of six percent against certificates of deposit maturing in 180 days or less, 
 whereas C/D's of over six months maturity require only a three percent reserve. 
 
 As a consequence, there may be an effort throughout the banking system to 
 place less reliance on short-term purchased money for funding asset growth in 
 favor of more stable relationship money, particularly in the area of savings 
 certificates. Of course, purchased money will remain an important component 
 in funding your Corporation's growth. However, its relative importance should 
 diminish the extent that we are able to attract increased deposits. Ideally, greater 
 liberalization of Illinois branch banking laws, and of the regulations of the 
 Comptroller of the Currency with regard to unmanned teller facilities, would 
 help achieve this objective more quickly and without adding unduly to operating 
 expense. 
 
 We believe that short-term interest rates will continue to decline for some 
 months, but neither as precipitously as they have recently nor to the low levels 
 considered normal in previous years. 
 
 Our expectation is that the corporate base rate will generally trend down- 
 ward for several more months, plateau, and then later, perhaps before year-end 
 begin to rise again. The need of the Federal government to borrow extensively 
 throughout the balance of this fiscal year and next may nudge longer and 
 medium-term interest rates to levels which again will discourage corporations 
 (at such time as they begin to need additional funds) from public offerings and 
 cause them to seek at least interim financing through the banks. By year-end 
 or early 1976 money may once again become tighter and more expensive. 
 
 The structural weaknesses in the world economy — evidenced principally by 
 accelerating inflation and payments imbalances in 1973 — were seriously ex- 
 acerbated in 1974 by the efforts of large increases in the prices of petroleum and 
 other major commodities. The resulting shift in international wealth and power 
 forced a number of developed countries to borrow unprecedented amounts to 
 compensate for large and growing trade deficits. 
 
 The Organization of Petroleum Exporting Countries (OPEC), one of the most 
 effective price cartels in economic history, has enabled its members to amass an 
 estimated $50 billion in foreign exchange reserves — an amount which it was 
 feared would test the absorptive capability of the private international financial 
 system, and which increased the OPEC countries' reserves to 20 percent of the 
 world total, compared with 8 percent at the end of 1973. 
 
 This rapid accumulation of foreign exchange reserves by the OPEC members 
 generated a widespread fear that unless oil prices are sharply reduced or mas- 
 sive aid given (neither of which seems likely) many countries would find it 
 necessary to reduce substantially either imports for current consumption or 
 capital goods for the development of a productive economy, with a consequent 
 decline in their standards of living. 
 
 More recently, there have been expressions of relief based upon the interpreta- 
 tion of figures for the past year which would suggest that many countries have 
 not suffered nearly as significant declines in their foreign reserves as had been 
 previously feared. This would indeed be welcome news, but we are inclined to 
 feel that it is a little premature to arrive at such conclusions. Several countries 
 lost significant proportions of their reserves and the severity of other losses was 
 
 International Banking Department 
 
130 
 
 moderated, but only temporarily, by increased prices for other exported raw 
 materials, and by some large borrowings from private capital markets. Thnsi 
 wo are concerned that the present euphoria may be dispelled and the impact oil 
 the dramatic increase in the cost of imported oil again may be recognized asi 
 one which may lead to serious economic deterioration and resultant political! 
 instability in several countries. 
 
 The growing feeling of uneasiness resulting from the early concern with the* 
 effect of the shifts in reserves was aggravated in June by the collapse of the* 
 Herstatt Bank, the largest private bank in the Federal Republic of Germany. 
 Tension was further increased by revelations of large foreign exchange losses \ 
 suffered by a few prestigious European banks and by the Franklin National in 
 New York. Small and medium-sized banks abroad encountered significant diffi- 
 culty in funding themselves, a situation most pronounced in the June- September 
 period. Foreign exchange markets became thin and highly erratic, and there was 
 a growing concern that the financial mechanism necessary for world trade and 
 investment might not be able to cope with these disturbances. 
 
 Your Corporation has emerged from these travails without serious burdens, 
 though not entirely unscathed. In the second quarter the Herstatt failure caused 
 us to charge off $3 million in anticipation of a possible loss of 50 percent of a $6 
 million deposit we had placed with that bank. Throughout the entire year we 
 continued to follow a policy of maintaining only very limited foreign exchange 
 positions. As a consequence, we finished the year with only a very modest loss 
 in foreign exchange. Hedging and translation losses for the year were $1,600,000. 
 of which $1,500,000 was charged to the reserve created in 1973 for this purpose. 
 
 The combination of the write-off of one-half of the Herstatt deposit, a foreign 
 exchange performance well below 1973's record earnings, and loan losses on 
 United Kingdom property loans reduced the International Banking Department's 
 1074 profit contribution. The Department accounted for 30 percent of the Cor- 
 poration's gross income in 1974. compared with 29 percent in 1973. On the basis 
 of internally developed allocations which are subjective and to an extent arbi- 
 trary, we estimate that the Department accounted for only 3 percent of the Cor- 
 poration's income before securitv transactions in 1974. compared with 12 percent 
 in 1973. 
 
 A highly positive development during 1974 was the improvement in interest 
 rate spreads on international loans. Because of the turbulance in the interna- 
 tional financial markets, as mentioned above, banks became much more selec- 
 tive in their choice of credits and insisted on a reasonable return for the risks 
 taken. In 1973, we became convinced that the very narrow spreads being taken 
 by many banks abroad did not adequately compensate them for credit risks and 
 operating costs, and we declined to make any loans below what we considered 
 appropriate levels. We have continued our policy of pricing international credits 
 at intelligent rates and are now able to secure spreads on our international port- 
 folio considerably above those of a year ago — approximately double in the cas* 
 of newly acquired or renewed prime business. 
 
 During 1974, 26 new installations were opened in 12 countries where First 
 Chicago had not been represented before, resulting in a total of 74 installations 
 in 39 countries. 
 
 Virtually all of the Bank's international loans are set at a floating rate over 
 our cost of purchased funds. This protects us against interest rate variations. 
 Nevertheless, as mentioned previously, we will continue our efforts to broaden 
 significantly our base of relationship money consisting of demand deposits, 
 savings accounts, and stable sources of corporate and governmental time deposits. 
 Several of our new installations are designed primarily to attract such deposits. 
 
 We anticipate that in 1975 the International Banking Department will be able 
 to take advantage of. and consolidate, the rapid, ten-year expansion of our inter- 
 national activities. We anticipate significantly higher profits and a greater rela- 
 tive contribution to overall Bank earnings. 
 
 Annual Report 1975 — First Chicago Corp., the First National Bank of 
 
 Chicago 
 
 the tear in review 
 
 Nineteen seventy-five was a year of consolidation for First Chicago Corpora- 
 tion, as it was for the general economy. Although we were naturally disappointed 
 
13; 
 
 that the recession proved to be protracted and deep, the slowdown brought focus 
 to the basics of banking and business in general. Unpleasant as it was, the 
 recession and its resulting problems may in the long run restore a greater sense 
 of fiscal responsibility to those in public and private life. 
 
 The uncertain economic outlook during the early part of the year, and the 
 Corporation's rapid growth in previous years, prompted us to concentrate our 
 energies on strengthening our more traditional activities. 
 
 An overview of earnings 
 
 The Corporation's earnings in 1975 derived their principal incremental strength 
 from the International Banking Department. Several of our newer overseas 
 installations became profitable for the first time. Spreads on international loans 
 improved significantly over 1974, loan volume increased moderately, foreign 
 exchange trading and fee income increased considerably, and carefully moni- 
 tored, but aggressive, funding policies produced excellent results. 
 
 The Corporate Banking Department's earnings increased significantly from 
 last year, but Real Estate Department results were severely depressed due to 
 adverse conditions in that industry. 
 
 In spite of reduced domestic loan demand, particularly in the second half, net 
 interest differential income increased by $27 million to $407 million in 1975. Part 
 of this growth was attributable to substantially greater holdings of U.S. govern- 
 ment securities. 
 
 Both the bond trading and Trust Department activities produced record profits. 
 First Chicago Leasing Corporation also established a new high in earnings. In 
 the Personal Banking Department, the emergence of Bank Americard as a 
 solidly profitable operation was a notable achievement. Throughout the Corpo- 
 ration, expenses were tightly controlled and non-interest expenses (excluding 
 provisions for loan losses) increased only 5.2 percent over 1974. 
 
 In summary, most departments turned in very strong performances in their 
 basic operations. However, these operating gains were almost wholly offset by 
 several negatives, including a very substantial increase in provisions for loan 
 losses, the reversal of interest previously accrued on a number of loans which 
 were placed on a cash basis, and reduced revenues because of lower interest 
 income on some loans than was originally negotiated. Each of these factors will 
 be described in more detail in the following paragraphs. 
 
 Provisions for loan losses 
 
 It continues to be our policy to write off all known losses as they are identified, 
 and to replenish and strengthen our reserve for loan losses by making adequate 
 provisions against earnings. In 1975 we wrote off (net of recoveries) $93 million 
 of loans and made provisions against earnings of $118 million, thus absorbing 
 all the write-offs and adding $25 million to our loan loss reserve. At year end, 
 the reserve for possible loan losses was $121 million, or 1.02 percent of total 
 loans outstanding, compared with $96 million or 0.77 percent of total loans a 
 year earlier. 
 
 Of the $93 million written off, $23 million involved loans secured primarily 
 by real estate, and $11 million was accounted for by loans to REITs. 
 
 In addition, $9 million of consumer loans, primarily originated through Bank 
 Americard, were written off. The balance of the write-offs, $50 million, repre- 
 sented loans to a wide variety of industries of which retailing was the most 
 significant. 
 
 The 1975 balance sheet reflects new accounting requirements for banks, which 
 provide that the reserve for bad debts be separated into three components : first, 
 the valuation* portion is now referred to as the reserve for possible loan losses, 
 which is deducted from loans; second, the deferred tax portion is included in 
 other liabilities : and third, the contingency portion is included in undivided 
 profits. The 1974 balance sheet was reclassified to reflect the accounting changes, 
 which increased undivided profits by $58,537,000 as of December 31, 1974. 
 
 Interest reversals and shortfall 
 
 Whenever the collectibility of principal or interest on any loan becomes uncer- 
 tain, that loan is immediately placed on a cash basis for purposes of income 
 recognition, and any interest accrued in the current or prior years, but unpaid, 
 is reversed. Thereafter, interest is recognized as income only as it is collected 
 in cash. Further, whenever the interest rate on any loan is negotiated downward 
 due to the deteriorating financial condition of the borrower, that loan also is 
 placed on a cash basis. 
 
132 
 
 In 1975, earnings were adversely affected by the shortfall in interest income, 
 as well as by the reversal of interest previously accrued. We have defined short- 
 fall as the difference between the amount of interest we actually collected on 
 these cash basis loans and the amount that would have been accrued based on 
 the original contract terms. Interest reversals of $27 million, and interest short- 
 fall of $52 million had an adverse pre-tax impact on 1975 earnings of $79 mil- 
 lion or $1 per share after taxes. 
 
 Interest reversals and interest shortfall in part arose because of the continuing 
 cash flow problems experienced by a number of our customers in 1975, par- 
 ticularly those operating in the real estate industry. In some of these instances, 
 we agreed to reduced rates of interest for a period of time in order to help the 
 borrowers work out their difficulties. 
 
 The total of interest reversals and shortfall is a significant number, and great 
 care must be used in relating it to current earnings. For example, it should not 
 be inferred that when a renegotiated loan is collected, the total amount of 
 the related shortfall can be restored to earnings. When and to the extent these 
 loans are collected, the funds must be used in new loans and investments at 
 prevailing market rates, which might be greater or lower than the original terms 
 of the renegotiated loans. 
 
 More recently, there have been expressions of relief based upon the interpreta- 
 tion of figures for the past year which would suggest that many countries have 
 not suffered nearly as significant declines in their foreign reserves as had been 
 previously feared. This would indeed be welcome news, but we are inclined 
 to feel that it is a little premature to arrive at such conclusions. Several coun- 
 tries lost significant proportions of their reserves and the severity of other 
 losses was moderated, but only temporarily, by increased prices for other ex- 
 ported raw materials, and by some large borrowings from private capital 
 markets. Thus, we are concerned that the present euphoria may be dispelled 
 and the impact of the dramatic increase in the cost of imported oil again may 
 be recognized as one which may lead to serious economic deterioration and re- 
 sultant political instability in several countries. 
 
 The growing feeling of uneasiness resulting from the early concern with the 
 effect of the shifts in reserves was aggravated in June by the collapse of the 
 Herstatt Bank, the largest private bank in the Federal Republic of Germany. 
 Tension was further increased by revelations of large foreign exchange losses 
 suffered by a few prestigious European banks and by the Franklin National in 
 New York. Small and medium-sized banks abroad encountered significant diffi- 
 culty in funding themselves, a situation most pronounced in the June-September 
 period. Foreign exchange markets became thin and highly erratic, and there was 
 a growing concern that the financial mechanisms necessary for world trade and 
 investment might not be able to cope with these disturbances. 
 
 Your Corporation has emerged from these travails without serious burdens, 
 though not entirely unscathed. In the second quarter the Herstatt failure caused 
 us to charge off $3 million in anticipation of a possible loss of 50 percent of a $6 
 million deposit we had placed with that bank. Throughout the entire year we 
 continued to follow a policy of maintaining only very limited foreign exchange 
 positions. As a consequence, we finished the year with only a very modest loss in 
 foreign exchange. Hedging and translation losses for the year were $1,600,000, 
 of which $1,500,000 was charged to the reserve created in 1973 for this purpose. 
 
 The combination of the write-off of one-half of the Herstatt deposit, a foreign 
 exchange performance well below 1973's record earnings, and loan losses on 
 United Kingdom property loans reduced the International Banking Department's 
 1974 profit contribution. The Department accounted for 30 percent of the Cor- 
 poration's gross income in 1974, compared with 29 percent in 1973. On the 
 basis of internally developed allocations which are subjective and to an extent 
 arbitrary, we estimate that the Department accounted for only 3 percent of the 
 Corporation's income before security transactions in 1974, compared with 12 
 percent in 1973. 
 
 A highly positive development during 1974 was the improvement in interest 
 rate spreads on international loans. Because of the turbulence in the inter- 
 national financial markets, as mentioned above, banks became much more selec- 
 tive in their choice of credits and insisted on a reasonable return for the risks 
 taken. In 1973. we became convinced that the very narrow spreads being taken 
 by many banks abroad did not adequately compensate them for credit risks 
 and operating costs, and we declined to make any loans below what we considered 
 appropriate levels. We have continued our policy of pricing international credits 
 at intelligent rates and are now able to secure spreads on our international 
 
133 
 
 portfolio considerably above those of a year ago— approximately double in the 
 case of newly acquired or renewed prime business. 
 
 During 1974, 26 new installations were opened in 12 countries where Jnrst 
 Chicago had not been represented before, resulting in a total of 74 installations 
 in 39 countries!. # 
 
 Virtually all of the Bank's international loans are set at a floating rate over 
 our cost of purchased funds. This protects us against interest rate variations. 
 Nevertheless, as mentioned previously, we will continue our efforts to broaden 
 significantly our base of relationship money consisting of demand deposits, 
 savings accounts, and stable sources of corporate and governmental time de- 
 posits. Several of our new installations are designed primarily to attract such 
 
 de We lt anticipate that in 1975 the International Banking Department will be 
 able to take advantage of, and consolidate, the rapid, ten-year expansion of our 
 international activities. We anticipate significantly higher profits and a greater 
 relative contribution to overall Bank earnings. 
 
 ASSET AND LIABILITY MANAGEMENT 
 
 The adverse earnings impact of carrying cash basis loans will be substantial 
 during the first quarter of 1976. However, as the year progresses and collections 
 are received on these loans, the proceeds will be reinvested at going market 
 
 The modest amount of the increase in 1975 earnings was disappointing, but 
 we are highly gratified that our basic earnings stream was strong enough to 
 absorb the aggregate burden of $118 million in loan provisions (up from 853 
 million in 1974), $27 million in interest reversals, and $52 million interest short- 
 fall, yet still show a gain. 
 
 Loan Quality 
 
 Constant attention to the quality of the loan portfolio is achieved through a 
 formal loan review process. The lending officers assign a credit quality classifica- 
 tion to each loan when it is recorded on the books. Subsequently, the Loan Review 
 Unit — staffed by experienced and able credit officers — independently evaluates 
 and ranks each loan greater than $50,000 annually or more frequently. Through 
 this ongoing process, management is advised of the condition of individual credits 
 and the quality and profile of the entire portfolio. This information, in turn, en- 
 ables management to make whatever changes in lending policies it deems 
 necessary. 
 
 As might be expected following a severe recession, the loan portfolio currently 
 reflects some deterioration in the financial condition of a number of companies, 
 particularly those in the real estate industry. However, the majority of our bor- 
 rowing customers are in sound condition, and among those that are experiencing 
 difficulties, improvement is being achieved. The reserve for loan losses will be 
 maintained at an adequate level to cover any potential losses. 
 
 Loans to REITs continue to represent the most troublesome part of the loan 
 portfolio. However, substantial progress in reducing our exposure was achieved 
 in 1975, and recent signs of increased activity in the real estate sector are 
 encouraging. 
 
 At year end, our loans to REITs were $693 million, down from $788 million 
 at the end of 1974. This $95 million reduction was accomplished by $66 million 
 of net cash payments, $18 million of specific assets obtained from trusts in ex- 
 change for our loans, and $11 million of write-offs. In addition to the REIT 
 loans written off, the quality of the remaining REIT portfolio was an important 
 consideration in the addition made to the reserve for possible loan losses. At 
 year end, $402 million of our REIT loans were on a cash basis. The average 
 interest rate earned on the entire REIT portfolio during the year was 5.4 
 percent. 
 
 A comment on the shipping portfolio is also appropriate in view of recent 
 publicity concerning the financing of this industry. As of December 31, 1975, our 
 credits secured by oceangoing ships amounted to $191 million, and we also had 
 additional commitments of $109 million. Our risks are well diversified, both as 
 to obligor and type of ship, and our losses on shipping credits have been modest. 
 
 Although we have our share of loans to manufacturers, retailers and others 
 hard hit by the 1974-75 recession, with the exception of the REIT and other real 
 estate-related loans, the overall portfolio is in good balance and of appropriate 
 quality. 
 
134 
 
 At the Annual Meeting on April 11, 1975, it was stated: . . if business 
 remains soft, then interest rates may stay at current levels or decline further, 
 loan demand will continue to be slack, and our own spreads, which began to 
 narrow in the second half of March, may come under additional pressure." 
 
 That observation turned out to be reasonably accurate. While the recession 
 bottomed out early in the second quarter, the recovery has progressed at a 
 moderate pace. Short-term rates declined rapidly early in 1975, but in May an 
 upswing in rates began. The upswing persisted through September and into 
 October before rates declined again late in the year. 
 
 % 
 8 
 
 Average Monthly 
 Short-Term Interest Rates 
 1975 
 
 6 - 
 
 \ 
 
 # # ♦ 
 
 ♦ 
 ♦ 
 
 \ 
 
 — Fed Funds 
 
 v+ Treasury Bills 
 
 ■ Commercial Paper 
 
 J I I I L 
 
 I I I 
 
 J FMAMJ JAS OND 
 
 Within this uncertain economic environment and changing interest rate pat- 
 tern, the Asset and Liability Management Committee attempted to maximize 
 the Corporation's interest spread income, while maintaining adequate liquidity 
 and acceptable capital ratios. 
 
135 
 
 Loan volume 
 
 The inventory liquidation and reductions in capital spending which accom- 
 panied the recession had a dampening impact on domestic loan demand through- 
 out 1975. However, this decrease was partially offset by steadily increasing loan 
 volume in the International and Personal Banking departments. Consequently, 
 consolidated loans declined only modestly during the year, to $11.8 billion at 
 year-end, compared with $12.3 billion at year-end 1974. 
 
 Average Consolidated Loans 
 First Chicago Corp. 
 Billions 1975 
 $12.5 
 
 12.0 -4 
 
 11.5 — : 
 
 11.0 _i 
 
 1st 
 Qtr. 
 
 2nd 
 Qtr. 
 
 3rd 
 Qtr. 
 
 4th 
 Qtr. 
 
 Investments 
 
 While domestic private credit demand slackened, the borrowing needs of the 
 Federal government and its agencies rose as the federal deficit soared to a record 
 level. Consequently, significant additions were made to the U.S. government and 
 Federal agency portfolios during the year, raising the total to $1.4 billion at year 
 end, an increase of $804 million over the $634 million as of December 31, 1974. 
 These additions were concentrated in the shorter maturity ranges to permit re- 
 duction of security holdings when loan demand strengthens, without the need 
 to liquidate bonds at prices below original cost. 
 
136 
 
 Investment Account Holdings 
 U.S. Government and 
 Federal Agency Securities 
 
 Billions 1975 
 
 $1.5 I 
 
 1.2 
 
 .9 
 
 
 
 
 
 
 
 
 
 3/31 6/30 9/30 12/31 
 
 3 yrs. 2 yrs. 1 yr. 1 yr. 
 2 mos. 4 mos. 7 mos. 4 mos. 
 
 Outstandings in the municipal portfolio declined during the year because the 
 proceeds of maturing bonds were reinvested in other assets. The portfolio at year 
 end amounted to $83S million, compared with $879 million the previous year, and 
 it does not contain any obligations of New York City or of the New York Munici- 
 pal Assistance Corporation. 
 
 Purchaxrd money 
 
 As bank assets grew at a rapid pace during the early 1970's, First Chicago, like 
 most other money center banks, relied heavily on "purchased money" — primarily 
 CDs (negotiable certificates of deposit) — as a means of financing domestic loan 
 growth. In early 1974, however, the growth of new loans was restrained in order 
 to insure adequate resources to fund existing and prospective requirements of 
 long-standing customers without the necessity to rely on more volatile sources of 
 
137 
 
 funds. Simultaneously, greater emphasis was placed on developing new sources 
 of relationship money, and on increasing the average maturity of the liability 
 structure. During 1975, the Corporation registered progress in achieving both of 
 these objectives. 
 
 CD portfolio 
 
 After lengthening the maturity structure of the CD portfolio during the first 
 half of 1975, the strategy was reversed in midyear, causing both the size and ma- 
 turity of the portfolio to decrease in order to take advantage of favorable rates 
 on short-term funds. As of December 31, i975, the portfolio totaled $3.9 billion 
 compared with $4.7 billion on December 31, 1974. The average maturity at year 
 end was 70 days, slightly higher than the average maturity of 68 days a year 
 earlier. 
 
 Funding Related Activities 
 
 The use of commercial paper to finance holding company and related activities 
 was significantly reduced during the year. This reduction was made possible 
 because of new funds generated by a $60 million private placement of 18-month 
 notes arranged in November, and an additional private placement of shorter term 
 notes, which totaled $127 million at year end. 
 
 As of December 31, 1975, total commercial paper outstanding was $397 million, 
 compared with $502 million as of December 31, 1974. 
 
 In keeping with previous policy, the Corporation maintains bank lines which, 
 together with overnight money market loans, short-term investments, and other 
 liquid assets, provide greater than 100 percent back-up for outstanding commer- 
 cial paper. 
 
 At year end the combined assets of our nonbank subsidiaries were $954 million. 
 These assets were principally financed by $80 million of equity capital and bor- 
 rowings either advanced from or guaranteed by the parent. Included in the 
 borrowings guaranteed by the parent were $127 million of short term privately 
 placed notes and $49 million of intermediate-term notes. The parent's sources of 
 funds used to finance the advances to the subsidiaries included $200 million of 
 intermediate-term debt and the $60 million of privately placed 18-month notes, 
 with the balance funded by commercial paper and other short-term liabilities. 
 
 Demand Deposits and Savings 
 
 Average demand deposits rose $74 million, or three percent, for the year. While 
 this is not a significant increase, it was achieved during a period when money 
 supply grew modestly, and when average domestic loans were actually one per- 
 cent below 1974. The increase under such circumstances was a source of satisfac- 
 tion since it resulted from efforts to attract new balances as compensation for 
 operating services, and to rely more heavily on balances instead of fees in pricing 
 certain lending commitments. 
 
 Average passbook savings increased $67 million, or 8.2 percent, during the year, 
 to a level of $889 million. The average of other savings-type deposits, primarily 
 consumer savings certificates, also increased from $1.2 billion to $1.4 billion. 
 
 International 
 
 Approximately 67 percent of offshore deposits are denominated in Eurodollars, 
 9 percent in other Eurocurrencies, and the balance of 24 percent in local curren- 
 cies of the countries where we have branches or subsidiary banks. As to the mix 
 of our sources, 67 percent of our funds are obtained from commercial banks, 16 
 percent from central banks and official government institutions, and 17 percent 
 from companies and individuals. 
 
 Most of the funding is accomplished through installations in London, Paris, 
 Singapore, and Panama. Approximately 25 percent of international deposits are 
 obtained from American commercial banks and companies operating abroad. The 
 remaining sources are well diversified, with depositors of no single nation ac- 
 counting for more than 10 percent of total offshore funds. 
 
 The international network is heavily invested in cash or cash equivalents. The 
 primary source of liquidity is represented by short-term deposits placed with 
 other major banks, which aggregated $1.7 billion as of December 31, 1975. 
 
 Interest Differential Income and Spreads 
 
 Total interest income declined in 1975 from 1974 reflecting the lower rates in 
 the second half of the year. Interest paid declined even more sharply, however, 
 
138 
 
 with the result that net interest differential income (our gross margin) increased 
 from $380 million to $407 million. This income is detailed in the interest differen- 
 tial statement in the financial section. 
 
 The overall increase in net interest income obscures some important changes 
 in its composition. The most notable increase in net interest differential resulted 
 from substantially improved overseas spreads (the difference between the yield 
 on assets and the cost of the supporting liabilities) in our international opera- 
 tions. The contractual spreads on international loans averaged 1.60 percent in 
 1975, up from 1.33 percent in 1974. Moreover, favorable funding provided sub- 
 stantial additional earnings over and above the contractual spreads. 
 
 Spreads earned on both U.S. governments and municipals also improved from 
 1974. The decision taken early in the recent year to expand the government port- 
 folio therefore had a favorable impact on 1975 earnings. 
 
 Spread Between 
 Investment Yield and 
 
 — 1974 
 
 1 1 I I I I » 1 1 I 1 
 
 JFMAMJJASOND 
 
 On the other hand, spreads on domestic loans narrowed throughout the 
 year, partly because the loans were more sensitive to changes in interest rates 
 than the liabilities used to fund them. Of greater significance, however, was 
 the adverse effect on domestic lending spreads caused by the increase in cash 
 basis loans. 
 
139 
 
 Spread Between 
 Commercial Loan Yield and 
 
 I I I t I I I I I I I I I 
 J FMAMJ J AS OND 
 
 A reduction in the level of these loans is one of your management's highest 
 priorities. 
 
 Capital 
 
 In recent years the general adequacy of capital in the banking industry and 
 the ability of the industry to finance additional loan growth have been widely 
 discussed. Such discussions tapered off as loan demand softened in 1975, and 
 attention turned to the asset side of the balance sheet. Nonetheless, the banking 
 industry is much more aware that a strong capital position is desirable. Although 
 no specific agreement has developed on what constitutes a proper level of capital, 
 the importance of the issue has not diminished in any way. 
 
 First Chicago has traditionally been one of the most strongly capitalized major 
 bank holding companies. We had hoped to further augment capital in 1975 by 
 going to the public market, but market conditions were not propitious for an 
 equity-type offering on reasonable terms. Consequently, we will rely on re- 
 tained earnings until market conditions become more favorable. 
 
 In 1975, after paying $37 million in dividends to shareholders, the Corporation 
 retained $71 million in earnings and increased the reserve for loan losses by 
 
 25-605 O - 78 - 10 
 
140 
 
 $25 million. This, together with proceeds of stock options exercised, raised the 
 total of net worth and the loan loss reserve by $98 million, from $909 million to 
 slightly more than $1 billion. 
 
 INTERNATIONAL BANKING DEPARTMENT 
 
 Relative calm characterized international financial markets in 1975, a sharp 
 contrast to the turmoil of recent years. As the worldwide recession sharply 
 reduced demand for funds, the growth of international bank credit to developed 
 countries slowed. Demand by socialist and developing countries, however, was 
 relatively strong. Interest rate spreads remained significantly greater than in 
 the past, although they began to weaken slightly in the last months of the year. 
 
 Part of the reduced demand for Euro-currency loans by industrialized coun- 
 tries was attributable to a record level of new issues in the international bond 
 market. Interest rates on both long and short-term obligations moved lower over 
 the course of the year in response to lower levels of inflation. 
 
 A significant development in the world economy was the sharp improvement 
 in the U.S. balance of trade to a record surplus of about $11 billion. The result 
 was a stronger dollar on the international exchange markets. 
 
 DISTRIBUTION OF LOANS— OVERSEAS OFFICES 
 
 Dec. 31, 1975 
 
 Amount Percent of 
 (thousands) total 
 
 North American-Caribbean. $382,727 12 
 
 Middle East-Africa 393,384 12 
 
 Asia-Pacific. 558,995 17 
 
 Continental Europe 711, 176 22 
 
 Latin America 599,293 19 
 
 British Isles-Scandanavia... 560,829 18 
 
 Total.. 3,206,404 100 
 
 The International Banking Department achieved a level of profits over three 
 times greater than in 1973, the best previous year. The Department accounted 
 for 32 percent of the Corporation's gross income in 1975, compared with 30 per- 
 cent in 1974. Based on internal reporting procedures, which involve certain sub- 
 jective allocations and adjustments, we estimate that the Department accounted 
 for 34 percent of the Corporation's income before security transactions in 1975, 
 compared with three percent in 1974. Strong profit performances in each geo- 
 graphic area contributed to the overall earnings growth. 
 
 Loans outstanding at year end in each geographic area were as shown in the 
 table above. 
 
 While loan spreads and income from fees and commissions registered substan- 
 tial increases over last year, an important element of the Department's total 
 profit contribution was the manner in which the asset portfolio was funded. By 
 altering the maturity structure of deposits taken, income was earned in excess 
 of contractual spreads. During most of the first three quarters of the year when 
 interest rates were falling, additional earnings were derived by funding a pru- 
 dent percentage of the assets with deposits having shorter maturities. They could 
 therefore be "rolled over" at progressively lower rates. Later in the year funding 
 profits were maintained by lengthening the maturities of our deposits taken, 
 thus locking in the favorable spreads. 
 
 Throughout the year, foreign exchange trading was mostly limited to buying 
 and selling for customer account and produced a bef ore-tax profit of more than 
 $fl million. 
 
 Responsibility for the worldwide shipping portfolio was assigned during the 
 year to a new Marine Finance Group headquartered in London. This Group, 
 composed of credit officers with special skills in marine finance, has credit re- 
 sponsibility for existing shipping loans, and approves all new extensions of 
 
 credit. 
 
 The marketing of fee-income services was improved by expanding these activ- 
 ities around experienced specialists. 
 
 We continued the extension of our global network, to a total of 81 installations 
 £ ttT 1 ^ 7 es - ^ nGW units In dude branches in Abu Dhabi and Sharjah in 
 the United Arab Emirates, a participation in an internationally controlled bank 
 in ^ew York, and an addition to our subsidiary branch network in Jamaica. 
 
141 
 
 Moreover, many installations opened in previous years are contributing to over- 
 all profitability. 
 
 We are proud of the correspondent relationship initiated in November with 
 the Bank of China. We intend to use this link with the People's Republic of 
 China to enhance trade between our customers and this potentially important 
 participant in world trade. 
 
 HISTORICAL FINANCIAL SUMMARY 
 LOANS AND LOAN LOSS STATISTICS 
 FIRST CHICAGO CORP. AND SUBSIDIARIES 
 
 [Dollar amounts in thousands] 
 
 
 19/3 
 
 13/4 
 
 1070 
 
 1070 
 
 vile 
 
 iy/i 
 
 Balances: 
 
 
 
 
 
 
 Average loans for the year 
 
 $11,826, 839 
 
 $11, 497, 376 
 
 $8, 610, 799 
 
 $6, 025, 157 
 
 $4, 914, 236 
 
 Loans outstanding at end of year 
 
 11,871, 731 
 
 12, 368, 337 
 
 9, 350, 562 
 
 7, 074, 941 
 
 5, 449, 914 
 
 Net chargeoffs for the year 
 
 92, 914 
 
 40, 253 
 
 17, 406 
 
 13, 793 
 
 24, 102 
 
 Reserve for possible loan losses at end of 
 
 
 
 
 
 
 year _ „ 
 
 121, 352 
 
 95, 766 
 
 83, 269 
 
 77, 277 
 
 71, 908 
 
 Provision for loan losses _ 
 
 118, 500 
 
 52, 750 
 
 23, 398 
 
 19, 162 
 
 16, 766 
 
 Ratios (percent): 
 
 
 
 
 
 
 Net chargeoffs to average loans 
 
 0. 79 
 
 0. 35 
 
 0. 20 
 
 0. 23 
 
 0. 49 
 
 Net chargeoffs to loans outstanding 
 
 0. 78 
 
 0. 33 
 
 0. 19 
 
 0.19 
 
 0. 44 
 
 Net chargeoffs to provision for loan losses... 
 
 78.41 
 
 76.31 
 
 74. 39 
 
 71.98 
 
 143. 76 
 
 Reserve for possible loan losses to average 
 
 
 
 
 
 
 loans.. 
 
 1. 03 
 
 0. 83 
 
 0. 97 
 
 1.28 
 
 1.46 
 
 Reserve for possible loan losses to loans 
 
 
 
 
 
 
 outstanding _ 
 
 1. 02 
 
 0. 77 
 
 0.89 
 
 1.09 
 
 1.32 
 
 
 
 
 Provision for loan losses: 
 
 
 
 
 
 
 5-yrformula 
 
 $45, 347 
 
 $33, 494 
 
 $22, 573 
 
 $17, 928 
 
 $16, 367 
 
 In excess of formula... 
 
 73, 153 
 
 19, 256 
 
 825 
 
 1,234 
 
 399 
 
 Analysis of net chargeoffs: 
 
 
 
 
 
 
 Chargeoffs: 
 
 
 
 
 
 
 In domestic offices: 
 
 
 
 
 
 
 Commercial 
 
 34, 583 
 
 28, 773 
 
 8, 676 
 
 9, 289 
 
 19, 355 
 
 Secured primarily by real estate... 
 
 23, 369 
 
 4, 595 
 
 5, 651 
 
 4 
 
 541 
 
 Real estate i n vestment trusts 
 
 11, 522 
 
 
 
 
 
 
 
 
 
 Consumer 
 
 11,019 
 
 6, 578 
 
 2,714 
 
 2, 466 
 
 1,997 
 
 Other... 
 
 9, 991 
 
 140 
 
 1,692 
 
 2, 797 
 
 162 
 
 In overseas offices 
 
 5, 099 
 
 5, 568 
 
 79 
 
 425 
 
 3, 368 
 
 
 
 
 
 
 
 Total chargeoffs 
 
 95, 583 
 
 45, 654 
 
 18,812 
 
 14, 981 
 
 25, 423 
 
 Recoveries: 
 
 
 
 
 
 
 In domestic offices: 
 
 
 
 
 
 
 Commercial... 
 
 204 
 
 2, 553 
 
 620 
 
 712 
 
 866 
 
 Secured primarily by real estate... 
 
 230 
 
 27 
 
 
 
 
 
 
 
 Real estate investment trusts 
 
 533 
 
 
 
 
 
 
 
 
 
 Consumer 
 
 1,918 
 
 1,342 
 
 654 
 
 444 
 
 453 
 
 Other 
 
 97 
 
 671 
 
 2 
 
 23 
 
 2 
 
 In overseas offices 
 
 (313) 
 
 808 
 
 130 
 
 9 
 
 
 
 Total recoveries 
 
 2, 669 
 
 5, 401 
 
 1,406 
 
 1, 188 
 
 1,321 
 
 Net chargeoffs 
 
 92, 914 
 
 40, 253 
 
 17, 406 
 
 13, 793 
 
 24, 102 
 
 (In thousands] 
 
 
 
 
 
 Dec. 31 
 
 
 
 
 
 
 1975 
 
 1974 
 
 Loans— Composition: 
 
 
 
 
 
 
 In domestic offices: 
 
 
 
 
 
 
 Commercial 
 
 
 
 S4. 419. 288 
 
 $4, 995, 100 
 
 Secured primarily by real estate >. 
 
 
 
 
 1, 383, 665 
 
 1, 282, 152 
 
 Real estate investment trusts 
 
 
 
 
 693, 500 
 
 788, 000 
 
 Other financial institutions 
 
 
 
 
 1,011,667 
 
 1, 104, 953 
 
 Consumer 
 
 
 
 
 501, 485 
 
 313,801 
 
 Other 
 
 
 
 
 680, 763 
 
 924, 619 
 
 Total in domestic offices 
 
 
 
 
 8, 690, 368 
 
 9, 408, 625 
 
 In overseas offices ... 
 
 
 
 
 3. 206. 404 
 
 2, 984, 059 
 
 Total gross loans 
 
 
 
 11,896,772 
 
 12, 392,684 
 
 i Includes residential and other mortgages. 
 
142 
 
 [In thousands] 
 
 Dec. 31, 1975 
 
 Loans in overseas offices— Composition: 
 
 Banks - — $467,622 
 
 Other financial institutions 26, 077 
 
 Governments and official institutions 695, 151 
 
 Consumer 40,687 
 
 Commercial 1,741,376 
 
 Real estate 175,924 
 
 Other 59,567 
 
 Total 3.206.404 
 
 [In thousands] 
 
 Dec. 31, 1975 
 Fixed rate Variable rate 
 
 Interest sensitivity loans: 
 In domestic offices: 
 
 Due in 1 yr or less $1,786,025 $3,314,968 
 
 Due after 1 yr 963, 319 2, 626, 056 
 
 Total in domestic offices 
 
 2,749,344 
 
 5,941,024 
 
 In overseas offices: 
 
 Due in 1 yr or less 
 
 Due after 1 yr 
 
 287, 621 
 
 105, 878 
 
 912,117 
 1, 900, 788 
 
 Total in overseas offices ... 
 
 393, 499 
 
 2,812,905 
 
 Total gross loans 3,142,843 8,753,929 
 
 [In thousands] 
 
 Dec. 31, 1975 
 
 1 yr or less 1 1 to 5 yr Over 5 yr 
 
 Maturity Distribution of Loans: 2 
 
 In domestic offices $4,601,750 $2,500,795 $852,163 
 
 In overseas offices 1,180,949 1,252,936 731,832 
 
 Total loans 5,782,699 3,753,731 1,583,995 
 
 2 Includes demands loans. 
 
 3 Excludes comsumer and residential mortgage loans totaling $776,347. 
 
 [In millions] 
 
 Dec. 31, 1975 
 
 Used Unused Total 
 
 Used/unused commitments: » 
 
 Domestic $8,148 $5,532 $13,680 
 
 International* 3,526 1,637 5,163 
 
 Total 11,674 7,169 18,843 
 
 1 Includes loans, lease financing, and customers' acceptance liability; excludes consumer and residential morgtage loans. 
 3 Includes commitments that are the credit responsibility of the International Banking Departments. 
 
 Citicorp Annual Report for 1974 
 
 financial summary 
 
 Citicorp's consolidated operating earnings after tax for 1974 rose to a record 
 level of $313,027,000 up 23% from the $254,820,000 earned in 1973. Of major 
 significance in the 1974 results was the establishment by management of an 
 
143 
 
 additional provision for possible losses on loans of $35,000,000 in excess of the 
 standard provision as calculated by application of a five-year moving average 
 method. This important subject is reviewed in greater detail in a subsequent 
 section of this Financial Review. 
 
 DOMESTIC EARNINGS 
 
 Citicorp's domestic earnings, approximately 38% of total earnings increased 
 18% over 1973. Domestic results were favorably influenced by improved net 
 interest revenue, partially offset by increases in the provision for loan losses, 
 premises expenses, and operating expenses associated with domestic expansion. 
 
 Average loans in domestic offices, including $1,150,000,000 of loans to interna- 
 tional companies booked domestically, were $16,546,000,000 up 23% from 1973. 
 
 DOMESTIC NET INTEREST REVENUE (TAXABLE EQUIVALENT BASIS) 
 [Dollar amounts in millions] 
 
 Change 
 
 1974 1973 (percent) 
 
 $150.4 $129.6 +16 
 
 165.8 132.7 +25 
 
 166.4 133.9 +24 
 
 174.0 135.7 +28 
 
 856.6 531.9 +23 
 
 1st quarter. 
 2d quarter. 
 3d quarter. 
 4th quarter. 
 
 Year. 
 
 The favorable net interest revenue of domestic operations was achieved pri- 
 marily in Citibank since Citicorp's other domestic activities were adversely 
 affected by high interest rates on funds used for their less interest-sensitive 
 asset portfolios. It should be noted that a change has been made from previous 
 reporting of net interest revenue by geographic area. In the past net interest 
 revenue from international loans and deposits booked in New York was in- 
 cluded as part of domestic offices. Our revised reporting allocates this portion 
 of net interest revenue to international earnings consistent with the treatment 
 of Geographical Sources of Operating Earnings. The improved domestic net in- 
 terest revenue in 1974 was favorably influenced by higher average demand de- 
 posits, net of float, of $4,673,000,000, an increase of 8% over the $4,339,000,000 
 in 1975. 
 
 INTERNATIONAL EARNINGS 
 
 Citicorp's international earnings, approximately 62% of total earnings, in- 
 creased 26% over 1973. This growth reflects improved net interest revenue and 
 increased foreign exchange trading income both broadly based throughout the 
 world, partially offset by higher loan loss provision and less favorable earnings 
 performances in certain consumer lending activities. 
 
 Average loans in overseas offices were $14,006,000,000, up 37% from 1975. This 
 growth continued to be widely spread geographically and relates to both the 
 corporate and consumer sectors. Earnings in all overseas areas, except the 
 Asian-Pacific area, increased over 1973 with the largest increase being in the 
 European area where foreign exchange trading income was strong. 
 
 INTERNATIONAL NET INTEREST REVENUE (TAXABLE EQUIVALENT BASIS) 
 [Dollar amounts in millions] 
 
 Change 
 
 1974 1973 (percent) 
 
 1st quarter $110.8 $83.6 +33 
 
 2d quarter 145.1 95.1 +53 
 
 3d quarter. 161.9 111.0 +46 
 
 4th quarter 209.1 118.1 +77 
 
 Year 626.9 407.8 +54 
 
144 
 
 As was true domestically, overseas corporate lending activities generated in- 
 creased net interest revenue, while the net interest revenue of consumer lending 
 activities was unfavorably influenced by higher interest rates involved in funding 
 
 the less interest-sensitive asset portfolios. 
 
 PRICING 
 
 During 1974, significant pricing actions were initiated. These pricing actions 
 included the changing of the Citibank domestic base rate formula by increasing 
 the rate over the three-week moving average of 90-day commercial paper from 
 live-eighths of 1% to 1% and an increase in rate differentials of our Euro- 
 currency lending. Fees for commitments to make loans in the future were in- 
 creased. Additionally, bankers' acceptance fees were raised worldwide. These 
 pricing changes took place in the last half of 1974. 
 
 Other factors affecting Citicorp's earnings were : 
 
 Foreign Exchange. — As a result of accelerated world trade, capital flows, 
 and investment banking activity, foreign exchange trading income increased 
 sharply in 1974. Foreign exchange trading income was $89,411,000 in 1974, an 
 increase of $35,424,000 over 1973. 
 
 Disposition of Subsidia?Hes and Affiliates. — Operating earnings after tax in 
 1974 included an after-tax net loss of $4,214,000 from the disposition of subsid- 
 iaries, affiliates and other equity investments, including venture capital invest- 
 ments and charges for management's estimate of permanent impairment in 
 value. A net loss of $1,227,000 from such disposition was reflected in 1973. 
 
 Trading Account. — Trading account profits and commissions in 1974 resulted 
 in a pre-tax gain of $977,000 compared with a pre-tax gain of $3,281,000 in 1973. 
 
 Reserve for "CAP" Loans. — Citicorp continued to reserve for interest on cer- 
 tain loans that are subject to refund if the average rate paid by customers over 
 a i>eriod of time exceeds the agreed upon maximum rate. During 1974, the amount 
 reserved was $22,424,000. The total reserve, net of refunds, at year-end 1974 
 was $25,180,000. All such amounts provided are netted against interest revenue. 
 
 LOAN LOSS EXPERIENCE, CITICORP AND SUBSIDIARIES 
 
 [In thousands] 
 
 1974 1973 1972 1971 1970 1969 
 
 Gross loan losses: 
 Commercial: 
 
 Domestic $37,972 $40,770 $21,219 $28,290 $37,971 $4,270 
 
 Overseas 41,474 23,395 12,607 9,802 4,058 1,879 
 
 Subtotal 79,446 64,165 33,826 38,092 42,029 6,149 
 
 Consumer: 
 
 Domestic 17,814 14,369 12,148 11,827 11,718 10,014 
 
 Overseas 19,659 6,762 3,344 3,408 1,199 618 
 
 Subtotal 37,473 21,131 15,492 15,235 12,917 10,632 
 
 Total gross loan losses . 116,919 85, 296 49, 318 53, 327 54, 946 16, 781 
 
 Loan recoveries: 
 Commercial: 
 
 Domestic... 4,224 1,784 4,758 2,164 1,916 (875) 
 
 Overseas 6,373 2,168 2,070 1,082 831 3,629 
 
 Subtotal 10,597 3,952 6,828 3,246 2,747 2,754 
 
 Consumer: 
 
 Domestic 3,697 3,224 3,245 2,886 3,151 2,492 
 
 Overseas 6,114 1,538 874 504 164 92 
 
 Subtotal 9,811 4,762 4,119 3,390 3,315 2,584 
 
 Total loan recoveries . 20, 408 8,714 10, 947 6, 636 6,062 5, 338 
 
145 
 
 LOAN LOSS EXPERIENCE, CITICORP AND SUBSIDIARIES— Continued 
 [In thousands] 
 
 1974 1973 1972 1971 1970 1969 
 
 Net loan losses: 
 Commercial: 
 
 Domestic 33,746 38,986 16,461 26,126 36,055 5,145 
 
 Overseas 35,103 21,227 10,538 8,720 3,227 (1,750) 
 
 Subtotal 68,849 60,213 26,999 34,846 39,282 3,395 
 
 Consumer: 
 
 Domestic — 14,117 11,145 8,903 8,941 8,567 7,522 
 
 Overseas 13,545 5,224 2,469 2,904 1,035 526 
 
 Subtotal 27,662 16,369 11,372 11,845 9,602 8,048 
 
 Total net loan losses - 96,511 76,582 38,371 46,691 48,884 11,443 
 
 provision for possible losses on loans 139,686 61,500 40,600 33,000 23,900 13,500 
 
 valuation portion of reserve for possible losses on 
 
 loans—. - 262,473 219,383 233,085 230,733 243,631 268,215 
 
 CITICORP'S 1974 LOAN LOSS EXPERIENCE 
 
 In proportion to Citicorp's 20% year-to-year increase in average loans out- 
 standing, net loan write-offs in 1974 were up 26% to $96,511,000 from the level 
 of $76,582,000 written off in 1973. Net loan losses as a percentage of average loans 
 outstanding remained at about the 1973 level. 
 
 Commercial lending 
 
 In 1974, 90% of Citicorp's world-wide loans and 71% of its credit losses were 
 to commercial borrowers. Average loans to the commercial sector increased by 
 28% from 1973 to 1974 while related net loan losses rose 14%. The percentage of 
 average loans to commercial borrowers written-off in 1974 fell to .25% from 
 .28% in the previous year. 
 
 Net commercial loan losses in domestic offices declined in 1974 to $33,746,000 
 from the $38,986,000 experienced a year earlier ; as a percentage of average loans 
 outstanding, the decline was from .33% to .23%. In overseas offices, net commer- 
 cial loan write-offs increased to $35103,000 from the $21,227,000 experienced 
 in 1973 ; as a percentage of average loans, the increase was to .27% from .22% 
 in the previous year. 
 
 Commercial loan write-offs were experienced in widely diverse loan classifica- 
 tions. No individual loss amounted to more than $7,000,000 and there were 29 
 individual write-offs for an amount equal to or exceeding $500,000. Commercial 
 loan write-offs worldwide in the real estate sector were higher in 1974, increas- 
 ing to a level of $17,500,000 from the $9,600,000 written-off in 1973. Although 
 such real estate related write-offs declined domestically in 1974 to $5,800,000 
 from the $9,300,000 experienced in the previous year, they increased overseas 
 to a level of $11,700,000 from the $300,000 experienced in 1973. This increase was 
 almost entirely in the United Kingdom. 
 
 Consumer lending 
 
 Net write-offs in Citicorp's consumer lending activities increased bv 69% in 
 1974 to a level of $27,662,000 from $16,369,000 in the previous year. This' parallels 
 the significant growth of Citicorp's consumer lending activities worldwide, with 
 average consumer loans up by 44% in 1974 over 1973. As a percentage of average 
 loans outstanding, domestic consumer related net write-offs in 1974 were .74% 
 as compared to .71% in the previous year. Overseas, consumer related net loan 
 loss experience in 1974 is not fully comparable to previous years because of the 
 inclusion of the Kundenkreditbank (KKB), whose share capital is owned 71%, 
 for the first time in the consolidated statements of Citicorp. The Kundenkredit- 
 
146 
 
 hank is a consumer financial institution in West Germany with over $700,000,000 
 in loans outstanding ; inclusion of the KKB's net write-offs accounted for more 
 than half of the total increase in Citicorp's consumer related net loss experience. 
 
 Net Loan Losses as a Percentage of Average Loans 
 Commercial/Consumer 
 
 1.00% 
 
 .75% 
 
 .50% 
 
 .25% 
 
 59% 
 
 .10% 
 
 .03% 
 
 1969 
 
 .60% 
 
 .35% 
 
 .32% 
 
 1970 
 
 Consumer 
 
 .73% 
 
 .59% 
 
 Total 
 
 .24% 
 
 1971 
 
 .16% 
 Commercial 
 
 1972 
 
 .76% 
 
 .28% 
 
 1973 
 
 .89% 
 
 .32% .32% 
 
 .25% 
 
 1.00% 
 
 .75% 
 
 .50% 
 
 .25% 
 
 1974 
 
147 
 
 Net Loan Losses as a Percentage of Average Loans 
 Domestic/Overseas 
 
 CITICORP S PROVISION FOR LOAN LOSSES 
 
 Of major significance in Citicorp's 1974 operating results was the $139,686,000 
 provision for loan losses charged to the year's earnings. This amount was $35,000,- 
 000 in excess of the standard provision calculated by application of the five-year 
 moving average formula and $43,175,000 in excess of actual net loan write-offs 
 experienced. 
 
148 
 
 Application of the five-year moving average method 
 
 In 1969, Citicorp adopted the "Five-Year Moving Average" method of calculat- 
 ing a standard provision for loan losses to be charged to earnings. Under this 
 method, the standard provision is computed by applying to average total loans 
 for the current year the ratio of net loan losses to average total loans for the 
 most recent five year period, including the current year. Application of this method 
 results in actual net loan write-off experience affecting current year's earnings 
 only to the extent that it impacts the five-year ratio used to determine the stand- 
 ard provision. 
 
 Thus, the "five-year moving average" method applies past loss experience to 
 the present loan portfolio. This method should produce an adequate loan loss 
 provision if future domestic and international economic conditions are relatively 
 similar to the recent past and if there is no significant growth in the portfolio 
 which would produce a lag effect when applying the formula. 
 
 Considering the current worldwide economic conditions and the increase in the 
 size of the loan portfolio, it was deemed prudent to increase the standard amount 
 being added to the Provision for Possible Losses on Loans for the year by 
 $35,000,000, of which $25,000,000 was charged to earnings in the fourth quarter. 
 The $43,175,000 excess bad debt provision charged to earnings over the $96,511,000 
 ill net write-offs for the year resulted in an increase in the valuation portion of 
 the bad debt reserve to $262,473,000. 
 
 The loan portfolios of certain nonbanking subsidiaries have characteristics 
 quite different from those of banks, including losses which are relatively predict- 
 able both as to the amount and timing. The recent significant growth in the loan 
 portfolios of nonbanking subsidiaries has created the need for certain other 
 changes in Citicorp's method of determining the correct level of loan loss provision 
 in these porfolios. 
 
 Prior to 1974, the five-year moving average was calculated by utilizing Citicorp's 
 consolidated loans and loan loss experience. Effective in 1974, the five-year moving 
 average will continue to be utilized by all subsidiary banks, including Citibank, 
 while all other Citicorp and Citibank subsidiaries will calculate their respective 
 provisions for loan losses based on the method deemed most appropriate for their 
 portfolio and loss experience. This change to a more preferable method results in 
 no material effect on 1974 consolidated net income. 
 
 The reserve for loan losses 
 
 Since actual loss experience for any given period may be higher or lower 
 than the provision charged to earnings, the excess or shortfall serves to increase 
 or decrease the Valuation Portion of reserve for possible losses on loans. The 
 Valuation Portion is that segment of the total reserve that has been created 
 by direct charges against operating income. The contingency and deferred-tax 
 portions have not been established by direct charges to earnings but rather by 
 transfers from undivided profits and the reserve for taxes. 
 
 The appropriate level of the valuation reserve at any time is a function of 
 the unique risk characteristics of the loan portfolio. The nature of certain 
 lending activities may involve higher risk than others, and accordingly such 
 risks should be matched by higher reserves. This fact, in part, is reflected in 
 a higher charge to earnings by Citicorp in 1974 for certain nonbanking subsidi- 
 ary lending activities. Some forms of lending activities such as consumer in- 
 stallment loans lead to an actuarial type of loss experience where the losses are 
 highly predictable in amount and timing and the appropriate level of valuation 
 reserves can be determined with reasonable accuracy. In addition, the appro- 
 priate level of valuation reserve must be related to the stringency of write-off 
 policy. The determination of valuation reserve adequacy must be made by man- 
 agement based on reviews of the portfolio undertaken internally and by ex- 
 aminations by regulatory bodies. 
 
 It is the opinion of the management of Citicorp that the $262,473,000 bal- 
 ance in the valuation portion of the reserve for possible loan losses at Decem- 
 ber 31, 1974, is adequate. 
 
149 
 
 Citicorp 1975 Annual Report 
 financial summary 
 
 Citicorp's consolidated operating earnings after tax for 1975 rose to a record 
 level of $348.2 million, up 11 percent from the $313.0 million earned in 1974. This 
 was the fourteenth consecutive year that Citicorp reported an increase in 
 earnings. 
 
 The 1975 increase was achieved after absorbing a significantly higher provi- 
 sion for possible losses on loans charged to current earnings of $327.1 million, 
 
 1 Net Loan Losses, after tax effect, as a percentage of Operating Earnings after tax 
 excluding Provision for Possible Losses on Loans. 
 
150 
 
 which compares with a 1974 provision of $139.7 million. Both the provision and 
 loan losses are reviewed in greater detail in a subsequent section of this Financial 
 Summary. 
 
 The increased earnings for 1975 reflect substantial improvement in worldwide 
 net interest revenue which, on a taxable equivalent basis, was $1,706 million, an 
 increase of $422 million or 33 percent over the $1,284 million earned in 1974. The 
 increase resulted from a combination of higher average volume abroad and 
 increased interest differential spreads, both in the U.S. and overseas. 
 
 Increased interest differential spreads in 1975 resulted to a major extent from 
 pricing actions initiated in 1974 and 1975. In 1975, earnings from domestic and 
 overseas lending reflected the full year impact of pricing actions initiated during 
 the last half of 1974. These pricing actions included the changing of the Citibank 
 domestic base rate formula by increasing the rate over the three-week moving 
 average of 90-day commercial paper from five-eighths of 1 percent to a full 
 1 percent and an increase in rate spreads on Eurocurrency lending. In the second 
 quarter of 1975, a further domestic pricing change was implemented, increasing 
 the spread over commercial paper to 1.25 percent. 
 
 The increased net interest revenue in 1975 is after reflecting the adverse impact 
 of certain loans ("cash basis" loans) where payment of interest in accordance 
 with contractual agreements is deemed questionable. Interest on such loans is 
 currently recognized only to the extent actually received in cash. The difference 
 between the interest that would have been accrued on such "cash basis" loans 
 at the initially contracted rate and the cash actually received was the after-tax 
 equivalent of 36 cents per share for the full year 1975. In addition, the equivalent 
 of 4 cents per share of interest which had been accrued during 1974 on several 
 such loans prior to their designation as "cash basis" loans was reversed in 1975 
 and charged to earnings. 
 
 Earnings in 1975 included an after-tax charge of $26 million (deducted from 
 Other Revenue), representing Citicorp's share of the operating losses of Grind- 
 lays Bank Limited ("Grindlays"), Citicorp's 49 percent-owned United Kingdom 
 affiliate. Grindlays' results were adversely impacted by write-offs of loans to 
 property companies made by its wholly-owned subsidiary, Brandts Limited. 
 
 During 1975. two companies were consolidated for the first time, the impact 
 of which, where applicable, will be referred to in the subsequent discussion. The 
 companies, Trinkaus & Burkhardt (T&B), a West German private banking 
 institution, and Industrial Acceptance Corporation (IAC), an Australian finance 
 company, were consolidated on a line-by-line basis in the first and second quarters 
 of 1975, respectively. 
 
 International earnings 
 
 Citicorp's international earnings, based upon internal allocations., increased 
 27 percent over 1974 and were about 70 percent of total earnings. This growth 
 reflects improved net interest revenue that was partially offset by the impact of 
 loan losses and Grindlays. 
 
 Average loans in overseas offices were $18.7 billion, up 34 percent from 1974. 
 Included in average 1975 loans was $1.1 billion for IAC and T&B. This growth 
 continued to be widely spread geographically and relates to both the corporate 
 and consumer sectors. The largest earnings increase was from the South Asia. 
 Middle East and Africa area. Europe, which was adversely impacted by Grind- 
 lays. was flat. 
 
 INTERNATIONAL NET INTEREST REVENUE (TAXABLE EQUIVALENT BASIS) 
 (Dollar amounts in millions] 
 
 Chance 
 
 1975 1974 (percent) 
 
 1st quarter $206.3 $106.7 +93 
 
 2d quarter 251.4 134.3 +87 
 
 3d quarter " " 237.5 1*5.7 +63 
 
 4th quarter 232.6 194.2 +20 
 
 Year 927.8 580.9 60 
 
 Overseas not interest revenue increased 60 percent in 1975 over 1974. The 
 ■nhMtantfal increase reflected a combination of hisrher volume and interest 
 differential rate snreads almost 00 basis points (hundredths of 1 percent) 
 wider thnn 1974. The first half of the year was particularly strong with com- 
 bined average loan and investment volume growing bv almost $4 billion from 
 the fourth quarter of 1974 to the second quarter of 1975. As interest rates fell 
 
151 
 
 during that period of time, interest rates fell more rapidly on funds borrowed 
 than rates on earnings assets, causing a positive impact on the net rate spread, 
 which increased by approximately 25 basis points. Volume decreased in the third 
 quarter, causing net interest revenue to fall, and remain essentially flat in the 
 fourth quarter with no significant change in rate spreads. The full year 1975 
 net interest revenue includes $52.6 million attributable to IAC and T&B. 
 
 Domestic earnings 
 
 Citicorp's domestic earnings in 1975 were some 30 percent of total earnings. 
 Domestic results were favorably influenced by improved net interest revenue, 
 offset by increases in the provision for loan losses and expenses associated with 
 domestic expansion. Domestic results were also impacted by $8 million of in- 
 creases in New York State and City taxes. 
 
 DOMESTIC NET INTEREST REVENUE (TAXABLE EQUIVALENT BASIS) 
 jDollar amounts in millions] 
 
 Change 
 
 1975 1974 (percent) 
 
 1st quarter $188. 1 $154.5 +22 
 
 2d quarter 175.8 176.6 
 
 3d quarter 210.2 182.7 +15 
 
 4th quarter 204.2 188.8 +8 
 
 Year 778.3 702.6 +11 
 
 Domestic net interest revenue increased by 11 percent for the full year 1975 
 compared with 1974. This increase was primarily a result of a 30 basis point 
 higher interest differential spread as the volume of funds employed rose less 
 than 4 percent compared with 1974. The improved margin resulted to a large 
 extent from the pricing changes described above. 
 
 Average loans in domestic offices, including $1.1 billion of loans to international 
 companies booked domestically, were $16.9 billion, up only 2 percent compared 
 with 1974. while the prior year's increase was 23 percent. 
 
 Citicorp continued to reserve (charge against interest revenue) for interest 
 on certain loans ("Cap" loans) that is subject to refund if the average rate 
 paid by customers over a period of time exceeds the agreed upon maximum 
 average rate. During 1975 the amount reserved was $6.1 million compared with 
 $22.4 million during 1974. The reserve at December 31, 1975, after 1975 rebates 
 of $.5 million, was $30.8 million compared with a reserve of $25.2 million at 
 December 31, 1974. The loans outstanding with such "Caps" were $517 million 
 at December 31, 1975, compared with $544 million at year-end 1974. 
 
 [Dollar amounts in thousands] 
 
 
 1975 
 
 1974 
 
 Change 
 (percent) 
 
 INTERST REVENUE AND EXPENSE 
 
 
 
 
 Interest revenue 
 
 Adjustment to taxable equivalent basis 
 
 $4, 461, 136 
 94, 836 
 
 $4, 553, 022 
 82,843 
 
 -2 
 +14 
 
 Interest revenue (taxable equivalent basis). 
 
 Interest expense 
 
 4, 555, 972 
 2, 849, 824 
 
 4, 635, 865 
 3, 352, 322 
 
 - 2 
 -15 
 
 Net interest revenue (taxable equivalent basis) 
 
 1, 706, 148 
 
 1, 283, 543 
 
 +33 
 
 NET INTEREST REVENUE (TAXABLE EQUIVALENT BASIS) 
 
 
 
 
 Domestic 
 
 778, 341 
 
 702, 563 
 
 +11 
 
 International: 
 
 Asia-Pacific 
 
 Canada and Caribbean 
 
 Europe 
 
 South America 
 
 South Asia, Middle East and Africa. 
 
 168, 231 
 176, 417 
 365, 965 
 133, 620 
 83, 574 
 
 85, 692 
 118, 184 
 231, 190 
 87, 726 
 58, 188 
 
 +96 
 +49 
 +58 
 +52 
 +44 
 
 
 927, 807 
 
 580, 980 
 
 +60 
 
 Total net interest revenue (taxable equivalent basis) 
 
 1, 706, 148 
 
 1, 283, 543 
 
 +33 
 
152 
 
 (.rograpfckil Somtcm of Operating Earnings' 
 
 tJU 100* 
 
 12 J J 100% 
 
 v..uth Ml, M«Mk U.i A Ainu 
 
 SS6 
 
 
 
 
 SSI 
 
 
 
 
 
 
 Coon Zos* experience 
 
 Reflecting the most severe economic downturn since the 1930's in the U.S. and 
 generally throughout the world, 1975's net loan losses amounted to $299.4 mil- 
 lion, an increase of $202.9 million from $96.5 million in 1974. Real estate related 
 loan losses were $135 million, approximately $60 million overseas and $75 
 million domestic, including $24 million of real estate investment trusts. This 
 compares with total real estate related losses in 1974 of $17 million. Of Citi- 
 bank's $97 million loan to W. T. Grant, $50 million was written off in 1975. 
 Other commercial loan losses were widely diversified by type of borrower and 
 by area of the world outside the U.S. 
 
 In part, reflecting a 36 percent Increase in average consumer loans outstanding, 
 net loan losses in connection with consumer leding in 1975 were $39.9 million 
 versus approximately $28 million in the prior year. As indicated on the accom- 
 panying chart, net loan losses as a percentage of average consumer loans in 
 1075, while high, are within a normally expected range. The table below shows 
 the breakdown of loan losses over the last six years. 
 
 Primarily reflecting the sharply increased level of loan losses incurred in 1975, 
 a provision for possible losses on loans of $327.1 million was charged to current 
 earnings, an increase of $187.4 million from the $139.7 million charged against 
 earnings in 1974. This provision was $27.7 million in excess of the net loan 
 losses actually incurred in the year. During 1975 and 1974, the amounts charged 
 to earnings for the two years taken together exceeded actual net loan losses by a 
 lotal of more than $70 million. 
 
153 
 
 Consumer Net Loan Losses as a Percentage 
 
 of Average Consumer Loans (Domestic/Overseas) 
 
 (percent) 
 1.25 — 
 
 1970 1971 1972 1973 1974 1975 
 
154 
 
 Commercial Net Loan Losses as a Percentage 
 
 of Average Commercial Loans (Domestic/Overseas) 
 
 ( percent) 
 
 1970 1971 1972 1973 1974 1975 
 
155 
 
 LOAN LOSS EXPERIENCE 
 [In thousands] 
 
 1975 1974 1973 1972 1971 1970 
 
 Provision for possible losses on loans $327, 098 $139, 686 $61, 500 $40, 600 $33, 000 $23, 900 
 
 Net loan losses 299,426 96,511 76,582 38,371 46,691 48,884 
 
 Excess of provision over net losses 27, 672 43, 175 (15, 082) 2, 229 (13, 691) (24, 984) 
 
 Reserve for possible losses on loans 300,755 262,473 219,383 233,085 230,733 243,631 
 
 Cumulative increase (decrease) in reserve.... 57,124 18,842 (24,248) (10,546) (12,898) 
 
 DETAIL OF LOAN LOSSES 
 
 Gross loan losses: 
 Commercial: 
 
 Domestic 182,902 37,972 40,770 21,219 28,290 37,971 
 
 Overseas 89,602 41,474 23,395 12,607 9,802 4,058 
 
 Suototal 272,504 79,446 64,165 33,826 38,092 42,029 
 
 Consumer: 
 
 Domestic 25,564 17,814 14,369 12,148 11,827 11,718 
 
 Overseas 32,624 19,659 6,762 3,344 3,408 1,199 
 
 Subtotal 58,188 37,473 21,131 15,492 15,235 12,917 
 
 Total, gross loan losses 330,692 116,919 85,296 49,318 53,327 54,946 
 
 Loan recoveries: 
 Commercial : 
 
 Domestic: 5,915 4,226 1,784 4,758 2,164 1,916 
 
 Overseas. 7,028 6,371 2,168 2,069 1,082 821 
 
 Subtotal 12,943 10,597 3,952 6,827 3,246 2,747 
 
 Consumer: 
 
 Domestic... 3,605 3,697 3,224 3,245 2,886 3,151 
 
 Overseas 14,718 6,114 1,538 875 504 164 
 
 Subtotal 18,323 9,811 4,762 4,120 3,390 3,315 
 
 Total, loan recoveries 31,266 20,408 8,714 10,947 6,636 6,062 
 
 Net loan losses: 
 Commercial: 
 
 Domestic 176,987 33,746 38,986 16,461 26,126 36,055 
 
 Overseas 82,574 35,103 21,227 10,538 8,720 3,227 
 
 Subtotal 259,561 68,849 60,213 26,999 34,846 39,282 
 
 Consumer: 
 
 Domestic. 21,959 14,117 11,145 8,903 8,941 8,567 
 
 Overseas 17,906 13,545 5,224 2,469 2,904 1,035 
 
 Subtotal 39,865 27,662 16,369 11,372 11,845 9,602 
 
 Total, net loan losses 299,426 96,511 76,582 38,371 46,691 
 
 25-605 O - 78 - 11 
 
156 
 
 Growth in Stockholders' Equity 
 Compared with Loan Losses 
 
 (in millions of dollars) 
 
 1.199 
 
 1970 1971 1972 1973 1974 1975 
 
 Reserve for possible losses on loans 
 
 After absorbing the $209.4 million in net loan losses, Citicorp's Reserve for 
 Possible Losses on Loans was $300.8 million on December 31, 1975 compared 
 with $202.5 million on December 31, 1974, an increase of $38.3 million, including 
 approximately $11 million resulting from the consolidation of certain subsidiaries. 
 It is the opinion of Citicorp management that the reserve is adequate to absorh 
 all future loan losses from the existing portfolio. 
 
 Citicorp's Reserve for Possible Losses on Loans as a percentage of loans out- 
 standing was ..S3 i>ercent at year-end 1975 compared with .74 percent at December 
 31. 1!>74. While this percentage is one factor that should be considered in assessing 
 the adequacy of the loan loss reserve, the significance of this relationship has 
 been generally overemphasized. A more important factor to the depositor and 
 investor is the ability of a bank holding company to absorb its net loan losses 
 out of current earnings and still provide an adequate return to the stockholder. 
 Therefore, two more important measures are the comparison of net loan losses 
 to the earnings stream and net loan losses to stockholders' equity. In 1975, a 
 year in which Citicorp incurred the largest amount of net loan losses in its his- 
 tory, earnings before tax and provision for loan losses exceeded net loan losses 
 by a factor of more than three to one. Furthermore, in 1975 net loan losses after 
 tax effect were 5.2 percent of Citicorp's total year-end stockholders' equity and 
 the reserve for loan losses. 
 
157 
 
 Loan Losses Compared 
 with Stockholders' Equity 
 
 (in millions of dollars) 
 
 2,666 
 
 Net Loan Losses, after Tax Effect 
 
 1970 1971 1972 1973 1974 1975 
 
 Loan Losses as a Percentage of Equity, including Reserve 
 
 1.6% 1.4% 1.0% 1.8% 2.0% 5.2% 
 
 Other factors affecting Citicorp's earnings were : 
 
 Foreign Exchange Income. — Foreign exchange income, including foreign ex- 
 change trading income, translation gains and losses and related hedging activ- 
 ties, was $26.2 million for the full year 1975 compared with $79.7 million in 1974. 
 Formerly, translation gains and losses and related hedging activities had been 
 classified in Other Revenue which, for prior years, has now been related to 
 reflect the change in reporting. About half the year-to-year decrease resulted 
 from translation losses incurred in translating the accounts of foreign offices at 
 appropriate exchange rates where related hedging was generally not possible. 
 
 In Citicorp's experience, the countries which have given rise to the most sig- 
 nificant translation losses also tend to have wider interest differential spreads 
 which have, over time, compensated for such losses. During 1975, the majority of 
 countries which had significant translation losses operated profitably after the 
 impact of such translation losses. 
 
 Other Revenue. — Other Revenue for 1975 was $114.8 million, compared with 
 $62 million for 1974, up $52.8 million. Higher leasing revenues contributed ap- 
 proximately $50 million to the increase. Other Revenue also includes a pre-tax 
 gain of $7.5 million in 1975 from the disposition of subsidiaries, affiliates and 
 other equity investments, including venture capital investments and charges for 
 management's estimate of permanent impairment in value. This compares with a 
 pre-tax loss of $6.2 million in 1974. 
 
158 
 
 Trading Account. — Trading Account Securities Profits and Commissions re- 
 sulted in a pre-tax gain of $15 million compared with a pre-tax gain of $1 mil- 
 lion in 1974. A substantial portion of the 1975 gain resulted from the inclusion 
 of T&B. 
 
 Salaries. — In 1975, Salaries were $512.4 million, an increase of $87.4 million 
 over the $424.9 million in 1974. After adjusting for the $22 million attributable 
 to the inclusion of IAC and T&B, the increase was $65.4 million or 15.4 percent 
 over 1974. Of this increase, $29.5 million was related to international operations 
 and $35.9 million was domestic, approximately $19 million of which related to 
 domestic expansion activities. 
 
 Other Expense. — Other expense includes, principally, telephone, insurance, 
 legal, travel, advertising and research and development. Other Expense in 1975 
 was $355.9 million, an increase of $64.8 million from the $291 million in 1974. 
 Adjusting for the $13.4 million related to the inclusion of IAC and T&B, the 
 increase was $51.4 million or 17.7 percent over 1974. Of this increase, $13.2 million 
 was associated with international operations. Of the $38.2 million domestic in- 
 crease in Other Expense, approximately $27 million was related to domestic 
 expansion activities including research and development, which increased $4 
 million in 1975 over 1974. This increase in research and development was pri- 
 marily associated with the further development of a global communications 
 network and continuing efforts on Electronic Funds Transfer Systems (EFTS). 
 
 Operating Expenses as a Percentage of 
 Net Interest and Other Operating Revenue 
 
 (percent) 
 
159 
 
 Expenses as a Percentage of Net Interest and Other Operating Revenue. — As 
 shown in the above chart, Citicorp's total of all staff payments and all other 
 operating expenses as a percentage of Net Interest and Other Operating Revenue 
 has declined from 67 percent in 1970 to 58 percent in 1974 and further declined to 
 55 percent in 1975. After adding the provision for possible losses on loans to 
 the expense total, the percentage declined from 70 percent in 1970 to 67 percent in 
 1974, but was up to 71 percent in 1975 as a result of the substantially increased 
 provision for possible losses on loans. 
 
 Citicorp Center. — Citicorp Center, a 915 foot high, 1,300,000 square foot com- 
 plex (incorporating 46 floors of office space) in the process of construction, is 
 located at Lexington Avenue and 53rd Street in New York City. The impact 
 of Citicorp Center on operating earnings was 2 cents per share in both 1975 and 
 1974, principally based upon the value of funds invested in the project. It is 
 estimated that the impact on operating earnings will be a cost of 3 cents per 
 share in 19TG and 5 cents per share in 1977. Citicorp Center is scheduled to be 
 completed in mid-1977. Initially Citicorp intends to occupy about half of the 
 space and lease the remainder to tenants. 
 
 Bankers Trust New York Corp. 
 financial review 
 
 Earnings summary 
 
 For the year 1974, Bankers Trust New York Corporation's income before 
 securities transactions totaled $71.3 million, as compared with the $65.9 million 
 reported in 1973. The Corporation earned $60.2 million in 1972. On a per share 
 basis the Corporation earned $6.82 in 1974, $6.25 in 1973 and $5.71 in 1972. The 
 earnings improvement was 9.1 per cent in 1974 and 9.5 per cent in 1973. 
 
 Net income for the Corporation totaled $70.7 million in 1974, $60.6 million in 
 1973 and $68.4 million in 1972. Net income was affected in 1973 by a security 
 loss program totaling $5.3 million after taxes. This program aided future earn- 
 ings by allowing reinvestment of funds at higher rates. The $7.2 million extraor- 
 dinary gain recorded in 1972 resulted from the sale of the Corporation's cor- 
 porate agency business. 
 
 The Corporation paid a dividend of $3.00 per share in 1974. This amounted to 
 44 per cent of income before securities transactions. 
 
 Following is a summary of the Corporation's consolidated income statement 
 for the years 1974, 1973 and 1972. Related information for 1971, 1970 and 1969 
 are available on pages 16 and 17. 
 
 SUMMARY OF EARNINGS 
 [In millions] 
 
 
 1974 
 
 1973 
 
 1972 
 
 Interest income. 
 
 Less interest expense 
 
 $1, 688. 7 
 1,350.0 
 
 $1,054.9 
 787.0 
 
 $587. 2 
 342.7 
 
 Interest differential income. 
 
 Foreign exchange and securities trading income 
 
 Trust and custodian income 
 
 Commissions and other income 
 
 33. 87 
 18.7 
 45.8 
 69.7 
 
 267.9 
 4.8 
 38.0 
 71.1 
 
 244.7 
 9.5 
 35.9 
 58.3 
 
 Operating income less interest expense 
 
 472.9 
 
 381.8 
 
 348.4 
 
 Provision for loan losses 
 
 Salaries and benefits 
 
 Other operating expense 
 
 68.3 
 178.9 
 136.1 
 
 31.9 
 152.7 
 109.1 
 
 20.2 
 140.7 
 92.9 
 
 Noninterest operating expense 
 
 383.3 
 
 293.7 
 
 253.8 
 
 Income before taxes, securities transactions and extraordinary item 
 
 89.6 
 18.3 
 
 88.1 
 22.2 
 
 94.6 
 34.4 
 
 Income before securities transactions and extraordinary item. 
 
 71.3 
 
 65.9 
 
 60.2 
 
 
 (.6) 
 
 (5.3) 
 
 1.0 
 7.2 
 
 
 70.7 
 
 60.6 
 
 68.4 
 
160 
 
 Many factors affected the Corporation's 1074 performance and these are re- 
 viewed in comparison to 1973 and 1972 where pertinent. 
 
 Lending and investing 
 
 The Corporation's interest differential income increased by $70.8 million in 
 1974. up 2G per cent over 1973. This compared with a 10 i>er cent improvement 
 in 1973 over 1972. Of the improvements in 1974, 40 per cent has come from In- 
 creased levels of loans and deposits in the domestic lending operation ; another 40 
 per cent from the higher prime rate, along with improved rate spreads over the 
 latter part of 1974 The balance of the improvement resulted from the expansion 
 of foreign business. The improvement in 1973 resulted from incerased levels of 
 loans and deposits in domestic and foreign offices. 
 
 Loan and deposit balances 
 
 During 1974 the Corporation's average balance of loans totaled $11.6 billion, 
 a $2.7 billion, or 30 per cent, increase over 1973. The table below highlights the 
 major areas of increase. 
 
 AVERAGE LOANS 
 ]ln billions] 
 
 
 1974 
 
 1973 
 
 1972 
 
 Commercial, industrial, and financial institutions 
 
 Consumer and residential 
 
 Other loans in domestic offices 
 
 Loans in foreign offices 
 
 $5. 4 
 
 1.7 
 
 1.5 
 
 3.0 
 
 $4.0 
 1.3 
 1.6 
 2.0 
 
 $2.9 
 .9 
 1.4 
 1.6 
 
 Total loans 
 
 11.6 
 
 8.9 
 
 6.8 
 
 Total deposits averaged $16 billion, a 26 percent increase over 1973. Demand 
 deposits, at $5.3 billion, were up 11 percent ; domestic time deposits, at $4.6 bil- 
 lion, were up 25 percent and foreign time deposits of $6.1 billion were 44 per- 
 cent higher than 1973. 
 
 AVERAGE DEPOSITS 
 
 (In billions] 
 
 
 1974 
 
 1973 
 
 1972 
 
 Demand deposits 
 
 Time deposits in domestic offices 
 
 Time deposits in foreign offices 
 
 $5.3 
 
 4.6 
 
 6. 1 
 
 $4.8 
 3.6 
 4.2 
 
 $4.6 
 
 2.7 
 2.8 
 
 Total deposits 
 
 16.0 
 
 12.6 
 
 10.1 
 
 Rate spreads 
 
 The consolidated average rate spread, which is the rate earned on loans and 
 securities less the rate paid on interest bearing sources of funds, ranged from 
 40 to 54 basis points during the first three quarters of 1974. Over the last three 
 months the spread widened to 102 basis points, a level more in line with rate 
 spreads experienced in early 1973. 
 
161 
 
 AVERAGE CONSOLIDATED RATE SPREAD 
 [Fully taxable basis] 
 
 1974 quarters (percent) 
 
 4th 3d 2d 1st 
 
 Rates earned __ 11.05 11.45 10.34 10.01 
 
 Rates paid 10.03 11.05 9.83 9.47 
 
 Rate spread 1.02 .40 .51 .54 
 
 1973 quarters (percent) 
 
 4th 3d 2d 1st 
 
 Rates earned... 9.48 9.77 7.74 7.17 
 
 Rates paid. 8.89 9.29 7.06 6.12 
 
 Rate spread .59 .48 .68 1.05 
 
 Foreign exchange and securities trading income 
 
 Foreign exchange and securities trading operations resulted in profits of $18.7 
 million in 1974, up from the $4.8 million recorded in 1973. Earnings from these 
 operations totaled $9.9 million in 1972. 
 
 Trust and custodian income 
 
 Trust and custodian income in 1974 totaled $45.8 million, up $7.8 million from 
 the $38 million recorded in 1973. The increase in trust income was due to the 
 improvement in the timeliness of the Corporation's method of billing certain 
 fiduciary services. 
 
 Commissions and other income 
 
 The increase in commissions and other income that occurred in 1973 over 1972 
 resulted primarily from sizable increases in loan and letter of credit commissions 
 and BankAmericard merchant income. 
 
 Operating expense 
 
 The Corporation's total expense levels before interest in 1974 totaled $383.3 
 million, up $89.6 million, or 30 per cent. The increase in 1973 totaled 16 per cent. 
 
 The provision for loan loss expense increased by $36.4 million in 1974 and 
 accounted for 40 per cent of the overall increase in expense. Of this amount, $15 
 million represented an addition over the minimum provision and reflected the 
 decision by the management to place the loan loss reserve in a more conservative 
 position in view of the increase in the loan portfolio. The balance of the increase 
 reflects current loss experience and higher loan volume over 1973, which caused 
 an increase in the minimum provision as required by regulatory authorities. 
 
 Salary and benefit expenses accounted for another 30 per cent of the total 
 increase. Reflected here was a 7 per cent across the board salary increase to most 
 employees, a modest increase in staff and higher payroll taxes paid for em- 
 ployees in 1974. Great emphasis continues to be placed on control of staff growth. 
 The Corporation, at year end, employed 13,052 persons, still below the 13,482 
 level of staff in 1970, while continuing to expand our business operations both 
 domestically and internationally over the period. 
 
 The balance of operating expenses increase was in other categories. These 
 costs were primarily affected by : first higher occupancy costs relating to a new 
 staff headquarters in downtown New York and continued branch expansion in 
 upstate New York and overseas ; and second, from strong inflationary pressures. 
 
 The $40 million non interest operating expense increase in 1973 was about 
 evenly incurred among loan loss provision, salary and benefit costs and other 
 operating expenses. 
 
162 
 
 Income taxes 
 
 Applicable income taxes decreased by $3.9 million in 1974, and $12.2 million 
 in 1973. The tax decreases result principally from earning an increasing amount 
 of tax exempt interest. 
 
 FINANCIAL STATEMENTS 
 
 Management's discussion and analysis of earnings for latest 5 years 
 
 Set forth below is management's discussion and analysis of the summary 
 of changes in earnings for the three years ended December 31, 1975. The analysis 
 comments on the significant changes in the summary and, where pertinent, in- 
 cludes comments on significant variances applicable to 1972 and 1971. In addition, 
 a detailed consolidated statement of income for the five years ended December 31. 
 1975 is presented on page 23. Pages 2 through G also includes a detailed financial 
 review of 1975. 
 
 SUMMARY OF CHANGES IN EARNINGS 
 [Dollar amounts in millions] 
 
 Increase (decrease) 
 
 Year 1975 compared Year 1974 compared 
 to year 1974 to year 1973 
 
 Amount percent Amount Percent 
 
 Interest income 
 
 Less interest expense 
 
 ($353.3) 
 
 (416.0) 
 
 (20. 9) 
 (30. 8) 
 
 $633. 8 
 563.0 
 
 60.1 
 71.5 
 
 Interest differential income 
 
 62. 7 
 
 18.5 
 
 70.8 
 
 26.4 
 
 Trading account securities profits and commissions. 
 
 Foreign exchange income 
 
 Trust and custodian income 
 
 Commissions and other income 
 
 7.6 
 
 (6) 
 
 (5.4) 
 
 23. 5 
 
 633.3 
 (3.4) 
 
 (11-8) 
 33.7 
 
 (1.8) 
 15.7 
 7.8 
 (1.4) 
 
 (60. 0) 
 872.2 
 20.5 
 (2.0) 
 
 Operating income less interest expense 
 
 87.8 
 
 18.6 
 
 91.1 
 
 23.9 
 
 Salaries and benefits 
 
 Provision for possible loan losses . 
 
 Other operating expense items 
 
 19.7 
 
 42.7 
 
 31.1 
 
 11.0 
 62.5 
 22.9 
 
 26.2 
 36.4 
 27.0 
 
 17.2 
 114.1 
 24.8 
 
 Total noninterest operating expense 
 
 93.5 
 
 24.4 
 
 89.6 
 
 30.5 
 
 Income before income taxes and securities transactions. 
 
 Applicable income taxes 
 
 :::::::: $V 
 
 9.8 
 
 1.5 
 (3.9) 
 
 1.7 
 (17.6) 
 
 Income before securities transactions.. 
 
 Securities gains (losses), net of tax... 
 
 (7. 5) 
 
 (10.6) 
 
 5.4 
 4.7 
 
 8.2 
 66.7 
 
 
 
 
 
 Net income 
 
 (7.5) 
 
 (10.6) 
 
 10.1 
 
 16.7 
 
 LOAN SUMMARY 
 
 The Corporation's loan portfolio is divided into two major segments — com- 
 mercial and consumer. Consumer loans include loans to individuals for personal 
 expenditures (installment, single payment and credit card loans) and resi- 
 dential mortgages on one to four family homes. The following table indicates 
 the average loans, net loan loss experience and the percentage of net loan losses 
 to average loans of these two segments of the loan portfolio: (dollars in 
 thousands) 
 
163 
 
 1975 
 
 1974 
 
 1973 
 
 1972 
 
 1971 
 
 Average loans: 
 Commercial: 
 
 Domestic offices $6, 467, 000 $6, 632, 000 $5, 216, 000 $4, 053, 000 $3, 756, 000 
 
 Foreign offices 3,124,000 3,040,000 2,040,000 1,638,000 1,304,000 
 
 Total commercial 9,591,000 9,672,000 7,258,000 5,691,000 5,060,000 
 
 Consumer . 1,349,000 1,357,000 1,115,000 853,000 673,000 
 
 Total average loans 10,940,000 11,029,000 8,373,000 6,544,000 5,739,000 
 
 Net loan loss experience: 
 Commercial: 
 
 Domestic offices 64.451 33,222 20,819 9,052 25,562 
 
 Foreign offices 7,734 8,460 3,555 1,311 833 
 
 Total commercial 72,185 41,682 24,374 10,363 26,395 
 
 Consumer 25,509 18,863 8,517 7,927 5,868 
 
 Total net loan losses 97,694 60,545 32,891 18,290 32,263 
 
 Percentage of net loan losses to average loans: 
 Commercial: 
 
 Domestic offices 1.00 0.50 0.40 0.22 0.68 
 
 Foreign offices... .25 .28 .17 .08 .08 
 
 Total commercial .75 .43 .34 .18 .52 
 
 Consumer 1.89 1.39 .76 .93 .87 
 
 Total percentage .89 .65 .39 .28 .56 
 
 Commercial loans 
 
 The net loan losses in the Corporation's consolidated commercial loans in- 
 creased from $24.4 million in 1973 to $41.7 million in 1974 and to $72.2 million 
 in 1975. The net loan loss ratio increased from .34% to .43% and to .75% in each 
 of those years. The increase in 1975 is largely attributable to losses in two indus- 
 tries that were severely affected by the economic downturn. $22.5 million was 
 charged off on loans to the retail industry (an increase of $15 million over 1974) 
 while $17.2 million was charged off against loans to the REIT industry. 
 
 Consumer loans 
 
 Xet loan losses from the Corporation's consumer lending activities totaled 
 $8.5 million in 1973, $18.9 million in 1974 and $25.6 million in 1975. The net loan 
 loss ratios for each of these years were .$76%, 1.397c and 1.89%- These increases 
 arose principally from non-recurring operating problems associated with a sys- 
 tems conversion in the Corporation's credit card subsidiary during 1974, from 
 the impact of adverse economic conditions, and to consumer loan growth during 
 1974. Since the middle of 1974 the Corporation's credit card subsidiary has insti- 
 tuted improved operating procedures and new systems ; has increased the quality 
 of credit card loans by increasing collection efforts, raising eligibility require- 
 ments and by withdrawing or not reissuing cards as permitted by agreements. 
 These actions have led to a reduction in credit card losses during the last six 
 months of 1975. Credit card losses totaled $8.9 million during the last six months s 
 of 1974, $13.7 million during the first six months of 1975 and $5.1 million during 
 the last six months of 1975. 
 
 The Chase Manhattan Corp. Annual Report, 1974 
 report from management 
 (By David Rockefeller, chairman of the board and Willard C. Butcher, president) 
 
 The year 1974 was an often difficult and discouraging year for the United 
 States and global economies. Currents of inflation and recession converged, 
 undermining the effectiveness of conventional fiscal and monetary policies. 
 Prices soared, industrial production fell, and by year's end. unemployment 
 was a growing problem domestically and in many areas abroad. 
 
165 
 
 It was a year marked by shortages — of fuel, food and other commodities — 
 coupled with monetary uncertainties brought on in large part by the four- 
 fold increase in the price of oil. It was a year in which confidence in govern- 
 ment and business eroded. And, significantly for Chase, it was a year in which 
 multinational financial services corporations were called upon not only to 
 expand their more traditional activities, but also to take on important new 
 responsibilities as well. Consequently, the resourcefulness of the banking 
 community was severely tested. 
 
 Despite slackening economic activity, loan demand was exceedingly heavy 
 both at home and overseas. In the United States, corporate capital spend- 
 ing was high, and the cost of financing inventories and accounts receivable 
 rose dramatically. Moreover, with corporate liquidity declining and faced with 
 investor resistance in debt and equity markets, corporations turned increas- 
 ingly to commercial banks. Overseas, due mainly to higher energy prices, loans 
 grew substantially. At Chase alone, these factors contributed to a rise of loans 
 on a daily average basis of almost $6 billion, or about 31 percent over the com- 
 parable 1973 figure. 
 
 Since growth in savings and demand deposits fell short of providing the added 
 funds needed to support the burgeoning loan demand, money center banks had 
 to rely increasingly on funds purchased in the open market. This, in turn, 
 exerted upward pressure on interest rates, thus complicating the job of effec- 
 tively managing the spread realized between interest earned and interest paid. 
 
 Increases in capital, both at Chase and throughout the banking system, did 
 not keep pace with the increases in assets. This further underscored the impor- 
 tance of controlled growth predicated on quality. In such a context, improving our 
 return on assets must be an increasingly central concern. 
 
 Earnings performance 
 
 A steady betterment of asset management was key to the substantial progress 
 Chase made toward its earnings objective in 1974. Income before securities 
 transactions totaled $182.0 million, 10.6 percent higher than in 1973, bringing the 
 corporation's five-year compound earnings growth rate to 8.6 percent, up from 
 6.2 percent a year ago. Net income was $180.8 million, a 10.9 percent increase 
 over 1973. 
 
 These overall results were not as strong as planned because of net losses in the 
 bond trading account. They were, however, highly encouraging to us since they 
 reflect very solid performance in Chase's basic business activities. Moreover, we 
 believe the sharp increase in fourth-quarter earnings demonstrates Chase's 
 growing flexibility to manage risk effectively in an uncertain economy. 
 
 Earnings from international activities were particularly impressive, increasing 
 by 31 percent over last year, despite the fact that 1973's international results had 
 included $5.3 million in after-tax revaluation gains from investments in overseas 
 branches, subsidiaries and associated companies. While international earnings 
 as a whole posted a strong advance, the income contributions of specific geo- 
 graphic areas shifted from year to year, pointing out the importance of a 
 geographically broad earnings base that allows temporary downturns in one 
 area of the world to be offset by more favorable results in another. 
 
 In 1974, earnings from international activities contributed $89 million, or 
 49 percent of total income before securities transactions, versus 41 percent in 
 1973. 
 
 Because of realized and unrealized losses in the bond trading account, domestic 
 earnings for the year were down slightly. Excluding the trading account, how- 
 ever, other domestic earnings were up strongly— a significant indication of very 
 real progress in our basic business lines and of improved interest spread manage- 
 ment. 
 
 Net loan losses in 1974 amounted to $93.0 million, compared with $76.3 million 
 in 1973, reflecting both our larger portfolio and deteriorating economic condi- 
 tions—particularly in the latter part of the year. Chase management follows a 
 conservative policy with respect to recognizing loan losses, recording them as soon 
 as they are identifiable. Also, at year end, we decided to increase the valuation 
 portion of our reserve for loan losses by $20 million more than was called for by 
 the five-year averaging formula. As a result, the provision for loan losses 
 charged to operating expenses in 1974 was $118.5 million, up $56.3 million from 
 1973. 
 
166 
 
 Bond trading account 
 
 Unrealized losses in our bond trading account adversely affected domestic 
 earnings. This account was troublesome most of the year, as interest rates failed 
 to follow projections. Particularly disturbing was the discovery in early October 
 that policies had not been followed in valuing our trading account inventory, 
 the portfolio being valued at approximately $32.8 million in excess of the esti- 
 mated market value as of September 30th. We immediately made a public dis- 
 closure and moved quickly to introduce additional controls to ensure against 
 over-pricing in the future. 
 
 Overall net losses, including unrealized losses, in the account for the first nine 
 months were $42.3 million. Full year figures show a reduction of net losses 
 to $29.2 million. This improvement of $13.1 million in the fourth quarter 
 strongly impacted overall domestic performance and resulted mainly from a 
 reduction in unrealized losses due to better bond market conditions prevailing 
 in the fourth quarter. The bond trading account inventory was reduced from 
 about $717 million to approximately $383 million between the end of the third 
 quarter and year end. 
 
 Financing corporate requirements 
 
 As noted, loan demand was heavy all year, with pronounced spurts in March, 
 April and June. Caught in the crossfire between inflation, growing recessionary 
 trends, inventory problems and energy costs, corporations not only needed 
 more money, but found that the traditional sources for long-term financing were 
 impaired. Consequently, banks — particularly large New York City institutions 
 that could gather substantial funds through money market instruments — virtually 
 became lenders of last resort. 
 
 Recognizing the growth of both demand and economic uncertainties, manage- 
 ment further emphasized strict measures with respect to quality, diversification 
 of risks, liquidity and yield within Chase's overall loan portfolio. These measures 
 were not intended to cut off the flow of credit to deserving customers with pro- 
 ductive needs. We felt last year — as we feel now — that support must be given 
 to worthy borrowers, notwithstanding the fact that more profitable, and cer- 
 tainly more comfortable, channels for resources may exist. We continue to take 
 the position that the lender must strive to help his worthy customers in trouble- 
 some as well as good times. 
 
170 
 
 FINANCIAL REVIEW 
 
 Earnings performance 
 
 Income before securities transactions for The Chase Manhattan Corporation 
 during 1974 totalled $182.0 million, an increase of $17.3 million, or 10.6 percent, 
 over the $164.7 million earned in 1973. This brought the Corporation's five-year 
 compound growth rate to 8.6 percent. Net income for the year was $180.8 million, 
 compared with $163.1 million in 1973. 
 
 The earnings performance of Chase's basic business activities, both domestic 
 and international, was strong throughout 1974. However, improvement in domes- 
 tic results was offset by net losses in the bond trading account, which amounted 
 to $29.2 million for the year, compared with a profit of $8.9 million in 1973. 
 Unrealized losses in the trading account inventory depressed earnings during 
 the first nine months, but were reduced significantly during the fourth quarter 
 by trading activity and the trend to lower interest rates. 
 
 Earnings from international activities, which encompass the activities of 
 our overseas offices and the international activities of our domestic offices, rose 
 in dollar amount and in their percentage contribution to overall income. In 1974, 
 based on internal allocations and allowances, international income before securi- 
 ties transactions increased 31 percent over 1973 to $89 million and represented 
 49 percent of consolidated income before securities transactions. Total operating 
 income from international activities accounted for 59 percent of compensated 
 operating income, up from 47 percent in 1973. A five year summary of the con- 
 tribution of international activities to earnings follows : 
 
 Total operating income : Percent 
 
 1974 59 
 
 1973 47 
 
 1972 : 44 
 
 1971 41 
 
 1970 31 
 
 Income before securities transactions : 
 
 1974 49 
 
 1973 41 
 
 1972 34 
 
 1971 29 
 
 1970 22 
 
 While international earnings posted impressive advances overall, the income 
 contribution of certain geographic regions shifted significantly from the prior 
 year. Hampered by a narrowing of interest rate spreads, particularly during the 
 first half of 1974, Europe's contribution to international income before secu- 
 rities transactions fell from 43 percent to 37 percent, although in absolute terms 
 earnings from Europe increased, as did the earnings of each of the other geo- 
 graphic areas. The relative contribution of Chase's international activities in the 
 Western Hemisphere remained at 31 percent, the same as for 1973, while the 
 contribution of Asia increased from 19 percent to 24 percent and Africa and the 
 Middle East increased from 7 percent to 8 percent. 
 
 Net interest margin (taxable equivalent basis) 1 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 MM' 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 •MM 
 
 
 
 M* 
 
 
 
 
 •MM 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 1 Taxable equivalent loads means interest income which is exempt from income taxes is 
 increased to an amount comparable to interest income which is subject to income taxes. 
 
171 
 
 Net interest margin, denned as the difference between total interest earned 
 on a taxable equivalent basis, and total interest paid, continued to represent the 
 T So°l Chase ! earnings This margin totalled $897 million in 1974, an advance 
 of 28.7 percent over This compared favorably with the 14.3 percent im- 
 
 provement recorded for 1973 over 1972. 
 
 The growth in net interest margin followed the trend of recent years A major 
 factor m that growth was the sharp rise in the average level of earning assets 
 which more than compensated for the narrowing difference between rates earned 
 and rates paid Since these were fluctuating and disparate interest rate patterns 
 both domestically and overseas during the course of the vear, the management 
 of interest spread was given particular emphasis. Policies and programs were 
 designed to help even out the the effects of these sometimes difficult to predict 
 interest rate patterns, so that an improved return on earning assets could be 
 attained. 
 
 Loans 
 
 Chase's commercial loan policy has always been to achieve the profitable 
 growth of quality assets through the application of sound credit principles. 
 Greater emphasis was placed upon this policy during 1974, as we improved 
 existing practices and implemented new ones to improve the quality of our loan 
 portfolio. We improved our loan pricing mechanisms to increase the profitabilitv 
 of the loan portfolio. Furthermore, our specialized management tools have been 
 refined to evaluate account profitability by centralizing information on the 
 services we provide to individual commercial customers. With better internal 
 profitability information, we have been able to apply our loan pricing strategy 
 with greater effectiveness. Through different combinations of supporting de- 
 posit balances and various types of fee arrangements, we have become more 
 flexible and more efficient in our loan pricing decisions. 
 
 Domestic Lending. — Commercial and industrial loan demand did not follow 
 traditional patterns in 1974. Despite a recessionary climate and prevailing 
 high interest rates, capital spending by corporations was high and working 
 capital needs rose as inflation boosted inventory costs. At the same time, many 
 corporations were faced with investor assistance in the debt markets and a sag- 
 ging price structure in the equity markets. Banks were called upon to supply 
 the financial needs of a high proportion of these companies. We saw our loan 
 demand spurt in March and April and again in June. By mid-year we were focus- 
 ing directly on controlling both the problems of national inflation and the 
 sudden demands on our own capital base. In July we intensified our vigorous loan 
 restraint program which emphasized the discouraging of non-productive loans. 
 We established our own priorities, which were subsequently reinformed by the 
 statement of the Federal Advisory Council on Bank Lending Policies in Sep- 
 tember. Formalized procedures were established to enable us to carry out our 
 program so that our customers could be dealt with equitably during this difficult 
 period when their needs were great and our capabilities w T ere being tested. 
 During 1974 the average volume of commercial and industrial loans was 19.6 
 percent higher than in 1973. Interest received on CAP loans — loans with average 
 interest rate limitations included in agreements with borrowers — in excess of 
 interest rate limitations is subject to refund, and has been credited to a reserve 
 account. The balance in this reserve account was $19.3 million at December 31, 
 1974. 
 
 An important portion of Chase's domestic loan portfolio consists of real estate 
 loans, including loans to real estate investment trusts and mortgage companies. 
 One- to four-family residential mortgages rose by 25.9 percent over 1973 to an 
 average of $967 million. The real estate industry was particularly hard pressed 
 in 1974 as a result of rising building costs, high interest rates and reduced long- 
 term financial sources. The industry may not recover for some time, but the 
 decline in interest rates which began in the last quarter of the year should 
 attract additional funds to the industry and reduce the carrying cost burden on 
 builders. Chase, long a leader in real estate lending, continued to meet the 
 financing needs of its customers, consistent with acceptable credit standards. 
 However, the amount of real estate loans for which interest is not being accrued 
 continues to increase. 
 
 Consumer loans, including installment credit, Bank Americard and cash re- 
 serve checking, increased by 15 percent in 1974 to an average of $644 million. 
 Here, too, rising funding and operating costs prompted rate increases. Consumer 
 loan rates were increased twice during the year and averaged 10.40 percent, 
 compared with 10.14 percent during 1973. 
 
 25-605 O - 78 - 12 
 
172 
 
 INCOME BEFORE SECURITIES TRANSACTIONS BY QUARTER 
 
 
 In millions 
 
 
 Dollars per share 
 
 
 
 1974 
 
 1973 
 
 1974 
 
 1973 
 
 
 $36. 3 
 
 38. 7 
 
 44. 6 
 
 62. 5 
 
 $40.1 
 
 28.3 
 41.1 
 45.2 
 
 $1.13 
 1.21 
 1.39 
 1.05 
 
 $1.26 
 1.20 
 1.26 
 1.41 
 
 
 182. 
 
 164.7 
 
 5. 68 
 
 5.16 
 
 A breakdown of loan balances by type for domestic offices at December 31, 1974 
 and December 31, 1973 is shown in the Notes to Consolidated Financial Statements 
 on page 37. Total interest income from domestic loans was $1,616 million, up by 
 50 percent over 1973. The average rate earned on domestic loans was 10.44 percent, 
 compared with 8.27 percent in 1973. Chase's prime rate averaged 10.78 percent in 
 1974, compared with 8.03 percent in 1973. 
 
 Overseas Lending. — Lending at overseas offices continued to advance rapidly 
 throughout most of 1974, increasing in average volume by 55.9 percent to $9.5 
 billion and accounting for 37.9 percent of total loans, compared with 31.8 percent 
 in 1973. 
 
 Strong economic growth has historically been the principal force behind rapid 
 loan expansion abroad, but this was not the case in 1974. Indeed, economic activity 
 slackened in many areas. However, record inflation, together with increased plant 
 and equipment spending continued to stimulate loan demand. Our loan restraint 
 program resulted in a leveling in overseas loan expansion in the fourth quarter of 
 1974, so that loans in overseas offices increased a relatively modest 5.0 percent 
 from September 30th to year-end. 
 
 Approximately 42 percent of all overseas loans at December 31, 1974 were de- 
 nominated in currencies other than U.S. dollars and more than half of such loans 
 have been made to indigenous companies with funds obtained in the local money 
 marketplace. 
 
 Total interest income from loans booked in overseas offices increased by 96 
 percent to $1,108 million from the $566 million of 1973. These sources contributed 
 41 percent of total interest income from loans, up from 34 percent in 1973. 
 
 Loan Losses. — The provision for loan losses charged to operating expenses in 
 1974 was $118.5 million, up from the $62.2 million recorded in 1973. This sharp rise 
 reflected the inclusion in the five-year moving average formula (see Summary of 
 Significant Accounting Policies — page 31) of increased 1974 average loan volume, 
 a higher level of net loan charge-offs during the period 1970-1974 than that experi- 
 enced in prior periods, and a management decision to increase the valuation por- 
 tion of the loan loss reserve by a $20 million charge to operating expenses in 
 excess of the provision required by the moving average formula. This manage- 
 ment decision in part reflects an evaluation of the loan portfolio in the light of 
 difficult world-wide economic conditions and the resulting increase in lending 
 risks. In the opinion of management, the valuation portion of the reserve at 
 December 31, 1974 is adequate to absorb all anticipated loan losses in the port- 
 folio at that date. However, if the increase in lending risks continues, further 
 additions to the loan loss reserve in excess of the formula provision can be 
 anticipated. 
 
 The major portion of Chase's net loan charge-offs was concentrated in the 
 United States. The percentage of net loan charge-offs relative to average domestic 
 loans increased significantly in the 1970's when compared with prior periods, 
 while the ratio of net loan charge-offs to loans overseas increased at a more 
 moderate rate. Chase's loan charge-off policy is conservative yet realistic; losses 
 are charged off as soon as they are identifiable. In 1974 there was a reduction in 
 loan charge-offs relative to the domestic commercial and real estate loan base. 
 This accounted in part for the decline in the net loan charge-off ratio for the year 
 1974. 
 
 Investment portfolio 
 
 New investments resulting primarily from maturity rollovers and selling in 
 order to buy higher yielding securities boosted overall portfolio yields to record 
 levels. The average yield on U.S. Treasury and Federal agency securities com- 
 
173 
 
 bined rose to 7.41 percent, up from 6.91 percent in 1973, while the taxable 
 equivalent yield of the state and municipal securities portfolio averaged 10.99 
 percent, compared with 9.30 percent in 1973. 
 
 THE CHASE MANHATTAN CORPORATION ANNUAL REPORT, 1975 
 FINANCIAL HIGHLIGHTS 
 
 1975 1974 
 
 For the year (in thousands): 
 
 Operating income $3,231,690 $3,675,604 
 
 Operating expenses 3,004,707 3,420,923 
 
 Income before securities gains (losses). 156,635 182,047 
 
 Net income. 173,710 180,801 
 
 Per share: 
 
 Income before securities gains (losses) $4.89 $5.68 
 
 Net income 5.42 5.64 
 
 Cash dividends paid, annually 2.20 2.20 
 
 Cash dividends paid, quarterly... .55 .55 
 
 Stockholders' equity 50.57 47.35 
 
 At yearend (in millions): 
 
 Assets.. $41,414 $42,233 
 
 Investment and trading account securities. 3,557 3,042 
 
 Loans.... 28,740 27,740 
 
 Deposits.. 33,928 34,667 
 
 Stockholders equity 1,621 1,518 
 
 To Our Stockholders: 
 It has been an extraordinary year for Chase. 
 
 Although 1975 marked the bottom of the world's worst economic downturn in 
 40 years, we turned in the third best earnings performance in our history with 
 income before securities transactions of $157 million and net income of $174 
 million, paid cash dividends of $71 million, or $2.20 a share, and increased stock- 
 holders' equity by more than $100 million through the retention of earnings. 
 • Since banking necessarily mirrors the overall economy, the industry's earnings 
 performance was significantly affected by a record level of loan charge-offs, and 
 Chase was no exception. Few of our customers failed to be touched in some way 
 by adverse economic conditions. While most were resilient enough to fulfill their 
 obligations to creditors on schedule, a larger than normal number of borrowers — 
 particularly those in the more depressed sectors of the economy, such as real 
 estate — found this an impossible task. Consequently, it was necessary for Chase 
 to charge off almost three times the dollar volume of loans charged off the year 
 before and to agree to accept reduced or deferred interest payments on certain 
 other credits. 
 
 There were other occurrences of particular significance to our institution. Not 
 the least of these was the fiscal crisis in New York City, which called on man- 
 
174 
 
 agement to spend a significant amount of time in helping to find solutions to the 
 problems of this financially beleaguered community. 
 
 In spite of the pressures imposed by these problems, Chase was able to dem- 
 onstrate an ability to cope with distressed business conditions worldwide, to 
 post impressive earnings, to continue to upgrade loan quality and to take signi- 
 ficant action toward developing new domestic and international marketing 
 capabilities. These steps provide a base of strength on which to build future 
 growth. 
 
 What we see as a looming problem of great importance is a distressing 
 tendency to criticize the banking system, growing partly out of public anxiety 
 over economic events. Banking and the banking system are remarkably complex, 
 both in themselves and in their impact on the workings of the entire economy. 
 The danger is that uninformed and poorly-informed critics will demand sweeping 
 changes in banking laws, without regard to side effects that may cripple the 
 functioning of our economy. Some of their proposals will be adressed later in this 
 letter. 
 
 LOANS 
 
 Maintaining its cautious policies with regard to doubtful loans, management 
 continued to increase its provision for possible loan losses well beyond the 
 amount called for by its five-year averaging formula. We felt a much larger 
 amount was required in view of prevailing uncertainties. Net loan charge-offs 
 for 1975 amounted to $251 million, some $61 million less than the provision 
 charged to operating expenses. As a result, the balance in the reserve for possi- 
 ble loan losses at year-end was at an historic high of $282 million. In the 
 opinion of management, the reserve for possible loan losses at December 31, 
 1975, is adequate to absorb all anticipated loan losses in the loan portfolio at 
 that date. 
 
 During the first nine months, management made a concerted effort to identify 
 troubled situations and recorded $209 million in net loan charge-offs. As a 
 result of these timely, though difficult, decisions, it was not necessary to take 
 massive charge-offs at year-end. Net charge-offs in the fourth quarter were 
 $42 million, actually some $10 million less than in the final quarter of 1974. 
 
 Chase also follows conservative accounting practice in not accruing interest 
 on loans where there is reasonable doubt as to the collectibility of interest. 
 Thus, interest on such loans is credited to income only to the extent that it is 
 actually received. Interest rates on some loans were also renegotiated to levels 
 substantially lower than the originally contracted rates. These non-accruing and 
 reduced rate loans resulted in a reduction of consolidated earnings of approxi- 
 mately $50 million, after taxes. 
 
 A number of steps were taken to improve further overall asset and liability 
 management. We continued our program to improve both the quality and 
 liquidity of our assets and installed a more effective credit audit system 
 throughout the Corporation. Holdings of investment securities were increased, 
 the net increase being almost entirely in maturities of under five years. At the 
 same time we reduced our reliance on short-term borrowings in the form of 
 federal funds and securities sold under repurchase agreements, while lengthen- 
 ing the average maturity of time deposits. Our larger, more liquid investment 
 portfolio, combined with a more stable liability structure, diminishes our vul- 
 nerability to unforeseen market changes. 
 
 NEW YORK CITY 
 
 New York City's deteriorating financial situation ranked high on the list of 
 problems dealt with during the year. 
 
 Throughout the crisis, Chase faced the delicate challenge of balancing its 
 responsibilities to its stockholders, to its depositors and to the community in 
 which it carries on a major portion of its operations — all of them interrelated 
 to a significant degree. We were concerned about the damaging repercussions 
 default could have on worldwide financial markets and about the possible disas- 
 trous effects on the City. On the other hand, we recognized that there were 
 limits as to the scope of our involvement. The end result indicates that an appro- 
 priate balance has been maintained. Within reasonable limits. Chase and other 
 major banks provided vital support to the City during the most critical phases 
 of the crisis. 
 
175 
 
 The City's inability to raise needed funds through traditional borrowing meth- 
 ods early in the year led to the creation of the Municipal Assistance Corpora- 
 tion (MAC), a financing vehicle empowered to raise funds on the City's behalf. 
 Chase, along with the other Clearing House banks in New York, were called 
 upon to provide support. We participated in the first underwriting of a MAC 
 issue in July. The following month. Chase took on the management of a second 
 public offering of MAC securities, which successfully raised an additional $1 
 billion for the City. By year-end, Chase's investment holdings of City and MAC 
 obligations totalled $408 million. 
 
 In time, it became clear that the resources of the private sector had been 
 tapped to their prudent limits and that further requirements of the City would 
 have to be provided by the Federal Government. Ultimately, the Ford Adminis- 
 tration proposed and Congress approved federal loans to the City of $2.3 billion 
 each year for the next three years. We anticipate that this support will give the 
 City the time it needs to regain its financial vigor — provided, of course, that its 
 leadership, its employees and its citizens act with speed and determination in 
 implementing sound municipal finance and management practices. 
 
 Clearly, fiscal discipline must be accepted. But positive actions are also re- 
 quired, and at present there is no greater priority than the creation of a healthier 
 environment for economic development — one which will attract new enterprises 
 and encourage existing businesses to remain. Tax incentives that can create 
 such an environment should be explored. While additional revenues will un- 
 doubtedly need to be raised, fiscal and regulatory policies that work against 
 job creation can only be counterproductive. For without increased economic 
 activity within its borders, New York City's efforts to trim budgets and bring 
 to bear more resolute fiscal management will be doomed to eventual failure. 
 
 At the same time, approaches to counteracting the root cause of New York's 
 fiscal decline should be examined. While fiscal management must be faulted, the 
 primary factors leading to the City's cash problems were essentially demographic 
 in nature. During and after World War II, New York and other large cities 
 experienced an influx of lower-income families, followed in time by the departure 
 of more affluent groups. This contributed significantly to a decrease in the City's 
 tax base, even while it increased the requirement for social services, such as 
 welfare and subsidized housing. 
 
 In a country which offers its people geographic mobility, such major demo- 
 graphic movements transcend the capabilities of both cities and states, leaving 
 their governments handicapped in their efforts to solve the economic imbalances 
 that are created. For that reason, the attendant financial problems are, in essence, 
 national problems, which can be dealt with effectively only on the national level. 
 Events like New York City's fiscal crisis make more manifest the need for deal- 
 ing with problems such as public welfare on a coordinated national basis. 
 
 THE REAL ESTATE SECTOR 
 
 While all sectors of the domestic economy were affected by the recession of 
 1974-75. among the hardest hit was real estate and, within that sector, real 
 estate investment trusts (REITs) in particular. REITs, made possible by an act 
 of Congress, concentrate on projects too large for most individual investors, such 
 as shopping centers, condominiums and office buildings. It is these very projects 
 that were most affected by the business downturn. 
 
 This was the case with the Chase Manhattan Mortgage And Realty Trust, an 
 independent, publicly-held REIT in which the bank holds no shares, but serves 
 as both an advisor and creditor. In August, the trust was faced with a cash flow 
 problem, primarily because many of its borrowers needed more time before their 
 projects could become viable. To relieve the resulting cash shortage, the credit 
 facility extended by a group of 41 banks to the trust was restructured, and in 
 addition, Chase agreed to purchase $161 million of the trust's loans assets and to 
 assume commitments of the trust to make further advances with respect to such 
 loans in an aggregate amount of $34 million. A detailed description of this trans- 
 action appears in the Notes to Financial Statements on Page 42. Based on the 
 price paid for these loan assets, management anticipates obtaining a reasonable 
 yield on its investment. 
 
 Conditions prevailing in the domestic real estate sector also adversely impacted 
 the operating results of our domestic mortgage banking subsidiaries, resulting in 
 an after-tax loss of $14 million. 
 
176 
 
 DOMESTIC AND INTERNATIONAL PROGRESS 
 
 Chase continued to meet the complex needs of its worldwide markets and made 
 advances in expanding its products and services. 
 
 Most significantly, we broadened our capabilities in three key service areas — 
 merchant banking, project finance and cash management. Given such conditions 
 as worldwide capital shortages, demands for enormously expensive natural re- 
 source development projects and the requirements of corporate treasurers to con- 
 serve and manage funds on a truly global basis, Chase's unique strengths in these 
 areas will increase in importance in the years ahead. 
 
 We also made progress in other areas vital to our marketing efforts, particu- 
 larly in new technology, market selectivity and relationship management. 
 
 Chase's international results continued to underscore the importance of main- 
 taining a broad earnings base. Whereas provisions for loan losses cut sharply 
 into domestic earnings for the year, earnings from international operations suf- 
 fered much less of a loan-loss setback and were able to maintain their strong up- 
 ward trend, reaching $101 million, as compared with $89 million in 1974. 
 
 The world market economy has tended to lag that of the United States, so that 
 much of the rest of the world is now slowly emerging from its worst downturn 
 since the 1930's. Recovery is already well underway in the United States and is 
 beginning to take hold in Europe. Chase remains alert to the opportunities such 
 an upturn can offer in 1976. 
 
 DEMANDS FOR BANKING REGULATION 
 
 Times of economic stress are almost always followed by attempts to find a 
 scapegoat for the conditions that prevailed, and the banking industry certainly 
 has not been exempted as a target. Over the past six months, some have en- 
 deavored to assign to banks a wide spectrum of sins, from perpetuating inflation 
 to keeping a sinister cloak of secrecy over their operations. Demands for change 
 have recently become more vocal and persistent than they have been for many 
 years. Proposals range from drastic redesign of the regulatory mechanism to 
 emasculation of the concept of confidentiality, which is at the very core of ethical 
 and sound banking practice. 
 
 What is most wanting, we believe, is a better and broader understanding of 
 how banks can and do relate to the economy as a whole and serve the public 
 interest. As one fundamental, it must be noted that risk goes to the very essence 
 of banking, as it goes to the essence of business in a free economy. By the same 
 token, a certain number of loan charge-offs becomes the natural concomitant of 
 assuming risks. 
 
 During the prolonged periods of broad-scale economic recession, such as we 
 have experienced over the past two years, loan charge-offs naturally increase. 
 Banks don't hide that fact. On the contrary, we publish our loan loss provisions 
 and make known the amount of loans we actually charge off against our reserves. 
 
 The contribution made by prudent risk-taking is often greatly misunderstood. 
 Without question, Chase and other banks make some loans which, when made, 
 are deemed prudent in the light of known facts and conditions, but which in 
 retrospect look far less attractive. But that is in the nature of risk. A commercial 
 bank that studiously avoids risk — for example, by placing the funds of its 
 stock-holders and depositors only in short-term U.S. government obligations and 
 loans to triple-A rated borrowers — serves neither the public need nor its own 
 advantage. 
 
 The past 30 years have been a time of unprecedented worldwide growth. 
 Economic development simply could not have taken place at the rate it occured 
 had banks been unwilling to exercise reasonable business judgment and accept 
 the risks involved. We lent money to high technology industries when they were 
 in their infancy. A few failed. But the vast majority have been successful, and 
 many of them now employ tens of thousands of workers. We lent money for the 
 development of natural resources. A few proved uneconomic. Others are now 
 supporting the economies of entire regions. Our real estate lending helped to 
 relievo severe housing shortages. Some of these loans defaulted. Most did not. 
 Clear evidence that the gains outbalanced the losses is the fact that the world 
 economy— and the banking industry — has emerged strong and vital. 
 
 As for problem loans, these are tracked carefully by our own lending officers, 
 our specialists in troubled loans, our internal audit staff, independent auditors 
 and by various banking regulatory authorities. Some demands have been voiced, 
 
177 
 
 however, that information on individual loans be made public. To propose such 
 disclosure is to disregard the value of confidentiality between a bank and its 
 customers; it could cause irreparable harm to companies, their employees and 
 shareholders, who do not merit a loss of confidence. 
 
 The fact is that there is no direct correlation between a company facing 
 temporary problems and one headed for ultimate failure. Indeed, most successful 
 companies have weathered such storms at one time or another and emerged 
 stronger for the experience. A bank's basic responsibility is to monitor its credits 
 closely and to take timely and remedial action when it is called for. This might 
 take the form of restructuring the terms of a loan or extending additional funds 
 to relieve a cash flow problem, or recommending and facilitating a better inter- 
 nal cash management system for the borrower. 
 
 But at the same time, the customer's management is almost invariably doing 
 its part to achieve viability. With very few exceptions, the end result is that the 
 company works its way out of its difficulties, remains an essential source of em- 
 ployment in its region and continues as a valued customer of the bank. 
 
 Negotiations under such circumstances are of necessity most sensitive. A public 
 airing of such problems would serve no useful purpose and might well impair 
 progress toward the goals that are sought. Confidentiality operates to meet prob- 
 lems head on and to work effectively toward their solution. 
 
 Ironically, as The Wall Street Journal noted in a recent editorial, many of the 
 people who not long ago were exhorting bankers to liberalize their lending policies 
 to accelerate growth are the same ones who are now calling bankers reckless and 
 demanding tighter regulation of the industry. 
 
 As for the Chase's willingness to talk responsibly about its operations, the de- 
 tailed disclosure in this annual report testifies to our continuing commitment to 
 meaningful disclosure. Our financial statements contain many items previously 
 included only in regulatory filings, and our financial review and statistical sec- 
 tions are more comprehensive. 
 
 Among the current legislative proposals are some that would alter the competi- 
 tive environment of banking by phasing in new powers for savings banks and 
 other types of thrift institutions. It is our judgment that too little attention is 
 being given to the problems of adjustment that these new powers would surely 
 entail. 
 
 Clearly, thrift institutions need to be less limited in the fields they may enter 
 so that, like commercial banks, they can broaden their earnings base and leave 
 themselves less vulnerable to cyclical trends. Unfortunately, while recommend- 
 ing broader powers, recent proposals also suggest that the thrift institutions be 
 allowed to retain, for at least another five years, the rate advantage on savings 
 accounts they now enjoy over commercial banks. The disparity in rate ceilings 
 has unfairly handicapped commercial banks and their customers in the past, and 
 the effect would become more severe as thrift institutions exert greater com- 
 petitive pressure as an outgrowth of their wider range of banking powers. 
 
 Fundamentally, there is an even broader consideration involved. It is that 
 ceilings on interest rates — even in the absence of rate differentials — present an 
 unnecessary and harmful constraint. Elimination of ceilings, for example, would 
 make possible a broader range of competitively priced savings instruments for 
 those with smaller sums to invest. Moreover, ceilings hamper mortgage lenders 
 and financial intermediaries since they cause disruptive deposit outflows prompted 
 by higher rates available elsewhere in the market. We believe it makes sense 
 to eliminate rate differentials as soon as thrift institutions are given expanded 
 powers and gradually, over a limited period, to phase out ceilings altogether. 
 
 All components of the financial services industry share a common purpose- 
 to serve the increasingly complex needs of individuals, businesses and govern- 
 ments. Opportunities for these groups to receive the very best and most efficient 
 services are maximized by freer competition. Unfettered competition also facili- 
 tates savings and aids in the capital formation process, another pressing need. 
 
 Through advertising, speeches and testimony, Chase has communicated the 
 message that the capital requirements of American business over the next 10 
 years will vastly outstrip the funds available for investment. The resulting 
 capital shortfall, which Chase economists estimate could total $1.5 trillion trans- 
 lates into lost jobs and a lower standard of living for all Americans. We believe 
 that new investment incentives are urgently needed and that Congress therefore, 
 should press for tax and related policies that can foster capital growth. 
 
178 
 
 THE FUTURE 
 
 111 the letter to our shareholders a year ago, we said : 
 
 "Chase is part of a financial system which is coming through some rough 
 weather and which may not have smooth sailing in the period immediately ahead. 
 On the other hand, a dangerous and greatly exaggerated sense of anxiety that 
 prevails in many quarters tends to conceal the basic strengths which character- 
 ize the world economy and the banking system which serves it . . . We at Chase 
 by no means foresee an easy future, but it is a future in which we believe real 
 progress can be made . . ." 
 
 That passage proved to be an understatement of the nature and character of 
 the problems we would face during the year, but it also understated the enhanced 
 strength and capabilities with which we would enter the new year. However, 
 the truly significant point behind all that has occurred is that the banking in- 
 dustry, of which Chase is an important part, managed to achieve significant 
 earnings while increasing its capacity to service the expanding needs of its 
 customers throughout the world. To have achieved this in a period of serious 
 economic recession is a testimonial to the strength of this nation's banking 
 system. 
 
 Over the years, the Chase organization has striven consistently for self- 
 improvement, and the recent difficulties generated by the poorest economy in more 
 than 40 years only accelerate our determination. The problems we encountered 
 set in sharp relief those facets of our activities that needed further strengthen- 
 ing. We have never hesitated to make improvements. This, importantly, has in- 
 cluded the installation of additional controls to provide for early detection of 
 potential problem areas. 
 
 Now, our mission is three-fold : 
 
 First, we must continue to improve the quality of our loan portfolio, assuring 
 that new credits placed on our books meet rigorous credit standards. 
 
 Second, we must continue to control our asset growth, while at the same time 
 increasing our return on assets, either through better pricing, better product 
 mixes or phasing out activities that can be performed more cost-effective by 
 others. 
 
 And third, we must take full advantage of all our logical areas of growth, 
 even while we are adding to our own internal strengths. Chase has no intention of 
 standing still. The requirements of our markets have grown, not diminished. If 
 we are to prosper in the years ahead, we must identify more precisely our appro- 
 priate markets, anticipate needs within them and develop outstanding responses 
 to those needs. 
 
 Chase Manhattan is a multinational services corporation with a reputation for 
 delivering high quality services worldwide in corporate banking, institutional 
 banking, retail banking, real estate, and trust and investment management. We 
 remain committed to these five markets, and we will focus our energies on pro- 
 viding them with new and better services. 
 
 David Rockefeller, 
 
 Chairman of the Board. 
 Willard C. Butcher, 
 
 President. 
 
179 
 
 The Chase Manhattan Corporation 
 Financial Review 
 
 Consolidated income before securities transactions in 1975 totalled 
 $156.6 million, down 14% from the $182.0 million earned in 
 1974. Net Income amounted to $173.7 million, down 3.9% . The 
 decline in earnings resulted principally from the need to increase 
 significantly our provision for possible loan losses and from a sub- 
 stantial reduction in interest income on non-accruing and reduced 
 interest rate loans. In addition, increases in New York State and New 
 York City tax rates, enacted during 1975, had a further negative 
 effect on earnings. Partially offsetting these negative factors were an 
 improved net interest margin and greater fee income from loans 
 and other business activities. In addition, bond trading account pre- 
 tax losses of $505,000 in 1975 were substantially below the $29.2 
 million of pre-tax losses reported for 1 974, in spite of the difficult 
 market conditions that resulted from New York City's financial crisis. 
 
 Domestic earnings were down sharply primarily due to the higher 
 provision for possible loan losses and increases in other operating 
 expenses other than interest paid. These negative factors more than 
 offset an increased net interest margin, higher revenues from loan, 
 trust and fiduciary investment fees, and greater income from credit 
 card activities and consulting and advisory services. 
 
 Earnings from international activities, encompassing the activities 
 of Chase's overseas offices and the international business conducted 
 from domestic offices, continued to increase in both dollar amount 
 and percentage contribution to overall income. After internal alloca- 
 tions and allowances, international income before securities trans- 
 actions climbed 13% to approximately $101 million, representing 
 64% of the consolidated total. 
 
 International results benefitted from an increase in net interest 
 
 margin brought about by wider interest rate spreads and a higher 
 volume of average earning assets. Fees on loans and international 
 business fees, such as those generated from letters of credit, accept- 
 ances and other financial services also increased, while foreign 
 exchange trading income declined moderately. The dramatic in- 
 crease in the percentage of international earnings to total 
 earnings reflects the fact that only a small portion of our increased 
 provision for possible loan losses was attributable to overseas 
 lending, since the loan charge-off experience overseas has continued 
 to be comparatively favorable. 
 
 Activities in certain international geographic regions were espe- 
 cially noteworthy. Europe's contribution to income before securities 
 transactions increased to $47 million or 46% of international earn- 
 ings, up from 40% in 1974, mainly as a result of improved interest 
 rate spreads and a higher average loan volume. The relative con- 
 tributions of other regions also shifted somewhat . The absolute 
 and relative contribution to international earnings from the Western 
 Hemisphere declined from $25 million to $18 million, or from 
 28% to 1 8% , respectively, as a result of difficulties experienced in 
 the real estate industry in Puerto Rico, while Asia's contribution 
 increased to 32% from 25%. The relative earnings contribution 
 from Africa and the Middle East fell from 7% to 4% . However, it is 
 important to recognize that deposits and services associated with 
 the handling of petro-dollars are spread through a variety of re- 
 gions, most notably the offices in Europe. Thus, the actual income 
 contributions derived from certain areas, particularly Africa and the 
 Middle East, are greater than the above results would indicate. 
 
 The contribution of international activities to income before secu- 
 rities transactions does not include the gain on the sale of the 
 Bank's minority interest in Standard and Chartered Banking Group 
 Limited, London, England. This sale, executed in May 1975, was 
 arranged after no practical alternative could be found for com- 
 plying with Federal banking regulations and resulted in a gain of 
 $23.3 million, after applicable taxes. For further discussion, see 
 Notes to Financial Statements, page 44. 
 
 12 
 
180 
 
 Net Interest Margin (Taxable Equivalent Basis) 1 
 
 Net interest margin, defined as the difference between total interest 
 earned, on a taxable equivalent basis, and total interest paid, 
 totalled $1,123 million, an advance of 24.6% over 1974. This in- 
 crease was due primarily to improved rate spreads, both domes- 
 tically and overseas, and to a higher average volume of earning 
 assets. While this increase was less than the 28.7% improvement re- 
 corded for 1 974, it was nevertheless significant because it was 
 achieved despite an adverse business environment and the deferral 
 and or reduction of interest income on non-accruing and reduced 
 rate loans. 
 
 Non-accruing loans are loans on which interest is taken into 
 income only to the extent of actual cash collections. This method is 
 used when doubt exists as to the collectibility of such interest. Re- 
 duced rate loans are loans wherein the rates at which interest is 
 currently accrued and receivable have been renegotiated to rates 
 substantially lower than those called for in the original contracts. 
 The combined impact of such non-accruing and reduced rate loans 
 was to reduce consolidated earnings for 1975 by approximately 
 S50 million, after applicable income taxes, compared with $14 mil- 
 lion for 1974. It is important to note that the placing of a loan on 
 non-accruing status is done to assure a conservative reporting of 
 current interest income and does not imply the ultimate loss of prin- 
 cipal or interest. 
 
 A schedule of net interest margin for domestic and overseas 
 offices and the consolidated Corporation is shown in the next 
 column. 
 
 Taxable equivalent basis means that interest income which is exempt from 
 income taxes is increased to an amount that makes it comparable to what the 
 inierest income would be were it subject to income taxes. 
 
 (Taiable Equivalent Basis) (S In Millions! Domwtk Ogtm 
 
 
 1975 
 
 1974 
 
 
 Amount 
 
 Rate 
 
 Amount 
 
 Rate 
 
 Interest Earned 
 
 $1,604 
 
 8.36% 
 
 $1,955 
 
 10 30% 
 
 Interest Paid' 
 
 835 
 
 6.16 
 
 1,251 
 
 9.26 
 
 Net Interest Margin 
 
 $ 769 
 
 2.20% 
 
 $ 704 
 
 1.04ft 
 
 
 
 Orerx 
 
 as Offices' 
 
 
 
 1975 
 
 1974 
 
 
 Amount 
 
 Rate 
 
 Amount 
 
 Rate 
 
 Interest Earned 
 
 $1,432 
 
 9.67% 
 
 $1,592 
 
 11.38% 
 
 Interest Paid 
 
 1,078 
 
 7.79 
 
 1,395 
 
 10.66 
 
 Net Interest Margin 
 
 $ 354 
 
 1.889c 
 
 $ 197 
 
 - : ~c 
 
 Consolidated Corporation 
 
 
 1975 
 
 1974 
 
 
 Amount 
 
 Rate 
 
 Amount 
 
 Rate 
 
 Interest Earned 
 
 $3,036 
 
 8.93% 
 
 $3,547 
 
 10.76% 
 
 Interest Paid 
 
 1,913 
 
 6.98 
 
 2,646 
 
 9.95 
 
 Net Interest Margin 
 
 SI. 123 
 
 1.95% 
 
 S 901 
 
 .81% 
 
 Notes: 
 
 'Includes cost of time deposits accepted by overseas offices for domestic use. 
 "Overseas offices exclude net interest margin on international activities 
 conducted from domestic offices. 
 
 Domestic Net Interest Margin Domestically, our net interest 
 margin increased by $65 million, a gain of 9.2 % over 1 974 as the 
 average interest rate spread widened to 2.20% compared to 1.04% 
 in 1974. Behind these increases was an environment of generally 
 declining interest rates in which the price we were paying for pur- 
 chased funds declined faster than the rates we earned on assets. 
 
 Although the economy began to improve around mid-1975, 
 problems persisted in certain key industries throughout the year. 
 Chase felt the impact of the spotty recovery in several ways. First, 
 there was a decrease in business loan volume from year-end 1974 
 to year-end 1975, partly attributable to the restructuring of corpo- 
 rate debt, as the recession bottomed out, from shorter-term bank 
 
 13 
 
181 
 
 financing to longer-term financing in the bond markets. Second, 
 in view of prevailing uncertainties, Chase continued to restrain 
 certain of its lending activities, thus further limiting volume growth. 
 
 The 1975 experience contrasts sharply with 1974. Then, a rapid 
 buildup in loans was created by heavy inventory accumulation and 
 high inflation combined with the Bank's prime lending rate rising 
 less rapidly than the cost of other short-term financing sources 
 available to corporate treasurers. At the same time, rates paid for 
 purchased funds rose markedly, which meant that the spread be- 
 tween interest rates earned and paid narrowed slighdy. In contrast 
 to 1975, therefore, gains in net interest margin in 1974 resulted 
 from increased volume, rather than from increased spread. 
 
 Overseas Net Interest Margin Of Chase's total net interest 
 margin, $354 million, or 3 1 .5 %, was contributed by overseas offices, 
 as compared with $ 1 97 million, or 2 1 .9% , in 1 974. This sharp 
 rise was due to a widening of interest rate spreads and a modest in- 
 crease in the volume of earning assets. However, as in the 
 United States, business activity throughout Western Europe and 
 Japan declined in 1975, and many lesser developed countries 
 were affected adversely by falling commodity prices and a decreased 
 demand for their exports. As a consequence, the need for bank 
 credit in many countries was weak. Nevertheless, record earnings 
 were achieved because the cost of purchased funds declined 
 faster than the average rates earned on earning assets. So here, too, 
 the experience was different from that of 1 974, when the volume 
 of loans outstanding expanded substantially, but interest rate spreads 
 were narrow. 
 
 A breakdown of year-end loan balances by type for both domestic 
 and overseas offices is presented in the Notes to Financial State- 
 ments on page 44. As for interest income, domestic loans contributed 
 $ 1 ,282 million, down 2 1 % from 1 974, reflecting average rates 
 earned of 8.06%, compared with 10.44% in 1974. Chase's prime 
 
 rate averaged 7.83% in 1975, compared with 10.78% in 1974. 
 For loans on the books of overseas offices, the average rates 
 earned were 9.83 % , down 1 88 basis points from the 1 1 .7 1 % 
 earned in 1974. 
 
 Domestic Lending The requirements of the commercial and indus- 
 trial sectors remained relatively weak due to the fact that corpo- 
 rations, particularly in the early part of the year, liquidated existing 
 stockpiles of inventories and trimmed capital spending plans. 
 Notwithstanding these trends, our overall volume of average domes- 
 tic loans outstanding was large enough to result in an increase of 
 2.8% versus 1974. In this regard, the general availability of money 
 in the latter part of 1975 provided Chase with the opportunity to 
 expand its holdings of liquid assets, such as overnight loans to 
 brokers and dealers and bankers' acceptances. 
 
 Certain of our domestic loans are termed CAP loans because they 
 have interest rate limitations. If the average rate paid by borrowers 
 over the term of these loans exceeds the stated maximum rate 
 provided in the ioan agreement, the excess interest is subject to 
 refund and, as such, is credited to a reserve account. CAP loans out- 
 standing at year-end totalled $414.5 million, down 3.8% from the 
 year before. Our reserve balance for refundable CAP loan interest 
 was $24 million at the end of the year, as compared with $ 1 9 
 million a year earlier. 
 
 Domestic real estate loans increased 1 3.5 % to an average level of 
 $3.9 billion during the year. Within that total, one-to-four family 
 residential mortgages rose by 8 .4 % to an average of $ 1 . 1 billion. 
 
 Chase's domestic real estate financing subsidiaries— Housing 
 Investment Corporation of Florida and Dovenmuehle, Inc.-experi- 
 enced substantial difficulties due to the general turndown in the 
 real estate market. Their problems are reflected in the $22.8 million 
 increase in the provision for possible loan losses in the Combined 
 Statement of Income of the Non-Banking Subsidiaries of the Parent 
 Company on page 39. 
 
 A portion of Chase's domestic loan portfolio consists of loans to 
 
 I as a percentage of I 
 
 tO U 28 « 56 70 84 98 112 
 
182 
 
 real estate investment trusts (REITs). These trusts lend to large 
 real estate ventures, such as condominiums, office buildings and 
 shopping centers. During 1974 and 1975, REITs experienced 
 substantial financial difficulties because many of the real estate 
 developers they lend to found themselves without sufficient current 
 cash flows to pay maturing installments of principal and interest on 
 their obligations. In turn, cash flows of REITs were inadequate to 
 meet their interest and principal obligations to the banks which 
 helped finance them. 
 
 This was the situation which confronted the Chase Manhattan 
 Mortgage And Realty Trust, a publicly held real estate investment 
 trust. In August 1975, the Bank, which is not a shareholder of the 
 Trust, but acts solely as an advisor on a fee basis, entered into an 
 agreement to purchase $ 160.7 million of the Trust's loan assets. 
 While some of the loans purchased are not accruing interest at 
 present, the Bank anticipates obtaining a reasonable yield on its in- 
 vestment. For a more detailed description, see Notes to Financial 
 Statements, page 42. 
 
 The average balance of loans outstanding to all REITs in 1975 
 amounted to $74 1 million, compared with $610 million a year 
 earlier. The amount of unused contractual commitments for REIT 
 loans totalled $ 1 1 8.0 million at year -end. Excluding the Trust, 
 at year-end Chase had renegotiated REIT loans totalling $67.6 mil- 
 lion, and another $360.4 million of REIT loans were on a non- 
 accruing basis. Loans outstanding to REITs at year-end 1975 
 amounted to 2.5 % of total loans. 
 
 Consumer loans— including installment credit, BankAmericard, 
 Cash Reserve checking and single payment loans to individuals- 
 averaged $898 million in 1975. Rising operating costs led Chase to 
 undertake a moderate increase in rates, bringing the average rate 
 earned on these loans to 10.72% . 
 
 Overseas Lending Lending at overseas offices during 1975 
 averaged $11.2 billion and accounted for 4 1 .4 % of total gross loans, 
 compared with 37.9% in 1974. While the growth in average loan 
 
 Geographic Breakdown of 
 International Earnings 
 
 In millions and as a percentage ol international earnings 
 
 volume was 18.8% in 1975 versus 1974, this increase was primarily 
 due to loan volume placed on the books in 1974. In 1975, economic 
 activity was actually slack in many overseas areas until late in the 
 year. Although there were indications of renewed business growth 
 overseas in the fourth quarter, loan demand abroad was damp- 
 ened by a number of interrelated factors including the sharply re- 
 duced pace of industrial expansion. This not only was a result of 
 the recession, but also reflected the fact that the cost of doing busi- 
 ness in Europe has been rising more rapidly than in the United 
 States and elsewhere. Labor costs, in particular, spurred by inflation, 
 have been increasing at a faster pace, and this, coupled with the 
 dollar devaluation in recent years and the greater political and social 
 risks abroad, has caused many business projects overseas to be 
 cancelled, reduced in scope, or stretched out over a greater number 
 of years than originally planned. 
 
 Approximately 30% of all overseas loans at year -end were de- 
 nominated in currencies other than U.S. dollars. More than half 
 of such loans were to indigenous companies with funds obtained in 
 the local money market. 
 
 The five countries in which Chase had the greatest amount of risk 
 exposure to borrowers, based on loans outstanding at year-end 
 1975, were Japan, the United Kingdom, West Germany, Mexico 
 and Brazil. 
 
 Total interest income from loans recorded in overseas offices de- 
 creased slightly to $ 1 , 1 05 million from $ 1 , 1 08 million. These 
 sources contributed 46% of total interest income from loans, up 
 from 41% in 1974. 
 
 Loan Charge-off s 
 
 Net loan charge-offs increased substantially in 1975, totalling $25 1 
 million, compared with $93 million in 1974. The major portion 
 of charge-offs continued to be concentrated in our domestic 
 loan portfolio. Domestic commercial net loan charge-offs, includ- 
 ing real estate and a major retailer, totalled $207.6 million. Domestic 
 consumer net loan charge-offs amounted to $16.7 million. Overseas 
 
 IS 
 
183 
 
 net loan charge-offs were $26.7 million in 1975. Total domestic 
 net loan charge-offs as a percentage of related average loans climbed 
 from .50% to 1.42% in 1975. Overseas net loan charge-offs as a 
 percentage of related average loans increased from .18% to .24% . 
 On a consolidated basis, the 1975 experience was .93% com- 
 pared to .37% for 1974. 
 
 With regard to consolidated gross charge-offs, by category, com- 
 mercial loan charge-offs from 1970 through 1974 accounted for 
 7 1 % of the five year total, followed by the consumer and real estate 
 categories. In 1975, however, these relationships changed sig- 
 nificantly, with real estate loan charge-offs climbing sharply from 
 12% to 40% , while commercial charge-offs dropped from 71 % 
 to 51 % of the total. Consumer charge-offs declined from 17% 
 to9%. 
 
 The provision for possible loan losses charged to operating 
 expenses was $312.4 million in 1975, up $194.0 million from the 
 year before and $61 million greater than actual net loan charge- 
 offs. The reserve for possible loan losses, which in prior years was 
 reported as the valuation portion of the reserve for loan losses, 
 amounted to $282 million, or .98% of loans outstanding at year- 
 end, compared with $22 1 million, or .80% of loans reported at 
 the end of 1974. 
 
 The large increase in the provision for possible loan losses re- 
 flects three factors: management's decision, in view of weakened 
 economic conditions, to increase the loan loss reserve by $ 1 1 8 
 million in excess of the amount called for by the five-year formula; 
 the inclusion in the five-year moving average formula of increased 
 average loan volume; and a substantially higher level of net loan 
 charge-offs in 1975. 
 
 In the opinion of management, the reserve for possible loan 
 losses at December 31, 1975 is sufficient to absorb all antici- 
 pated loan charge-offs in the portfolio at that date. Furthermore, it 
 will continue to be Chase's policy to ensure that the reserve remains 
 adequate to cover all foreseeable loan charge-offs. Therefore, in the 
 future, as in the past, provisions in addition to the five-year formula 
 
 will be made by management to the extent deemed prudent. 
 Investment Portfolio 
 
 Investment portfolio management in 1975 successfully achieved the 
 dual objectives of higher earnings and improved liquidity. This was 
 primarily accomplished through active trading, a buildup of short 
 and intermediate-term U.S. Treasury and Federal Agency secu- 
 rities, and selected sales of long-term municipal bonds offset in part 
 by the acquisition of securities of the New York State Municipal 
 Assistance Corporation. As a result of these actions, the combined 
 taxable equivalent return of the investment portfolio increased 
 on average from 9.42% in 1974 to 9.69% in 1975. 
 
 The total carrying value of investment security holdings at year- 
 end 1975 amounted to $3.4 billion, a 26.4% increase over the 
 $2.7 billion in the account at December 3 1 , 1974. This change re- 
 flected reductions of $83 million in Federal Agency securities 
 and $141.5 million in state and municipal securities, offset by a 
 $946.3 million increase in U.S. Treasury securities. The increase 
 in U.S. Treasury securities was concentrated in the 0-5 year 
 category with an increase of $5 14 million in securities maturing 
 within one year. At year-end, the average life of the U.S. Treasury 
 and Federal Agency portfolio was 5 years, 9 months, down from 
 1 1 years, 4 months at year-end 1974. Activity in the state and muni- 
 cipal securities portfolio centered on significant reductions in 
 
 Comparative Maturit 
 
 es Summary- 
 
 Year End 
 
 U.S. Treasury & 
 Federal Agency 
 
 State & 
 Municipal 
 
 Maturity 
 
 
 1975 
 
 1974 
 
 1975* 1974 
 
 Within One Year 
 
 
 31% 
 
 8% 
 
 4% 24% 
 
 Between One and Five Years 
 
 47% 
 
 41% 
 
 9% 3% 
 
 After Five Years 
 
 
 22% 
 
 51% 
 
 87% 73% 
 
 Average Life 
 
 
 5 Yrs. 
 9 Mos. 
 
 11 Yrs. 
 4 Mos. 
 
 18 Yrs. 18 Yrs. 
 5 Mos. 8 Mos. 
 
 •The maturity data for 1975 reflects the restructuring of certain New York 
 City Notes in moratorium and New York State Municipal Assistance 
 Corporation obligations. 
 
 Average Assets Employed, 
 L .S. versus International 
 
184 
 
 long and short-term maturities, while $187 million of New York 
 State Municipal Assistance Corporation obligations were added. 
 The average life of the state and municipal securities was 18 years, 
 5 months at the end of 1975, compared to 1 8 years, 8 months at the 
 end of 1974. 
 
 These significant changes in maturity structure and liquidity, 
 while executed during a period of generally lower rates, produced 
 higher overall taxable equivalent returns. The average return 
 on the U.S. Treasury and Federal Agency portfolio combined was 
 7. 19%, down from 7.41% in 1974, while the taxable equivalent 
 return on the state and municipal securities portfolio averaged 
 12.65%, up from 10.99% in 1974. This major restructuring placed 
 Chase in a more liquid position to respond to the increased loan 
 demand anticipated over the next two years. 
 
 Investment Portfolio Returns 
 
 
 
 (Taxable Equivalent Basist 
 
 1975 
 
 1974 
 
 I S Treasury Securities 
 
 7.03% 
 
 7.17% 
 
 Federal Agency Securities 
 
 7.50% 
 
 7.75% 
 
 State and Municipal Securities 
 
 12.65% 
 
 10.99% 
 
 The sharp decline in municipal security prices which resulted 
 from the New York State and City problems of 1975 was the major 
 cause of the widening of the difference between the investment 
 portfolio's carrying value and its estimated market values. For further 
 discussion, see Notes to Financial Statements: Investment and 
 Trading Account Securities. 
 
 At year-end, the investment portfolio included in its state and 
 municipal holdings securities issued by New York State and City, 
 their related agencies and authorities, as well as the Municipal 
 Assistance Corporation, in the amount of $732 million. Our total 
 holdings of these municipals, while large, constituted only 2 1 .8% of 
 our total investment portfolio at year-end. We believe that the 
 current sharp declines in the municipal bond market, precipitated 
 by the threat of default by New York City, will be remedied provided 
 local financial issues are systematically addressed and investor con- 
 
 fidence returns. 
 
 Overall investment portfolio sales in 1975, excluding the gain on 
 the sale of Chase's minority interest in the Standard and Chart- 
 ered Banking Group Limited, resulted in net losses, after taxes, of 
 $6.2 million, compared with net after tax losses of $1 .2 million in 
 1974. 
 
 Bond Trading Account 
 
 Securities that are used by Chase solely in its underwriting or dealer 
 activities are placed in our bond trading account. Consequently, 
 profits and commissions from this account include fees from under- 
 writing, realized gains and losses from the sale of securities, and 
 unrealized losses due to a decline in the market value of securities 
 acquired for trading and positioning. 
 
 The average balance in the bond trading account in 1975 was 
 $296 million, down sharply from 1974's $845 million. This 
 decline was consistent with Chase's announced plans to reduce em- 
 phasis on longer-term positioning in favor of shorter-term trading 
 strategies. 
 
 Overall, Chase experienced a pre-tax loss of $505,000 in trading 
 account profits and commissions for 1975, down substantially 
 from the pre-tax loss of $29.2 million reported in 1974. The sharp 
 decrease was primarily the product of two different phases of 
 the Bank's trading activity. The first involved trading results from 
 special situations whereby unrealized losses in holdings of New York 
 State, New York City and their related agency obligations occur- 
 ring in the latter half of 1975 were only moderately offset by realized 
 profits on the 1974 carryover inventory. The second phase 
 reflected a favorable $7. 1 million impact on trading profits, primarily 
 in the first and fourth quarters, realized in Chase's day-to-day 
 current trading operations, while we maintained our position as the 
 leading bank underwriter of municipal securities. 
 
 Inter-Bank Deposit Placements 
 
 Inter-bank deposits are time deposits placed by Chase with other 
 
 Breakdown of Average Assets 
 Employed Internationally 
 
 in billions and as a percentage of total international 
 
185 
 
186 
 
) 
 
 187 
 
 banks, primarily in the eurocurrency market. These deposits 
 averaged $3.6 billion in 1975, down 19.0% from 1974. The reduced 
 volume reflected somewhat less active trading in the eurocurrency 
 market as a result of the economic downturn and changes in the inter- 
 est rate trend in the second half of 1975. The average interest 
 rates earned on all inter-bank deposits was 9.07% compared with 
 10.75% in 1974. 
 
 Deposits 
 
 Total deposits rose in 1975 to an average of $32.6 billion, an 
 increase of 2.8% over 1974. At year-end, total deposits were $33.9 
 billion, down slightly from the $34.7 billion reported at Decem- 
 ber 31, 1974. 
 
 Domestic Deposits With the decline in general business activity, 
 reduced loan demand and slack retail sales, domestic demand 
 deposits, net of cash items in the process of collection, decreased by 
 2.6% to an average of $5.8 billion in 1975. A year-end comparison 
 of gross demand deposits in relation to net demand balances in our 
 domestic offices is shown below: 
 
 The movement of funds from money market instruments, whose 
 yields declined in 1975, contributed to this modest 4.6% growth in 
 the savings and other time account category. Along with demand 
 deposits, savings deposits have in recent years accounted for a di- 
 minishing portion of the total funds employed to produce asset 
 growth. Instead, this growth has been accomplished by money mar- 
 ket instruments, such as certificates of deposit. Negotiable certi- 
 ficates of deposit averaged $4.5 billion, up 1 1 . 1 % from $4. 1 billion 
 in 1974. 
 
 Overseas Deposits As in prior years, eurocurrency markets were 
 the primary source of increases in overseas deposits. However, 
 in 1975, a more restrained and stable market environment as a re- 
 sult of the economic recession caused a general reduction in the 
 volume of eurocurrency trading. 
 
 Nevertheless, Chase and other large international banks were able 
 to maintain a slight rate advantage in attracting deposit funds. 
 Time deposits in overseas offices averaged $ 1 3.3 billion in 1975, 
 up4.1% from $12.8 billion in 1974, while average demand deposits 
 increased $ 1 66 million, or 1 8 . 1 % , to $ 1 . 1 billion. 
 
 (In Millions) 
 
 December 31, 1975 
 
 December 31, 1974 
 
 Gross Demand Deposits 
 
 $10,023 
 
 $10,418 
 
 Less: Cash Items in Process 
 
 
 
 of Collection (Float) 
 
 2,806 
 
 2,809 
 
 Net Demand Deposits 
 
 $ 7,217 
 
 $ 7,609 
 
 Included in gross demand balances are deposits of $65 million at 
 year-end 1975 and $60 million at year-end 1974 with Chase's grow- 
 ing network of offices of subsidiary banks in upstate New York 
 and Suffolk County, Long Island. 
 
 Average balances of savings and other time accounts, excluding 
 negotiable certificates of deposit, increased from $4.5 billion in 1974 
 to $4.7 billion in 1975. Within this total, non-negotiable certificates 
 of deposit averaged $1.0 billion in 1975 and $1.3 billion in 1974. 
 
 Funds Borrowed 
 
 Funds borrowed include federal funds purchased, securities sold 
 under repurchase agreements, commercial paper, customers' paper 
 rediscounted by overseas offices and floating rate notes. Our use 
 of these funds averaged $4.2 billion in 1975, an 8.3% decrease from 
 the year before. 
 
 Domestically, borrowed funds averaged $3.7 billion, down 
 5.8% from 1 974. Federal funds purchased and securities sold 
 under repurchase agreements, averaged $2.4 billion, representing 
 63.7% of the total, compared with 71.8% in 1974. Although 
 there was a reduction in average volume, the use of these funding 
 techniques represented a continuation of a trend begun in 1974 
 when federal funds purchased and securities sold under repurchase 
 agreements acquired a significant cost advantage over alternative 
 
 t millions and as a percentage of total 
 
 ■■■■■■■■II 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 45 Foreign Exchange Trading 
 
 20 
 
188 
 
 source* Commercial paper averaged $457 million, or S49 million 
 greater than in 1974 In 1975, the average rate paid for domestic 
 borrowed money wai 6.22% , compared with 10.34% in 1974. 
 
 Floating rate notes totalling $200 million were issued by Chase in 
 August 1974 to obtain longer term financing. At year-end 1975, 
 the applicable interest rate on these notes was 6.60% compared with 
 a 9 70% rate when the notes were originally issued. Since issu- 
 ance, these notes hav e constituted a favorable source of funding for 
 the Corporation. 
 
 Overseas, the average rate paid on borrowed hinds was 9.22% 
 on a volume of $51 1 million in 1975, compared with 11.75% on a 
 volume of $666 million in 1974. Globally, the average rate paid 
 for all borrowed money was 6.58% in 1975, compared with 10.54% 
 in 1974. 
 
 Capital Notes and Debentures 
 
 Capital notes and debentures at year-end 1975 totalled $480 million, 
 down slightly from 1974's $484 million. Certain of these issues 
 are convertible into common stock of the Corporation at stated con- 
 version prices. All issues are subordinated in right of payment 
 to the claims of depositors and/or certain other creditors of either 
 the Bank or the Corporation. Historically, these funds have had a 
 relatively low cost, averaging 5.45% in the three-year period from 
 1972 through 1974and5.49% for 1975. The relatively low cost of 
 funds derived from such notes and debentures was not as sig- 
 nificant for Chase in 1975 as in 1974, a year marked by record high 
 interest rates. Nevertheless, capital notes and debentures contin- 
 ued to represent a stable funding source at reasonable cost. 
 
 Trust mi Fiduciary Investment Fees 
 
 Income from our trust and fiduciary activities increased 10.2% to 
 $55.8 million. While we experienced a modest decline in fees 
 earned on individual trust accounts, fees from corporate trust and 
 agency, pension trust and corporate custody accounts increased 
 significantly. The fee income of Chase Investors Management 
 Corporation New York, our wholly-owned investment management 
 
 subsidiary, also increased substantially. 
 Foreign Exchange Trading Income 
 
 Our foreign exchange trading income is derived primarily from the 
 trading we do on behalf of customers. Our objective is to accommo- 
 date their international financing needs. However, in a competi- 
 tive market place, inevitably there arise occasions when currencies 
 purchased from or sold to a customer cannot be readily offset with 
 other customers or dealers. The majority of trading positions which 
 Chase maintains originate from these circumstances. Such posi- 
 tions are modest in respect to our trading activity and of short dura- 
 tion. 
 
 1975 results reflect a substantial year-to-year drop in both profes- 
 sional trading and in customer activity. Falling commodity prices 
 and crude oil currency pricing decisions were each major factors in 
 reducing world demand in 1975 for foreign exchange trading 
 services. As a consequence, foreign exchange income, including 
 commissions earned from processing customer transactions, was 
 down 9% in 1975 from $49.5 million to $45.0 million. 
 
 Other Income 
 
 Other income increased to $139 million, up 27.2% over 1974, 
 with significant increases coming in the form of fees and commissions 
 from letters of credit and acceptances, consulting and advisory 
 services, and other financial activities and services. Advisory fees 
 from Chase Manhattan Mortgage And Realty Trust were in- 
 significant in amount for both 1975 and 1974. 
 
 Prior to the 1975 fourth quarter, foreign exchange translation 
 gains on overseas investment assets were deferred in a reserve ac- 
 count until released to income based on management's assessment 
 of the relative stability of exchange rates. In 1975, Chase adopted 
 the Financial Accounting Standards Board's recent statement on ac- 
 counting for foreign currency transactions. The balance in the 
 reserve was released to operating income and all foreign exchange 
 translation gains or losses are now reported as a direct credit 
 or a direct charge to operating income. Release of the reserve, which 
 
 '9-5 
 
 ■ Ul>«MEncii<»>S<«''!1 ■«<% 
 
 n PnMKonkvPoMDto Loan Loan (M%) 
 
 21 
 
189 
 
 had a balance of $3.0 million at the beginning of the year, had 
 a positive effect on earnings of about $1.1 million after taxes, all of 
 which was reflected in the first quarter's restated results. This gain, 
 however, was offset by continued net foreign exchange translation 
 losses on our capital investments in overseas branches, subsidi- 
 aries and associated companies, which amounted to $2.5 million, 
 after taxes, in 1975, after giving effect to the release of the reserve, 
 and $2.5 million, after taxes, in 1974. 
 
 A provision for losses on venture capital stock investments by two 
 wholly-owned subsidiaries of the Bank— Chase Manhattan Capital 
 Corporation and Chase International Investment Corporation— 
 adversely impacted other operating income by $6.6 million before 
 taxes. 
 
 Under sinking fund arrangements, $4.5 million of the 4.60% 
 Capital Notes were retired in 1975, resulting in a pre-tax gain of 
 $858,000 reflected in other income. In 1974, Capital Notes with a 
 par value of $15.7 million were retired for a pre-tax gain of $3.5 
 million. 
 
 Equity income from non-consolidated subsidiaries and associated 
 companies increased by about 46% . The major portion of this 
 increase was generated by subsidiaries and associated companies 
 located in Western Europe, Asia, and South America. 
 
 Operating Expenses 
 
 The same factors that caused an increase in expenses in prior years- 
 higher salaries and employee benefits, costs of diversification and 
 expansion, increased business activities, and inflation— continued 
 their escalating impact on operating expenses during 1975. 
 Excluding interest paid and the provision for possible loan losses, 
 operating expenses climbed to $779 million, an increase of 1 8.7 % . 
 Salaries and Employee Benefits Increases in staffing levels, 
 higher costs of employee benefits, due importantly to the enactment 
 of the Employee Retirement Income Security Act of 1974, and 
 inflation induced changes in salary programs prompted an 18.7% 
 increase in salaries and employee benefits. 
 
 Number of Employees at Year-End 
 
 1975 
 
 1974 
 
 Domestic Offices 
 
 21,986 
 
 21,210 
 
 Overseas Offices 
 
 8,137 
 
 7,774 
 
 Total 
 
 30,123 
 
 28,984 
 
 Occupancy Expenses Higher real estate taxes, increased rental 
 costs in domestic and overseas offices, and higher maintenance, 
 fuel and electric costs, caused net occupancy expenses to rise by 
 23.4% to $96.0 million. 
 
 Other Operating Expenses This item includes advertising, com- 
 munications, travel, insurance, postal and shipping, supplies 
 and transaction processing costs. The impact of inflation, combined 
 with increased business volume, boosted these costs by 17.2% to 
 $188.6 million. 
 
 Taxes Other Than Income Taxes In addition to the adverse impact 
 on 1 975's earnings due to increased income taxes, the Corporation 
 had to bear an increase in other taxes of approximately $ 1 1 million, 
 from $40 million to $5 1 million. Continually rising payroll taxes 
 comprised by far the largest segment of this increase. Payroll taxes 
 include domestic and overseas social security taxes as well as 
 domestic disability and unemployment insurance taxes. These taxes, 
 other than income taxes, are reflected in the various expense 
 captions above. 
 
 Income Taxes 
 
 The increase in income taxes as a percentage of income before secu- 
 rities transactions was primarily the result of increases in New 
 York State and New York City tax rates enacted in response to the 
 fiscal problems of the State and the City. The New York State 
 tax rate applicable to banks was increased from 8% to 12% . In 
 addition, the State also imposed an additional surcharge of 
 30% for 1975, thus bringing the 12% rate to 15.6%. Likewise, the 
 New York City tax rate rose from 6.756% to 13.823%. The net 
 impact of these tax rate increases was $6.0 million on 1975 net 
 income, of which $4.2 million was applicable to income before 
 securities transactions. 
 
 Taxes Other Than Income Taxes 
 
 in millions and as a percentage of total 
 
 Domestic Payroll (37%) 
 5 1 Overseas Payroll ( 101. ) 
 25 Domestic Real Estate (24 5"M 
 (6%) 
 
 22 
 
190 
 
 The Chase Manhattan Corporation 
 Summary of Significant Accounting Policies 
 
 Consolidation Policy 
 
 The consolidated financial statements include, on a line-by-line 
 basis, the accounts of the Corporation and its wholly-owned subsidi- 
 aries, principally the Bank, after the elimination of material 
 intercompany transactions. 
 
 Investments in unconsolidated subsidiaries (majority-owned) and 
 associated companies (20% -50% ownership interest) are reported 
 in the financial statements on the equity method of accounting. 
 The Corporation's equity interest in the earnings of these investments 
 and gains and losses realized on the disposition thereof are re- 
 ported in Other Income. 
 
 Investments in companies in which ownership is less than 20% 
 are carried at cost in Investment Securities: Federal Reserve Bank 
 and Other Stock Investments. Cash dividends received on these 
 investments are reported as Interest and Dividends on Investment 
 Securities: Federal Reserve Bank and Other Stock Investments. 
 Gains and losses realized on disposition of these investments are re- 
 ported in Securities Gains (Losses). 
 
 Translation of Foreign Currency Financial Statements 
 
 Assets and liabilities of overseas offices, other than premises and 
 equipment, are translated at the current rates of exchange at the 
 respective year-end. Income and expenses, other than depreciation 
 and amortization of premises and equipment, are translated monthly 
 at prevailing rates of exchange. Premises and equipment and the 
 related depreciation and amortization thereon are translated at ex- 
 change rates prevailing at December 31,1 974, and commencing in 
 1975 at exchange rates at dates of acquisition. The effect of this 
 change in accounting method is not material to Net Income. 
 
 In 1975, the Corporation changed its method of accounting for 
 foreign exchange translation gains and losses resulting from its 
 investments in overseas branches, subsidiaries and associated com- 
 panies in order to conform with the Financial Accounting Standards 
 Board's statement on "Accounting for the Translation of Foreign 
 Currency Transactions and Foreign Currency Financial Statements." 
 In 1974 and prior years, translation gains were deferred in a reserve 
 account classified in Other Liabilities; losses were charged against the 
 reserve account to the extent of gains in the same currency previously 
 deferred; losses in excess of gains previously deferred were charged 
 directly against Other Income; and the deferred gains were taken 
 into income based on management's assessment of the relative 
 stability of the respecuve foreign currencies. All translation gains 
 and losses are now credited or charged directly to income, and the 
 balance in the reserve account at the end of 1974 was credited to 
 income in 1 975. The effect of this accounting change on Net 
 Income for 1975 and 1974 is not material. 
 
 Investment Securities 
 
 Investment securities are carried at cost, adjusted for amortization 
 of premium and accretion of discount. Premium and discount on 
 investment securities are amortized (deducted) and accreted 
 (added), respectively, to interest income on investment securities 
 on the straight-line method over the period to maturity (call date 
 with respect to premium, if earlier) of the related securities. 
 
 Interest and dividends on investment securities are reported in 
 Operating Income. Gains and losses realized on sales of investment 
 securities are reported separately in Securities Gains (Losses). 
 
 Introduction 
 
 The following summarization of the significant accounting policies 
 of The Chase Manhattan Corporation ( Parent Company ) and its 
 wholly-owned subsidiaries, principally The Chase Manhattan Bank, 
 N.A and its wholly-owned subsidiaries (the Bank), is presented 
 to assist the reader in understanding the financial statements, notes 
 thereto and other data contained in this report. Throughout this 
 summary, the term "the Corporation" refers to The Chase Man- 
 hattan Corporation and its wholly-owned subsidiaries. 
 
 Changes in Consolidated Financial Statement Presentation 
 
 In 1975, the Corporation changed the financial statement presenta- 
 tion of the Reserve for Loan Losses. In 1974 and prior years, the 
 Reserve for Loan Losses consisted of the following elements: a valu- 
 ation portion which was available for loan charge-offs, a contin- 
 gency portion and its related deferred tax portion. The valuation 
 portion was increased by provisions charged to Operating Expenses 
 and reduced by loan charge-offs, net of recoveries. The contingency 
 portion and its related deferred tax portion arose from the transfers 
 from Undivided Profits and the income tax effect related thereto so 
 as to increase the Reserve to an amount allowable under Internal 
 Revenue Service regulations. Under the new presentation, the con- 
 tingency portion is included in Retained Earnings (Undivided Profits 
 in the Bank's Statement of Condition), and the deferred tax portion 
 is included in Accrued Taxes and Other Expenses. In addition, the 
 valuation portion now is reflected as a deduction from Loans and has 
 been entitled "Reserve for Possible Loan Losses." 
 
 Unearned discount on loans made on a discount basis was 
 previously included in Other Liabilities. Unearned discount now is 
 reflected in the financial statements as a deduction from Loans. 
 
 Other presentation changes include separate captions in both the 
 Statements of Condition and Income for direct lease financing and 
 related income therefrom and the separation of Other Investment 
 Securities into Other Bonds, Notes and Debentures and Federal 
 Reserve Bank and Other Stock Investments. 
 
 The 1974 financial statements have been reclassified to conform 
 with the current financial statement presentation. 
 
 General Accounting Policy 
 
 The Corporation follows generally accepted accounting principles 
 and, where applicable, the accounting and reporting guidelines 
 prescribed by banking regulatory authorities. 
 
 The Corporation carries its assets and liabilities on the historical 
 cost basis, and follows the accrual basis of accounting, except for 
 certain trust and fiduciary investment activities which are reported 
 on the cash basis. Results of such activities on the cash basis do not 
 differ materially from those which would be reported using the 
 accrual basis. 
 
 Assets held by commercial banking and investment advisory sub- 
 sidiaries in an agency or fiduciary capacity are not assets of the 
 Corporation and, accordingly, are not included in the accompanying 
 financial statements. 
 
 24 
 
191 
 
 Trading Account Securities 
 
 Trading account securities, except for U.S. Treasury bills, are 
 reported at the lower of cost or estimated current market value. 
 U.S. Treasury bills in the trading account are reported at estimated 
 current market value. Trading account income is differentiated as 
 between Interest Income and Profits and Commissions. Trading 
 profits reflect gains and losses realized on the sales of securities and 
 valuation adjustments to the carrying value of trading account 
 securities. 
 Loans 
 
 Loans are reported at their principal amount, net of unearned 
 discount, if any. 
 
 Interest income on loans not made on a discount basis is credited 
 to income based on loan principal amounts outstanding during 
 the period. Unearned discount on loans made on a discount basis is 
 credited to income on a basis which results in approximate level rates 
 of return over the terms of the loans. Recognition of interest on 
 the accrual method is discontinued when it is not reasonable to ex- 
 pect that it will be realized. Loans on which the accrual of interest 
 income has been discontinued are designated as non-accruing and, 
 subsequently, interest is recognized only in the period collected. 
 The Corporation's general policy has been to cease accruing interest 
 on loans when they are sixty days or more in arrears on payments 
 of interest or principal, or when other factors indicate collection of 
 interest is doubtful. Such loans are not returned to an accrual status 
 until interest is being received on a current basis and the other factors 
 indicating doubtful collection cease to exist. 
 
 Certain loans ("CAP loans") are made under agreements which 
 contain provisions calling for the interest rate to fluctuate in relation 
 to the prevailing prime rate, but limit the total interest to be charged 
 over the term of the loan to a maximum based on a contractually 
 stated average rate. Accordingly, interest received in excess of the 
 maximum is refundable to the borrower when the loan matures 
 or at other specified dates. Interest payments received during the 
 term of the loan in excess of the amount based on the stated average 
 rate are credited to a reserve account which is reported in Other 
 Liabilities. 
 
 Real estate properties acquired in satisfaction of loans are treated 
 as loan related, and any subsequent transactions affecting prin- 
 cipal are correspondingly treated as loan related. Accordingly, such 
 properties are reflected in the financial statements with Loans, and 
 subsequent charge-offs or recoveries of principal are recorded by 
 charging or crediting the Reserve for Possible Loan Losses. 
 Reserve for Possible Loan Losses 
 
 The Reserve for Possible Loan Losses, which is reported as a 
 deduction fron\Loans, is available for loan charge-offs. This Reserve 
 is increased by provisions charged to Operating Expenses and is 
 reduced by loan charge-offs, net of recoveries. 
 
 The Provision for Possible Loan Losses included in Operating 
 Expenses for the Corporation is determined based on management's 
 evaluation of the loan portfolio in light of worldwide economic con- 
 ditions, changes in the nature and volume of the loan portfolio and 
 other relevant factors. For national bank subsidiaries, the provision 
 required by using the bank regulatory authorities' formula method 
 is determined for each individual national bank by applying to 
 average loans outstanding for the current year a loan loss experience 
 ratio of average net loan charge-offs to average loans outstanding 
 for the most recent five years, including the current year. Should the 
 
 provision determined by management exceed the amount calculated 
 under the formula, the provision determined by management is the 
 amount so provided. 
 Direct Lease Financing 
 
 Direct lease financing transactions are generally recorded under 
 the financing method of accounting. Unearned income is credited to 
 income on a basis which results in approximate level rates of 
 return over the period during which the investment in leased equip- 
 ment is outstanding. 
 Premises and Equipment 
 
 Depreciable assets are reported at original cost less depreciation 
 thereon. Depreciation is charged to Operating Expenses over the 
 estimated useful lives of the assets. Leasehold improvements are 
 capitalized and amortized to Operating Expenses over the terms of 
 the respective leases or the estimated useful lives of the improve- 
 ments, whichever are shorter. Depreciation and amortization are 
 computed on the straight-line method for domestic assets acquired 
 after January 1 , 1973, and for depreciable assets located in over- 
 seas offices. Domestic depreciable assets acquired prior to 1973 are 
 being depreciated and amortized on accelerated methods. 
 Foreign Exchange Trading Income 
 
 The Corporation follows the general practice of valuing its foreign 
 exchange trading positions monthly at estimated current market 
 rates and reporting the profits or losses resulting therefrom in For- 
 eign Exchange Trading Income. 
 Pension Plans 
 
 The Corporation has trusteed non-contributory pension plans cover- 
 ing substantially all full-time and part-time employees. Costs of the 
 plans, based on actuarial computations of current and future benefits 
 for employees, are charged to Operating Expenses, and are 
 funded as accrued. 
 Research and Development Costs 
 
 The Corporation is actively engaged in systems development, com- 
 puter software development, and other in-house research and 
 development programs designed to enhance existing or to develop 
 new financial services and products, and to reduce operating 
 expenses. The costs of these programs are expensed as incurred. 
 Income Taxes 
 
 The Parent Company and appropriate subsidiaries file consolidated 
 Federal, New York State and New York City tax returns. Sub- 
 sidiaries that are not included in the consolidated tax returns file 
 separate domestic and foreign tax returns, as required. Applicable 
 taxes of the individual companies, whether or not included in the 
 consolidated tax returns, are generally determined on a separate 
 return basis. Such taxes determined for the consolidated subsidiaries 
 are paid to or received from the Parent Company. 
 
 Deferred income taxes are provided on transactions which are 
 reported for financial statement purposes in different years than for 
 income tax purposes. The principal items causing these timing 
 differences in the consolidated financial statements are accretion of 
 discount on investment securities, loan interest subject to refund 
 (CAP loan interest), loan interest on non-accruing loans, deprecia- 
 tion expense, trading account securities valuation adjustments, 
 provision for possible loan losses, and undistributed earnings of 
 overseas subsidiaries and associated companies. 
 
 Investment tax credits on equipment, including lease financing 
 equipment, are deferred and amortized to income. 
 
 25 
 
192 
 
 The Chase Manhattan Corporation 
 Consolidated Statement of Condition 
 
 MM 
 
 Cash and Due from Banks $ 7,107,440,427 
 
 Investment Securities: 
 
 U.S. Treasury Securities 1,391,527,350 
 
 Federal Agency Securities 299,813,571 
 
 State and Municipal Securities 1,232, 1 3 1 ,303 
 
 Other Bonds, Notes and Debentures 373,729,859 
 
 Federal Reserve Bank and Other Stock Investments 62,394,219 
 
 Total Investment Securities 3,359,596,302 
 
 Trading Account Securities 197,348,480 
 
 Federal Funds Sold and Securities Purchased Under Resale Agreements 281 ,746,945 
 
 Loans (Net of Unearned Discount of $92,027,473 and $77,579,288, Respectively) . . 28,739,630,235 
 
 Less : Reserve for Possible Loan Losses 282,457,208 
 
 Loans, Net 28,457,173,027 
 
 Direct Lease Financing 82,729,728 
 
 Customers' Liability on Acceptances 670,226,142 
 
 Investments in Unconsolidated Subsidiaries and Associated Companies 157,117,940 
 
 Premises and Equipment 254,257,585 
 
 Accrued Interest Receivable 462,869,711 
 
 Other Assets 383,048,782 
 
 Total Assets $41,413,555,069 
 
 Liabilities and Stockholders' Equity 
 
 Deposits: 
 
 Demand $10,023,114,572 
 
 Savings and Other Time 9,1 72,624,6 1 3 
 
 Overseas Offices 14,732,695,898 
 
 Total Deposits 33,928,435,083 
 
 Federal Funds Purchased and Securities Sold Under Repurchase Agreements 1 ,4 1 8,73 1 ,503 
 
 Other Borrowed Money 1,878,663,818 
 
 Acceptances Outstanding 681 ,050,45 3 
 
 Accrued Taxes and Other Expenses 539,736,767 
 
 Other Liabilities 665,924,375 
 
 Floating Rate Notes (Due 1999) 200,000,000 
 
 Liabilities Other Than Capital Notes and Debentures 39,3 1 2,54 1 ,999 
 
 Capital Notes and Debentures: 
 
 Capital Notes (4.60% Due 1990) 130,510,000 
 
 Convertible Capital Notes (4 7 /s % Due 1993) 149,299,700 
 
 Convertible Subordinated Debentures (6Vi % Due 1996) 199,995,000 
 
 Total Capital Notes and Debentures 479,804,700 
 
 Total Liabilities 39,792,346,699 
 
 Stockholders' Equity: 
 
 Common Stock (Par Value $12.50 Per Share) 
 
 I97S 1974 
 Authorized Shares 50,000,000 50,000,000 
 
 Outstanding Shares 32,059,158 32,059,006 400,739,475 
 
 Surplus 501,306,738 
 
 Retained Earnings 719,162,157 
 
 Total Stockholders' Equity 1,621,208,370 
 
 Total Liabilities and Stockholders' Equity $41,413,555,069 
 
 $ 8,686,609,258 
 
 445 
 
 382, 
 1,373, 
 357 
 99 
 
 ,262,786 
 ,803,306 
 659,924 
 406,193 
 509,980 
 
 2,658, 
 383 
 176 
 27,740 
 220 
 
 642,189 
 410,066 
 047,368 
 467,277 
 988,155 
 
 27,519 
 51 
 1,375 
 133 
 247 
 621 
 379 
 
 479,122 
 650,357 
 730,523 
 914,627 
 441,705 
 050,792 
 459,852 
 
 $42,233,435,859 
 
 $10,417 
 10,579 
 13,670 
 
 ,547,966 
 264,475 
 573,508 
 
 34,667 
 1,487 
 1,477 
 1,388 
 581 
 428 
 200 
 
 385,949 
 ,640,000 
 088,310 
 ,507,841 
 ,979,359 
 ,489,468 
 000,000 
 
 40,231,090,927 
 
 135,022,000 
 149,308.100 
 199,995,000 
 484,325,100 
 40.715,416,027 
 
 400,737,575 
 501,300,278 
 615,981,979 
 1,518,019,832 
 $42,233,435,859 
 
 The accompanying notes are an integral part of the financial statements. 
 
193 
 
 The Chase Manhattan Corporation 
 Notes to Financial Statements 
 
 L 
 
 The accounting policies followed by The Chase Manhattan 
 Corporation (Parent Company) and its wholly-owned subsidiaries, 
 principally The Chase Manhattan Bank, N.A. and its wholly- 
 owned subsidiaries (the Bank) , are disclosed in the accompanying 
 Summary of Significant Accounting Policies on pages 24 and 25. 
 This summary is an integral pan of the financial statements and 
 should be read in conjunction with these notes. Throughout 
 these notes, the term "the Corporation" refers to The Chase Man- 
 hattan Corporation and its wholly-owned subsidiaries. 
 
 Cash and Due from Banks 
 
 
 The composition of Cash and Due from Banks as of December 3 1 , 
 
 1975 and 1974 follows: 
 
 
 1975 1974 
 
 i In Thousands) 
 
 Interest Bearing Deposits Placed with 
 Banks. Principally Time Deposits 
 Placed by Overseas Offices 
 
 $3,382,135 $3,499,218 
 
 Reserve Account Maintained with the 
 Federal Reserve Bank, Cash Items in 
 Process of Collection and Other 
 
 3,725,305 5.187,391 
 
 Total Cash and Due from Banks 
 
 Investment and Trading Account Securities 
 
 Shown below is a summary of investment securities (with related 
 maturity data) and trading account securities at their respective 
 par values, carrying values and estimated market values as of 
 December 31, 1975 and 1974. The maturity data as of December 
 
 3 1 , 1 975 for State and Municipal Securities reflects the moratorium 
 on New York City Notes and the restructuring, effective February 1 , 
 1976, of principal repayment terms of New York City Notes and 
 of certain New York State Municipal Assistance Corporation (MAC) 
 obligations, more fully described below. 
 
 
 
 
 1975 
 
 
 
 
 
 
 1974 
 
 
 
 
 
 
 
 
 Bans 
 
 lated 
 
 
 
 
 
 Estimated 
 
 (In Millions) 
 
 
 
 Carrying 
 
 Market 
 
 
 
 Carrying 
 
 Market 
 
 Par Value 
 
 Value 
 
 Value 
 
 Par Value 
 
 Value 
 
 Value 
 
 Investment Securities: 
 
 VS. Treasury Securities: 
 
 Maturing Within 1 Year 
 
 $ 
 
 550 
 
 $ 
 
 542 
 
 S 
 
 541 
 
 $ 
 
 29 
 
 $ 
 
 28 
 
 $ 29 
 
 Maturing After 1 Year but Within 5 Years 
 
 
 659 
 
 
 663 
 
 
 663 
 
 
 179 
 
 
 179 
 
 177 
 
 Maturing After 5 Years but Within 10 Years 
 
 
 
 
 
 
 
 
 24 
 
 
 24 
 
 23 
 
 Maturing After 10 Years 
 
 
 186 
 
 
 187 
 
 
 173 
 
 
 215 
 
 
 214 
 
 202 
 
 Total 
 
 $ 
 
 ,395 
 
 $ 
 
 ,392 
 
 $1,377 
 
 $ 
 
 447 
 
 $ 
 
 445 
 
 $ 431 
 
 Federal Agency Securities: 
 
 Maturing Within 1 Year 
 
 S 
 
 3 
 
 $ 
 
 3 
 
 S 
 
 3 
 
 $ 
 
 35 
 
 $ 
 
 35 
 
 $ 35 
 
 Maturing After 1 Year but Within 5 Years 
 
 
 121 
 
 
 121 
 
 
 120 
 
 
 154 
 
 
 159 
 
 157 
 
 Maturing After 5 Years but Within 10 Years 
 
 
 
 
 
 
 
 
 10 
 
 
 10 
 
 10 
 
 Maturing After 10 Years 
 
 
 178 
 
 
 176 
 
 
 164 
 
 
 182 
 
 
 179 
 
 164 
 
 Total 
 
 $ 
 
 3o: 
 
 $ 
 
 300 
 
 s 
 
 287 
 
 S 
 
 381 
 
 $ 
 
 383 
 
 S 366 
 
 State and Municipal Securities: 
 
 Maturing Within 1 Year 
 
 $ 
 
 55 
 
 $ 
 
 56 
 
 1 
 
 52 
 
 $ 
 
 327 
 
 $ 
 
 330 
 
 $ 327 
 
 Maturing After 1 Year but Within 5 Years 
 
 
 106 
 
 
 106 
 
 
 85 
 
 
 54 
 
 
 55 
 
 53 
 
 Maturing After 5 Years but Within 10 Years 
 
 
 208 
 
 
 209 
 
 
 144 
 
 
 47 
 
 
 47 
 
 44 
 
 Maturing After 10 Years 
 
 
 878 
 
 
 861 
 
 
 537 
 
 
 960 
 
 
 942 
 
 685 
 
 Total 
 
 $1,247 
 
 $1,232 
 
 s 
 
 818 
 
 $1,388 
 
 $1,374 
 
 $1,109 
 
 Other Bonds, Notes and Debentures: 
 
 Maturing Within 1 Year 
 
 $ 
 
 134 
 
 $ 
 
 131 
 
 s 
 
 134 
 
 $ 
 
 92 
 
 $ 
 
 91 
 
 $ 93 
 
 Maturing After 1 Year but Within 5 Years 
 
 
 69 
 
 
 69 
 
 
 72 
 
 
 92 
 
 
 91 
 
 93 
 
 Maturing After 5 Years but Within 10 Years 
 
 
 38 
 
 
 38 
 
 
 36 
 
 
 39 
 
 
 39 
 
 39 
 
 Maturing After 10 Years 
 
 
 136 
 
 
 136 
 
 
 120 
 
 
 139 
 
 
 136 
 
 111 
 
 Total 
 
 $ 
 
 377 
 
 $ 
 
 374 
 
 s 
 
 362 
 
 S 
 
 362 
 
 5 
 
 357 
 
 $ 336 
 
 Federal Reserve Bank and Other Stock Investments: 
 
 Federal Reserve Bank 
 
 
 
 $ 
 
 33 
 
 s 
 
 33 
 
 
 
 $ 
 
 33 
 
 $ 33 
 
 Other 
 
 
 
 
 29 
 
 
 30 
 
 
 
 
 67 
 
 60 
 
 Total 
 
 
 
 $ 
 
 62 
 
 f 
 
 63 
 
 
 
 $ 
 
 100 
 
 $ 93 
 
 Total Iniestment Securities 
 
 
 
 $3,360 
 
 s:.9o- 
 
 
 
 $2,659 
 
 S 2.335 
 
 
 Trading Account Securities 
 
 $ 
 
 205 
 
 $ 
 
 197 
 
 s 
 
 197 
 
 $ 
 
 401 
 
 $ 
 
 383 
 
 $ 383 
 
 43 
 
194 
 
 Company 
 
 The financial difficulties of New York City led, in November 1975, 
 to a moratorium on New York City Notes and the restructuring 
 of the principal repayment and interest terms of these New York City 
 Notes and the MAC obligations. The effect of these changes on 
 New York City Notes and MAC obligations in the investment port- 
 folio were as follows: 
 
 
 New York City 
 Notes 
 
 MAC 
 Obligations 
 
 ($ In Millions) 
 
 Par \alues it December 31, 1975 
 
 $66 
 
 $188 
 
 Average interest rates applicable at 
 December 31, 1975 
 
 7.96% 
 
 8.37% 
 
 Interest rates pursuant to restructuring 
 agreement 
 
 S.OOW 
 
 6.00% 
 
 The maturities of the above Notes, originally scheduled to mature in 
 1 976, and certain of the above MAC obligations (approximately 
 $115 million), originally scheduled to mature on various dates 
 through 1985, were restructured under the terms of an agreement 
 betw een certain creditors of the City of New York (including the 
 Bank ) and MAC. Shown below are details of obligations of New 
 York State, New York City, their related agencies and independent 
 authorities held in the investment portfolio at December 31, 1975. 
 The maturities of New York City Notes and MAC obligations reflect 
 the restructuring of principal repayment terms. 
 
 
 Within 
 1 Year 
 
 Between 
 
 1 and 3 Over 3 
 Yeats Years 
 
 Total 
 
 Carrying Values (In Millions ) 
 
 New York City Notes 
 in Moratorium 
 
 $ - 
 
 $ - $66 
 
 $66 
 
 Municipal Assistance 
 Corporation 
 
 
 18 169 
 
 187 
 
 Other Securities 
 Issued or 
 Guaranteed by 
 or Otherwise 
 Obligating the 
 City of New York 
 
 6 
 
 36 113 
 
 155 
 
 New York State and 
 Financially Related 
 Agencies 
 
 26 
 
 2 225 
 
 253 
 
 Revenue Obligations 
 of Independent 
 Authorities 
 
 5 
 
 66 
 
 71 
 
 At December 31, 1 975, the aggregate carrying value of New York 
 City Notes in moratorium and MAC obligations, together with the 
 aggregate carrying value of other securities issued, or guaranteed 
 by, or otherwise obligating the City of New York which will mature 
 within three years, held in the investment portfolio, amounted 
 to $295 million, and the estimated market value (reflecting the re- 
 structuring) was $200 million. Estimated market value has been 
 derived using quotations for publicly traded issues taking into con- 
 sideration the mandatory provisions of the restructuring. This 
 market value may not necessarily be indicative of value that could 
 be received upon sale. The interest earned on these securities 
 for the period they were held during 1975 aggregated approximately 
 $ 1 2 million, before income taxes. The difference between the 
 interest that would have been earned in 1976 at the rates applicable 
 at December 31, 1 975, and the interest that is anticipated as a 
 result of the debt restructuring is approximately $4,759,000, before 
 
 income taxes ($4,129,000, after income taxes or 1 3 cents per 
 share). 
 
 At December 31,1 975 the Bank held in its trading account New 
 York City securities included in the debt restructuring or maturing 
 within three years amounting to $29 million at estimated market 
 value. 
 
 On May 14, 1975, the Bank sold its 1 1.9% minority interest in 
 the Standard and Chartered Banking Group Limited, London, 
 England. The Bank sold its interest after no practical alternative 
 could be found for complying with Federal banking regulations. 
 The issue arose when The Standard Bank Limited was merged with 
 The Chartered Bank Limited whose banking subsidiary in California 
 was engaged in domestic banking activities in the United States. The 
 sale of this investment, carried at a cost of $34,328,809, resulted in a 
 gain of $23,277,422, after applicable income taxes, and is reported 
 in Securities Gains (Losses). 
 
 Loans 
 
 Details of loan balances as of December 3 1 , 1975and 1974foIlow: 
 
 
 1975 
 
 1974 
 
 
 (In Thousands) 
 
 Domestic Offices: 
 
 Real Estate Loans 
 
 $ 3,031,391 
 
 $ 2,988,995 
 
 Loans to Real Estate Investment 
 Trusts and Mortgage Companies 
 
 827,595 
 
 904,970 
 
 Loans to Financial Institutions 
 
 1,371.977 
 
 2.184,506 
 
 Loans for Purchasing or Carrying 
 Securities, Principally to Brokers and 
 Dealers 
 
 1,095,253 
 
 508,521 
 
 Commercial and Industrial Loans 
 
 9,019,329 
 
 9,322,994 
 
 Loans to Individuals 
 
 926,949 
 
 963.958 
 
 Other Loans 
 
 336,115 
 
 449,831 
 
 Real Estate Properties Acquired in 
 Satisfaction of Loans 
 
 113,250 
 
 1.811 
 
 Total Domestic Offices 
 
 16,726.859 
 
 17.325.586 
 
 Overseas Offices: 
 
 Real Estate Loans 
 
 1,165,109 
 
 966.920 
 
 Loans to Foreign Governments and 
 Official Institutions 
 
 1.302.409 
 
 959,083 
 
 Commercial and Industrial Loans 
 
 7,855,279 
 
 7.062,769 
 
 Other Loans 
 
 1.773.136 
 
 1,498,926 
 
 Real Estate Properties Acquired in 
 Satisfaction of Loans 
 
 8,865 
 
 4.762 
 
 Total Overseas Offices 
 
 12,104.798 
 
 10,492.460 
 
 Loans, Gross 
 
 28,831.657 
 
 2-.81S.04n 
 
 Less: Unearned Discount 
 
 92,027 
 
 77,579 
 
 Total 1 ouns 
 
 $28,739,630 
 
 $27,740,467 
 
195 
 
 Reserve for Possible Loan Losses 
 
 Changes in the Reserve for Possible Loan Losses, which is available 
 for loan charge-offs, for the years ended December 31,1975 and 
 1974 are shown below: 
 
 
 The Bank 
 Consolidated 
 
 Other Subsidiaries of 
 The Parent Company 
 
 
 (In Thousands) 
 
 Banking 
 
 Non-Banking 
 
 Total 
 
 Balance at 
 December 31, 1973 
 
 $194,598 
 
 $ 313 
 
 $ 469 
 
 $195,380 
 
 Additions : 
 Provisions 
 Charged to 
 Operating 
 Expenses 
 
 114,526 
 
 999 
 
 2,931 
 
 118,456 
 
 Reserve of 
 Subsidiary Bank 
 Acquired 
 
 
 111 
 
 
 111 
 
 Deduction: 
 Loan Charge-Offs 
 
 104,918 
 
 1,193 
 
 
 106,111 
 
 Less: Recoveries 
 on Loans 
 
 13,033 
 
 119 
 
 
 13,152 
 
 Net Loan 
 Charge-Offs 
 
 91,885 
 
 1,074 
 
 
 92,959 
 
 Balance at 
 December 31, 1974 
 
 217,239 
 
 349 
 
 3,400 
 
 220,988 
 
 Addition: 
 Provisions 
 Charged to 
 Operating 
 Expenses 
 
 284,736 
 
 2,011 
 
 25,690 
 
 312,437 
 
 Deduction: 
 Loan Charge-Offs 
 
 274,681 
 
 1,706 
 
 
 276,387 
 
 Less: Recoveries 
 on Loans 
 
 25,231 
 
 188 
 
 
 25,419 
 
 Net Loan 
 Charge-Offs 
 
 249,450 
 
 1,518 
 
 
 250,968 
 
 Balance at 
 December 31, 1975 
 
 $252,525 
 
 $ 842 
 
 $29,090 
 
 $282,457 
 
 The Provision for Possible Loan Losses of national bank subsidiaries 
 (included in the provisions charged to operating expenses of the 
 Bank consolidated and banking subsidiaries of the Parent Company), 
 calculated using the five year moving average formula, amounted 
 to $133,373,000 and $84,339,000 in 1975 and 1 974, respectively. 
 Additional amounts of $1 18,000,000 and $20,000,000 in 1975 
 and 1974, respectively, over the formula amount were provided in 
 order to increase the Reserve for Possible Loan Losses to the 
 amount determined to be adequate by management. 
 
 In the opinion of management, the Reserve for Possible Loan 
 Losses at December 31, 1975 is adequate to absorb all anticipated 
 loan losses in the loan portfolio at that date. 
 
 At December 3 1 , 1 975, the Reserve for Loan Losses for national 
 bank subsidiaries for Federal income tax purposes amounted to 
 $329,100,000, which exceeded the Reserve for Possible Loan 
 Losses for financial reporting purposes by $ 1 1 6,500,000. 
 
 Premises and Equipment 
 
 A summary of premises and equipment as of December 31, 1975 
 and 1974 folic - ';: 
 
 
 1975 
 
 1974 
 
 
 (In Thousands) 
 
 Domestic Offices: 
 
 Land 
 
 $ 21,068 
 
 $ 20,969 
 
 Buildings 
 
 73,042 
 
 74,388 
 
 Leasehold Improvements 
 
 51,008 
 
 49,412 
 
 Equipment 
 
 40,554 
 
 37,765 
 
 Overseas Offices: 
 
 Land 
 
 4,816 
 
 4.863 
 
 Buildings 
 
 27,537 
 
 23,618 
 
 Leasehold Improvements 
 
 22,041 
 
 23,166 
 
 Equipment 
 
 14,192 
 
 13,261 
 
 Total Premises and Equipment 
 
 S254.258 
 
 S247.442 
 
 Depreciable assets are stated, in general, at their net depreciated 
 cost, as it has been the policy of the Bank for many years to credit 
 provisions for depreciation and amortization applicable to premises 
 and equipment directly to the appropriate asset accounts. Depreci- 
 ation and amortization of premises and equipment aggregated 
 $25,427,565 for 1975 and $22,538,722 for 1974. Maintenance 
 and repairs aggregated $23,067,000 for 1975 and $20,107,000 
 for 1974. 
 Funds Borrowed 
 
 The following summary presents the amount of funds borrowed, 
 principally maturing within one year, as of December 31, 1975 and 
 1974: 
 
 
 1975 
 
 1974 
 
 
 (In Thousands) 
 
 Federal Funds Purchased 
 
 $ 982,261 
 
 $ 973,086 
 
 Securities Sold Under 
 Repurchase Agreements 
 
 436,470 
 
 514,554 
 
 Total 
 
 1,418,731 
 
 1,487,640 
 
 Other Borrowed Money: 
 
 Money Borrowed by Overseas Offices 
 
 439,382 
 
 581,847 
 
 Commercial Paper Issued by 
 Parent Company 
 
 661,947 
 
 383,488 
 
 Other Borrowings 
 
 777,335 
 
 511,753 
 
 Total 
 
 1,878,664 
 
 1,477,088 
 
 Total Funds Borrowed 
 
 $3,297,395 
 
 $2,964,728 
 
 45 
 
196 
 
 Operations in Overseas Offices 
 
 Assets and liabilities in overseas offices included in the Corporation's consoli- 
 dated financial statements, after elimination of intercompany balances, at De- 
 cember 31, 1975 and 1974 were as follows : 
 
 [In thousands] 
 
 1975 1974 
 
 Total Assets $17,135,000 $16,007,000 
 
 Total Liabilities 16,384,000 16,074,000 
 
 The following is a summary of deposits in overseas offices included in total lia- 
 bilities above, as of December 31, 1975 and 1974 : 
 
 [In thousands] 
 
 1975 1974 
 
 Demand Deposits $1, 404, 000 $1, 119, 000 
 
 Time Deposits 13,329,000 12,552,000 
 
 Total Deposits in Overseas Offices 14, 733, 000 13, 671, 000 
 
 The nature of demand deposits varies in overseas countries and is not neces- 
 sarily comparable with the definition used domestically ; for example, demand 
 deposits in some countries are interest bearing. 
 
 Income of overseas offices not included in the consolidated financial statements 
 because of restrictions on remittance of income is less than $300,000 and $800,000 
 in 1975 and 1974, respectively. 
 
 In 1975, foreign exchange translation losses on investments in overseas 
 branches, subsidiaries and associated companies amounted to approximately 
 $2,500,000, after income taxes, which amount includes the release to Other In- 
 come in 1975 of the balance in the foreign exchange reserve account at Decem- 
 ber 31, 1974 amounting to $3,000,000, as discussed in the accompanying Summary 
 of Significant Accounting Policies. For the year 1974, foreign exchange transla- 
 tion losses amounted to $2,500,000, after income taxes. 
 
 ******* 
 
 Income Taxes 
 
 Income taxes applicable to Net Income for the years 1975 and 1974 were as 
 follows : 
 
 [In thousands of dollars) 
 
 
 1975 
 
 1974 
 
 Tax provision applicable to income before securities gains (losses) 
 
 Tax provision applicable to gain on sale of investment in standard and chartered banking 
 group limited _ 
 
 70, 348 
 20, 288 
 
 72, 634 
 
 Tax provision (benefit) applicable to other securities gains (losses) 
 
 (9, 497) 
 
 (1,040) 
 
 Total __ 
 
 81,139 
 
 71,594 
 
 CURRENT AND DEFERRED TAX PROVISIONS (BENEFITS) 
 
 
 
 [In thousands of dollars] 
 
 
 
 
 1975 
 
 1974 
 
 Current: 
 
 Federal 
 
 State and municipal 
 
 Foreign 
 
 5,253 
 34, 347 
 78, 676 
 
 3, 933 
 22,818 
 61,710 
 
 Total current. 
 
 118, 276 
 
 88, 461 
 
 Deferred: 
 
 Federal 
 
 State and municipal 
 
 Foreign 
 
 (26, 327) 
 (10, 593) 
 (217) 
 
 (13, 528) 
 (5,910) 
 2,571 
 
 Total deferred 
 
 (37, 137) 
 
 (16, 867) 
 
 Total 
 
 81, 139 
 
 71, 594 
 
197 
 
 Although not affecting the total tax provision, current income tax payments 
 may differ from the amounts treated above as current as a result of the final 
 determination as to the timing of certain deductions and credits. The effects, 
 if any, of these determinations are reflected in the following year. The 1975 tax 
 provisions include an amount attributable to interest on non-accruing loans de- 
 termined to be taxable in 1974. 
 
 Based upon currently anticipated operations, it is expected that the deferred 
 income tax liability balance will be substantially reduced in 1976, and the cash 
 payment of taxes associated with that year will exceed tax expenso by approxi- 
 mately $50,000,000, principally due to interest on non-accruing loans and loan 
 loss deductions for income tax purposes being less than the Provision for 
 Possible Loan Losses charged to Operating Expenses. 
 
 The estimated amount of investment tax credits to be utilized in the 1975 
 U.S. Federal income tax return is approximately $3,400,000. The amount utilized 
 in the 1974 income tax return was $2,874,000. 
 
 The principal items which caused the timing differences resulting in deferred 
 income taxes and the tax effect of each follow : 
 
 [In thousands of dollars] 
 
 1975 
 
 1974 
 
 Loan loss deduction for income tax purposes (under) over provision for possible loan.- 
 losses charged to operating expenses of national bank subsidiaries 
 
 Undistributed earnings of overseas subsidiaries and associated companies.. — 
 
 Depreciation and amortization of premises and equipment, including lease financing — 
 equipment. _ - 
 
 Loan interest subject to refund (CAP loan interest) 
 
 Loan interest on nonaccruing loans 
 
 Trading account securities valuation adjustments 
 
 Other— Net... 
 
 Total 
 
 ,<2 69 > 
 6, 251 
 
 11,581 
 (3, 193) 
 (61,513). 
 5, 552 
 4, 454 
 
 5, 096 
 (37) 
 
 7, 647 
 (10,573) 
 
 (9,977) 
 (9, 023) 
 
 (37, 137) 
 
 (16, 867) 
 
 The total provision for income taxes applicable to Net Income is less than the 
 amount computed by applying the U.S. Federal income tax rate of 48% to income 
 before taxes. The principal reasons for this difference follow : 
 
 1975 
 
 1974 
 
 Percent of Percent of 
 
 Amount (in income Amount (in income 
 
 thousands) before taxes thousands) before taxes 
 
 Provision for income taxes at U.S. Federal income tax 
 rate. 
 
 Increase (decrease): 
 
 Tax-exempt interest 
 
 State and municipal income taxes, net of Federal 
 
 income tax benefits 
 
 Securities gains at capital gain rates 
 
 Other— Net 
 
 Total provision for income taxes 
 
 $122, 328 
 
 (50, 295) 
 
 11,226 
 (7, 871) 
 5.715 
 
 81. 139 
 
 48. 00 
 
 (19. 72) 
 
 4. 41 
 (3.09). 
 2.24 
 
 31.84 
 
 $121, 150 
 
 (56, 033) 
 8, 346 
 
 71, 594 
 
 48. 00 
 
 (22. 20) 
 3. 30 
 ""(."73) 
 
 28. 37 
 
 Earnings Per Share 
 
 Earnings per share amounts are based on average shares outstanding. Per 
 share amounts on a fully diluted basis assume full conversion of all outstand- 
 ing 4 7 / 8 % Convertible Capital Notes and 6y 2 % Convertible Subordinated Deben- 
 tures, with elimination of related interest expense, after applicable tax effect. 
 
 Pledged Assets 
 
 Assets of national bank subsidiaries aggregating $3.2 billion at December 31, 
 1975 and $3.0 billion at Decemeber 31, 1974 were pledged to secure public and 
 trust deposits and for other purposes. 
 
198 
 
 Commitments and Contingent Liabilities 
 
 In the normal course of business, the Corporation and its subsidiaries make 
 various commitments and incur certain contingent liabilities which are not 
 reflected in the accompanying financial statements. These commitments and 
 contingent liabilities include various guarantees, commitments to extend credit, 
 letters of credit, and foreign exchange futures contracts. Commitments under 
 letters of credit outstanding aggregated approximately $3.1 billion and $3.7 
 billion at December 31, 1975 and 1974, respectively. Included in these amounts 
 are standby letters of credit totaling $1.0 billion at December 31, 1975 and $1.3 
 billion at December 31, 1974. Management does not anticipate any material 
 losses as a result of these transactions. 
 
The Chase Manhattan Corporation 
 
 Five Year Comparative Summary of Selected Statistics 
 
 (In Millions) 
 
 
 1975 
 
 1974 
 
 1973 
 
 1972 
 
 1971 
 
 kverage Loan Balances 
 
 
 
 
 
 
 Domestic Offices: 
 
 
 
 
 
 
 
 $ 3,014 
 
 $ 2,656 
 
 $ 2,060 
 
 $ 1,540 
 
 $ 1,503 
 
 Loans to Real Estate Investment Trusts 
 
 
 
 
 
 
 
 850 
 
 749 
 
 
 
 
 Loans to Financial Institutions 
 
 1,720 
 
 1,934 
 
 1,527 
 
 1,124 
 
 1,048 
 
 Loans for Purchasing or Carrying 
 
 
 
 
 
 
 Securities, Principally to Brokers and 
 
 
 
 
 
 
 Dealers 
 
 492 
 
 525 
 
 556 
 
 920 
 
 470 
 
 
 8,661 
 
 8,342 
 
 6,975 
 
 6,394 
 
 6,839 
 
 
 898 
 
 914 
 
 862 
 
 688 
 
 617 
 
 All Other Domestic Loans 
 
 221 
 
 349 
 
 534 
 
 511 
 
 202 
 
 Real Estate Properties Acquired 
 
 
 
 
 
 
 
 47 
 
 5 
 
 10 
 
 5 
 
 3 
 
 
 15,903 
 
 15,474 
 
 13,015 
 
 11,374 
 
 10,785 
 
 Overseas Offices 
 
 11,244 
 
 9,461 
 
 6,068 
 
 3,685 
 
 3,055 
 
 
 27,147 
 
 24,935 
 
 19,083 
 
 15,059 
 
 13,840 
 
 Less: Unearned Discount 
 
 82 
 
 72 
 
 55 
 
 52 
 
 54 
 
 Total Average Loans 
 
 S27.065 
 
 $24,863 
 
 $19,028 
 
 $15,007 
 
 $13/786 
 
 Net Interest Margin (Taxable 
 Equivalent Basis) 
 
 Interest Income $ 2,909 
 
 Taxable Equivalent Basis Adjustment . . . 127 
 
 Adjusted Interest Income 3,036 
 
 Interest Paid 1,913 
 
 Net Interest Margin (Taxable 
 
 Equivalent Basis) $ 1,123 
 
 $ 3,424 
 
 $ 2,111 
 
 $ 1,267 
 
 $ 1,254 
 
 123 
 
 101 
 
 101 
 
 91 
 
 3,547 
 
 2,212 
 
 1,368 
 
 1,345 
 
 2,646 
 
 1,512 
 
 755 
 
 752 
 
 $ 901 
 
 $ 700 
 
 $ 613 
 
 $ 593 
 
 Average Deposit Balances 
 Domestic Offices: 
 
 Demand Deposits of Individuals, 
 
 Partnerships and Corporations 
 
 $ 5,077 
 
 $ 5,048 
 
 $' 4,895 
 
 $ 4,699 
 
 $ 4,793 
 
 Time and Savings Deposits of 
 
 
 
 
 
 
 Individuals, Partnerships 
 
 
 
 
 
 
 and Corporations 
 
 7,258 
 
 6,649 
 
 5,033 
 
 4,423 
 
 4,012 
 
 Deposits of United States Government, 
 
 
 
 
 
 
 States and Municipalities 
 
 473 
 
 638 
 
 1,004 
 
 863 
 
 670 
 
 Deposits of Commercial Banks 
 
 3,651 
 
 3,574 
 
 2,842 
 
 2,524 
 
 2,543 
 
 All Other Domestic 
 
 1,679 
 
 2,019 
 
 1,730 
 
 1,756 
 
 2,119 
 
 Total Domestic Offices 
 
 18,138 
 
 17,928 
 
 15,504 
 
 14,265 
 
 14,137 
 
 Overseas Offices 
 
 14,429 
 
 13,740 
 
 9,987 
 
 7,662 
 
 6,840 
 
 Total Average Deposits 
 
 $32,567 
 
 $31,668 
 
 $25,491 
 
 $21,927 
 
 $20,977 
 
200 
 
 Liabilities and Stockholders' Equity 
 
 Interest Paying Liabilities : 
 Savings and Other Time Deposits: 
 Domestic Offices: 
 
 Savings Deposits 
 
 Savings Certificates, Christmas Club and Nest Egg Accounts 
 
 Negotiable Certificates of Deposit 
 
 Other Time Deposits 
 
 Time Deposits in Overseas Offices 
 
 Total Interest Paying Deposits 
 
 Federal Funds Purchased and Securities Sold Under Repurchase Agreements .... 
 
 Floating Rate Notes and Other Borrowed Money 
 
 Capital Notes and Debentures 
 
 Total Interest Paying Liabilities 
 
 Non-Interest Paying Liabilities: 
 Demand Deposits: 
 
 Domestic Offices 8,855 
 
 Overseas Offices 1,082 
 
 Acceptances Outstanding 1,140 
 
 Other Liabilities 1,072 
 
 Total Non-Interest Paying Liabilities 12,149 
 
 Total Liabilities 39,498 
 
 Total Stockholders' Equity 1,587 
 
 Total Liabilities and Stockholders' Equity $41,085 
 
 Net Interest Rate Spread 
 
 Net Interest Margin (Taxable Equivalent Basis) as a Percent of Interest 
 Earning Assets 
 
 1. Taxable equivalent rate, wbere applicable. 
 
 2. Excludes profiu and commissions. 
 
 3. Rate computed net of unearned discount only. 
 
 The Chase Manhattan Corporation 
 
 Five Year Comparative Average Consolidated Statement 
 
 of Condition Balances and Interest Rates \221 
 
 (balances in millions) Average Average 
 
 Balance Rate 1 
 
 Interest Earning Assets 
 
 Bank Deposits 
 
 Investment Securities: 
 
 U.S. Treasury Securities 
 
 Federal Agency Securities 
 
 State and Municipal Securities 
 
 Other Securities 
 
 Total Investment Securities 
 
 Trading Account Securities 
 
 Federal Funds Sold and Securities Purchased Under Resale Agreements . 
 Loans: 
 
 Domestic Offices 
 
 Overseas Offices 
 
 Total Loans, Gross 
 
 Less: 
 
 Unearned Discount 
 
 Reserve for Possible Loan Losses 
 
 Loans, Net 
 
 Direct Lease Financing 
 
 Total Interest Earning Assets 
 
 Non-Interest Earning Assets: 
 
 Cash and Due From Banks (Excluding Interest Earning Bank Deposits) . 
 
 Customers' Liability on Acceptances 
 
 Other Assets 
 
 Total Non-Interest Earning Assets 
 
 Total Assets 
 
 $ 3,606 
 
 9.07% 
 
 758 
 
 7.03 
 
 394 
 
 7.50 
 
 1,214 
 
 12.65 
 
 446 
 
 8 06 
 
 2,812 
 
 9.69 
 
 296 
 
 11.41' 
 
 155 
 
 6.22 
 
 15,903 
 
 8.06 
 
 11,244 
 
 9.83 
 
 27,147 
 
 8.79 
 
 82 
 
 
 242 
 
 
 26,823 
 
 8.82* 
 
 56 
 
 10.97 
 
 33,748 
 
 8.93% J 
 
 4,711 
 
 
 1,109 
 
 
 1,517 
 
 
 7,337 
 
 
 $41,085 
 
 
 $ 1,635 
 
 4.97% 
 
 284 
 
 6.14 
 
 4,540 
 
 7.04 
 
 2,824 
 
 5.76 
 
 13,347 
 
 7.66 
 
 22,630 
 
 7.09 
 
 2,371 
 
 5.80 
 
 1,865 
 
 7.58 
 
 483 
 
 5.49 
 
 27,349 
 
 6.98% 
 
201 
 
 
 1974 
 
 1973 
 
 1972 
 
 1971 
 
 Average 
 Balance 
 
 Average 
 Rate 1 
 
 Average Average 
 Balance Rate 1 
 
 Average Average 
 Balance Rate 1 
 
 Average Average 
 Balance Rate 1 
 
 $ 4,454 
 
 10.75% 
 
 $ 3,317 
 
 8.68% 
 
 449 
 
 7.17 
 
 481 
 
 6.70 
 
 310 
 
 7.75 
 
 178 
 
 7.48 
 
 1,467 
 
 10^99 
 
 1,637 
 
 9^30 
 
 417 
 
 7.56 
 
 249 
 
 7.10 
 
 2,643 
 
 9.42 
 
 2,545 
 
 8.47 
 
 845 
 
 9.43 2 
 
 679 
 
 7.96 2 
 
 102 
 
 10.67 
 
 132 
 
 7.03 
 
 15 474 
 
 10.44 
 
 13 015 
 
 8.27 
 
 9 461 
 
 1 1.71 
 
 6 068 
 
 9.33 
 
 24,935 
 
 10.93 
 
 19,083 
 
 8.61 
 
 72 
 
 
 55 
 
 
 210 
 
 
 203 
 
 
 24,653 
 
 10.96 3 
 
 
 
 47 
 
 7.82 
 
 40 
 
 7.67 
 
 32,744 
 
 10.76% 3 
 
 25,538 
 
 8.59% 3 
 
 5,107 
 
 
 4,585 
 
 
 920 
 
 
 625 
 
 
 1,573 
 
 
 1,186 
 
 
 7,600 
 
 
 6,396 
 
 
 $40,344 
 
 
 $31,934 
 
 
 $ 1,441 
 
 4.95% 
 
 $ 1,463 
 
 4.71% 
 
 258 
 
 5.84 
 
 266 
 
 5.36 
 
 4,088 
 
 10.38 
 
 3,368 
 
 7.80 
 
 2,837 
 
 8.74 
 
 1,775 
 
 6.16 
 
 12,824 
 
 10.69 
 
 9,126 
 
 8.29 
 
 21,448 
 
 9.93 
 
 15,998 
 
 7.58 
 
 2,839 
 
 10.38 
 
 1,776 
 
 8.93 
 
 1,782 
 
 10.80 
 
 1,225 
 
 8.68 
 
 494 
 
 5.47 
 
 513 
 
 5.45 
 
 26,563 
 
 9.95% 
 
 19,512 
 
 7.70% 
 
 9,304 
 
 
 8,632 
 
 
 916 
 
 
 861 
 
 
 963 
 
 
 666 
 
 
 1,144 
 
 
 906 
 
 
 12,327 
 
 
 11,065 
 
 
 38,890 
 
 
 30,577 
 
 
 1,454 
 
 
 1,357 
 
 
 $40,344 
 
 
 $31,934 
 
 
 
 .81%' 
 
 
 .89% 
 
 
 2.73% 3 
 
 
 2.72% 
 
 $ 2,631 
 
 5.68% 
 
 $ 1,941 
 
 6.86% 
 
 686 
 15 
 2,073 
 225 
 2 999 
 420 
 70 
 
 5.28 
 5.44 
 8.46 
 7.66 
 7.66 
 
 atF~ 
 
 3.47 
 
 949 
 169 
 1,608 
 
 193 
 
 2 919 
 419 
 120 
 
 5.58 
 
 5.80 
 
 9.48 
 
 7.83 
 
 7.92 
 
 6T55 1- 
 
 4.23 
 
 11,374 
 3,685 
 15,059 
 
 6.08 
 7.38 
 6.40 
 
 10,785 
 3,055 
 13,840 
 
 6.49 
 8.17 
 6.86 
 
 52 
 216 
 14,791 
 
 39 
 20,950 
 
 6.42 s 
 7.75 
 6.46% 3 
 
 54 
 218 
 
 13,568 
 37 
 19,004 
 
 6.89 3 
 7.00 
 
 7.00% 3 
 
 4,524 
 458 
 1,059 
 6,041 
 $26,991 
 
 
 4,589 
 574 
 1,126 
 6,289 
 $25,293 
 
 
 $ 1,589 
 278 
 2,661 
 1,200 
 6,963 
 12,691 
 1,378 
 361 
 528 
 14,958 
 
 4.47% 
 
 5.21 
 
 4.95 
 
 3.44 
 
 5.48 
 
 5.04 
 
 4.52 
 
 6.13 
 
 5.42 
 
 5.03% 
 
 $ 1,403 
 237 
 
 1,369 
 6,230 
 11,259 
 1,093 
 253 
 438 
 13,043 
 
 4.46% 
 5.22 
 
 4.04 
 6.76 
 5.87 
 4.66 
 5.35 
 5.16 
 5.73% 
 
 8,537 
 699 
 467 
 1,070 
 10,773 
 25,731 
 1,260 
 $26,991 
 
 1.43% 3 
 2.90% 3 
 
 9,108 
 610 
 582 
 768 
 11,068 
 24,111 
 1,182 
 $25,293 
 
 1.27% 3 
 3.09% 3 
 
 53 
 
202 
 
 The Chase Manhattan Corporation 
 Summary of Consolidated Income 
 
 (In Thousands) 
 
 Year Ended December 3 1 
 
 
 1975 
 
 1974 
 
 1973 
 
 1972 
 
 1971 
 
 Interest Income 
 
 
 
 
 
 
 Interest on Loans 
 
 $2 368 467 
 
 $2,717,441 
 
 $1,642,439 
 
 $ 961,636 
 
 $ 948,345 
 
 Interest and Dividends on Investment Securities 
 
 187 665 
 
 166,290 
 
 137,273 
 
 139,498 
 
 152,643 
 
 
 
 
 
 
 
 Trading Account Interest 
 
 21 979 
 
 58,033 
 
 41,084 
 
 13,654 
 
 17,873 
 
 Direct Lease Financing Income 
 
 4 277 
 
 3,013 
 
 2,593 
 
 2,587 
 
 2 213 
 
 Total Interest Income 
 
 2,909,406 
 
 3,423,734 
 
 2,111,235 
 
 1,266,767 
 
 1,254,213 
 
 Interest Expense 
 
 
 
 
 
 
 Deposits 
 
 1 607 587 
 
 2,131,788 
 
 1,219,249 
 
 641,568 
 
 664,427 
 
 Other 
 
 305 358 
 
 513,947 
 
 292,781 
 
 1 1 3,464 
 
 87,08! 
 
 Total Interest Expense 
 
 1 912 945 
 
 2,645,735 
 
 1,512,030 
 
 755,032 
 
 751 508 
 
 Net Interest Margin 1 
 
 996,461 
 
 777,999 
 
 599,205 
 
 51 1,735 
 
 502 705 
 
 Other Operating Income 
 
 
 
 
 
 
 
 65 985 
 
 57,092 
 
 44 549 
 
 29 406 
 
 31 593 
 
 Trading Account Profits and Commissions 
 
 (505) 
 
 (29,159) 
 
 8,882 
 
 9,515 
 
 (2,705) 
 
 
 55,818 
 
 50,644 
 
 50,586 
 
 52,480 
 
 52,816 
 
 Foreign Exchange Trading Income 
 
 45 022 
 
 49,463 
 
 36,499 
 
 20,223 
 
 15,181 
 
 Other Income 
 
 155,965 
 
 123,830 
 
 109,778 
 
 82,448 
 
 81,262 
 
 
 322,285 
 
 251,870 
 
 250,294 
 
 194,072 
 
 178,147 
 
 Net Interest Margin and Other Operating Income 
 
 1,318,746 
 
 1,029,869 
 
 849,499 
 
 705,807 
 
 680,852 
 
 Other Operating Expenses 
 
 
 
 
 
 
 Salaries and Employee Benefits 
 
 463,758 
 
 390,798 
 
 321,856 
 
 281,372 
 
 264,074 
 
 Provision for Possible Loan Losses 
 
 312,437 
 
 118,456 
 
 62,178 
 
 37,715 
 
 36,072 
 
 Net Occupancy 
 
 95,965 
 
 77,780 
 
 64,846 
 
 57,074 
 
 51,444 
 
 
 219,603 
 
 188,154 
 
 159.911 
 
 119,425 
 
 108,242 
 
 Total Other Operating Expenses 
 
 1,091,763 
 
 775,188 
 
 608,791 
 
 495.586 
 
 459,832 
 
 Income Before Taxes and Securities Gains (Losses) 
 
 226,983 
 
 254,681 
 
 240,708 
 
 210,221 
 
 221,020 
 
 Less: Applicable Income Taxes 
 
 70,348 
 
 72,634 
 
 76,036 
 
 61,908 
 
 73,333 
 
 Income Before Securities Gains (Losses) 
 
 156,635 
 
 182,047 
 
 164,672 
 
 148,313 
 
 147,687 
 
 Securities Gains (Losses), After Applicable Taxes: 
 
 
 
 
 
 
 Gain on Sale of Investment in Standard and Chartered 
 
 
 
 
 
 
 Banking Group Limited 
 
 23,277 
 
 
 
 
 
 Gain on Sale of Investments in Associated Companies . . 
 
 
 
 
 
 971 
 
 Loss on Sale of Commercial Mortgages 
 
 
 
 
 
 (8,150) 
 
 Other Securities Gains (Losses) 
 
 (6,202) 
 
 (1,246) 
 
 (1.577) 
 
 661 
 
 720 
 
 Net Income 
 
 $ 173,710 
 
 $ 180,801 
 
 $ 163,095 
 
 $ 148,974 
 
 $ 141,228 
 
 Per Share, Based on Average Shares Outstanding of: 
 
 32,059,093 
 
 32,057,144 
 
 32,005,277 
 
 31,919,983 
 
 31,881,463 
 
 Income Before Securities Gains (Losses) 
 
 $ 4.89 
 
 $ 5.68 
 
 $ 5.15 
 
 $ 4.65 
 
 $ 4.63 
 
 
 5.42 
 
 5.64 
 
 5.10 
 
 4.67 
 
 4.43 
 
 Assuming Full Conversion of Convertible Notes and 
 
 
 
 
 
 
 Debentures: 
 
 
 
 
 
 
 
 4.30 
 
 5.00 
 
 4.55 
 
 4.13 
 
 4.24 
 
 
 4.75 
 
 4.97 
 
 4.51 
 
 4.15 
 
 4.06 
 
 
 2.20 
 
 2.20 
 
 2.00 
 
 2.00 
 
 2.00 
 
 1. Net interest margin figures are presented on a book financial statem 
 interest income exempt from income taxes 
 
 ent basis and. thus, d 
 
 o not reflect the ac 
 
 d back for the taxable equivalent adjustment on 
 
 
 
 
 
 
 M 
 
203 
 
 Management's Discussion and Analysis 
 of the Summary of Consolidated Income 
 
 Net Interest Margin 
 
 In 1974, net interest margin increased by 29.8% to $778.0 million 
 as the sharp rise in the average level of earning assets more than 
 compensated for the narrowing difference between interest rates 
 earned and rates paid, continuing the trend begun in 1973. 
 Domestically, a rapid build-up of loans resulted from the Bank's 
 prime lending rate rising less rapidly than the cost of other short 
 term financing sources available to corporate treasurers. At the 
 same time, rates paid for purchased funds rose markedly, causing 
 a narrowing in the spread between rates earned and rates paid. 
 Overseas, interest rate spreads remained narrow on a higher volume 
 of loans, reflecting the heightened competitive pricing among banks 
 in the eurocurrency markets. 
 
 In 1975, as funding costs declined more rapidly than interest rates 
 earned, a more favorable rate spread was established, despite the 
 negative impact of the substantial reduction of about $115 million, 
 before taxes, of interest income on "non-accruing" and "reduced 
 rate" loans. Net interest margin increased 28.1 % over 1974 to 
 $996.5 million. There was little expansion in domestic and overseas 
 earning assets due to the economic recession. 
 
 Other Operating Income 
 
 In 1974, bond trading produced a pre-tax loss of $29.2 million, as 
 compared to pre-tax income of $8.9 million in 1973, as rapidly rising 
 interest rates adversely impacted the large 1974 inventory holdings 
 and created substantial unrealized losses. In 1 975, trading account 
 losses decreased dramatically, down to $505,000, due to improved 
 trading performance and a marked reduction in unrealized losses 
 on the 1974 carry-over inventory. Nevertheless, results were nega- 
 tively affected by losses in the second half of 1975 of $6.8 million, 
 before taxes, primarily as a result of unrealized losses on the inven- 
 tory of New York State and New York City securities and re- 
 lated agency obligations. 
 
 Other operating income reflected substantial growth from 1973 to 
 1974 as increases in fees on loans, foreign exchange trading income 
 and greater revenues from credit card, letters of credit, and other 
 international business activities more than offset net foreign exchange 
 translation losses of $3.6 million before taxes on capital investments 
 in overseas branches, subsidiaries and associated companies, which 
 were charged against other income. For 1975, other operating 
 income continued to grow, due mainly to increased revenues from 
 fees on loans, international business fees, equity income, credit card 
 activities, and consulting and advisory services. Partially off- 
 setting these increases was the provision for losses on venture capital 
 stock investments of $6.6 million before taxes. 
 
 Provision for Possible Loan Losses 
 
 In 1 974, the increase in the provision for possible loan losses 
 reflected the inclusion in the five-year moving average formula of in- 
 creased average loan volume and a higher level of net loan 
 
 charge-offs over those experienced in prior years. Also included in 
 1974's increase was an additional management provision of $20 
 million over the formula reflecting the evaluation of the loan port- 
 folio in the context of then prevailing economic conditions. In 
 1 975, the further erosion in worldwide economic conditions resulted 
 in substantially greater loan charge-offs, particularly in the 
 domestic real estate and commercial sectors. The provision of $3 1 2 
 million in 1975 includes a management addition of $1 18 million 
 in excess of the amount required by the formula. Under current eco- 
 nomic conditions, further management additions to the reserve 
 for possible loan losses, over the formula amount, can be anticipated. 
 
 Other Operating Expenses 
 
 The increases in operating expenses (other than interest paid and 
 provision for possible loan losses) in 1974 and 1975 reflect con- 
 tinued increases in business activity, costs of expansion and diversifi- 
 cation, and the impact of inflation. 
 
 Applicable Income Taxes 
 
 In 1974, the income tax provision was lower than in 1973 because 
 the increase in tax exempt income was greater than the increase 
 in total earnings before taxes. In 1975, although income before secu- 
 rities gains (losses) was significantly lower than in 1974, the 
 applicable income taxes did not decrease proportionately, primarily 
 due to the three rate increases with respect to New York State and 
 New York City taxes which were enacted during the year. These tax 
 increases, all retroactive to January 1, 1975, resulted in a $4.2 
 million increase in the 1975 provision for taxes on income before 
 securities gains (losses). 
 
 Income Before Securities Gains (Losses) 
 
 Income before securities transactions increased by 10.6% in 1974 
 over 1973. While the Corporation's earnings performance in 1975 
 reflected an improved net interest margin both in domestic and 
 overseas offices, an increase in loan and other business fee income, 
 and a substantial decline in losses in the bond trading account, in- 
 come was, nevertheless, adversely affected by the non-accruing and 
 reduced rate loans, the increased provision for possible loan 
 losses, and the higher New York State and City taxes. 
 
 Net Income 
 
 Net income in 1974 increased by 10.9% over 1973. In 1975, net 
 income declined only 3.9% from 1974, although income before 
 securities gains (losses) decreased by 14.0% in the same period. In- 
 cluded in net income is the gain of $23.3 million, after applicable 
 taxes, on the sale, in May 1975, of the Bank's 1 1.9% minority inter- 
 est in the London based Standard and Chartered Banking Group 
 Limited. The 1975 New York State and New York City tax rate 
 increases adversely impacted net income by $6.0 million, of which 
 $4.2 million was applicable to income before securities gains (losses ) . 
 
 55 
 
 25-605 O - 78 - 14 
 
204 
 
 International Advisory 
 Committee 
 
 Overseas Locations 
 
 Europe 
 
 Pehr G. G> lie 
 Managing Director and 
 Chief Executive Officer 
 AB Volvo 
 
 Pierre A Uourd-Vogt 
 Chairman and Managing 
 Director 
 
 Nestle Alimentana S A 
 
 Denmark. England. 
 France, Germany. 
 Greece, Italy 
 
 Eletnodade SA.. 
 
 Ian D. 
 
 Sir Reay Geddcs, Chairman 
 Dunlop Holdings Ltd. 
 
 L oiled States 
 
 C Douglas Dillon 
 
 Henry Ford II 
 Chairman of the Board 
 Ford Motor Company 
 
 Dr. Carl A Gerslacker 
 
 The Do» Chemical 
 
 Ro:>er. Marjoun 
 
 Otto Wolff von Amerongen 
 
 President 
 
 Quo Wolff AG 
 
 P E Haggerty 
 Chairman 
 
 Incorporated 
 
 WUliam A. Hewitt 
 
 Chairman 
 
 Deere A Company 
 
 Erwin E Kelm 
 
 Y.JCPao,< 
 and Chief Executive 
 World-Wide (Shipping) 
 Limited 
 
 JR. D.Tata, 
 Tau 
 
 Dr Giovanni Agnelli 
 Chairman 
 
 FIAT. S.p.A. 
 
 CargiU. Incorporated 
 
 C William Verity . Jr. 
 Chairman and 
 Chief Executive Officer 
 Armco Steel Corparau oi 
 
 F i -Officio Members 
 (The Chase Manhattan 
 ■—a, MA.) 
 
 David Rockefeller 
 Willard C Butcher 
 George A. Roeder. Jr. 
 William S. Ogden 
 Francis X. Stankard 
 
 Italy, Spain. Switzerland. 
 
 U-S.S.R. 
 
 Austria: 
 
 Chase Manhattan Bank 
 
 (Austria), AG 
 
 Belgium: 
 
 Banque de Co mm er ce . S.A- 
 
 Staodard & Chase 
 Bank, C-L, Ltd. 
 Standard & Chase 
 Trust Co., CL Ltd. 
 
 France: 
 
 Banque de Reescompte 
 et de Placement 
 
 (B.A.R-E.E) 
 
 Chase Manhattan. S.A 
 
 Germany: 
 Familienbank. AG. 
 
 Guernsey: 
 
 Chase Manhattan Bank 
 
 (Guernsey), Ltd. 
 Orion Bank 
 (Guernsey), Ltd 
 
 Luxembourg: 
 
 Chase Manhattan Bank 
 
 Luxembourg, S.A 
 
 The Netherlands: 
 Nederiandse 
 Credietbank. N.V 
 
 Republic of Ireland: 
 Chase and Bank of Ireland 
 I International). Ltd 
 
 Switzerland: 
 
 Chase Manhattan Bank 
 
 United Kingdom: 
 Chase Manhattan Limited 
 Libra Bank 1 imiled 
 On an Bank 1 imitrd 
 
 Netherlands 
 Multinational Prion 
 Leasing Holdings N.V. 
 
 SA.. 
 S-A 
 
 Switzerland: 
 
 Capital International. S-A 
 
 United Kingdom: 
 Equipment Leasing 
 Company. Ltd. 
 Orion l 
 Holdings Ltd. 
 Orion Multinational 
 Services Ltd. 
 
 Lie Alberto BaOleres 
 Chairman of the Board 
 and Executive President 
 CREMI Group 
 
 France: 
 Essor Gestxm 
 Financiere rflnvestisse- 
 ment et de Construction 
 
 :SJV. 
 
205 
 
 Domestic 
 Subsidiaries 
 
 Asia and Australasia 
 
 Western Hemisphere 
 
 Africa and Middle East 
 
 Guam, Hong Kong, 
 Indonesia, Japan, Korea, 
 Malaysia, Singapore, 
 Taiwan, Thailand 
 Representative Offices 
 India, Korea, Singapore 
 
 Hong Kong: 
 Chase Asia Limited 
 Malaysia: 
 
 Amanah Chase Merchant 
 Bank Berhad 
 The Philippines: 
 Commercial Bank and 
 Trust Company 
 of the Philippines 
 Singapore : 
 
 United Chase Merchant 
 Bankers Ltd. 
 
 Australia : 
 
 Alliance Acceptance 
 Co., Ltd. 
 
 Alliance Holdings, Ltd. 
 All States Commercial 
 Bills Ltd. 
 
 Chase-N.B.A. Group 
 Depository Ltd. 
 Chase-N.B.A. Group Ltd 
 Managed Deposits Ltd. 
 Hong Kong: 
 Diamond Lease 
 (Hong Kong) Ltd. 
 Orion Pacific Ltd. 
 Japan: 
 
 Diamond Lease 
 Company Limited 
 Kita Nihon Shinyo Hanbai 
 Kabushiki Kaisha 
 Mitsubishi Chase 
 Consulting Company, Inc. 
 New Zealand : 
 Chase-NBA. 
 New Zealand Group Ltd. 
 The Philippines: 
 Filinvest Credit 
 Corporation 
 
 The Philippine American 
 Investment Corporation 
 Singapore : 
 
 International Discount 
 Company Ltd. 
 Thailand: 
 Chase Manhattan 
 Investment Company 
 (Thailand) Ltd. 
 
 Bahamas 
 
 Barbados 
 
 Cayman Islands 
 
 Dominican Republic 
 
 Grenada 
 
 Guadeloupe 
 
 Guyana 
 
 Martinique 
 
 Monserrat 
 
 Panama and Canal Zone 
 Puerto Rico 
 St. Lucia 
 St. Maarten 
 Trinidad & Tobago 
 U.S. and British 
 Virgin Islands 
 
 Representative Offices 
 
 Argentina, Brazil, Colom- 
 bia, Mexico, Venezuela 
 
 Subsidiary and 
 
 The Bahamas: 
 
 The Chase Manhattan 
 
 Trust Corporation Limited 
 
 Brazil: 
 
 Banco de Investimentos 
 Lar Brasileiro, S.A. 
 Banco Lar Brasileiro, S.A. 
 
 Cayman Islands: 
 Chase Manhattan Trust 
 Cayman, Ltd. 
 
 Colombia: 
 
 Banco del Comercio 
 
 Honduras: 
 
 Banco Atlantida, S.A. 
 Jamaica: 
 
 Chase Merchant Bankers 
 Jamaica, Ltd. 
 
 Panama: 
 
 Banco del Comercio 
 (Panama) S.A. 
 
 Brazil: 
 
 Financeira Lar 
 Brasileiro, S.A. 
 
 Canada: 
 
 C.M.B. Holdings, Ltd. 
 C.M.B. Properties, Ltd. 
 
 Costa Rica: 
 Chase Manhattan 
 Costa Rica, S.A. 
 
 Honduras: 
 
 Inversiones Atlantida, S.A. 
 
 Panama: 
 
 International Americas 
 Finance, Inc. 
 
 Puerto Rico: 
 Housing Investment 
 Corporation 
 
 Venezuela: 
 Arrendacima, CA. 
 Consorcio Inversionista 
 Mercantil y Agricola, CA. 
 
 Representative Offices 
 
 Egypt, Iran, South Africa 
 
 Egypt: 
 
 Chase National Bank 
 (Egypt) S.A.E. 
 Iran: 
 
 International Bank of Iran 
 Nigeria: 
 
 Chase Merchant Bank 
 Nigeria, Ltd. 
 United Arab Emirates: 
 The Commercial Bank 
 of Dubai, Ltd. 
 
 Venezuela: 
 Banco Mercantil y 
 Agricola, CA. 
 
 Chase Manhattan Bank of 
 
 Central New York, N.A. 
 
 Syracuse, N.Y. 
 Chase Manhattan Bank of 
 
 Eastern New York, N.A. 
 
 Albany. N.Y. 
 Chase Manhattan Bank of 
 
 Greater Rochester, N.A. 
 
 Rochester, N.Y. 
 Chase Manhattan Bank of 
 
 Long Island, N.A. 
 
 Melville, L.I. 
 Chase Manhattan Bank of 
 
 the Mid-Hudson, N.A. 
 
 Saugerties, N.Y. 
 Chase Manhattan Bank of 
 
 Western New York, N.A. 
 
 Buffalo, N.Y. 
 Chase Manhattan Bank of 
 
 Northern New York, N.A. 
 
 Canton, N.Y. 
 Chase Manhattan Bank of 
 
 the Southern Tier, N.A. 
 
 Binghamton, N.Y. 
 
 Chase Commercial 
 
 Corporation 
 Chase Econometric 
 
 Associates, Inc. 
 Chase Investors Manage- 
 ment Corporation 
 
 New York 
 Chase Manhattan Capital 
 
 Corporation 
 Chase Manhattan 
 
 Consulting, Inc. 
 Chase Manhattan Leasing 
 
 Corporation 
 Chase Manhattan Realty 
 
 Leasing Corporation 
 Chase Manhattan Service 
 
 Corporation 
 Chase National Corporate 
 
 Services, Inc. 
 Chase World Information 
 
 Corporation 
 CMRCC, Inc. 
 Chase Manhattan Realty 
 
 Capital Corporation 
 Dovenmuehle, Inc. 
 Housing Investment 
 
 Corporation of Florida 
 Interactive Data 
 
 Corporation 
 
 Edge Act Corporations 
 
 Chase Bank International- 
 Chicago 
 
 Chase Bank International- 
 Houston 
 
 Chase Bank International- 
 Los Angeles 
 
 Chase Bank International- 
 Miami 
 
 Chase International 
 Investment Corporation 
 
 Chase Manhattan Overseas 
 Banking Corporation 
 
 60 
 
APPENDIX D 
 
 Department of the Treasury, 
 Washington, D.C., February 27, 1978. 
 
 Hon. Ralph H. Metcalfe, 
 
 Chairman, Subcommittee on Panama Canal, Committee on Merchant Marine and 
 Fisheries, House of Representatives, Washington, D.C. 
 
 Dear Mr. Chairman : On December 30, 1977 and January 20, 1978, I responded 
 to various questions submitted by the Subcommittee as follow-up to my earlier 
 testimony on the Panama Canal treaties. Other questions posed by the Sub- 
 committee at that time were not within the scope of responsibility or the knowl- 
 edge of my office; and, therefore, it has required additional time to determine 
 answers or to identify those agencies which are the appropriate sources of the 
 information you seek. 
 
 With regard to the questions raised by the West Watch article of November 
 1977, Treasury believes that either the Drug Enforcement Administration of 
 the Department of Justice or the Department of State would be the authorita- 
 tive source for most of the type of drug trafficking information in which you 
 are interested. Treasury can, however, respond to Sections (e) and (f) of 
 Question Number 1 and to Questions 3 and 4. Our responses are enclosed. 
 
 With regard to inquiries such as Question Number 5, it is the policy of the 
 Department of the Treasury that disclosures of investigative information are 
 inappropriate except to those executive agencies with a need to know in order to 
 perform their criminal justice or national security missions. Such disclosures 
 may compromise sensitive investigative techniques and procedures and may 
 jeopardize the lives, safety, reputations and rights of defendants, criminal sus- 
 pects, informants, witnesses, law enforcement agents and innocent third parties. 
 This policy is applicable to ongoing operations and pending litigation and to 
 closed cases in which prosecution has been declined, thus making the privileged 
 character of the information particularly sensitive. I have also been advised 
 that the grand jury proceedings from which any indictment must arise may be 
 disclosed, pursuant to Rule 6(e) of the Federal Rules of Criminal Procedure, 
 only by order of the court. Furthermore, the determination to seek an indict- 
 ment by a Federal grand jury is made by either the Department of Justice or the 
 appropriate United States Attorney. 
 
 With regard to the questions raised by the New York Times article 1 of Feb- 
 ruary 5, 1974, the Treasury Department has no information to provide and be- 
 lieves those questions, too, are appropriately within the jurisdiction of either 
 the Drug Enforcement Administration or the Department of State. 
 
 I have included a response to the Daily Telegraph article question which you 
 submitted on February 22, 1978. 
 
 I regret the unavoidable delay in our response and hope this information is 
 of use to the Subcommittee. 
 Sincerely, 
 
 Arnold Nachmanoff. 
 
 Enclosure. 
 
 Treasury Responses to Questions Asked by Congressman Snyder 
 xii. west watch article 
 
 Questions 1-2. The Merchant Marine and Fisheries Committee has published 
 information in the past on Panama's drug traffic into the U.S. and the. complicity 
 of top Panamanian officials in that traffic. 
 
 1 See Appendix B, Item VIII. 
 
 (207) 
 
208 
 
 (e) How do Panama banks, or how could they, facilitate illicit drug traffic 
 in that country? 
 
 Answer. We do not know whether or not Panamanian banks have been used 
 to facilitate illegal drug traffic. The banks of many countries could be used for 
 that purpose. The foreign banking industry generally has very little knowledge 
 concerning the background of the large number of payments it handles each 
 day. Foreign bank accounts could be used as depositories or distribution points 
 for payments, including remittances from the United States in payment for drugs 
 delivered there, as well as a means for disbursing shares of drug profits or 
 bribes. 
 
 (/) How could a U.S. bank or lending institution in this country facilitate 
 such traffic? 
 
 Answer. A U.S. bank could be used in much the same way as a foreign bank 
 since U.S. banks cannot possibly be aware of all the circumstances surrounding 
 the tens of millions of transactions they handle each day. In addition, a U.S. 
 bank could be used to exchange or recycle currency derived from drug distri- 
 bution networks. The provisions of the Bank Secrecy Act. however, require 
 U.S. banks to maintain records of their transactions and to report large and 
 unusual currency transactions. 
 
 Question 3. Has the U.S. Government at any time cracked down on any U.S. 
 bank for such a practice? If so, give details. 
 
 Answer. It is a matter of public record that the Chemical Bank. NYC, was 
 indicted in 1977, in connection with its failure to report hundreds of large and 
 unusual currency transactions. A number of those transactions involving more 
 than $1,800,000 were alleged to have been related to major narcotic traffickers. 
 The indictment was subsequently dropped when the bank pled guilty to 445 
 related misdeamenors and was fined $222,500. 
 
 Question 4- Has any U.S. banker been indicted for such a practice? If so, give 
 details. 
 
 Answer. Two of the bank officers who were involved in the Chemical bank 
 violations were indicted on tax charges stemming from those activities and 
 pled guilty. 
 
 V. DAILY TELEGRAPH ARTICLE 
 
 Question 8. Has the Carter Administration been (or was the Nixon/Ford Ad- 
 ministration) "under pressure from American banking interests to hand the 
 Canal over to Panama"? 
 
 Answer. No. 
 
 Department of the Treasury, 
 Washington, D.C.. March 17, 1978. 
 
 Hon. Ralph H. Metcalfe, 
 
 Chairman, Subcommittee on Panama Canal. Committee on Merchant Marine 
 and Fisheries, House of Representatives, Washington, D.C. 
 Dear Mr. Chairman : The enclosed question and answer was inadvertently 
 left out of the sets previously submitted for the record following my testimony 
 before your subcommittee on November 30, 1977. 
 Sincerely, 
 
 Arnold Nachmanoff. 
 
 Westwatch Article 
 
 Question 9. How does the mushrooming banking system in Panama with its 
 secret accounts, tax advantages to bankers and clients, etc. 
 (a) benefit the citizens of the U.S. as a whole? 
 (6) disadvantage them? 
 
 Answer. Offshore banking centers, such as Panama, increase the overall 
 efficiency of international capital markets, thereby contributing to increased 
 international trade and investment. The foreign presence of U.S. banks en- 
 hances the ability of U.S. banks to compete with foreign banks for interna- 
 tional business and greatly facilitates world-wide acceptance of the U.S. dollar 
 in international commerce. Offshore banking centers also make possible the 
 pooling of foreign savings of U.S. dollars for subsequent use by others. The 
 improvement in trade and investment to which this contributes benefits U.S. 
 citizens by providing expanded markets for goods and services they produce, 
 returns from investments aboard, foreign investments in the U.S., and moder- 
 ately priced imports. 
 
APPENDIX E 
 
 Response of the Department of State to Mr. Snyder's Questions on Inter- 
 national Banking Interests Relating to Panama, and on Various Treaty- 
 Related Matters 
 
 Department of State, 
 Washington, D.O., January 30, 197S. 
 
 Hon. Ralph H. Metcalfe, 
 
 Chairman, Subcommittee on Panama Canal, 
 
 House of Representatives. 
 
 Dear Mr. Chairman : In a memorandum of December 14 to Ambassadors 
 Bunker and Linowitz, the Subcommittee posed questions relating to the proposed 
 Panama Canal Treaties. 
 
 We have attached our replies to these questions, with the exception of Mr. 
 Snyder's six questions on the New International Economic Order and his seven 
 questions related to an article in the Washington Post of December 15, 1977 head- 
 lined "Central Bank Role is Urged for IMF ; '. Answer to these 13 remaining 
 questions will be sent to the Committee soon. 
 Sincerely, 
 
 Douglas J. Bennet, Jr., 
 
 Assistant Secretary for 
 
 Congressional Affairs. 
 
 Enclosures : As stated. 
 
 I 
 
 On February 25, 1977, The Washington Star carried this editorial by Charles 
 Bartlett : 
 
 Why Some Panamanians Are in No Rush on Canal 
 
 Panama City, Panama. — Rarely in American history has the nation been 
 obliged to contemplate the award of a great prize to a government as deficient 
 as the one now presiding over Panama. 
 
 "Ah, but you are not handing over the canal to the Torrijos government," 
 exclaims a Panamanian negotiator. "You are giving it to the people of Panama." 
 
 He may be right in that the canal's transfer will not occur until the year 2000 
 when Torrijos will be 70. But he may be wrong because dictators with strong 
 livers hang on. At any rate he will get most of the Zone property immediately. 
 
 A new treaty promises to give Omar Torrijos enough historic stature to be- 
 come a semi-permanent fixture. Since his leadership is characterized by heavy 
 corruption, economic mismanagement, intolerance of dissent and a disturbing 
 tilt to the left, the dignity which the Panamanians gain from evicting the Zonians 
 may be lost in the ordeal of protracted repression. 
 
 This is why some who have struggled hard to bring the Zone under Panama's 
 flag are now alarmed at the speed at which President Carter is propelling the 
 negotiations. 
 
 One fear is that Torrijos is so mired in loans from U.S. banks that he will 
 make a poor deal for the country. Another is that the treaty will arm the dicta- 
 tor with funds to build an army and fresh opportunities for corruption. 
 
 The State Department is perceived by these Panamanians to be playing a 
 cynical game. It has propped up Torrijos with sizable AID assistance, unusual 
 for a nation with one of the highest per capita incomes in Latin America. Em- 
 bassy spokesmen defend Torrijos's corruption as par for Latin politics and 
 minimize the implications of his Communist ties. He is the key to the treaty 
 they seek, so they accord him a respectable aspect. 
 
 The credibility of the Communist threat in Panama has been damaged by 
 Zonians who apply Red labels to all who question their colonial outlook. But it 
 deserves more serious attention because the moves, which some experts see as 
 
 (209) 
 
210 
 
 efforts by Torrijos to placate the left, add up to a menacing pattern of conces- 
 sions. Too many of the regime's key figures including some principal negotiators, 
 are committed to the hard left. 
 
 The only political party now allowed to function in Panama is the Communist 
 "People's party," a negligible force when Torrijos took power in 1968. Two 
 queasy figures with Marxist links, Diaz Herrera and Antonio Noriega, are moving 
 moving with the President's support into dominance over the national guard. 
 Torrijos's chief adviser, Escobar Betancourt, turns up in such curious roles as 
 head of the Panama-North Korean Association. 
 
 Drink is Torrijos's personal vice ; avarice is the preoccupation of his brothers ; 
 brutality is the distinguishing feature of his police, and extravagent ineptness 
 is the failing of his economic planners. The regime has put the small nation 
 so deeply in the red (an estimated $1.2 billion) that the canal treaty has no sup- 
 porters more fervent than the American bankers whose hopes for repayment 
 rest on a revival of faith in the Panamanian economy. 
 
 This is not the sort of government to which the United States would normally 
 be eager to transfer a property that is crucial to its commerce. 
 
 Most Panamanians are satisfied now that the pressures of nationalism make 
 the transfer inevitable at some point. But some thoughtful ones say they are 
 content to wait because time will work to their advantage if it rids them of 
 Torrijos and softens the U.S. negotiating position. 
 
 The signs here indicate that the negotiators will manage to strike a 'deal. But 
 when the Senate has a close look at the evolving nature of the Panamanian 
 regime, ratification is not apt to come easily. 
 
 Question 1. If what Bartlett says of Omar Torrijos is true, "his leadership is 
 characterized by heavy corruption, economic mismanagement ... so mired in 
 loans from U.S. banks . . . and extravagant ineptness is the failing of his eco- 
 nomic planners," how can the State Department assure the Congress and the 
 U.S. taxpayers that the Panama Canal will be operated economically and honestly 
 by the Torrijos regime? 
 
 Answer. Bartlett's assertions would appear to be grossly exaggerated. While 
 it is arguable that some of Panama's economic problems can be traced to eco- 
 nomic mismanagement, it should be noted that the exceptionally high rate of 
 growth in Panama during the 1960's was far above the general average and thus 
 probably unsustainable over the long term. In the early 1970's economic growth 
 started to fall off. This trend was accelerated with the sharp oil price increases 
 in 1973, and the resulting world-wide inflation and recession. In order to main- 
 tain aggregate demand at an acceptable level, the government has carried out 
 a large public investment program. This has sustained economic activity and 
 provided employment, but has resulted in a major increase in the level of debt. 
 (The total foreign debt is $1.4 billion, of which $355 million was owed to U.S. 
 banks as of December 31, 1976). However, Panama has never defaulted on re- 
 payment of any loan to banks, and we feel confident it will continue to meet its 
 obligations. 
 
 Question 2. Is it true, as Bartlett alleges, that Torrijos has been propped up 
 with "sizable AID assistance" 
 
 Answer. The purpose of the Panama-A.I.D. Program is to assist the Pana- 
 manians to alleviate those constraints which prevent the rural and urban poor 
 from participating fully in the economy. In education, A.I.D. resources are geared 
 to develop a practical basic curriculum and technical training system in the 
 Ministry of Health so that health facilities are more accessible. This effort 
 includes the construction and organization of rural health centers, the training 
 of paramedical personnel and the construction and development of sanitation 
 facilities and potable water systems. In agriculture, AJ.D.'s efforts include de- 
 velopment of market towns, cooperatives, marketing facilities and infrastructure, 
 and rural regional integrated development. AID is also financing low income 
 housing at a number of locations throughout Panama. This is a cooperative 
 effort in which the Panamanians themselves are playing the major financial 
 role. 
 
 Question S. What have been the specific amounts annually since 1968? 
 
 Answer. From 1962-69, AID provided Panama a total of $125.4 million in 
 development loans and grants. Specific amounts for the 1970-76 period are sum- 
 marized below : 
 
211 
 
 [Amounts in millions of U.S. dollars] 
 
 
 1970 
 
 1971 
 
 1972 
 
 1973 
 
 1974 
 
 1975 
 
 1976 
 
 Loans 
 
 8.5 
 
 7.0 
 
 19.1 
 
 3.8 
 
 8.3 
 
 6.7 
 
 24.5 
 
 Grants 
 
 3.3 
 
 4.1 
 
 3.7 
 
 3.3 
 
 2.5 
 
 1.6 
 
 3.2 
 
 Total 
 
 11.8 
 
 11.1 
 
 22.8 
 
 7.1 
 
 10.8 
 
 8.3 
 
 26.7 
 
 Note: Figures are currently maintained for the period and years shown above. Yearly figures for 1968 and 1969 will be 
 urnished later. 
 
 f 
 
 Question 4- Is it true this aid has been unusual for a nation with one of the 
 highest per capita incomes in Latin America? 
 
 Answer. Although the nation's per capita income of $1,290 ranks Panama 
 fairly high by this traditional yardstick of economic development, the presence 
 of the Canal Zone and the accompanying United States wage scale, together 
 with a monetary system based on the United States dollar, have given a de- 
 ceptive impression of affluence. Very serious problems exist involving rural- 
 urban imbalance and the urban poor, whose per capita income is estimated at 
 less than $425. This target group is the principal beneficiary of aid programs in 
 Panama. 
 
 Question 5. List annual AID to all Latin American countries and the per 
 capita incomes of each since 1968. 
 
 Answer. The following tabulation summarizes per capita incomes and AID 
 levels to Latin American countries for the 1962-69 period and through fiscal year 
 1976. 
 
 Income 1962-59 1970 1971 1972 1973 1974 1975 1976 
 
 Bolivia 360 201.1 3.0 3.7 55.6 17.0 38.4 20.1 24.2 
 
 Brazil 1,030 1,132.2 88.0 79.4 12.1 40.6 5.0 3.1 .9 
 
 Chile 990 564.4 18.0 1.5 1.0 .8 5.3 31.3 21.2 
 
 Colombia. 580 584.9 75.8 84.0 92.6 76.9 40.1 14.0 20.6 
 
 Costa Rica 960 61.6 19.5 6.4 1.7 1.3 8.9 .7 6.9 
 
 Ecuador 590 100.5 23.2 15.3 4.9 4.6 2.5 2.1 
 
 El Salvador 460 64.0 10.3 2.5 6.0 2.0 7.8 1.3 1.8 
 
 Guatemala 570 53.4 29.1 14.2 12.5 9.5 2.5 9.4 32.7 
 
 Guyana 580 55.3 11.3 1.2 15.6 .7 .1 1.0 1.8 
 
 Honduras 360 58.3 5.5 5.2 3.6 5.6 24.6 25.4 16.7 
 
 Mexico 1,050 66.5 
 
 Nicaragua 730 82.5 2.3 12.5 2.5 22.5 12.4 43.1 17.7 
 
 Panama 1,290 125.4 11.8 11.1 22.8 7.1 10.8 8.3 26.7 
 
 Paraguay 580 41.0 7.1 6.9 2.8 6.0 4.4 6.7 5.5 
 
 Peru 760 123.2 11.3 6.9 31.7 3.8 12.2 8.9 13.6 
 
 Uruguay 1,300 42.1 16.9 4.9 1.4 1.2 .9 12.8 .6 
 
 Note: Per capita income given for 1976. Figures are currently maintained for the period and years shown above. Yearly 
 figures for 1968 and 1969 cannot be supplied immediately. 
 
 Question 6. Bartlett says, "The regime has put the small nation so deeply in 
 the red (an estimated $1.2 billion) that the Canal Treaty has no supporters 
 more fervent than the American bankers whose hopes for repayment rest on 
 the revival of faith in the Panamanian economy", if the present economy of 
 Panama does not improve, can that country repay coming (a) interest (b) prin- 
 cipal due on loans of the commercial banks? 
 
 Answer. Because Panama has an open economy and is a significant financial 
 center for Latin America, it has a very large stake in maintaining its favorable 
 investment climate and international credit-worthiness by meeting all its finan- 
 cial obligations. The Government has never defaulted on its financial obligations, 
 and we anticipate that it will take the necessary steps to meet its current and 
 future obligations. 
 
 II 
 
 Christopher Lvdon authored an article in the Atlantic Monthly, July 1977, 
 entitled "Jimmy ^Carter Revealed: He's a Rockefeller Republican." Lydon wrote 
 the following: 
 
 "I stumbled blindly on the Rockefeller clue in the spring of 1976 and I admit 
 I didn't know what to do with it when I found it. 
 
212 
 
 "The second Rockefeller connection — more obvious, less noted — was the Tri- 
 lateral Commission. The Trilateral Commission was David Rockefeller's brain- 
 child, a somewhat more energetic young cousin of the elite Bilderberg Confer- 
 ences at which Prince Beruhard of the Netherlands had been gathering senior 
 hankers and political figures from Europe and the United States since the mid- 
 fifties. Should the Trilateral Commission be viewed as a cabal of multinational 
 financiers — indeed, as the first step toward a multinational government? Should 
 it be seen simply as David Rockefeller's foreign policy toy? This debate has 
 barely begun. 
 
 ' The commission was couceived in 1972 as a private vehicle for planning the 
 industrial world's course out of the international monetary crisis (and John 
 Connally's cowboy responses) of that period, away from the 'Xixon shocks' that 
 had troubled Japan, into a new stability of banking relationships among the 
 First World and of trading agreements with the Third World. The distinctive 
 contribution of the Trilateral Commission was its very three-sidedness. encom- 
 passing as equals sixty members each from North America, Western Europe, 
 and Japan. David Rockefeller handpicked the key members and the staff experts 
 who have produced a dozen pamphlets so far on such subjects as 'A New Regime 
 for the Oceans,' 'Energy : the Imperative for a Trilateral Approach,' and 'Seek- 
 ing a New Accommodation in World Commodity Markets." 
 
 "Jimmy Carter had been the one Democratic governor chosen among sixty 
 North American members of the Trilateral Commission in 1973. The official expla- 
 nations have run that the commission needed a southerner and that in the 
 southern governor category Carter won a photo-finish race against Governor 
 Reubin Askew of Florida. A couple of years earlier, in fact, Carter, ever alert 
 to his future, had been currying Rockefeller attention. In an interview David 
 Rockefeller recalled with amusement that Jimmy made the first, ever so slightly 
 brash, overture in 1971, calling almost as soon as he had been sworn in to say 
 that Georgia sold a lot of bonds in New York, and would David Rockefeller please 
 schedule a lunch at which Governor Carter might meet some bankers. Like so 
 many others, David Rockefeller was more than pleasantly surprised and in- 
 trigued at meeting the peanut-farming politician. As a Trilateral Commissioner 
 Jimmy Carter was silent but assiduous at the occasional meetings — a careful 
 notetaker and offstage brainpicker. He proudly mentioned his Trilateral studies 
 and trips whenever questions of his international experience popped up in the 
 early presidential campaign. But presumably the much greater value of Tri- 
 lateral membership was the private reassurance it conveyed that David Rocke- 
 feller had deemed him a promising student and had gotten his education under 
 way. The Trilateral Commission's executive director, Zbigniew Brzezinski, be- 
 came literally Jimmy Carter's tutor, and now, of course, directs the White House 
 foreign policy staff, as Henry Kissinger did in the first Nixon term. Perhaps 
 all David Rockefeller hoped for in assembling the American delegation, a Tri- 
 lateral colleague mused the other day, was to be sure he included the prospective 
 secretary of state in the era following Nixon's. How could he have guessed that 
 his Trilateralists would staff all major policy posts in the new government — 
 including, as if bv a miracle, the vice presidency and the presidency? How in- 
 deed?" 
 
 QUESTIONS 
 
 (1) Is it accurate for the Trilateral Commission to be characterized as a 
 group of "multinational financiers?" 
 
 (2) Please identify the 60 North American Commission Members. Cite those 
 who are connected with international finance. 
 
 (3) Identify all members who are now in the Carter Administration, giving 
 their position. 
 
 (4) Name the Japanese and European Commission Members who are from 
 the banking community. 
 
 (5) Has either David or Nelson Rockefeller served the Carter Administration 
 
 in any capacity? 
 
 (6) What has been the position of the Trilateral Commission in regard to the 
 new Panama Canal Treaties? 
 
 Please supply copies of its position papers on the subject or articles from its 
 publications commenting on the issue. 
 
 (7) Are there any grounds in the Commission's history and in its publications 
 for one to consider that it may have "multinational government" as its goal? 
 
213 
 
 Questions 1 through 4, 6 and 7 should be referred to the Trilateral Commission. 
 Question 5. Has either David or Nelson Rockefeller served the Carter Ad- 
 ministration in any capacity ? 
 Answer. No. 
 
 Ill 
 
 Labor journalist Alan Howard had a piece in the Nation for October 15, 1977, 
 entitled "The Real Latin American Policy." 
 Howard writes: 
 
 "Panama is important not only for its obvious symbolic and intrinsic value 
 but also because the chief negotiator of the new Canal treaties, along with Ells- 
 worth Bunker, was Sol Linowitz. A former ambassador to the OAS and a senior 
 partner of Coudert Brothers, Linowitz probably has more to say about the shape 
 of our Latin American policy than anyone in the administration except the 
 President himself. For most of the ideas that guide that policy were formulated 
 last December by the Commission on United States-Latin American Relations, of 
 which Linowitz was chairman. The commission, a private group sponsored by 
 the Center for Inter- American Relations, issued last December a report, 'The 
 United States and Latin America : Next Steps,' commonly referred to as the 
 Linowitz Report. 
 
 "A cross-check of the commission's members and staff, with Carter's Cabinet- 
 level and key sub-Cabinet appointments, beginning with Treasury Secretary 
 Blumenthal, indicates that 'Next Steps' is not just another think-tank docu- 
 ment to be stored away for future reference. Commission members and staff 
 now operate at critical levels of the Treasury Department and National Security 
 Council, and to a lesser extent in the State Department. They are intent on 
 seeing the perspectives of the commission translated into governmental policy. 
 
 " 'It's fairly obvious that the Linowitz Report in opposition is now more or less 
 the accepted wisdom,' notes Abraham Lowenthal, himself a consultant on the 
 report and the former director of studies for the Council on Foreign Relations." 
 ******* 
 
 "Confronted with the demand of the developing world for a new international 
 economic order, with increased competition from its capitalist allies, and with 
 the historic threat of Socialist revolutions, the U.S. Government, says, the re- 
 port, has taken the election of President Carter as a signal to recover crucial 
 ground lost during the debacles of Vietnam and Watergate, particularly in rela- 
 tionship to the enormous resources and growing markets of the Third World. 
 The report continues: 'Among the most powerful and prosperous countries of 
 the Third World, several key Latin American nations will significantly influence 
 how the international economic order evolves. . . . The primary aim of U.S. policy 
 in thp Wpstprn Hpmi spher e should hp to w ork with Latin American countries 
 in dealing with this broad global agenda.' " 
 
 * * * * * * * 
 
 "In specific terms, the 'most urgent issue' on the Linowitz agenda was Panama, 
 for all reasons the administration is now advancing in its impending battle to 
 have the treaties ratified." 
 
 (1) Is the international economic order the Linowitz Commission talks about, 
 the same new order sought by the Trilateral Commission according to Jeremiah 
 Novak in the July 1977 Atlantic Monthly ? 
 
 (2) Does that order signify : 
 
 (a) An increasing measure of economic cooperation with socialist coun- 
 tries dominated by Communist regimes? 
 
 (b) An ultimate economic interdependence with socialist states? 
 
 (3) Does the goal of this new international economic order envision a meshing 
 or merging in some way of the world's capitalist states with the socialist states — 
 in accordance with the convergence theory held by some global thinkers? 
 
 (4) What is the role of the Panama Canal to be in this new economic order? 
 
 Howard writes further : 
 
 "Both businessmen and government officials are touchy on the subject of 
 business influence on U.S. policy. It is not unusual for an official of a large bank 
 with a multibillion-dollar investment in Latin America to say, 'we react non- 
 politically' to events in Latin America, or for a State Department official to 
 assure you that the big corporations 'have given up on trying to influence the 
 
214 
 
 U.S. Government.' But it is absurd, and an insult to the intelligence of the 
 American people, to suggest that corporations which do $30 bililon a year in 
 trade with Latin America and which have $16 billion in direct investments 
 there, along with banks that have outstanding approximately $25 billion in loans 
 to the region, do not have a hand in shaping the policy of the U.S. Government 
 toward Latin America. 
 
 "Probably the most dramatic change in the pattern of U.S. investments in the 
 region is the growing role of private banks. In the days of the Alliance for 
 Progress, private banks accounted for less than a third of the U.S. loans made to 
 Latin America ; the bulk of the funds came from government agencies. Today, 
 private banks account for around 55 percent. The huge debts acquired by Latin 
 American countries due to balance of payments deficits (oil is a large but not the 
 only factor along with the sluggishness of the U.S. economy, have prompted U.S. 
 banks to extend loans to Latin American countries at a staggering rate. In the 
 past decade, the external debt of the region has quadrupled to more than $40 
 billion (owed to commercial banks), of which more than half is owed to private 
 U.S. banks." 
 
 ******* 
 
 "The very survival of the transnational banks may now depend on the abil- 
 ity — and willingness — of a few dozen LDCs to keep up their debt service pay- 
 ments. Therefore, to assure the flow of those funds the banks are participating 
 ever more directly in the political affairs of those nations, by-passing not only 
 the U.S. Government but also the multilateral lending institutions that until 
 now have insulated the commercial banks from overt political involvement." 
 ***** 
 
 "The deepening involvement of bankers and corporate executives in the po- 
 litical affairs of countries where they operate has created among these men atti- 
 tudes of the sort that used to be associated with foreign service officers who had 
 spent too much time in a particular country or region of the world. While super- 
 ficially neutral toward the political character of the local government, they are 
 deeply sympathetic toward the military regimes that have seized power — not 
 because they are military regimes but because they are prepared to get what for- 
 eign capital demands out of the hides of the people. 
 
 "These executives and their Washington operatives tend to become advocates 
 for their host countries in dealing with the U.S. Government. So, for example, 
 instead of reinforcing the Washington line on human rights, they tend to appear 
 as apologists for their adopted countries. 'I think our government has to realize 
 that those countries are at war, combating terrorism, and that many of the re- 
 quests we are making are not realistic,' said one banker. Such observations are 
 usually followed with some version of the argument that the countries in ques- 
 tion are not ready for democracy anyway. Within this elite sector of American 
 society there are honorable and even courageous men, but within the institutions 
 they serve there is no effective way to measure the impact of human rights and 
 political democracy on the balance sheet; to the extent they can be measured, 
 they tend to show up on the debit side of the ledger. 
 
 "Therefore, the extravagant hopes raised throughout the continent, and within 
 this country, by Carter's promise to promote human rights must be tempered by 
 an understanding of these economic relationships." 
 
 ******* 
 
 "When State Department spokesman Hodding Carter was asked if it were true 
 that various U.S. Ambassadors in Latin America were privately assuring local 
 officials not to worry about all the human rights talk in Washington, that it was 
 really just a device for internal political consumption, he quite frankly replied 
 that this was a problem and that 'we are trying to deal with it,' " 
 
 (5) Many Members of Congress and private individuals and groups have 
 pointed out the miserable human rights record of the Torrijos regime and ques- 
 tion the Administration's ignoring of that record while pushing the now treaties. 
 Has Howard spelled out the reason? Please comment in full on his remarks. 
 
 (6) Can the Congress expect any change on the part of the Executive Branch 
 toward violations of Panamanians' human rights by the Torrijos government? 
 
 (7) Despite Torrijos' recent claims to be ameliorating his authoritarian stance, 
 what provisions in the new treaties guarantee that once they are ratified, he 
 would reimpose the same, or even greater, oppression? 
 
215 
 
 Questions 1 through 4. 
 
 Answers. Questions 1 through 4 concern views and recommendations of the 
 Commission on United States-Latin American Relations. As this is a private 
 organization, such questions should be directed to the Commission itself. 
 
 Question. 5. Many Members of Congress and private individuals have pointed 
 out the miserable human rights record of the Torrijos regime and question the 
 Administration's ignoring of that record while pushing the new treaties. Has 
 Howard spelled out the reason? Please comment in full on his remarks. 
 
 Answer. The U.S. Government has by no means ignored the human rights 
 situation in Panama. While the record is mixed, the Department of State does 
 not view that record as "miserable". As required by law, we have reviewed 
 Panama's performance on human rights just as carefully as we have that of 
 other countries in Latin America. We have also expressed our deep interest in 
 human rights to the Panamanians through our Embassy. Ambassador Jorden 
 has said nothing to the Panamanians that might lead them to believe that the 
 United States interest in human rights is anything but serious and sincere. 
 
 It is true that allegations of human rights violations in Panama have been 
 made by certain individuals and groups. It is worthwhile to note, however, 
 that Amnesty International, a respected non-governmental organization con- 
 cerned with human rights, did not include a section on Panama in its reports 
 for 1975-76 and 1977. 
 
 We will soon be submitting an updated report to Congress on human rights 
 in Panama which will contain a detailed assessment of conditions there as we 
 see them. 
 
 For another assessment of the human rights situation in Panama, you may 
 wish to read the report of the Inter-American Human Rights Commission, 
 based on its visit to Panama late in 1977, at Panama's invitation. This report 
 will probably be completed in the first part of this year. 
 
 Question 6. Can the Congress expect any change on the part of the Executive 
 Branch toward violations of Panamanians' human rights by the Torrijos 
 Government? 
 
 Answer. As noted above, we have expressed our sincere interest in human 
 rights to the Panamanians. We have been gratified by the positive steps that 
 the government has taken recently in rescinding Decree Laws 341 and 342 
 relating to certain restrictions on individual liberties. For the future, we intend 
 to continue a dialogue with the government of Panama on human rights matters 
 and will encourage it to maintain the momentum of recent progress. There will 
 be no change in our position in this regard. 
 
 Question 7. Despite Torrijos' recent claims to be ameliorating his authori- 
 tarian stance, what provisions in the new treaties guarantee that once they are 
 ratified, he would not reimpose the same, or even greater, oppressions? 
 
 Answer. The provisions of the new Treaties do not address the question of 
 human rights. 
 
 While one cannot guarantee the behavior of a foreign government in the fu- 
 ture, we believe that implementation of these Treaties will be accompanied by 
 improved economic development as well as closer and more cooperative ties 
 to the United States. Panama, therefore, should better tend toward democracy 
 and respect for human rights than it would were the Treaties to fail ratification. 
 
 IV 
 
 In July 1977, the Atlantic Monthly carried an article entitled "The Trilateral 
 Connection" by Jeremiah Novak. I quote several paragraphs : 
 
 "For the third time in this century a group of American scholars, businessmen, 
 and government officials is planning to fashion a new world order. Discouraged 
 by UN inadequacies, disheartened by chaos in the Bretton Woods institutions 
 (IMF and the World Bank), and worried about the United States' waning 
 strength, these men are looking to a 'community of developed nations' to coordi- 
 nate international political and economic affairs. 
 
 " 'After every major war in this century, Americans sought a new world order. 
 Wilson pushed the League of Nations; Roosevelt and Truman constructed the 
 UN-Bretton Woods system : and now, after Vietnam, Jimmy Carter gives us the 
 Trilateral plan.' So said C. Fred Bergsten, assistant secretary of the treasury and 
 one of sixteen top Carter appointees who belong to the Trilateral Commission. 
 All sixteen represent a deeply internationalist tradition that is part of the eastern 
 American establishment. 'Liberal internationalism is our creed,' said Bergsten. 
 
216 
 
 "And Jimmy Carter is its prophet. Carter is a charter member of the Tri- 
 lateral Commission and an advocate of its basic internationalist viewpoint." 
 
 ******* 
 "Brzezinski's 'Between Two Ages,' published in 1970, in which Brzezinski, now 
 national security adviser, formed the concept of 'a community of developed na- 
 tions' that would direct the world to new levels of freedom, human rights, and 
 economic progress." 
 
 ******* 
 "Brzezinski's community would include not only the United States, Western 
 Europe, and Japan, but eventually all other 'advanced nations,' even communist 
 ones. The emphasis is on 'developed' and 'advanced.' As Richard Cooper, who 
 along with Brzezinski is a key architect of Trilateralisin, wrote in a recent 
 Trilateral paper, 'Only those nations whose decisions can affect the whole group 
 should be admitted.' " 
 
 ******* 
 "Brzezinski convinced Huntington Harris, a Brookings Institution trustee, to 
 fund a series of Tripartite Studies. Joining Brookings scholars were thinkers 
 from the Japanese Economic Research Center and the Economics Research 
 Center and the European Community Institute of University Studies. The re- 
 sults of these stuoUes influenced David Rockefeller to found the Trilateral Com- 
 mission. According to his own testimony Rockefeller had begun calling in 1072 
 for the establishment of a Trilateral Community. He broached the subject at the 
 Bilderberg Conference of corporate leaders, where it found immediate accept- 
 ance. Among those in attendance was Michael Blumenthal, now secretary of 
 the treasury." 
 
 ******* 
 
 "As early as May 1975, Brzezinski, at a Trilateral Commission meeting in 
 Kyoto, hailed Carter as 'one political leader with the courage to speak forth- 
 rightly on difficult political issues.' And Peter Bourne, Carter's former deputy 
 campaign chief, has been quoted as saying, 'David Rockefeller and Zbig have 
 both agreed that Carter is the ideal politician to build on.' " 
 
 ******* 
 
 "The Trilateralists' emphasis on international economics is not entirely dis- 
 interested, for the oil crisis forced many developing nations, with doubtful re- 
 payment abilities, to borrow excessively. All told, private multinational banks, 
 particularly Rockefeller's Chase Manhattan, have loaned nearly $52 billion to 
 developing countries. An overhauled IMF would provide another source of credit 
 for these nations, and would take the big private banks off the hook." 
 
 QUESTIONS 
 
 (1) What developments have occurred to give rise to Novak's term "chaos in 
 the Bretton Woods institutions (IMF and the World Bank)"? 
 
 (2) In essence, is the core of the Trilateral Plan for a New World Order what 
 Xovak describes it to be quoting Bergsten, Brezezinski, and Cooper? 
 
 (3) Is it correct that David Rockefeller founded the Trilateral Commission? 
 
 (4) (a) What is the Bilderberg Conference of corporate leaders where Novak 
 says David Rockefeller broached the idea and got immediate acceptance? 
 
 (&) Who were the corporate leaders present who accepted the idea ? 
 (e) What was that Conference and its purpose and where was it held? 
 (d) How often and where has it been held? 
 
 (c) Has this or any other Bilderberg Conference sought to influence the world's 
 financial order and the International banking system in any way? 
 
 (5) How would the Trilateral Commission overhaul the IMF? 
 
 (6) How would this "lake the big private banks off the hook" in regard to their 
 nearly $52 billion loans to "developing nations with doubtful repayment abilities," 
 such as Panama? 
 
 The Department suggests that questions 1-6 relating to the Trilateral Commis- 
 sion, its founding, objectives, etc., be referred to the Commission itself. 
 
 V 
 
 A memorandum from the United States Embassy in Panama to the State 
 Department dated October 26, 1976, was inserted in the Congressional Record 
 
217 
 
 by Senator Helms of North Carolina on Feb. 22, 1977 (S2819ff). Under ••com- 
 ments,'' 1 the following two paragraphs appears in that memorandum : 
 
 "(A) Panama's high wages, subsidies, and consumer imports — together with a 
 moderate tax burden and little public saving — permit a standard of living which 
 no longer appears to be supportable by Panama's inefficient domestic production. 
 
 "(B) Increased external financial flows per se, regardless of concessionary, 
 permit Panama to defer grappling with the core problem of low productivity until 
 a later date when the problem will probably have worsened, unless such financing 
 bears specifically on some aspect of costs. Indeed, much of the capital inflow of 
 the past three years has aggravated Panama's economic malaise by exacerbating 
 its debt service burden without enhancing overall productivity. Moreover, total 
 inflows greatly exceeded the current account deficit of Panama's balance of pay- 
 ments, resulting in large negative "errors and omissions" (around $100 million 
 annually) most of which probably represented outflows of domestically-owned 
 capital." 
 
 (1) According to the memorandum, the foreign loans made to Panama have 
 increased the debt service burden without increasing productivity and therefore 
 Panama's ability to repay the loans. Does this still hold true today? 
 
 (2) If it does, why would increased loans to Panama — including the economic 
 package agreed upon in connection with the new treaties — have any different 
 effect? 
 
 See Appendix G. 
 
 VI 
 
 Senator Henry M. Jackson, in a foreword to a Committee Print, April 5, 1977, 
 of his Permanent Subcommittee on Investigations of the Senate Committee on 
 Governmental Affairs, entitled "The Rising Soviet and East European Debt to 
 the West," stated : 
 
 "Large-scale loans to the Soviet Union and the East European countries were 
 once thought of as a way to gain 'leverage' over these governments ; what may 
 be happening instead is that the debtors are on the verge of obtaining leverage 
 over Western governments by the substantial interest in (repayment that the 
 Western banking system may be acquiring." 
 
 Senator Jackson's observation parallels that expressed in the Church Report 
 quoted in my opening statement regarding the leverage Zaire held and exerted 
 against Citibank. 
 
 Question 1. Can you positively assure the Subcommittee that Panama — 
 
 (a) is not doing the same thing to the United States banks, 
 
 ( b ) has not already done it, or 
 
 (c) will not do it in the future? 
 
 Answer. U.S. banks have outstanding loans of approximately $355 million to 
 the Government of Panama. The decision to extend these loans was made by the 
 banks on the basis of commercial considerations. The Government of Panama 
 has not obtained any leverage over the Government of the United States as a 
 result of these commercial bank transactions, nor will it have any in the future. 
 
 Question 2. Provide for the record all information available relating to loans 
 to the Republic of Panama, if any, from the Soviet Bloc of Socialist countries. 
 
 Answer. The Department of State is not aware of any loans to the Republic 
 of Panama from the Soviet Union or other Communist countries. 
 
 Questions 3 and 4. Discuss any past negotiations for such loans to Panama that 
 fell through. Provide detailed information on the very recent, and perhaps con- 
 tinuing negotiations for increased trade between Panama and the Soviet Bloc 
 and loans to Panama that may be contemplated in the discussions. 
 
 Answer. A Soviet trade delegation visited Panama in July of 1977. The an- 
 nouncement which followed that visit indicated that a number of projects had 
 been discussed during the delegation's visit. However, no agreements were con- 
 cluded as a result of the visit. There is no indication that the talks have been 
 pursued, nor do any loans to Panama by the U.S.S.R. or other communist coun- 
 tries appear to be in the offing. . - ■ 
 
 Question 5. To what extent could the Socialist Bloc's lending institutions 
 compete with U.S. and other free world banks operating in Panama? 
 
 Answer. All foreign banks in Panama operate under that country's banking 
 laws and. in accordance with the type of license they hold, complete with others 
 so licensed. 
 
 1 See Appendix I, B (Exhibit 4). 
 
218 
 
 The Banco Nacional of Cuba recently established a branch in Panama. It is too 
 early to make a judgment as to whether and to what extent it can compete with 
 other banks operating there. The present activities of the Banco Nacional do 
 not extend to traditional banking operations, either internationally or within 
 Panama, only to certain very limited activities of a representational nature. 
 
 VII 
 
 The Wall Street Journal, April 14, 1977, featured an article by staff reporter 
 Charles N. Stabler headlined: "Developing Debts — Poorer Countries Face Test 
 of Their Ability to Repay Bank Loans — Total Due Continues to Rise : Big Banks 
 are Confident, But Some Doubts Persist" 
 
 Stabler wrote : 
 
 "But many poor nations — and their bank creditors — have a more pressing 
 problem than just the size of the debt. It's that the amount the countries have 
 to pay back is increasing each year. The question arises whether numerous coun- 
 tries might fail to meet the payments, threatening the solvency of the banks that 
 lent them the money. Executives of major banks say they are confident that won't 
 happen although some wouldn't be surprised if a few governments ran into 
 trouble. 
 
 "Estimates vary, but there is plenty of evidence that loan-repayment obliga- 
 tions of poorer countries will soar this year and for the following several years. 
 Counting debts not only to commercial banks, but also to such official lenders as 
 the World Bank, economists at Morgan Guaranty Trust Co. of New York figure 
 that developing countries without oil will have to repay $15 billion this year, com- 
 pared with last year's $12 billion. The economists see $18 billion coming due next 
 year and $20 billion in 1980. 
 
 ******* 
 
 "What worries the gloomiest analysts is that enough countries could default on 
 enough debt to threaten the confidence of investors and depositors in one bank or 
 several. Large withdrawals of funds could, in turn, cause a contraction of the 
 credit markets. Then, the script goes, the International Monetary Fund and major 
 nations' central banks would, have to bail out the banking system with large 
 money transfusions, leading ito runaway inflation and ultimately to economic 
 collapse. 
 
 ******* 
 
 "In the view of Alfred Miossi, executive vice president for international serv- 
 ices at Chicago's Continental Bank, 'Almost certainly it will be necessary to re- 
 schedule or restructure the loans to some countries,' giving them more time to 
 pay. 
 
 This isn't something the banks welcome, but it is a standard element of their 
 business. In the past 15 years, loans have been rescheduled for Argentina, Chile, 
 Brazil, Peru and Uruguay. In no case, bankers say, have they lost a nickel. 
 
 "Indeed, bankers expect to continue expanding their lending to credit-worthy 
 developing countries. 'To cut back on development loans would take away the 
 means of earning the funds to repay existing debt,' Mr. Miossi says. 
 
 "Some of the new loans, it seems clear, will be used to pay off old ones. In the 
 market for Eurodollars, or dollars held at banks outside the U.S., a recent analy- 
 sis found that one dollar of every four borrowed by developing countries this 
 year will go for repayment of debt. By 1980 it will be one out of of two, according 
 to economists at Amex Bank Ltd., a London affiliate of American Express Ot>rp. 
 And by 1985, of every three Eurodollars borrowed, two will be used to repay 
 existing debt, the economists say. 
 
 "This means increasing borrowing for years to come and a narrowing net flow 
 of funds to the borrowers." 
 
 Question J. Is Panama's indebtedness likely to progress in line with these 
 general estimates 
 
 Answer. Panama's debt situation will depend to a large degree on developments 
 which cannot now be predicted with accuracy. Panama is of course subject to 
 the same types of financial stress as those in evidence in other developing coun- 
 tries ; but. the extent to which these may be offset by circumstances peculiar to 
 Panama cannot now be foreseen. 
 
 Question 2. What has been the ratio of Panama's total foreign debt to its 
 gross national product annually since 1968? 
 
219 
 
 Answer. 
 
 [In millions] 
 
 Foreign debt GNP Percent of GNP 
 
 1970 140.6 1,019.4 13.8 
 
 1971... 173.3 1,125.7 15.4 
 
 1972 214.9 1,264.1 17.0 
 
 1973.. 296.9 1,430.2 20.8 
 
 1974.. 358.9 1,779.7 20.2 
 
 1975 427.4 1,913.6 22.3 
 
 1976. 510.2 2,006.0 25.4 
 
 Note: Data for 1968 and 1969 not available at present. 
 
 Sources: "Informe del Controlor General de la Republica, 1977;" Panama en Cifras, 1974-77." 
 
 Question 3. Project and quantify from the present time beyond year 2000 
 utilization of Panama — if its present economy remains stagnant — of likely new 
 loans to pay off increasing debt. 
 
 Answer. We are unable to make such a projection. Loans which Panama might 
 or might not need after the year 2000 which depend on a number of factors 
 (such as the country's internal development plans) about which obviously no 
 decisions have been made at this time. 
 
 Question //. Make a comparative projection after year 2000 for Panama with 
 total control of the Panama Canal. 
 
 Answer. This will depend on the usage of the Canal in the 21st century and 
 on the strength of other sectors of the Panamanian economy. We cannot make 
 such forecasts on this matter. 
 
 Question 5. If Panama should prove incapable of operating the Canal without 
 a loss, is the U.S. bound by the new treaties — or in any other way — to subsidize 
 the waterway (a) to the break-even point? (b) to some profitable rate? 
 
 Answer. In the event that some time after the year 2000 the Canal operation 
 should become a financial burden to Panama, naturally Panama would consult 
 with us (and probably with other major users) with a view to alleviating the 
 situation. While the Neutrality Treaty commits the United States and Panama 
 to a regime of neutrality which provides that the Canal will be open at all 
 times, we are not obligated to subsidize the waterway after Panama assumes 
 responsibility for its operation. 
 
 VIII 
 
 The New York Times for December S and 9, 1969, carried the following stories 
 from New York and Washington describing a mysterious three-day mission to 
 Panama by Joseph F. Carlino, an intimate of Nelson Rockefeller, which neither 
 the State Department in the Nation's Capital nor the U.S. Embassy in Panama 
 knew anything about until it had ended : 
 
 Carlino Sent on Panama Mission 
 
 rockefeller envoy advised general on coming elections 
 
 (By Linda Charlton) 
 
 Former State Assembly Speaker Joseph F. Carlino was sent by Governor 
 Rockefeller to Panama last week to advise Brig. Gen. Omar Torrijos, the leader 
 of the provisional government, and other officials on how to set up a represent- 
 ative government. 
 
 Mr. Carlino, a Republican, served as Speaker of the Legislature's lower house 
 from 1959 until his defeat in 1964 for his Assembly seat from Long Beach, L.I. 
 lie has been in private law practice since. 
 
 He said he had made his three-day trip to Panama City at the request of 
 Governor Rockefeller. "On an informal basis, I was advising and making sug- 
 gestions of a governmental nature," he said. 
 
 Mr. Carlino would identify the persons with whom he met in his hotel only as 
 "top governmental officials," but a high Government source in Panama said that 
 Mr. Carlino had talked with Nicolas Ardito Barletta, the country's planning 
 director, and General Torrijos. 
 
 25-605 O - 78 - 15 
 
220 
 
 General Torrijos, then a colonel, was a leader of the coup d'etat that overthrew 
 Panamanian President Arnulfo Arias in October, 1968, only 11 days after Mr. 
 Arias had been sworn in following his election. 
 
 The ruling junta, nominally headed by Col. Jose M. Pinilla, has promised free 
 elections to name members to a constituent assembly to replace the present 
 system of rule by decree. The elections are to take place between Dec. 15 and 30, 
 1970. 
 
 General Torrijos said that he had reaffirmed this pledge to Governor Rocke- 
 feller during the Governor's May visit to Panama. 
 
 The visit was part of a 20-nation Western Hemisphere fact-finding tour under- 
 taken by Mr. Rockefeller at the request of President Nixon. 
 
 The Governor's interest in Latin America dates back many years — his family 
 has extensive business interests there and he served as the United States co- 
 ordinator for Inter-American Affairs from 1940 to 1944, and as Assistant Secre- 
 tary of State for American Republic Affairs from 1944 to 1945. 
 
 A spokesman for the Governor, asked about Mr. Carlino's trip, said he had "no 
 information and no comment on that." 
 
 "Unusual Sort of Request" 
 
 A State Department official familiar with Panama said, "We hadn't heard 
 about it." 
 
 Such a mission, he said, is "not the kind of thing we generally do, an unusual 
 sort of request, but nothing particularly shocking." 
 
 He added, "We would like very much to see the Panamanians get back to 
 a democratic procedure." 
 
 A White House spokesman said that although the Governor conferred with Ad- 
 ministration officials frequently, he did not know if the matter of Mr. Carlino's, 
 trip to Panama had been discussed at any time. 
 
 The initial request for the former Assembly Speaker's advice came from 
 Panamanian officials with whom he and Governor Rockefeller had met in New 
 York "a month or so ago," Mr. Carlino said. 
 
 Mr. Carlino said that he did not know whether the Governor had conferred 
 with the State Department. "I don't know who made the request to him, but 
 he requested me to go," he said. General Torrijos and Mr. Ardito met with the 
 Governor and Mr. Carlino in New York in the late summer, according to Pana- 
 manian sources. 
 
 The area in which his help was solicited, Mr. Carlino said, was that of how 
 what he called the "government in transition" could "develop a representative 
 government in which people can participate." 
 
 "Not Politically Sophisticated" 
 
 This included, he said, questions of "political structure," adding : "The group 
 of people in Panama are not politically sophisticated — they've never conducted 
 an election. The political-party question, how do you conduct elections, that sort 
 of thing." 
 
 Accompanying him on the trip, Mr. Carlino said, was his brother, Lorenzo, 
 who lived in Venezuela for 25 years as a businessman and was fluent in Spanish 
 and "intimately conversant" with Latin America. 
 
 His own command of Spanish, Mr. Carlino said, is "just fair, but I can under- 
 stand everything." He said that he had not paid for making the trip and that 
 his expenses "haven't been paid yet — I assume somebody will pay them." 
 
 Mr. Carlino said he was uncertain whether he would return to Panama for 
 further talks. "It's only a beginning on this one project," he said. "I assume they 
 require more attention." 
 
 He said that he was making a report to the Governor and that lie felt that 
 the mission was "an important thing." 
 
 Mr. Carlino said lie did not know whether it had been cleared with the Admin- 
 istration, but added, "I assume that what Governor Rockefeller was requesting 
 was appropriate." 
 
 No account of the meetings appeared in the Government-controlled press in 
 Panama. 
 
 The Governor undertook his Latin- American tour last spring at the request of 
 President Nixon to determine "how the United States can improve its policies 
 and increase the effectiveness of its cooperation." 
 
 In a number of countries, the Governor was greeted by violent protests, and he 
 was requested not to visit two of the countries of his itinerary. His visit to 
 Panama was without incident, although he was heavily guarded. 
 
221 
 
 The Governor and 25 advisers drafted a 137-page report entitled "Quality of 
 Life in the Americas" that was submitted to Mr. Nixon on Aug. 30 and made 
 public Nov. 10. The President in his Oct. 31 Latin-American policy speech, said 
 that the Governor's recommendations had "substantially shaped" the Adminis- 
 tration's thinking. 
 
 It is known, however, that several of Mr. Rockefeller's ideas were not accepted, 
 including a recommendation that a new Cabinet-rank post of Secretary for 
 Western Hemisphere Affairs be created. 
 
 Carlino Mission Puzzles Capital 
 state department declines comment on panama trip 
 (By Tad Szulc) 
 
 Washington, December 8. — The State Department appeared to be perplexed 
 today over last week's political mission to Panama undertaken by the former 
 Speaker of the New York State Assembly, Joseph F. Carlino, on Governor Rocke- 
 feller's recommendation. 
 
 Mr. Carlino said in a telephone interview today that the Governor had been in 
 "constant communication'' with the Nixon Administration in Washington over 
 plans for his trip to advise the Panamanian military junta, led by Brig. Gen. 
 Omar Torrijos, on restoring representative government. The State Department 
 declined formal comment on the matter, but officials privately took issue with 
 Mr. Carlino's statement. 
 
 The officials acknowledged that Governor Rockefeller, who is a senior adviser 
 to President Nixon on policies toward Latin America, might have informed the 
 White House of the Carlino trip, which came to light over the weekend. But, they 
 said, this information, if indeed provided, never reached the State Department. 
 
 The United States Embassy in Panama was likewise unaware of Mr. Carlino's 
 presence in the country and of his meeting with the top leaders, including Gen- 
 eral Torrijos. 
 
 The disclosure of Mr. Carlino's three-day trip, from Nov. 30 to Dec. 3, coincided 
 however with reports that the Administration was considering resuming the 
 stalled talks with the Panamanian Government over the renewal of the Panama 
 Canal Treaty. 
 
 Negotiations in Abeyance 
 
 The impression created in the State Department was that the Panamanian 
 junta had accepted Governor Rockefeller's suggestion that Mr. Carlino — a fellow 
 Republican now in private law practice — act as an adviser on restoring a demo- 
 cratic system as a means of hastening the resumption of the canal talks. 
 
 These negotiations have been in abeyance since 1967 when a draft treaty was 
 produced but neither Government moved to act on it. 
 
 After a military coup de'etat in Panama in October, 1968, ousted the constitu- 
 tional Government of President Arnulfo Arias, the policy here was to await the 
 restoration of representative rule there before resuming the talks. 
 
 But, diplomats, said, the White House asked the State Department early last 
 September for a status report on the canal talks in what many officials saw as 
 the prelude to a resumption of the discussions. 
 
 There was speculation here that the regime of General Torrijos had invited 
 Mr. Carlino to Panama to "gain respectability" in Washington's eyes and pave 
 the way for new negotiations. 
 
 Governor Rockefeller met General Torrijos last May in Panama on one of the 
 Latin-American tours he undertook to prepare a report on hemisphere policy for 
 President Nixon. 
 
 The Governor saw General Torrijos again at his New York City office on 
 Sept. 26 — and it was on this occasion, according to Mr. Carlino, that the Governor 
 introduced the Panamanian leader to him. The specific suggestion for the Panama 
 mission was made by the Governor during that meeting, Mr. Carlino said today. 
 
 General Torrijos then spent the evening with Governor Rockefeller at his 
 home in Westchester, informants here said. 
 
 The Provisional Panamanian President visited New York between Sept. 25 
 and Oct. 2 in a private capacity before going to Fort Bragg, N.C., to attend the 
 Ninth Conference of the American Armies at the invitation of Gen. William C. 
 Westmoreland, the Army Chief of Staff. 
 
222 
 
 While in New York, General Torrijos had a formal meeting with Secretary 
 of State William P. Rogers, who was attending the opening session of the 
 United Nations General Assembly. But, officials here said, the question of the 
 Carlino mission did not come up. 
 
 Most of General Torrijos' time in New York was taken up in discussions with 
 banks and financial institutions concerning assistance to Panama. On Sept. 25, 
 the day before his meeting with Governor Rockefeller and Mr. Carlino, the gen- 
 eral attended a dinner given for him by Goldman Sachs, a New York banking 
 and investment concern, which last August placed a $15-million bond issue on 
 behalf of Panama's national bank. 
 
 While Mr. Carlino insisted that Governor Rockefeller informed the Adminis- 
 tration of his Panama mission, the Governor's office said yesterday it had "no 
 information and no comment" on it. State Department officials learned of it 
 from newsmen over the weekend, after Mr. Carlino's return. 
 
 Mr. Carlino said he had not been in contact with the United States Embassy 
 in Panama as he met with top officials led by General Torrijos. Today the State 
 Department was understood to have dispatched telegrams to Ambassador Rob- 
 ert M. Sayre apprising him of Mr. Carlino's activities in Panama. 
 
 Governor's Envoy to Panama 
 joseph francis carlino 
 (By Emanuel Perlmutter) 
 
 Three years ago, when New York City was preparing to increase real estate 
 taxes, Mayor Lindsay complained that realty interests were using "high priced 
 talent" to defeat the effort. 
 
 An aide to the Mayor said that Mr. Lindsay meant Joseph Francis Carlino, 
 former Republican speaker of the Assembly and a registered lobbyist for the 
 Citizens Tax Council, which had been set up to fight the tax rise. Further, the 
 New York Racing Association, which runs thoroughbred racing in the state, 
 reported last May that it had paid Mr. Carlino $25,000 for his services during 
 the 1969 legislative session. 
 
 Mr. Carlino has not held political office since he was defeated for re-election 
 in the Republican debacle of 1964, after he had represented Long Island in the 
 Assembly for 20 years. But as a lobbyist and man of connections, the 52-year-old 
 lawyer has clearly lost none of his powers financially or politically. 
 
 Asked to Give Advice 
 
 "He's got a million-dollar disposition," a Republican office-holder says. 
 
 Last week, Governor Rockefeller turned again to Mr. Carlino, sending him on 
 a diplomatic mission to Panama. 
 
 Mr. Carlino said that he had been asked by the Governor to advise the pro- 
 visional government of Panama how to set up a representative regime "in 
 which the people can participate." Mr. Carlino was accompanied by his brother 
 Lorenzo, a businessman who lived in Venezuela for 25 yeaTS, speaks Spanish 
 fluently and is "intimately conversant" with Latin America. 
 
 "I have no political ambitions," Joseph Carlino said in an interview yesterday 
 in Mineola, L.I. "I work hard and I'm doing all right. I'm kept pretty busy and 
 I like it." 
 
 Mr. Carlino has long had a law office in Mineola. He is also a partner in the 
 firm of Brown, Carlino & Emmanuel of 90 Park Avenue. According to the New 
 York Department of State, the Park Avenue firm received $10,000 from Trans- 
 america Corporation for "drafting and passage" of insurance company legislation 
 in the 1969 legislative session. 
 
 In his days in the legislature, Mr. Carlino was usually expected by his close 
 friend Governor Rockefeller on line up support for Executive-sponsored measures. 
 His personality helped A bandsome man, affable, gregarious and a fluent shaker. 
 Mr. Carlino was respected for his political canniness and much sought out for 
 BOdal gatherings. 
 
 There were times when his activities as a lawyer came into collision with his 
 duties as a legislator, but Mr. Carlino managed t<> extricate himself without them. 
 
 As an example, in 1962, he resigned as director of a concern that built fallout 
 shelters shortly after he had maneuvered through the Assembly a $100-million 
 appropriation for fallout shelter construction. The Assembly held a hearing on 
 
223 
 
 the matter and, with only one dissenting vote, acquitted him of conflict of interest. 
 He received a standing ovation after the vote. 
 
 He Attended Fordham 
 
 Although he has spent most of his life on Long Island, Mr. Carlino was born 
 June 13, 1917, on Manhattan's Lower East Side, son of an Irish mother and an 
 Italian father. He was graduated from St. John's University and the Fordham 
 Law School and almost immediately entered on a political career. 
 
 He and his wife, the former Joanne F. Hefferman, live by the water in Long 
 Beach. He has a married daughter, a son who is on leave as mathematics pro- 
 fessor while studying on a National Science Foundation Scholarship, and another 
 son who is a college sophomore. 
 
 He appears to be in good physical shape and keeps that way by golfing, swim- 
 ming in the ocean and playing tennis. 
 
 QUESTIONS 
 
 ( 1 ) In view of the total ignorance of the State Department of the Carlino Mis- 
 sion while it took place, please submit — 
 
 (a) all communications to and from the Embassy in its regard, 
 ( & ) all internal memos in its regard, and 
 
 (c) all communications from Mr. Rockefeller or Mr. Carlino, or from 
 other persons regarding the mission to State. 
 
 (2) Did the Carlino mission have anything to do with resumption of Panama 
 Canal Treaty talks, as the New York Times reported was an early impression 
 at the Department? 
 
 If so, detail the actual relationship of the mission to the treaty negotiations. 
 
 (3) Name all the government officials and any other Panamanians the Depart- 
 ment later learned Mr. Carlino met with in Panama. 
 
 (4) Why would Torrijos invite a nationally unknown figure from New York 
 out of elected office for five years to "gain respectability" in the eyes of Wash- 
 ington, D.C.? 
 
 (5) Did Mr. Carlino ever make public any plan for restoration of Panamanian 
 democracy that he may have submitted to the Torrijos regime? 
 
 Did Mr. Rockefeller, or anyone else? 
 If so. please provide it for the record. 
 
 (6) Did Carlino make any subsequent trips to Panama — 
 (a) for Mr. Rockefeller ? 
 
 ( & ) for his law firm or for a client 
 
 (7) Did Carlino or his firm, Brown, Carlino, and Emmanuel, or any other firm 
 with which Carlino may have been associated with, ever represent — 
 
 (a) any Panamanian government or private interests in any way what- 
 ever? 
 
 (&) any bank or other financial institution that had assets in Panama or 
 business dealings with the Government or citizens of Panama? 
 
 (8) Did Carlino's brother, Lorenzo, who also was on the mysterious mission, 
 have any business connections with any such entity ? 
 
 (9) Submit Department communications and publications regarding Torrijos' 
 1969 trip to the United States. 
 
 (10) List all available information on banks and other financial institutions he 
 visited or consulted with in the States. 
 
 (11) Was his consultation in "a private capacity" as the Times reported? If 
 so, why ? 
 
 (12 Were either Nicolas Ardito Barletta or Omar Torrijos in the States at an 
 earlier date than the September 25-October 2 trip to New York, in connection 
 with the $15 million bond issue Panama issued in August, 1969? 
 
 (13) Had Goldman Sachs ever previously assisted in extending loans to Pan- 
 ama or in placing bond issues for Panama before August 1969? 
 
 (14) Is there any truth to the rumor that there is some family relationship 
 between the Torrijos clan and Goldman Sachs or some other banking interests in 
 the United States? 
 
 If so, what is the relationship? 
 
 (15) Provide all information as to bonds issued by or on behalf of Republic of 
 Panama since 1960 identifying the institution handling the issue, maturity dates, 
 interest rates, etc., and any data available as to current holders of large amounts 
 of such bonds. 
 
 (16) Detail how the annuity and the method by which it is paid to Panama 
 by the United States relates to any obligations on Panamanian bonds. 
 
224 
 
 (17) What has been the investment ratings of those bond issues from 1960 to 
 the present? 
 
 (18) On December 15, 1969, Colonel Amado Sanjur, who was Omar Torrijos' 
 number-two man in the Guardia Nacional, declared Torrijos persona non grata 
 while he was on vacation in Mexico City with Demetrio Lakas, now President of 
 Panama, and said a new government would be formed. This effort failed. Torrijos 
 returned, and Sanjur was jailed. Later he escaped to the Canal Zone and was 
 given political asylum in the U.S. Since Carlino's visit to Panama preceded this 
 abortive coup by only a few days, and his ostensible mission was to "develop a 
 representative government," the question arises : 
 
 Did Carlino meet with Colonel Sanjur in Panama? 
 
 The New York Times articles concern events that were alleged to have taken 
 place in 1969. Available records at the Department of State do not indicate 
 that the contents of these articles are correct. 
 
 Concerning questions 2, 3, 4, 5, 6, 7, 8, 10, 11, 12 and 18, we suggest that 
 you make inquiry directly to Mr. Carlino or his law firm. Questions 13 and 14 
 might be addressed to the firm of Goldman Sachs. Questions 1 and 9 are properly 
 the subject of requests under the Freedom of Information Act. Replies to ques- 
 tions 15, 16 and 17 follow : 
 
 Question 15. Provide all information as to bonds issued by or on behalf of the 
 Republic of Panama since 1960 identifying the institution handling the issue, 
 maturity dates, interest rates, etc., and any data available as to current holders 
 of large amounts of such bonds. 
 
 Answer. Since 1960, Panama has issued one series of external bonds dated 
 December 19, 1962. The principal amount of this issue was $9,024,000 and it 
 bears interest at 4.5 percent annually. The maturity date of these bonds is 2001. 
 The entire series was sold to the Prudential Insurance Co. which currently holds 
 the bonds. These bonds are not traded on the open market. 
 
 Pursuant to a fiscal agency agreement between the Republic of Panama and 
 the Chase Manhattan Bank, Panama has given the United States irrevocable 
 instructions to pay to Chase Manhattan $500,000 of the annuity due to Panama 
 under the 1955 Treaty in order to provide the payment of interest on and the 
 retirement of the bonds. There is outstanding $7,413,659 on this issue. 
 
 In addition to the 1S62 issue, Panama has issued numerous series of internal 
 bonds primarily to finance capital improvement projects. A list of these bond 
 issues (under the heading "deuda interna") is attached. We have no informa- 
 tion as to the identity of the holders of these bonds. 
 
 DETALLE DE LA DEUDA PUBLICA CONTRACTUAL AL 31 DE DICIEMBRE DE 1976 
 [From the Informe del Contralor General de la Republica, 1977| 
 
 Detalle 
 
 Tasa de 
 intergs 
 (porcen- 
 taje) 
 
 Fecha 
 de emi- 
 
 sion o Fecha 
 contra- de naci- 
 
 taci6n miento 
 
 Emision o 
 contrataci6n 
 autonzada 
 
 Suscripci6n 
 suma adqui- 
 rida al 31 
 de diciembre 
 de 1976 
 
 Estado de la 
 deuda al 31 
 de diciembre 
 de 1976 
 
 Deuda Externa: 
 Mack Trust del Ministerio de 
 
 Desarrollo Agropecuario. . 6.5 1974 1978 41,895.00 41,895.00 17,955.00 
 Cfa Panamena de Maq., 
 
 S.A.— MIDA 1.5 1975 1981 1,946,319.00 1,946,319.00 1,946,319.00 
 
 Subtotal Compra de 
 
 Equipo 16,570,455.88 16,013,680.55 6,341,928.93 
 
 Total Deuda Externa. 641,100,261.61 576,683,176.76 510,244,149.37 
 
 Deuda interna: 
 Bonos Conversi6n Caja 
 
 Seguro Social. 4.0 1953 1993 5,000,000.00 5,000,000.00 2,990,500.00 
 
 Do 4.0 1958 1998 8,920,000.00 8,920,000.00 6,392,000.00 
 
 Do 5.0 1961 1986 8,000,000.00 8,000,000.00 4,435,000.00 
 
 Do 4.5 1961 1991 5,878,000.00 5,878,000.00 3,949,000.00 
 
 Bonos Cuota Seguro Social. 6.0 1967 1987 10,000,000.00 10,000,000.00 6,900,000.00 
 
 Bonos Conversion Caja 
 
 Seguro Social 6. 1969 1994 28, 000, 000. 00 28, 000, 000. 00 23, 520, 000. 00 
 
 Bonos Cuota Seguro Social.. 6.0 1970 1990 7,000,000.00 7,000,000.00 5,700,000.00 
 Bonos Conversion Caja 
 
 Seguro Social... 6.0 1972 1992 22,212,700.00 22, 212,700.00 19,550,000.00 
 
 Subtotal Bonos Caja 
 
 Seguro Social 95,010,700.00 95,010,700.00 73,436,500.00 
 
225 
 
 DETALLE DE LA DEUDA PUBLICA CONTRACTUAL AL 31 DE DICIEMBRE DE 1976-Continued 
 [From the Informe del Contralor General de la Republica, 1977]— Continued 
 
 Fecha Suscripcion 
 
 Tasa de de emi- suma adqui- Estado de la 
 
 interes sion o Fecha Emisi6n o rida ai 31 deuda al 31 
 
 (porcen- contra- de naci- contrataci6n de diciembre de diciembre 
 
 Detalle taje) tacion miento autorizada de 1976 de 1976 
 
 Bonos Construcciones Naci- 
 
 onales"A" 6.0 1957 1977 1,850,000.00 1,850,000.00 78,450.00 
 
 Bonos Construcciones Naci- 
 
 onales"C** 6.0 1958 1983 530,000.00 530,000.00 213,450.00 
 
 Bonos Construcciones Naci- 
 
 onales 6.0 1963 1983 1,000,000.00 930,000.00 « 480, 100. 00 
 
 Do 6.0 1966 1986 1,150,000.00 1,135,200.00 1 768, 900. 00 
 
 Do 6.0 1967 1987 3,000,000.00. 2,441,500.00 " 1, 168, 100. 00 
 
 Bonos Construcciones Naci- 
 
 onales "A" 6.0 1968 1988 1,500,000.00 1,500,000.00 1,099,300.00 
 
 Bonos Construcciones Naci- 
 
 onales 6.0 1969 1989 6,570,000.00 5,542,350.00 » 2, 051, 150. 00 
 
 Bonos Construcciones Naci- 
 
 onales "B" 6.0 1968 1988 1,500,000.00 1,045,200.00 1 783, 700. 00 
 
 Bonos Escuelas PGblicas 
 
 "B" 6.0 1959 1979 745,000.00 735,000.00 1 145, 600. 00 
 
 Bonos Escuelas Publicas 
 
 "C" 6.0 1961 1981 1,000,000.00 984,700.00 1 334, 300. 00 
 
 Bonos Escuelas Publicas 
 
 "D". 6.0 1965 1985 300,000.00 298,190.00 i 165, 400. 00 
 
 Bonos Escuelas Publicas 
 
 "E" 6.0 1966 1986 1,800,000.00 1,799,370.00 1 1,183,890.00 
 
 Bonos Escuelas POblicas 
 
 "F". 6.0 1966 1986 200,000.00 200,000.00 132,400.00 
 
 Bonos Escuela Vocacional de 
 
 Chapala.-. 6.0 1967 1987 250,000.00 250,000.00 167,600.00 
 
 Bonos Escuelas Publicas 
 
 "G" 6.0 1967 1987 50,000.00 48,000.00 (') 
 
 Bonos Escuela Vocacional de 
 
 Chapala "B" 6.0 1967 1987 250,000.00 250,000.00 150,000.00 
 
 Bonos Escuelas Publicas . - ,„ „. 
 
 "H" 6.0 1967 1987 2,500,000.00 2,010,800.00 1,517,550.00 
 
 Bonos Escuela Vocacional de 
 
 LaChorrera 6.0 1967 1987 50,000.00 50,000.00 30,500.00 
 
 Bonos Universidad de 
 
 Panama "A" 6.0 1967 1987 500,000.00 267,700.00 » 177, 500. 00 
 
 Bonos Universidad de „„_ • „ 
 
 Panama "B" 6.0 1968 1988 500,000.00 500,000.00 367,500.00 
 
 B Tu7sos F H7m a anos. de .. Re ". 6.0 1965 1990 1,000,000.00 550,200.00 « 246, 200. 00 
 
 Bonos Electrificaci6n "A"... 6.0 1961 1981 2,150,000.00 2,150,000.00 532,700.00 
 
 Bonos Electrificacion "B".._ 6.0 1963 1983 400,000.00 400,000.00 ^0,600.00 
 
 Bonos Electrificaci6n "C"... 6.0 1965 1995 2,300,000.00 2,300,000.00 779,200.00 
 
 Bonos Electrificacion "D" . 6.0 1969 1999 1,000,000.00 1,000,000.00 835,000.00 
 
 Bonos Electrificacion "E".__ 6.0 1969 1999 119,600.00 119,600.00 107,000.00 
 
 ^BSulfr'-A" ^ Cr6dit ° 6.0 1961 1981 2,500,000.00 1,004,000.00 > 386, 500. 00 
 
 Xular-A-' 3 ^" 6 " 1103 . 6.0 1966 1986 1,701,770.00 1,700,000.00 > 1,092 800.00 
 
 Bonos IFHA "A" 6.0 1967 1987 1,000,000.00 999,000.00 671,900.00 
 
 Bonos IFHA"B" . 6.0 1967 1987 1,000,000.00 1,000,000.00 686,800.00 
 
 Bonos Frigorfico I FE . . 6. 1969 1989 1, 500, 000. 00 1, 500, 000. 00 1, 165, 000. 00 
 
 Bono FHA-C'' _ 6.0 1970 1990 1 000,000.00 1,000,000.00 791,300. 00 
 
 Bonos IFHA "D"""" ... 6.0 1971 1991 1,000,000.00 1,000,000.00 847,900.00 
 
 Bonos Garantla Bancaria::.. 6.0 1971 1996 2,000,000.00 2,000,000.00 2,000,000.00 
 
 Bo ( nos ( GaranUa Bancaria ^ ^ ^ 1(000 000 00 li000 ,000.00 1,000,000.00 
 
 ^(SENAPI) 6 ArteSa " ia 6.0 1972 1982 50,000.00 50,000.00 32,450.00 
 
 Bonos ifha -e";:;::::::: lo \m \m 1,000; 000. 00 1,000,000.00 914,800.00 
 
 Bonos Centro Femenino de _ „„„ „ ... ... oni nnn nn 
 
 Rehabilitacion 6.0 1961 1981 600,000.00 600,000.00 201,000.00 
 
 Bonos Multifamiliares:::::: 6.0 1963 1983 2,000',000.00 1,963,600.00 1 926, 100. 00 
 
 Bonos Garantia Bancaria W7g 2 ,000,000.00 1,989,000.00 1,989,000.00 
 
 Bonos SaIud"PODlica" , B ,T "" 6 1966 1986 700,000.00 362,600.00 1 194, 700. 00 
 
 BSSsSSdPfibKr-c"":: eo im \m 3,ooo',ooo.oo 3,000,000.00 2,177,100.00 
 
 B °s7ud™ 6.0 1967 1987 1,000,000.00 423,700.00 * 271, 500. 00 
 
 B °s7ud E p^ 6 1968 1988 450,000.00 147,800.00 1 64, 300 00 
 
 BonoJ ?SalSd PObl ka 6.0 1968 1988 900,' 000. 00 880,600.00 .660,700.00 
 
 B °ta° lla A do ''C"' 103 y AICa "" 6 1961 1986 2, 000, 000. 00 2, 000, 000. 00 580, 100. 00 
 
 B Tan,. A d"^^ 6.0 1966 1986 1,300,000.00 1,300,000.00 848,050.00 
 
 B T^.^^.. 0nm . PIC0S . 6.0 1968 1988 1,500,000.00 1,500,000.00 1,084,600.00 
 
 See footnotes at end of table. 
 
226 
 
 DETALLE DE LA DEUDA PUBLICA CONTRACTUAL AL 31 DE DICIEMBRE DE 1976— Continued 
 [From the informe del Contralor General de la Republica, 1977]— Continued 
 
 Fecha Suscripci6n 
 
 Tasa de de emi- suma adqui- Estado de la 
 
 interns si6n o Fecha Emision o nda al 31 deuda al 31 
 
 (porcen- contra- de naci- contratacion de diciembre de diciembre 
 
 Detalle taje) taci6n miento autorizada de 1976 de 1976 
 
 Bonos Juegos Olfmpicos 
 
 "B" 6.0 1968 
 
 Bonos Juegos Olfmpicos 
 
 **C" 6.0 1969 
 
 Bonos Juegos Olfmpicos 
 
 "D" 6.0 1969 
 
 Bonos Juegos Olfmpicos 
 
 "E" 6.0 1979 
 
 Bonos Juegos Olfmpicos 
 
 "F" 6.0 1969 
 
 Bonos Agrarios de la Re- 
 publica 4.0 i958 
 
 Bonos Agrarios 1.0 1969 
 
 Bonos Agrarios "B" 4.0 1969 
 
 Bonos Agrarios "A" 6.0 1972 
 
 Bonos Agrarios "B" 6.0 1973 
 
 Bonos Puente Rfo Pacora.... 6.0 1967 
 
 Bonos Puente de la Provin- 
 
 cia de Colon 6.0 1967 
 
 Bonos de Inversi6n 6.0 1973 
 
 Bonos Obras Publicas 
 
 Nacionales 6.0 1956 
 
 Bonos Rellenode Colon "A". 6.0 1966 
 
 Bonos Puerto de Aguadulce. 6.0 1967 
 
 Bonos Valorizaci6n "C" 6.0 1969 
 
 Bonos Valorizacion "B" 6.0 1963 
 
 Bonos Valorizaci6n "A" 6.0 1960 
 
 Bonos Previsi6n Social, Ha- 
 cienda y Contralorfa Gen- 
 eral 4.0 1955 
 
 Bonos Edificio Contralorfa 
 
 General 6.0 1964 
 
 Bonos Carretera Inter- 
 
 americana "B" 6.0 1961 
 
 Bonos Carretera Interior de 
 
 la Republica "A" 6.0 1962 
 
 Bonos Carretera de Pene- 
 
 traci6n"A" 6.0 1962 
 
 Bonos Carretera Provincia 
 
 deCol6n 6.0 1963 
 
 Bonos Carretera Interior de 
 
 la Republica "B" 6.0 1965 
 
 Bonos Carretera Interior de 
 
 la RepGblica "C" 6.0 1966 
 
 Bonos Carretera Interameri- 
 
 cana"C" 6.0 1967 
 
 Bonos Carretera Armuelles- 
 Progreso-lnteramericana 
 
 "C". 6.0 1967 
 
 Bonos Caminos Llanos de 
 
 Cocle" 6.0 1968 
 
 Bonos Carretera Tumba 
 
 Muerto 6. 1969 
 
 Bonos Compra Materiales 
 
 para Caminos 6.0 1972 
 
 BonosdeCol6n"A" 6.0 1958 
 
 Bonos de Col6n "B" 6.0 1961 
 
 Bonos deCol6n 6.0 1963 
 
 Bonos Agrarios Desarrollo 
 
 Integral del Bayano "A".. 6.0 1974 
 
 Bonos Agrarios Desarrollo 
 
 Integral del Bayano "B"_. 6.0 1974 
 
 Bonos Adquisici6n de Bienes 
 
 Empresas Estatales 6.0 1975 
 
 Bonos de Inversiones Pub- 
 licas 1975 "B" 9.0 1975 
 
 Bonos de Inversiones Pub- 
 licas 1975 6.0 1975 
 
 Bonos de Mineria 8.0 1975 
 
 Bonos Compra de Materiaies 
 
 para Caminos 6.0 1974 
 
 Donos Garantfa Bancaria 
 
 Serie "D" 6.0 1974 
 
 Bonos Agrarios Serie "A"... 1975 
 
 Seo footnotes at end of table. 
 
 1988 
 
 1, 000, 000. 00 
 
 1,000, 000.00 
 
 761, 100. 00 
 
 1989 
 
 3, 250, 000. 00 
 
 3, 250, 000. 00 
 
 2, 448, 000. 00 
 
 1989 
 
 600, 000. 00 
 
 596, 000. 00 
 
 i 437, 100. 00 
 
 1989 
 
 500, 000. 00 
 
 499, 800. 00 
 
 • 380, 700. 00 
 
 1989 
 
 600, 000. 00 
 
 573, 800. 00 
 
 i 413, 900. 00 
 
 1978 
 2009 
 1994 
 1992 
 1993 
 1987 
 
 2, 000, 000. 00 
 2, 000, 000. 00 
 I, 200, 000. 00 
 1, 000, 000. 00 
 1, 000, 000. 00 
 500, 000. 00 
 
 2, 000, 000. 00 
 912,250. 00 
 668, 500. 00 
 
 1,000, 000.00 
 917, 850. 00 
 475, 000. 00 
 
 220, 550. 00 
 642, 550. 00 
 600, 500. 00 
 903, 050. 00 
 856, 350. 00 
 I 334, 500. 00 
 
 1987 
 1993 
 
 1, 000, 000. 00 
 J6, 000, 000. 00 
 
 223, 000. 00 
 5, 325, 550. 00 
 
 1 149, 100. 00 
 4, 993, 000. 00 
 
 1976 
 1986 
 1987 
 1975 
 1983 
 1980 
 
 2, 250, 000. 00 
 100, 000. 00 
 
 1, 500, 000. 00 
 325,000.00 
 300, 000. 00 
 300, 000. 00 
 
 2, 250, 000. 00 
 100, 000. 00 
 180, 000. 00 
 111,300. 00 
 296, 500. 00 
 300, 000. 00 
 
 40, 000. 00 
 • 128, 000. 00 
 
 131, 000. 00 
 99, 000. 00 
 
 1995 
 
 1, 100. 000. 00 
 
 1, 100, 000. 00 
 
 731, 500. 00 
 
 1984 
 
 1, 000, 000. 00 
 
 1,000, 000.00 
 
 609, 600. 00 
 
 1981 
 
 1, 500, 000. 00 
 
 1, 498, 300. 00 
 
 i 548, 500. 00 
 
 1982 
 
 5, 500, 000. 00 
 
 5, 500, 000. 00 
 
 1, 757, 400. 00 
 
 1982 
 
 750, 000. 00 
 
 717, 900. 00 
 
 I 290, 500. 00 
 
 1983 
 
 2, 000, 000. 00 
 
 1, 787, 000. 00 
 
 > 958, 500. 00 
 
 1985 
 
 2, 730, 000. 00 
 
 2, 706, 800 00 
 
 1 1, 644, 100. 00 
 
 1986 
 
 180, 000. 00 
 
 92, 100. 00 
 
 i 49, 000. 00 
 
 1987 
 
 450, 000. 00 
 
 437, 900. 00 
 
 • 295, 000. 00 
 
 1987 
 
 2, 000, 000. 00 
 
 194, 300. 00 
 
 i 35, 800. 00 
 
 1988 
 
 350, 000. 00 
 
 220, 200. 00 
 
 > 110, 000. 00 
 
 1989 
 
 170, 000. 00 
 
 169, 000. 00 
 
 » 111,100. 00 
 
 1982 
 1978 
 1981 
 1983 
 
 1 000,000.00 
 2, 000, 000. 00 
 500, 000. 00 
 1,000, 000. 00 
 
 975, 200. 00 
 1,980,000. 00 
 500, 000. 00 
 943, 040. 00 
 
 763, 300. 00 
 335,140.00 
 181,000. 00 
 i 531, 800. 00 
 
 1992 
 
 5, 000, 000. 00 
 
 1,988, 950. 00 
 
 1, 683, 950. 00 
 
 1979 
 
 600, 000. 00 
 
 198, 900. 00 
 
 8, 750. 00 
 
 1995 
 
 3, 200, 000. 00 
 
 3, 200, 000. 00 
 
 3, 100, 000. 00 
 
 1990 
 
 5, 000, 000. 00 
 
 5, 000, 000. 00 
 
 4,911,000.00 
 
 1995 
 1995 
 
 6, 573, 800. 00 
 18, 600, 000. 00 
 
 6, 342, 150. 00 
 18, 600, 000. 00 
 
 6, 094, 850. 00 
 18, 205,000. 00 
 
 1984 
 
 1, 000, 000. 00 
 
 992, 350. 00 
 
 893, 800. 00 
 
 1979 
 2000 
 
 2, 000, 000. 00 
 2, 000, 000. 00 
 
 500, 000. 00 
 335, 100. 00 
 
 500, 000. 00 
 332, 100. 00 
 
227 
 
 DETALLE DE LA DEUDA PUBLICA CONTRACTUAL AL 31 DE DICIEMBRE DE 1976— Continued 
 (From the Informe del Contralor General de la Republica, 1977]— Continued 
 
 
 
 r 
 
 hecha 
 
 
 
 Suscripcion 
 
 
 
 T A 
 
 \ asa oe 
 
 de emi- 
 
 
 
 sums adqui- 
 
 Estado de la 
 
 
 interes 
 
 sion o 
 
 Fecha 
 
 Emision o 
 
 rida al 31 
 
 deuda al 31 
 
 
 (porcen- 
 
 contra- 
 
 de naci- 
 
 contratacion 
 
 de diciembre 
 
 de diciembre 
 
 Detalle 
 
 taje) 
 
 tacion 
 
 miento 
 
 autorizada 
 
 de 1976 
 
 de 1976 
 
 Bonos de Inversiones Pub- 
 
 
 
 
 
 
 
 licas— 1976 _.. 
 
 6.0 
 
 1976 
 
 1996 
 
 4, 387, 000. 00 
 
 2, 503, 650. 00 
 
 2, 485, 450. 00 
 
 Bonos de Inversiones POb- 
 
 
 
 
 licas "D" 
 
 6.0 
 
 1976 
 
 1996 
 
 875, 000. 00 
 
 491, 050. 00 
 
 491,050.00 
 
 Bonos Corporation Financ- 
 
 
 
 
 ier Nacional Serie "A".. 
 
 6.0 
 
 1976 
 
 1996 
 
 2, 000, 000. 00 
 
 2, 000, 000. 00 
 
 1, 990, 000. 00 
 
 Bonos Compra de Materiales 
 
 
 
 
 para Caminos 
 
 6.0 
 
 1975 
 
 1985 
 
 1, 000, 000. 00 
 
 602, 900. 00 
 
 582, 900. 00 
 
 Subtoal Bonos Particulars 161, 307, 170. 00 138, 564, 450. 00 96, 428, 180. 00 
 
 Subtotal Bonos 256,317,870.00 233,575,150.00 169,864,680.00 
 
 Pagargs Tropelco, S. A.— 
 
 Instalacion "Radio Liber- 
 tad" 
 
 Pagargs Financiamiento 
 
 Sobregiro Banco Nacional. 
 Pagargs Financiamiento 
 
 Sobregiro Banco Nacional. 
 
 Pagares IRHE 
 
 Pagares Banos Hipotecario — 
 
 Vivienda 
 
 Pagargs Banco Nacional— 
 
 Conversion 1974 
 
 Pagargs IRHE "A" 
 
 Pagares IRHE "B" 
 
 Pagargs INTEL "A" 
 
 Pagargs INTEL "B" 
 
 Pagares Conversion Caja de 
 
 Seguro Social 1974 
 
 Pagargs Banco Hipotecario 
 
 Nacional-XIII rnes.. 
 
 Pagargs Banco Nacional 
 
 1975 
 
 Pagargs Caja de Seguro 
 
 Social 
 
 Pagargs Banco Hipotecario 
 
 XIII mesl975 
 
 Pagargs IRHE— ABC 
 
 Pagargs I RHE— Serie "D"— 
 
 1976 
 
 Pagargs Banco Nacional 
 
 Pagargs Caja de Seguro 
 
 Social— 1976 (22.7 M)__„ 
 Pagargs Caja de Seguro 
 
 Social— 1976 (4.8 M) 
 
 
 1971 
 
 1976 
 
 140, 672. 00 
 
 140, 672. 00 
 
 6.0 
 
 1971 
 
 1981 
 
 16, 600, 000. 00 
 
 16, 600, 000. 00 
 
 6.0 
 
 1972 
 
 1982 
 
 14, 400, 000. 00 
 
 14, 400, 000. 00 
 
 6.0 
 
 1974 
 
 1976 
 
 1, 312, 889. 36 
 
 1, 312, 889. 36 
 
 6.0 
 
 1975 
 
 1985 
 
 810, 000. 00 
 
 810, 000. 00 
 
 7.0 
 
 1975 
 
 1985 
 
 13, 404, 567. 07 
 
 13, 404, 567. 07 
 
 8.0 
 
 1975 
 
 1977 
 
 2, 644, 175. 92 
 
 2, 644, 175.92 
 
 8.0 
 
 1975 
 
 1977 
 
 2,817, 163.82 
 
 2,817, 163.82 
 
 8.0 
 
 1975 
 
 1977 
 
 840, 810. 56 
 
 840, 810. 56 
 
 8.0 
 
 1975 
 
 1977 
 
 1, 340, 061. 79 
 
 1, 340, 061. 79 
 
 6.0 
 
 1975 
 
 1994 
 
 28, 970, 000. 00 
 
 28, 970, 000. 00 
 
 6.0 
 
 1975 
 
 1987 
 
 3, 592, 172. 21 
 
 3, 592, 172. 21 
 
 8.0 
 
 1975 
 
 1985 
 
 13, 400, 000. 00 
 
 13, 400, 000. 00 
 
 6.0 
 
 1975 
 
 1996 
 
 17, 400, 000. 00 
 
 17, 400, 000. 00 
 
 8.0 
 
 1975 
 
 1987 
 
 3, 942, 307. 06 
 
 3, 942, 307. 06 
 
 8.0 
 
 1975 
 
 1978 
 
 2, 337, 414. 44 
 
 2, 337, 414. 44 
 
 8.0 
 
 1975 
 
 1978 
 
 576, 759. 12 
 
 576, 759. 12 
 
 9.0 
 
 1976 
 
 1983 
 
 21,900,000. 00 
 
 21, 900, 000. 00 
 
 6.0 
 
 1976 
 
 1997 
 
 22, 743, 964. 07 
 
 22, 743, 964. 07 
 
 8.0 
 
 1976 
 
 1986 
 
 4, 853, 475. 00 
 
 4, 853, 475. 00 
 
 9, 223, 500. 00 
 9, 434, 744. 47 
 
 668, 250. 00 
 
 11,339, 977. 03 
 1, 121,239. 28 
 1, 194, 199. 14 
 356, 420. 62 
 568, 053. 79 
 
 26, 073, 000. 00 
 
 3, 075, 000. 00 
 
 12, 287, 591.60 
 
 17, 053, 025. 00 
 
 3, 737, 544. 25 
 1,619,114. 27 
 
 399, 517. 90 
 21, 900, 000. 00 
 
 22, 743, 964. 07 
 4, 853, 475. 00 
 
 Subtotal Pagargs 174,026,432.42 174, 026, 432. 42 147, 648, 616. 42 
 
 First National City Bank— 
 Turismo 
 
 Banco de Desarrollo Agro- 
 pecuarie-Bancos Locales.. 
 
 m 
 
 1.0 
 Variable 
 
 9175 
 1974 
 
 1990 
 1984 
 
 9, 000, 000. 00 
 6, 570, 000. 00 
 
 9, 000, 000. 00 
 6, 570, 000. 00 
 
 9, 000, 000. 00 
 6, 241, 500. 00 
 
 Subtotal Financiamiento 
 Privado Interino 15,570,000.00 
 
 15, 570, 000. 00 15, 241, 500. 00 
 
 Total deuda interna 443,097,138.60 423,171,582.42 332,754,796.42 
 
 Total deuda publics 1, 084, 197, 400. 21 999, 854, 759, 18 842, 998, 945. 79 
 
 1 El remanente entre suma autorizada y la suscrita fue incinerado. 
 
 A second series of bonds is designated "Republic of Panama External Secured 
 Bonds of 1958." The total amount of this issue was $16,800,000 and the bonds 
 bear interest at a rate of 4.80% per annum. Payment of interest due on these 
 bonds and the ultimate retirement of the bonds is provided for in a fiscal agree- 
 ment between the Republic of Panama and First National City Bank of New 
 York dated October 1, 1958. The agreement is similar in form to the 1950 agree- 
 ment discussed above. The annual payment required from Panama under the 
 
228 
 
 1958 agreement is $1,000,000. In accordance with the agreement, the Republic 
 of Panama has instructed the United States Government to pay to the fiscal 
 agent $1,000,000 of the total annuity payment owed by the United States to 
 Panama under the 1955 Treaty of Mutual Understanding and Cooperation. 
 
 A third series of $9,024,000 principle amount was issued to the Prudential 
 Insurance Company pursuant to a purchase agreement between the Republic of 
 Panama and the Prudential Company dated December 19, 1962. These bonds bear 
 interest at an annual rate of 4.5%. Pursuant to a fiscal agency contract dated 
 December 21, 1962, the Republic of Panama has given the United States irre- 
 vocable instructions to pay $500,000 of the Treaty payment directly to the Chase 
 Manhattan Bank as fiscal agent for the Republic of Panama with respect to this 
 issue. This bond issue differs from the previous two in that in addition to the 
 fiscal agency contract and the irrevocable instructions to the U.S. Government, 
 a purchase agreement between Panama and the Prudential Insurance Co. is also 
 involved. 
 
 It should be noted that Panama's obligation to secure these bond issues through 
 a pledge of annuity revenues does not arise from the 1955 Treaty but rather 
 from contractual arrangements among Panama, the fiscal agents, and the bond- 
 holders. 
 
 Question 16. Detail how the annuity and the method by which it is paid to 
 Panama by the United States relates to any obligations on Panamanian bonds. 
 
 Answer. At present, portions of the annuity payment due Panama under the 
 1955 Treaty have been pledged by the Republic of Panama as security for three 
 separate series of bonds issued by the Republic of Panama. The first series was 
 issued in 1950 and is designated "Republic of Panama 3 percent External Se- 
 cured Serial Bonds." These bonds bear interest at the rate of 3 percent annually, 
 and are part of a $10,500,000 issue dated July 15, 1950. Payment of interest due 
 on these bonds and the retirement of the bonds is provided for in a fiscal agency 
 agreement of July 15. 1950, between the Republic of Panama and the Na- 
 tional City Bank of New York. That agreement provides that Citibank will 
 establish a sinking fund for the bonds and contains an installment payment 
 schedule for retirement of the bonds by 1995. The agreement obligates the 
 Republic of Panama to pay $430,000 annually to Citibank to provide for the 
 payment of interest on all outstanding bonds and of principal due on maturing 
 bonds. 
 
 In accordance with a provision of this fiscal agency agreement, the Republic 
 of Panama has irrevocably instructed the U.S. Government to pay directly to 
 Citibank each year $430,000 from annuity funds owed to Panama. 
 
 Question 17. What has been the investment ratings of those bond issues from 
 1960 to the present? 
 
 Answer. Neither the 1962 external issue nor the internal issues listed in the 
 attachment to question 15 have been assigned an investment rating. The rating 
 service, Moody's, lias received no requests that there bonds be rated. 
 
 IX 
 
 Liberty Lobby's publication, "Spotlight," for October 3, 1977 featured a sec- 
 tion called, "Who and Why of Panama," one subject of which was Nelson 
 Rockefeller. One of the three articles in that section was the following, written 
 by George Nicholas : 
 
 Rocky's CIA Switched Signals on General Torrijos 
 (By George Nicholas) 
 
 Why is the Carter administration suddenly so anxious to divest itself of 
 the Panama Canal? What makes Washington so eager to hand over this vital 
 American strategic possession to — of all people — a dangerous, dishonest, dope- 
 dealing demagogic dictator named Omar Torrijos, who is one of Fidel Castro's 
 cronies? How does the corrupt, brutal, communist-honeycombed Torrijos regime 
 deserve such a multi-billion dollar present from taxpayers? 
 
 It's true that talk about a review of the original canal treaty was heard 
 around the White House during previous administrations too, notably during 
 the tenure of President Lyndon Johnson. But those discussions sprang from a 
 fundamentally different situation. 
 
 Prior to 1969, when Omar Torrijos seized power in Panama, every govern- 
 ment of that small nation was made up of profoundly pro-American politicians. 
 Any one of those regimes would have joined with Washington in a new canal 
 
229 
 
 agreement in exchange for some symbolic concessions and increased revenues 
 (U.S. subsidies), leaving America's essential sovereign rights and strategic in- 
 terests intact. 
 
 With Torrijos, however, the U.S. faced a demagogic and disreputable adver- 
 sary in Panama. Until 1975 arrived, and with it the Great Canal Giveaway 
 Scheme, there was no serious intent in Washington to perpetuate this corrupt tin- 
 horn dictator in power by handing him U.S. strategic assets which a friendly 
 government of Panama would have never dreamed of obtaining from Washing- 
 ton — a canal treaty conferring sovereign rights over the crucial waterway to the 
 Torrijos gang. 
 
 To find an explanation for this maddening mystery. The Spotlight recently 
 interviewed two senior U.S. intelligence officials with long experience in Latin 
 affairs, and several other knowledgeable sources who asked to remain anony- 
 mous. Their disclosures revealed that U.S. strategy on Panama had been co- 
 vertly reversed by a clique of eastern financiers, multinational corporation lobby- 
 ists, bank lawyers and academic foreign-affairs "experts" who staged, in effect, 
 a secret coup after the Carter inauguration, resulting in a 180-degree turn- 
 about described by one troubled and angry CIA official in the following words : 
 
 "We just did a complete flip-flop. It was crazy. From 1971 through most of 
 1975, the U.S. strategic objective in Panama was : get rid of Torrijos. Do it by 
 fair means or foul, but this reckless demagogue must go. I put the baseline year 
 at 1971, not because Torrijos was our friend before that date : he was always 
 considered anti-American, ruthless and dirty — his brother Hugo Torrijos ran 
 the whorehouses and gambling dens; younger brother Marden was involved in 
 smuggling. We used to say at the CIA, 'The Torrijos clan is the only orga- 
 nized crime family which issues postage stamps'. But in 1971 and 1972 U.S. 
 intelligence acquired hard evidence that Omar Torrijos and his brothers were 
 taking a big hand in narcotics, giving top French and Italian heroin shippers 
 a protected haven in Panama for transshipping their dangerous cargo, in ex- 
 change for a percentage of the huge profits. 
 
 "Panama became the staging areas for cocaine and heroin smugglers. Dictator 
 Torrijos had a brother called Moises — his nickname is 'Monci' — who didn't 
 have a crime concession of his very own, so Moises Torrijos became the drug 
 boss in Panama. He made millions of dollars in narcotics payoffs for the Torri- 
 jos family kitty. Monci Torrijos is now the Panamanian Ambassador to Spain, 
 but he still daren't set foot in the United States — the drug enforcement people 
 have a file on him that's a foot thick, and Moises Torrijos might find himself 
 facing some tough questions. 
 
 "Throughout the first half of the seventies," the intelligence official told The 
 Spotlight, "the CIA and the Pentagon and even the State Department looked 
 on Torrijos as a criminal and a menace. From the standpoint of narcotics control 
 alone, the Torrijos family represented a serious problem ; some of the biggest 
 international dealers found a protected base under Torrijos' wing, and some Pana- 
 manian diplomats were beginning to take an active hand in the heroin trade, 
 smuggling in packets of narcotics under their diplomatic immunity. The agency 
 (the CIA) had orders to oust this sleazy family from power in Panama. 
 
 "The Clandestine Services Division gave major help to the Panamanian exile 
 leaders who organized the anti-Torrijos movement. Colonel Amadeo Sanjur 
 had our full support. He was funded to organize an anti-Torrijos coup in 
 Panama — given ample money, a load of weapons and ammo, even permission to 
 hire some CIA-trained Cuban commandos in Miami to knock off Torrijos. Fed- 
 erico Boyd, another anti-Torrijos leader, and ex-President Arnulfo Aires (who 
 is still the legal President of Panama ; Omar Torrijos is just an usurper who 
 seized power at gunpoint and a treaty signed "Torrijos" has no real legitimacy) 
 also got some Washington support. 
 
 "In 1973 and 1974, Torrijos grew even bolder and louder, and he cozied up 
 to Castro : we in the agency thought his days were numbered. But then, in late 
 1975, something strange happened. We got orders to 'lay off' Torrijos — there 
 were going to be 'negotiations' with him '. 
 
 In fact, negotiations with the Torrijos regime were already underway, al- 
 though U.S. intelligence officials were unaware of it. The confidential talks 
 were initiated, not from Washington, but from New York and two European 
 finance capitals, London and Paris. 
 
 Among Hie negotiators were representatives of the Rockefeller empire: Alfred 
 Wentworth, a senior vice president of Chase Manhattan, regarded as an expert 
 on dealing with Marxist-dominated nations; Lawrence Treadwell, a Latin Ameri- 
 can specialist from IBEC, the Rockefeller subsidiary that serves as a private 
 
230 
 
 political intelligence agency for the brothers; Harvey Wallender, another IBEC 
 executive, who was a U.S. intelligence official before he joined the Rockefeller 
 organization and Lee Zimnier, an international lawyer who advises several 
 major New York banks of foreign credit and investment programs. 
 
 Also attending the secret Panama talks was Baron Philippe de Segonzac. a 
 vice president of S. G. Warburg Ltd. — personal representative for the influential 
 European merchant banker Sir Siegmund Warburg, and of the financial groups 
 which tied in with Warburg's far-flung money empire : Paribas of Paris, Lazard 
 Freres, various Rothschild subsidiaries. But the key figure among the negotia- 
 tors was Sol Linowitz, a Washington lawyer, and his "special adviser" on 
 Panama. Dr. Robert Pastor. 
 
 Sol Linowitz is a cynical promoter whose behind-the-scenes influence in Wash- 
 ington — especially in the area of Latin American affairs — is rumored to he 
 legendary. 
 
 As a registered foreign agent, Linowitz has worked for the communists without 
 batting an eyelid : he was the principal lobbyist for the ultra-communist regime 
 of Salvador Allende, an anti-American, pro-Castro government which wrecked the 
 economy of Chile in the early seventies until a joint effort of the Chilean military 
 and the CIA got rid of it. As a Chilean agent, Linowitz had once before attempted 
 to reverse U.S. policy in favor of an improvident, debt-ridden. Marxist-dominated 
 foreign regime. Now he was engaged in attempting the same thing on behalf of 
 Torrijos. Incredibly, this time around, Linowitz' efforts were destined to be suc- 
 cessful — at immense peril to U.S. strategic interests and great cost to the Amer- 
 ican taxpayers. 
 
 "The trouble was this," a U.S. intelligence official told The Spotlight, "In 
 Washington we regarded Torrijos as a threat. But the New York financiers and 
 the European moneylenders, the Rockefellers and the Warburgs saw Torrijos as 
 an ally, if not accomplice; he was their boy, and they needed him. 
 
 "The unscrupulous, money-hungry Torrijos, moreover, for all his Marxist 
 demagoguery in public, in private knew how to talk the language the interna- 
 tional financiers understood. Soon after he grabbed power and ousted the con- 
 situtional government of his country, Torrijos inaugurated new banking laws and 
 regulations in Panama which made it a haven, a veritable paradise for money 
 traders and currency manipulators — a risky, semi-legal sort of business in which 
 big banks like to take a hand without being seen." 
 
 By 1975, moreover, some of the biggest European and American banks were in 
 desperate trouble — stretched thin, overextended, facing disaster far more nar- 
 rowly than the public realized. 
 
 Trust assets had dropped dangerously. In 1974 the giant Bankers Trust Co. 
 lost $3 billion in portfolio holdings, and Chase Manhattan was next with a near- 
 fatal hemorrhage of $1.5 billion in "asset shrinkage." Melting "soft loans" 
 amounting to hundreds of millions of dollars had to be written off by every 
 major bank — once again Chase Manhattan, with First Chicago and Citicorp, was 
 among the biggest losers. 
 
 Faced with their most critical equity capital shortage since 1929. the terrified 
 giant banks saw themselves teetering on the edge of collapse. Panicky, starved for 
 liquidity, desperate for cash, they turned to the semi-legal, high-hazard game of 
 quick gains — or big losses ; international currency manipulation. 
 
 But currency juggling is a dicey, deadly sort of gamble. A bank finding itself 
 deep in the wrong sort of currency position faces collapse, threatening the whole 
 system: when giant Bankhaus I.D. Herstatt. one of West Germany's largest 
 commercial lenders, lost some $200 million in ill-fated currency plunges, it failed. 
 It was found that Chase Manhattan — with which Herstatt was closely affiliated — 
 faced even more catastrophic losses, said to have totaled over $500 million, in the 
 aftermath of the collapse of its German banking partner. 
 
 The alarmed U.S. banking regulators came out of their comatose state with a 
 start and threatened to put an end to currency ventures by U.S. banks and their 
 close European affiliates. Bank supervision was tightened, and comptroller of the 
 Currency Joseph Campbell threatened to "post an examiner in every bank which 
 is found to have an overload position in currency trading." 
 
 Now the international banking cabal really needed a man like Torrijos who 
 was ready and willing to provide them with a sanctuary, a sort of financial 
 freeport where currency manipulation, gold trading and other high-rolling money 
 gambles could be played out without interference. To keep Torrijos in power and 
 to provide him with desperately needed additional revenues, the finance consor- 
 tium decided that Panama should be given the U.S.-owned canal. 
 
231 
 
 The man chosen to sell this smelly proposition to U.S. voters was none other 
 than Sol Linowitz. 
 
 "I must say it was fascinating to watch him operate," a U.S. intelligence 
 official recalled. "Even for an influence-peddler as versatile and slippery as 
 Linowitz, this was an impossible mission : to convince America to hand over its 
 strategic waterway to a disreputable, illegitimate tinhorn, communist dictator 
 and pay him an extra $2 billion for the privilege of taking it over — all because 
 this shabby deal would be 'beneficial in the long run.' What a preposterous fraud ! 
 But to give the devil his due, Linowitz pulled it off. It's gotta be the most brazen 
 lobbying stunt in the book." 
 
 The great canal confidence game proceeded, through 1976 and 1977, in the fol- 
 lowing phases : 
 
 A so-called "expert commission on Latin affairs'' suddenly emerges from 
 nowhere on the Washington scene. Fueled by Rockefeller funds, it is officially 
 known as the Commission on United States-Latin American Relations. Its 
 chairman : none other than the shadowy Sol Linowitz. Its staff director : 
 none other than Linowitz' right-hand man, Robert Pastor. 
 
 In October, 1976, the Linowitz Commission put out its first report. It 
 recommends that the U.S. should "promptly negotiate a new canal treaty 
 with Panama."' The recommendation is written by Robert Pastor and signed 
 by "Chairman"' Linowitz. 
 
 In November, 1976 David Rockefeller visits Panama. He is accompanied 
 by "Chairman" Linowitz. Rockefeller and Torrijos have a friendly and 
 productive talk"' and on his return to the U.S., Rockefeller recommends that 
 the Linowitz Commission's report be included among the foreign-policy plan- 
 ning papers of the newly elected Carter team. It is so ordered. 
 
 In December 1976, a second report urging ''justice for Panama" (i.e. a 
 payoff for Torrijos) is issued by the Linowitz Commission. Its author: Rob- 
 ert Pastor. The Council on Foreign Relations holds a special colloquium, 
 chaired by Winston Lord, to discuss and endorse the Linowitz Report's 
 position on Panama. 
 
 In January. Zbigniew Brzezinski is appointed principal aide for national 
 security affairs to the new Carter administration. Brzezinski, an old Rocke- 
 feller courtier, in turn, quickly appoints a special assistant of his own to 
 take charge of the "Panama situation," he is none other than Robert Pastor, 
 the obscure academic whose only distinction is his position as Linowitz' 
 sidekick. 
 
 In late January 1977. Robert Pastor draws up a National Security Council 
 memorandum recommending that the Panama Canal be handed over to 
 Torrijos. It is promptly approved by Pastor's new White House boss, 
 Brzezinski. and submitted to President Carter. After conferring with some 
 "experts" including C. Douglas Dillon and Henry Kissinger — all faithful 
 Rockefeller retainers — President Carter approved the NSC paper, which is. 
 in effect, a thinly disguised version of the Linowitz Commission's recom- 
 mendations. 
 
 In a couple of months. Linowitz has achieved a lobbyist's dream : he has con- 
 trived to have the President adopt as his own policy a course of action worked 
 out on behalf of and in the interest of hidden vested interests. 
 
 More is to come : having achieved the influence-peddler's 'impossible 
 dream" Linowitz — is now about to be beatified. President Carter appoints a 
 team of two negotiators to implement the canal giveaway in direct talks 
 with Torrijos. One of them is the senile Ellsworth Bunker. The other one — 
 the U.S. negotiator who will do the real talking — is none other than Lino- 
 witz himself ! 
 
 It was this fundamental conflict between the U.S. intelligence and security 
 establishment on one hand, with its long rap sheet on Torrijos and its deep dis- 
 trust of the Panamanian dictator, and on the other hand the Linowitz-Brzezinski- 
 Rockefeller axis, with its subversive penetration of the White House and the 
 National Security Council, that led to an incident, just lately come to light : 
 
 Electronic eavesdropping on some of the negotiating sessions between Linowitz 
 and Panamanian representatives, particularly Torrijos' brother-in-law Marcelino 
 Jaen. and Oscar Escobar Betancourt. 
 
 Jaen has been identified in U.S. intelligence memoranda as a Soviet intelligence 
 BS^et in Panama. "As for Linowitz." a U.S. intelligence official told The Spot- 
 light. "Hp was a communist asset while working for the Allende government, 
 and from tbe view point of U.S. national security, he's still considered a com- 
 munist asset." 
 
232 
 
 U.S. Portrayal Before Canal Switch 
 
 This Spanish-language leaflet is a fair sample of the voluminous anti- Torrijos 
 propaganda designed and issued by the CIA in the early 70s. The text offers a 
 large reward (100,000 balboas, worth its equivalent in U.S. dollars) for the cap- 
 ture of the "Notorious Delinquent Omar (Anything for Money) Torrijos Her- 
 
 rera. " 
 
 The Panamanian dictator is further identified as a "murderer . . . rapist . . . 
 thief . . . embezzler of public funds . . . narcotics smuggler . . . and traitor. " 
 
 The leaflet was produced and printed by the CIA for clandestine distribution 
 in Panama in 1973. Its rhetoric reflects accurately the essential fact that from 
 1970 through 1975, U.S. intelligence agencies considered Torrijos a disrepu- 
 table and subversive pro-Communist usurper who had to be ousted from power, 
 if only for vital U.S. security considerations. 
 
 Translation of CIA-printed anti-Tomjos leaflet 
 
 REWARD 
 Dead or Alive 
 $100,000.00 Hundred Thousand Balboas 
 Omar Torrijos (alias) "Anything for Money. " 
 8100,000.00 (Hundred Thousand Balboas) will be paid to the officers, non- 
 commissioned officers, troops and civilians who participate on "D" Day in the 
 capture of the notorious delinquent Omar Torrijos Herrera (alias) "Anything for 
 
 r- ' _ . . • • 
 
 The capture ot Umar l ornjos nerrera is suuciteu ;.. . v jn r that he may pa? lor 
 the following (crimes): 
 
 1. Homicide: (Second Lt. Andres Pistonich, Guardia trooper Andres ^ai- 
 cia Torres, lawyer Ruben Oscar Miro, Floyd Britton, Rev. Father Hector 
 Oscar Santio, etc.) 
 
 2. Brazen robbery of the funds of the Panamanian people. 
 
 3. International drug trafficking. 
 
 4. Abuse of (official) authority and extralegal activities. 
 
 5. Oppression of the people by force of arms. 
 
 6. Seduction (corruption) of numerous girl students: 
 
 7. Using state powers to become rich overnight. 
 
 8. Plundering the funds of the state (in sex orgies, wild parties, helicopter 
 junkets, trips abroad, for his relatives, mistresses and cronies, all on gov - 
 ernment expense accounts.) 
 
 9. Treason against the Fatherland, against his fellow-officers, and against 
 the (Panamanian) people. 
 
 10. Shameless boozer and bigamist financing his vices with state money and 
 with giving away sinecures (to his intimates) on the public payroll. 
 
 This (wanted) subject is highly dangerous and is known to be a vicious sadist. 
 Although he likes to preach that 'He who gives love receives love 1 he is a be- 
 sotted drunkard who experiences occasional attacks of delirium tremens and 
 nervous disorders requiring shots of tranquilizers to quiet his nerves and his 
 dirty conscience. He is also a blusterer and a bluffer who, when he needs to 
 distract the Panamanian people, publicizes such slogans as "The CIA Has 
 Hatched A Plot To Kill Me 1 and 'Standard Fruit Is Trying To Kill Me 1 or 
 'Colonel Amado Sanjur Has Organized A Huge Conspiracy Of International Di- 
 mensions To Stage A Coup To Oust Me' or 'What I Want For My Children Is 
 What I want For My Nation' and similar buffooneries. 
 
 The $100,000.00 (Hundred thousand Balboas) will be paid by the new govern- 
 ment. — - 
 "All For Panama Movement." 
 
 Panamanian: while your country suffers, what are you doing to help it? 
 
233 
 
 RECOMPENSA 
 
 VIVO o MUERTO 
 
 $100,000.00 Cien Mil Balboas 
 
 QMAR TORRIJOS (ayTodo por la Plata" 
 
 $100,000.0QCIEN MIL BALBOAS) LE SERAN PAGADOS A LOS OFICIALES, CLA- 
 SES, TROPAY CIVILES QUE PARTICIPEN EN LA CAPTURA EL DIA "D", OEL 1 
 CONOCIDO CLICUENTE "OMAR TORRIJOS HERRERA" (a) TODO POR LA PLA- 
 TA. 
 
 LA CAPTUR DE OMAR TORRIJOS HERRERA, SE SOLICITA PARA QUE LE PAGUE 
 AL PUEBLO* AN AMENO LO SIGUIENTE: 
 
 1. « HOMICIQ.): (Subte. Andrts Fistonich, Guardia Andres Garcia Torres, Lie. Ruben 
 
 Oscar Mfo, Flo, - Brirran, it. P. Hector Gallegos, Gonzalez Santizo, Etc. 
 
 2. - ROBO DSCARADO DE LOS OINEROS DEL PUEBLO PANAMENO. 
 3- TRAFICAITE INTERHACIONAL DE DROGAS. 
 
 4.. ABUSO D AUTORIDAD Y EXTRALIMITACION DE FUNCIONES. 
 5.. OPRESIO) AL PUEBLO POR LA FUERZA DE LAS ARMAS. 
 
 6. - CORRUPdON DE NUMEROSAS SENORITAS E STUD I ANTES. 
 
 7. - EMPLEQ3E LOS MEDIOS DEL ESTADO PARA SU ENRIQUECIMIENTO DE LA 
 
 NOCHE 4LA MANAMA. 
 8- DESPlLftRRO DE LOS DINEROS DEL ESTADO(en orgios, parrandos, paseos en 
 Helicopters, viajes al extranjero de sus fomiliares, queridas y omistades, por cuen- 
 ta del goterno, etc) 
 
 9.. TRAICIOj A LA PATRIA, A SUS COMPANEROS DE ARMAS Y AL PUEBLO. 
 
 10. BORRACjlO EMPEDERNIDO A COSTILLA DEL ESTADO Y BIGAMIA PAGADA 
 CON BO'ELLAS EN LOS PUESTOS PUBLICOS. 
 ESTE SUJETCtS DE GRAN PELIGROSIDAD.Y SE CARACTERIZA POR SER UN SADICO 
 MALVADO, PISE A QUE PREDICA QUE "EL QUE DA CARINO RECIBE CARINO" 
 ES UN BORRCHO INCCRREG IBLE, QUE CUANDO LE DAN ATAQUES DE DELI- 
 RIUM TREMEljs y DIABLOS AZULES LE DA POR LLORAR Y SUFRE DE LOS 
 NERVIOS Y TlfeNE QUE SER INYECTADO PARA PODER TRANQUILIZAR SU CON. 
 CIENCIA SUCL. TAMBIEN ES UN GRAN FANFARRON PROFESIONAL Y DE CARAC- 
 CTER INTERNKIONAL PORQUE CUANDO QUIERE DISTRAER LA ATENCION DEL 
 PUEBLO PKt AMENO MANIFIESTA LAS SIGUIENTES FRASES: "LA C.I.A. TIENE 
 UN COMPLOTPARA MATARME" "LA STANOAR FRUIT CO."ME QUIERE MATAR", 
 "EL CORONEl AMADO SANJUR TIENE UNA GRAN CONSPIRACION DE CARACTER 
 INTERNAaONAL PARA DARME UN GOLPE DE ESTADO". "AL QUE NO LE GUSTE" 
 LA FORMA Dt GOBIERNO ACTUAL, TIENE UN AVION DE LA FUERZA AERE' 
 LISTO PARA IR AL VALLE DE LOS CAIDOS", "LO QUE QUIERO PARA MIS HI; * 
 LO QUIERO PARA Ml PATRIA" Y OTRO POCO DE PAYASADAS MAS. 
 
 LOS 1000,000.00 (Cien Mil Balboas) DE LA RECOMPENSA, SERAN PAGADOS POR 
 EL NUEVO GOBIERNO. 
 
 "MOVIMIENTD „ TODO POR PANAMA" 
 
 PANAMENO: MIENTRAS TU PATRIA AGONIZA TU QUE NACES POR ELLA? 
 
 Nolo: Sdcgle fotocopias j ptfolas en las poredes y pastes al igual que distribute*. 
 
234 
 
 Question 1. This article, quoting a CIA official as saying : "The Torrijos clan is 
 the only organized crime family which issues postage stamps", gives consider- 
 able support to the view of the Torrijos regime expressed in the Washington 
 Star by Charles Bartlett on February 25, 1977. Do you care to comment on the 
 article as it relates to the alleged drug activities of the Torrijos family? 
 
 Answer. Questions concerning alleged drug activities of members of the family 
 of General Torrijos should be addressed to the Department of Justice. 
 
 Question 2. Do you care to comment on the statement that the CIA had orders 
 to oust Torrijos from power some time before 1975? 
 
 Answer. We do not comment on allegations concerning intelligence matters. 
 
 (3) Did the "negotiations" regarding Panama described by George Nicholas 
 as taking place in New York, London and Paris, and involving Sol Linowitz and 
 men associated with the Rockefellers and European bankers, actually take place? 
 
 (4) If so, please give additional details about those meetings, where and when 
 these were held and who was present. 
 
 (5) Was the fate of the Panama Canal a subject of discussion by these inter- 
 national financiers? 
 
 (6) Was off-shore banking in Panama a major concern of those in attendance? 
 
 (7) Were other similar meetings for similar purposes held? If so, where and 
 when, and who attended? 
 
 Questions 8 to 7 and 11. Did the "negotiations" regarding Panama described 
 by George Nicholas as taking place in New York, London and Paris, and involv- 
 ing Sol Linowitz and men associated with the Rockefellers and European bank- 
 ers, actually take place? 
 
 Answers. We have no information concerning meetings members of the Torri- 
 jos Government are alleged to have had with others in New York, London and 
 Paris. If such meetings occurred, they had no connection with or bearing upon 
 our Panama Canal Treaty negotiations. We cannot, therefore, reply to questions 
 3 through 7, which relate to private persons and entities. 
 
 We can say that Ambassador Linowitz has not participated in any negotiations 
 regarding Panama other than in his official capacity. His activities with the 
 Commission on United States-Latin American relations were those of a private 
 citizen. 
 
 Concerning Mr. Linowitz' role in "selling" the new Treaties (question 11), 
 we would like to observe that negotiations were begun in 1964, four years before 
 Torrijos came to power and 13 years before Mr. Linowitz was appointed co- 
 negotiator. In fact, the last four Administrations have sought to reach an agree- 
 ment with Panama. 
 
 Question 8. The article indicates the bankers needed Torrijos, that he spoke 
 their language, that he had inaugurated a new banking law making Panama 
 "a veritable paradise for money traders and currency manipulators — a risky, 
 semi-legal sort of business in which big banks like to take a hand without being 
 seen." 
 
 (a) What benefits, and or losses has the 1970 banking law brought to 
 Panama itself? 
 
 (&) Is there any evidence that before the coup through which Torrijos 
 came to power, Panama intended to establish such a favorable banking law 
 and banking climate? 
 
 (c) If the Torrijos regime fell from power and was replaced by a con- 
 stitutionally elected administration, is there any likelihood of the banking 
 law being substantially revised or even abrogated? 
 Answer. For centuries the economy of Panama has been oriented toward serv- 
 icing transit trade and international commerce. Capitalizing upon its location, 
 good communications and transportation facilities and the absence of exchange 
 controls (the Balboa is equivalent to the United States dollar), Panama lib- 
 eralized its banking law in 1970. Panama is especially attractive to depositors 
 from South America, because it is the principal banking center using the Spanish 
 language, but it has also developed Into a major international financial center. 
 About three quarters of the loans generated by banks in Panama in 197G went 
 to foreign borrowers. Of the $1.6 billion of loans to private and public borrowers 
 in Panama, only about 19% or $304 million were made by banks in Panama 
 which opened after 1969. It is possible that this percentage will increase as 
 new banks enter the domestic Panamanian market, either by opening new 
 offices or by obtaining a general license to add on-shore activities to their off- 
 shore operations. 
 
235 
 
 Question 9. (a) Comment on the "high-hazard game of quick gains — or big 
 losses: international currency manipulation", the author alleges is engaged in 
 by some banks. 
 
 (&) Describe some of the bank failures resulting from currency speculation. 
 
 Answer. We do not have the information available to respond to Question 9 
 on international currency manipulation and bank failures. The question should 
 be directed to the private entities themselves. 
 
 Question 10. This author flatly declares that this "international banking cabal" 
 he described as meeting in New York, London and Paris "decided that Panama 
 should be given the U.S. owned canal," to keep Torrijos in power. Is this true? 
 
 Is there any information whatever from the aforementioned international meet- 
 ings that might lead an observer to such a conclusion? 
 
 Answer. We have no information that would support such an assertion. The 
 United States and Panama, as noted earlier, began negotiations in 1964, before 
 Torrijos came to power. The U.S. Government view has been, since before nego- 
 tiations began, that our national interest is best assured by having the Canal 
 open and accessible at all times. The present treaty relationship, which is 
 resented by Panamanians of all political persuasions, jeopardizes that objec- 
 tive. Therefore, in order to advance this national interest, we have negotiated 
 with the government that is in power in Panama now. 
 
 Question 11. Do you care to comment on the remainder of the article which 
 mainly deals with the role of Mr. Linowitz in "selling" the new treaties? 
 
 ( See answer to question 3. ) 
 
 X 
 
 The Declaration and Programme of Action on the Establishment of a New In- 
 ternational Economic Order, and the Charter of Economic Rights and Duties 
 of States were products of the U.N. General Assembly in 1974. 
 
 QUESTIONS 
 
 (1) How do they focus on the international debts of the developing countries 
 and the problems of repayment? 
 
 (2) Is the international economic order discussed in the report of the Lino- 
 witz Commission the same as the New International Economic Order envisioned 
 by the United Nations? If not, how do the two relate? 
 
 (3) Is the new world order which is the concern of the Trilatral Commission 
 the same as the U.N. goal? If not, how do the two relate? 
 
 (4) (a) How did the United States vote on these resolutions in the United 
 Nations? 
 
 (b) Why? 
 
 (5) How did Panama vote? 
 
 (6) What would be the role of the Panama Canal in this New International 
 Economic Order of the United Nations? 
 
 Subcommittee note: See cover letter of Assistant Secretary Douglas J. Ben- 
 net, Jr. Also see Appendix F. 
 
 XI 
 
 The following article appeared in the November 13, 1977, Philadelphia 
 Inquirer : 
 
 Four Rich Nations Cancel Debts of Poorer Ones 
 (By Don Shannon) 
 
 United Nations. — Four of the world's wealthier nations have started canceling 
 the debts owed them by some of the world's poorest nations, touching off cries 
 of dismay in the United States and Europe. 
 
 Canada, Sweden, the Netherlands and Finland feel that there is not much 
 point in insisting that the "least developed" nations comply with international 
 banking standards and pay their debts. 
 
 But the United States and the larger industrial nations of Europe do not 
 agree. They argue that writing off foreign debts could produce financial chaos 
 and cripple the world economy. 
 
 The idea of a moratorium on foreign debts was put forth three years ago by 
 the Third World as part of its proposed "new world economic order." Most 
 industrialized nations did not embrace the idea. 
 
236 
 
 It came up again in Paris at the Conference on International Economic Coop- 
 eration, the so-called North-South dialogue that wound up last spring. Again 
 the industrialized world looked the other way. 
 
 Meanwhile, Third World debts continued to mount. The current total is about 
 $225 billion. Of that, the least-developed countries owe about $26 billion. 
 
 Then, at this year's session of the U.N. General Assembly, Canada and Sweden 
 decided that they would not wait for joint action. They moved on their own. 
 
 Canada's minister for foreign aid, Alan MacEachen, announced that his gov- 
 ernment was canceling $300 million loans to 13 nations. The loans were made on 
 what are known as concessionary terms, long term at low interest, but the re- 
 cipients had been unable to meet them anyway. 
 
 Taking inflation into account, a Canadian official said, the debts probably 
 amounted to no more than $50 million. 
 
 Not long afterward, Sweden announced that it was canceling $200 million 
 in debts. These two were the result of loans made on concessionary terms. Ola 
 Ullsten, Sweden's minister for international development, announced his gov- 
 ernment's decision and appealed to other industrialized nations to take similar 
 action. 
 
 He said that the rich nations — the United States, Japan and others in Western 
 Europe — had outstanding loans of $20 billion to the poorest nations and that 
 interest payments alone were approaching $1 billion a year. 
 
 "If all the (leading) countries joined in an action to cancel the 'debts of the 
 poorest countries, it would mean an increase in aid of nearly 20 percent to those 
 countries," Ullsten said. 
 
 There is little sentiment in Washington for taking such action. Congress 
 appears to be more concerned with the question of what would happen if 
 debtor nations should choose to default. 
 
 Commissioner Claud Cheysson of the European Economic Community warned 
 that debt cancellation could mean that a country "will remain on welfare for 
 the rest of its days. It will have no credit status anymore." 
 
 A diplomat who advocated debt cancellation said that this was exactly the 
 point, that the poorest nations had no credit standing anyway. 
 
 Private banks, he said, would consider none of them as a loan prospect. He 
 said that other governments should look on them as charity cases and provide 
 aid for them in the form of grants, not loans. 
 
 The neediest cases are mostly African, together with a scattering of Asian 
 nations and one in the Western Hemisphere, Haiti. 
 
 Tanzania in East Africa was a beneficiary of all four governments that have 
 acted to wipe out debts and, in the case of Finland, was the only debtor cleared. 
 
 Like Australia, Finland decided several years ago to make all its foreign 
 aid in the form of gifts, and a small loan to Tanzania was written off at that 
 time. 
 
 In addition to Tanzania, the Netherlands included Bangladesh in the cancel- 
 lation of $18 million worth of loans for $1977. 
 
 In previous years, beginning in 107;". when the Dutch also decided to make 
 all further aid to the least-developed states in the form of grants, loans almost 
 equal to the 1977 Swedish cancellations were written off without fanfare. 
 
 Question. 1. Submit for the record any published accounts representing the 
 "cries of dismay" mentioned in the first paragraph. 
 
 Answer. In discussing the recent "write-offs" of debt by Sweden, Canada. Fin- 
 land, and the Netherlands, one must recall that the debt related entirely to 
 development credits (i.e., debt extended for aid purposes) rather than commercial 
 type debt. In effect, these donor countries have used debt relief as a means of 
 responding to the needs of particular poor countries which have a special need 
 for additional aid. We do not view the actions of Sweden, Canada, and the 
 Netherlands as setting any precedent for the United States. We are not, how- 
 ever, aware of "cries of dismay" resulting from the actions of these four countries. 
 
 Question 2. Will cancellation of the debts of poorer nations create a domino 
 effect where other debtor countries could beg off repayment on the grounds 
 those debts should be forgiven outright? 
 
 Answer. We do not have any evidence that such a domino effect will take 
 place. 
 
 An explanation of what some countries are seeking might be useful: 
 Within the context of the North/South dialogue, developing countries have 
 for the past two years been pressing for generalized debt relief for the poor 
 
237 
 
 countries. Their primary focus has been on the relief of debt attributable to 
 development credits (i.e., debt extended for aid purposes). In effect, they advo- 
 cate the use of debt relief to supplement what they believe are inadequate flows 
 of development assistance. The USG and other major creditors have opposed 
 demands for generalized relief believing it to be an inefficient form of resource 
 transfer. We have, however, stressed our willingness to continue cooperating in 
 multilateral efforts to help individual countries encountering extraordinary debt 
 servicing problems. 
 
 Question 3. Could not Panama do this if its economy does not improve? 
 
 Answer. Despite the slowdown in Panama's economy, the country has been 
 meeting its debt obligations on time and its credit rating remains good. We have 
 no indications that Panama would consider refusing to repay its loans in the 
 event the economy does not improve. 
 
 Question 4- Is the moratorium on foreign debts, mentioned in the fourth 
 paragraph as put forth by the Third AVorld's proposed "new world economic 
 order", part of the thinking of (a) the Linowitz Commission (b) the Trilateral 
 Commission? 
 
 Answer, (a) The Linowitz Commission Report takes note of the debt servic- 
 ing problem in Latin America. It speaks of debt rescheduling, but does not call 
 for an overall moratorium on foreign debt per se. Rather, it suggests that . . . 
 "we should reconsider the question of grant aid for certain countries as a 
 preferable means of assisting them to handle debt burdens which they cannot 
 support." The Linowitz Commission may be able to provide further information 
 about this question. 
 
 (ft) We do not have sufficient information about the Trilateral Commis- 
 sion's views on this matter to reply. 
 
 XII 
 
 The Panama Star & Herald, April 21, 1977, printed the text of the Panama- 
 Libya Cooperation Pact. Article II reads : 
 
 "Both parties have decided to promote and strengthen a mutual cooperation 
 for the establishment of a new international order, based on equality, justice 
 and peace." 
 
 Question 1. Is this new international order the same as the goal of the United 
 Nations discussed elsewhere? 
 
 Answer. We do not have any information as to whether this "new interna- 
 tional order" mentioned in Article II of the Panama-Libya Cooperation Pact 
 is the same as the goal of the United Nations. 
 
 XIII 
 
 Newsweek, for April 25, 1977, reported on the results of Omar Torrijos' visit 
 to Libya's Chief, General Muamar Kaddafi : 
 
 "Rhetoric aside, the two countries did reach some substantial agreements on 
 military and economic cooperation. They arranged a periodic exchange of mili- 
 tary delegations, and several Panamanian officers traveled into the desert to 
 watch some Libyan maneuvers. But the main results of the meeting were largely 
 financial and political. Libya agreed to invest in a Panamanian copper mine and 
 a number of irrigation projects and to establish an Arab bank in Panama with 
 capital of $100 million. The bank could give Panama desperately needed assist- 
 ance in meeting some heavy debt payments that fall due shortly. It may also 
 give Kaddafi a convenient place to launder the currency he uses to fund radical 
 terrorist groups in the Third World. The Libyan leader also said he would 
 build a $2 million mosque and Islamic center in Panama." 
 
 Question 1. Submit all information available on this Arab bank especially as 
 to the degree of its financing. 
 
 Answer. To our knowledge, the Libyans have not yet made any move toward 
 establishing a bank in Panama. 
 
 Question 2. Have any Libyan loans to Panama been forthcoming in the interim? 
 
 Answer. There have been no Libyan loans to Panama. 
 
 Question 3. Comment on the likelihood of Kaddafi laundering support for ter- 
 rorists through Panama. 
 
 Answer. The Newsweek article mentions the possibility of Kaddafi laundering 
 currency through an Arab bank in Panama. Since no such bank has been estab- 
 lished and given the fact that Libyan ties with Panama are extremely limited, 
 the likelihood of Libyan laundering through Panama appears remote. 
 
238 
 
 XIV 
 
 In the Washington Post for June 3, 1977, Marlise Simons wrote an article 
 entitled "Canal Treaty Seen Leaving Political Vacuum In Panama." In that 
 item, she stated the following : 
 
 "As a U.S.-trained economist here pointed out, the canal and its operations 
 have been restricted to being a nonprofit organization by act of Congress. 
 
 "Once a new treaty removes this barrier, Panama will have access not only 
 to tolls but also to profits of the Canal Zone's companies. Moreover, the country 
 will be able to develop new industries such as shipbuilding and repair and dry- 
 docks, which are nonexistent now. 
 
 "Many of the non-essential operations of the canal, now controlled by the U.S. 
 government, such as the terminals division, stevedores, warehousing and tug 
 and launch services, will pass into Panamanian hands. These areas are re- 
 garded as potentially immensely profitable. 
 
 • The Panamanian government also expects to receive significant tax income 
 from the many current activities in the zone such as packing, trucking, shipping 
 and other services in the hands of private firms which have escaped taxation 
 until now. 
 
 "But, one economic expert here commented, "There are many people making 
 eyes at the Zone as a sort of easy gold mine, but all this will require much time 
 and expertise." 
 
 " 'The important thing however,' he added, 'is that a new treaty will change 
 the momentum and, however slowly, that will be the only way out of the eco- 
 nomic deadlock we are in.' 
 
 "Some of the pressure Panamanian businessmen are putting on the Torrijos 
 government, observers here believe, is aimed at assuring themselves a large slice 
 of the cake once the Canal Zone or its enterprises are ready for carving up. 
 
 "A recent meeting of businessmen, for example, demanded that Torrijos define 
 himself ideologically at last. This was taken here as tantamount to a request to 
 have him place most of the newly available business in private hands. 
 
 "Torrijos has not spoken out publicly on his intentions, but in a recent inter- 
 view he implied that the economic spoils of the zone will not simply be up for 
 grabs. 
 
 "Asked about his post-treaty plans for the economy and the running of the 
 canal-related industries, Torrijos replied : 'I am in favor of a mixed economy with 
 the state controlling basic industry. I favor a larger role for the state than we 
 have now.' " 
 
 Question 1. Do any U.S. banks own subsidiary firms in Panama that might 
 profit from such Canal operations were they to pass into private hands? 
 
 Answer. The State Department does not have information as to what U.S. 
 1 tanks may own in Panama. This information is held by the Department of Com- 
 merce, but its proprietary nature precludes its availability except under very 
 special circumstances. 
 
 Question 2. Comment on speculation that some international bankers feel that 
 the Canal itself may be put up as collateral for Panama's forthcoming borrowing, 
 and that the waterway would fall into these bankers' hands when Panama de- 
 faults on these loans. 
 
 Answer. Despite the slowdown in its economy in recent years. Panama has 
 continued to strive for and has indeed demonstrated a sense of fiscal responsi- 
 bilitv. While its debts have climbed as a result of the slowdown, Panama has 
 managed to service these debts with little difficulty. Its credit rating in the inter- 
 national business community is good. 
 
 Clearly, Panama is concerned about its economy and it is counting on the 
 ratification of the Treaties for both the confidence and revenues it will thereby 
 obtain. We have no reason to believe, however, that Panama is so concerned as to 
 abandon its past fiscal practices and embark upon a round of borrowing of un- 
 toward proportions. 
 
 Mortgaging the Canal is simply not feasible. Apart from all other considera- 
 tions (political, financial, etc.) the Treaties would preclude this possibility. Pan- 
 ama will not take control of the Canal until the year 2000, for one thing. Beyond 
 this, Panama has agreed through the Neutrality Treaty to maintain the neutrality 
 and efficient operation of the Canal. Panama would not be able to fulfill this 
 obligation were it to lose control of the Canal through mortgaging or another 
 similar procedure. Obviously, this would cause the United States, which also 
 will maintain the Canal's neutrality, to judge whether such action would consti- 
 tute a threat to the Canal's neutrality, and to act appropriately, in accordance 
 with its rights under the Neutrality Treaty. 
 
239 
 
 xv 
 
 Hobart Rowen authored an article in the December 15, 1977, Washington Post 
 titled, 
 
 Central Bank Role Is Urged for IMF 
 (By Hobart Rowen) 
 
 The International Monetary Fund should "increasingly evolve" into an inter- 
 national central bank, enabling it to act as a lender of "last resort" in crisis 
 situations, the Trilateral Commission recommended yesterday. 
 
 In a report on "renovating" current international relationships, the commission 
 said that the post World War II "international order ... is no longer adequate 
 to cope with new global problems." 
 
 It said that "wide participation" by many countries would impede the de- 
 cision-making process, and that the key role should therefore be left to "smaller 
 groups of countries (who) collaborate together." 
 
 The Trilateral Commission was formed in 1973 by Chase Manhattan Bank 
 chairman David Rockefeller and Zbigniew Brzszinski* now head of the U.S. Na- 
 tional Security council. 
 
 The 200 commission members are drawn from the business, labor, and academic 
 elite of North America, Europe, and Japan. The commission has been attacked 
 from the left as a vehicle for domination of the world economy by the large 
 multinational companies. Right-wingers have attacked it as a radical front. 
 
 The report on renovating the international system was written by Under- 
 Secretary of State for Monetary Affairs Richard N. Cooper, formerly a Yale 
 University professor ; Karl Kaiser, professor of political science at Cologne Uni- 
 versity, and Masataka Kosaka, professor of law at Kyoto University. 
 
 On non-monetary issues, the report urged : 
 
 Trilateral support of the U.N. environmental program. It acknowledged 
 that most of the world's pollution is in the industrialized countries, which 
 requires them to initiate corrective action. 
 
 Access of all countries, developing as well as developed, to nuclear tech- 
 nology, provided they accept international safeguards and controls. 
 
 A balance of the goal of human rights "with other important goals of 
 world order." The report said, "Some trilateral conceptions of detente with 
 the Soviet Union and other Communist states tend to conflict with a policy 
 of promoting human rights." 
 
 The study acknowledged that the current order has been "severely criticized" 
 by Third World countries, who demand a "more equitable sharing of benefits 
 from the world economy." The report argued for substantially increasing the 
 flow of resources "addressed to alleviating world poverty.'* 
 
 Specifically, it endorsed expansion of loans to stabilize export earnings of de- 
 veloping countries through the International Monetary Fund, or by expansion 
 cf the Lome' Agreement with the European community. 
 
 It added that commodity buffer stocks for the purpose of price stabilization 
 should be considered, especially for majors food grains and non-ferrous metals. 
 
 The main thrust of the 68-page document is that an interdependent world 
 must be better managed, because there are inherent conflicts between interna- 
 tional cooperation and national interests. 
 
 The authors suggests that instead of "playing it by ear," the trilateral coun- 
 tries should evolve a strategy for management of the international order that 
 will provide "sense of direction" for the next couple of decades. 
 
 As essential goals, they list "keeping the peace, managing the world economy, 
 contributing to economic development and the satisfaction of basic human 
 needs, and promoting human rights." 
 
 The report contends that the trilaternal nations "must assume leadership of 
 the system," which require informal but close collaboration in economic policy 
 making, especially among the U.S. West Germany, and Japan. 
 
 It recommends guidelines to keep the various issues separate ("piecemeal 
 f unctionalism" ) , accompanied by an effort tc decentralize decision making. 
 
 The proposal for making the IMF into a central bank was set out in detail 
 to illustrate how the proposed guidelines could be applied to international 
 monetary problems. 
 
 The core of a future international monetary system, Cooper-Kaiser-Kosaka 
 say, must be "agreed and operated" by the 5 to 10 biggest countries. The other 
 
240 
 
 countries could then adopt "a wide variety of arrangements . . . around that 
 central core." 
 
 The IMF would provide only a forum for "discussion of ongoing develop- 
 ments," while proposals for formal changes should "originate" with the big 
 powers. 
 
 The need for transforming the IMF into a central bank was said to derive 
 from good management of the flexible exchange rate system, and in order to 
 make Special Drawing Rights (SDRs) the source of most additional monetary 
 reserves. "If SDRs become the principal reserve asset." the report says, "the 
 IMF will play a central role as creator of international reserves." 
 
 QUESTIONS 
 
 (1) Does the State Department and the Administration of Trilateralist Presi- 
 dent Jimmy Carter endorse the conclusion in this report written by Tri- 
 lateralist Under Secretary of State for Monetary Affairs, Richard N. Cooper, 
 
 (a) that the present "international order ... is no longer adequate to 
 cope with new global problems" ? 
 
 (&) that the International Monetary Fund should be converted into an 
 international central bank? 
 
 (2) Is the Trilateral Commission not presenting itself in this report as a 
 vehicle for control of the world economy by calling for better management of an 
 interdependent world by the Trilateralist nations? 
 
 (3) How would, or could, the International Monetary Fund be made into a 
 central bank for the world banking system ? 
 
 (4) Detail the impact on the U.S. taxpayers of such a development. 
 
 (5) Briefly describe the nature of SDRs and their potential on the U.S. 
 citizens' tax dollars. 
 
 (6) Since the inception of each, what have been the total annual contributions 
 from U.S. citizens' tax dollars by the government (including next fiscal year's 
 budget request) to : 
 
 (a) the International Monetary Fund ; 
 ( 6 ) the World Bank ; 
 
 (c) the Inter- American Development Bank ; 
 
 (d) the Asian Development Bank, and 
 
 (e) every other governmental and quasi-governmental international bank? 
 
 (7) (a) Discuss the reasoning behind the recommendation in the 1974 Report 
 of Sol Linowitz's Commission on United States-Latin American Relations for 
 the elimination of the effective U.S. veto over many loans by the Inter- American 
 Development Bank. 
 
 (6) Has the Carter Administration followed this recommendation? 
 Subcommittee note : See cover letter of Assistant Secretary Douglas J. Bennet, 
 Jr. Also See Appendix F. 
 
 XVI 
 
 Spotlight, for June 20, 1977, featured the following two articles: 
 Financial Triumvirate Lured Russians to Panama 
 (By Mark Allan and Tracey Ehre) 
 
 The Russian economic incursion into the Republic of Panama is the illegitimate 
 offspring of a former high-ranking government official and elder state-man, an 
 International financial promoter, and a politically well-connected mini-conglom- 
 erate with interests throughout the world. 
 
 The Spotlight lias learned that the prime movers in forging the liaison between 
 the Soviet Union's Moscow Narodny Bank and Tana ma's official Banco de Na- 
 tional are former Treasury Secretary Robert B. Anderson, reputed international 
 promoter and financier Edward Wong, and the highly-diversified Prudential 
 Group head(Ml by Nathan Shippoe. 
 
 Sources close to these parties have confirmed that all three — in an effort to 
 consolidate and improve their Panamanian financial interests — played key roles 
 in obtaining Soviet capital to bail out and save the Pacific-Atlantic Bank and 
 the Panama Hotel from potential rnin. 
 
 Anderson, by far the best known member of this triumvirate, boasts more than 
 30 years of service in government and private industry. In addition to serving as 
 
241 
 
 President Eisenhower's Treasury secretary, he was also Secretary of the Navy 
 during the early 1950s, served as civilian head of the Defense Department's DEW 
 LiNju project and provided principal direction for the development of the Atomic 
 Energy Commission. Even more significant, however, is Anderson's long history 
 of involvement in the on-again/off -again Panamanian negotiations of the past 13 
 years. 1 1 
 
 As far back as 1966 Anderson, together with Dr. Milton Eisenhower, was co- 
 director of a Johnson Administration White House Task Force which was charged 
 with negotiating a new Panamanian treaty, and in 1973 he was President Nixon's 
 chief negotiator in Panama. That Anderson favors the current effort to relin- 
 quish U.S. control of the Canal and the Canal Zone and that he has long been 
 interested in this highly important country is well documented. 
 
 Indeed, news reports from June 1966 reveal that Anderson and Eisenhower 
 conducted a $10 million study of current treaty arrangements and possible revi- 
 sions, and their recommendations then were essentially identical with the Carter 
 Administration's current policy. 
 
 Among other things the Anderson report of 1966 called for an abrogation of 
 the current 1903 treaty, the granting of sovereignty over the Canal Zone to the 
 Republic of Panama, and the granting of access to the Canal to such nations as 
 Communist China and Cuba whose relations with the U.S. at the time were at 
 an all-time low. 
 
 Given this background Anderson's present associations with the Soviet Union, 
 Wong and the Prudential Group are not surprising. 
 
 According to informed sources Edward Wong, who ostensibly serves as chair- 
 man of the troubled Pacific- Atlantic Bank as well as of the Panama Hotel, is an 
 international promoter and financier whose interests allegedly include dealings 
 with both the Soviet Union and the Communist Chinese. 
 
 Reputedly based in Hong Kong, he is almost constantly traveling the globe in 
 the furtherance of his enterprises and recently visited such financial capitals as 
 Zurich, London, Paris and New York. 
 
 The third member of this triumvirate is Nathan M. Shippee, president and 
 chairman of the Prudential Group, who is described in company literature as a 
 specialist in international venture capital banking. The Prudential Group itself 
 is essentially a mini-conglomerate with involvements in financing, architecture, 
 feasibility studies, etc., and its links to Anderson and the Panamanian situation 
 are readily documented. 
 
 Anderson, for example, is chairman of the board of the Prudential Group's 
 subsidiary Prudential Technology International for which he is also a financial 
 and technical management consultant. Its projects include the development of 
 the DEWLINE radar and communications systems in the Arctic, a Defense De- 
 partment project for which Anderson was at one time the civilian head. Another 
 Prudential Group subsidiary, the prestigious architectural firm of Edward Dur- 
 rell Stone International Ltd., is closely linked to the Panama Hotel, which was 
 originally designed in 1945 by Stone himself. 
 
 That these three men (Anderson, Wong and Shippee) were the masterminds 
 behind the Moscow Narodny's entrance into the Panamanian financial commu- 
 nity was divulged to The Spotlight by highly-placed "Panamanian officials as well 
 as by well-informed sources within the Prudential Group. 
 
 According to these sources Anderson and Wong were ostensibly the chief archi- 
 tects in cementing financial alliance between Bank Narodny and Banco Na- 
 cionale of Panama which have invested a combined total of $14 million in the 
 Panama Hotel and the Pacific-Atlantic Bank, which officially at least are both 
 headed by Wong. 
 
 Despite his highly visible position, however, sources close to the situation 
 state that Wong will not negotiate or discuss in depth any financial transactions 
 with regard to these holdings. He states instead, "Contact Mr. Anderson. He is my 
 partner (in these ventures)." Wong also asks that all correspondence addressed 
 to him in the U.S. should be sent in care of Anderson at a Fifth Avenue address 
 in New York where Anderson manitains a consulting firm. 
 
 The theory that Anderson and not Wong is in fact the leader of this strange 
 coalition can be even further substantiated. For example, the former Treasury 
 secretary, according to well informed sources, frequently boasts of his excellent 
 relationships with the entire Soviet banking community, and particularly with 
 the Gosbank, which is the official state bank of the Soviet Union and that coun- 
 try's equivalent of our own Federal Reserve. 
 
242 
 
 He has also been quoted as saying that he deals with the Bank Xarodny 'as 
 a matter of courtesy," since this is considered to be a lower echelon or "people's" 
 bank which must in any event have the approval of Gosbank before transacting 
 any overseas business. 
 
 In another highly illuminating statement made by Anderson to a source close 
 to the Spotlight he stated, regarding the Panamanian/Russian alliance : "I don't 
 care who I do business with as long as I make money. 
 
 That Anderson, Wong and Shippee's Prudential Group are currently "making 
 money" In return for providing the Soviets with their first economic foothold in 
 the Republic of Panama seems to be more than amply demonstrated by the fact 
 that both the hotel and the bank in which the Soviets have invested are described 
 by sources within The Prudential Group as being "financially troubled." 
 
 Indeed, while Wong is peddling these and other holdings in the world's financial 
 capitals, his "partner" Anderson and The Prudential Group itself tell inquiring 
 investors that they are acting as "referees in bankruptcy" for these Panamanian 
 holdings. Informed sources have also told The Spotlight that Shippee is now 
 telling these same interested investors that any further negotiations on the 
 properties are being delayed pending the signing of a new Panamanian Treaty. 
 
 Thus it appears that the quickly approaching agreement on the U.S. give-away 
 of the Panama Canal and the Canal Zone will insure not only a financial profit 
 for Anderson and his friends, but an already established economic foothold for 
 the Soviet Union in a politically unstable nation whose official bank is already 
 in partnership with the Russians. 
 
 Once again, the intense desire of greedy men for the greatest possible profit — 
 even if reaped at the expense of our national security — is proving to be a domi- 
 nant force in our most important foreign policy decisions. 
 
 Soviet Foothold in Panama Raises Serious Questions 
 (By Mark Allan) 
 
 It can now be revealed that Moscow's Bank Xarodny, the central bank of the 
 Soviet Union, is a direct partner of the Panamanian Government through the 
 Republic's Banco de Xacional of Panama, and that it has helped finance at least 
 one venture that The Spotlight has been able to uncover. 
 
 The Banco de Nacional of Panama and Bank Xarodny have a combined invest- 
 ment of 814 million in what has long been known as Panama's best hotel, the Pan- 
 ama Hotel. This loan was granted so that the hotel could be renovated and ex- 
 panded, and the funds were also to be used to help expand and revitalize the 
 Pacific-Atlantic Bank which has been in bankruptcy at least twice. 
 
 Thus, with one loan the Soviets managed to establish a foothold in both the 
 Panamanian tourist trade and in the banking industry, which shows signs of de- 
 veloping in the secretive mode of the Swiss financial system. 
 
 In addition, the Russians were granted an excellent opportunity to import "fi- 
 nancial advisors," construction consultants, etc., to help protect their investments. 
 
 Thus, in one bold stroke the Soviet Union changed its tactic of military intru- 
 sion to economic infiltration, while at the same time quietly achieving aims that 
 a more provocative military offensive would never have accomplished. These goals 
 moreover were achieved without State Department protest and, except for The 
 Spotlight's story of February 14, without the unpleasant blare of media attention. 
 
 Somewhere along the line, moreover, it was mutually decided by all parties in- 
 volved that it would be even more beneficial to the Russians to enlist the support 
 of private investors with whom they could be cooperative, while at the same time 
 gaining even more friends and increased strength in the trouble-ridden Republic 
 of Panama. (See The Spotlight, Feb. 14, 1977). 
 
 When The Spotlight initially brought this little-known situation to the atten- 
 tion of the State Department early this year, officials stated that they did not 
 consider the Soviet investment in this nation to be a matter of great importance. 
 However, now that it has been ascertained that the investment was sought out 
 and made with direct complicity of the Panamanian government and its official 
 bank and that this government has allowed the Soviet bank and its "advisors" to 
 direct the financial negotiations for attracting U.S. multinational interests, it 
 
243 
 
 would seem that this scenario can no longer be lightly disposed of as it was ini- 
 tially by the administration spokesmen. 
 
 On another front, moreover, the avowed plans of the Torrijos government — 
 plans that have been confirmed by the Panamanian Embassy — to build an oil pipe- 
 line across the Isthmus that could service supertankers from both the Atlantic 
 and Pacific without necessitating their actually negotiating the canal raises the 
 question of whether the Soviets would also be a partner in this together with the 
 avowedly concerned oil companies, including of course the biggest of all — David 
 Rockefeller's Exxon Corp. 
 
 Although this pipeline is currently the most strategic project envisioned by the 
 Torrijos regime, plans have also been announced by the Panamanian government 
 for the development of the San Bias Islands as a major tourist resort. Again the 
 question must arise as to whether U.S. financial interests will join with the 
 communists in orchestrating the development of this potentially lucrative project. 
 
 Indeed, the whole financial structure of the Panamanian government, once it 
 finds itself in sole possession of the Canal Zone, appears to be heading directly 
 into the hands of an American-Soviet corporate and banking group, which has 
 shown its ability to manipulate the White House and the State Department to 
 accommodate its every whim. 
 
 That this Soviet involvement — no matter what the potential for economic 
 gain — poses a security threat for the U.S. is unquestionable, especially when one 
 takes into consideration the fact that Castro's Cuba has already announced its 
 support for the so-called liberation of the Canal Zone and has offered to aid the 
 Panamanian government in reaching a new level of economic achievement. 
 
 Question 1. (a) Submit all available information on the alleged link between 
 the Soviet Union's Moscow Narodny Bank and the Pacific- Atlantic Bank. 
 
 (6) What, if any, are the interests in Pacific-Atlantic Bank of any U.S. 
 citizens ? 
 
 Answer. The Pacific- Atlantic Bank and the Hotel Panama owned by Edward 
 Wong had borrowed money from the Singapore branch of the Moscow Narodny 
 Bank. Nearly all the collateral which Moscow Narody Bank received for the debt 
 was held by Pacific-Atlantic Bank in Panama on Moscow Narodny Bank's 
 behalf. 
 
 With the bankruptcy of Mr. Wong's Panama interests Moscow Narodny Bank 
 "called" in the loans and stopped all financial support to Mr. Wong or any of 
 his companies. 
 
 The matter is currently under litigation in Hong Kong. 
 
 No U.S. citizens, to the best of our knowledge, have interests in the Pacific- 
 Atlantic Bank. 
 
 Question 2. {a) What, if any, working relationships have been planned be- 
 tween the Narodny Bank and Panama's Banco de Nacional? 
 
 (6) Which of these have actually been implemented, if any? 
 
 (c) Supply all available information on these as well as on the reported joint 
 investment in the Pacific- Atlantic Bank and Panama Hotel. 
 
 Answer. The Narodny Bank has no involvement with Banco Nacional. 
 
 The investment in the Pacific-Atlantic Bank and Panama Hotel is explained in 
 answer to question 1. 
 
 Question 3. Did Soviet Union citizens go to Panama as alleged, as financial 
 advisers, etc., either to protect investments or for any other reason? 
 
 Answer. A representative of the U.S.S.R. Foreign Trade Bank did visit Panama 
 at the time of the liquidation of Eddie Wong's bank. We do not know what the 
 outcome of his visit was. 
 
 Question 4. What has been the thrust of the Prudential Group's major and 
 subsidiary business interests in Panama? 
 
 Answer. This question should be addressed to Prudential. 
 
 Question 5. Has Prudential Group, or any of its subsidiaries, or any of the 
 three persons cited in the article, Robert B. Anderson, Edward Wong, or Nathan 
 Shippee, shown or expressed interest in developing a sea-level canal in (a) 
 Panama? (&) elsewhere? (c) to what extent? 
 
 Answer. We do not know of any interest or involvement by these individuals 
 or the Prudential Group. 
 
 Question 6. List any U.S., Soviet, or Communist Chinese banks, if any, or their 
 branches, with which each of the three men may have been connected as an offi- 
 cial, or business partner, or as an associate in any degree. 
 
244 
 
 Answer. We do not have any information on this matter. 
 
 Question 7. Did either of the three men play any role in the U.S.-Panama ne- 
 gotiations on : 
 
 (a) the new treaties since January 1, 1974? 
 (6) any other matter whatsoever? 
 
 (c) or in any Panama-U.S.S.R. or Panama-Mainland China negotiations 
 or discussions? 
 
 Answer. From 1964 to 1970, Robert Anderson was Chairman of the Inter- 
 oceanic Canal Study Commission which was created by President Johnson to 
 study all feasible routes for a sea-level canal. He was also Chief Negotiator for 
 the Panama Canal Treaty Negotiations from 1964 until 1973. He has not been 
 involved since then. 
 
 To the best of our knowledge, none of these persons were involved in negotia- 
 tions or discussions between Panama and the U.S.S.R. or Mainland China. 
 
 Question 8. Is there any "American-Soviet corporate and banking group" in 
 the offing or on the horizon which is planning, or is expected to take part in, any 
 financial, industrial, tourist or any other development in Panama, especially in 
 what will be the former Canal Zone, if the treaties are ratified? 
 
 Answer. Not to our knowledge. 
 
 Question 9. (a) Has Mr. Anderson ever contacted any of the Canal Zone Gov- 
 ernment or Panama Canal Company officials on behalf of either Mr. Shippee or 
 Mr. Wong or any Prudential Group interest? 
 
 (b) Detail. 
 
 Answer. Not to our knowledge. 
 
 XVII 
 
 "La Estrella de Panama" reported on Monday, August 29, 1977, on a meeting 
 over the weekend held by the Panama Banking Association directors and repre- 
 sentatives with three treaty negotiators, Architect Edwin Fabrega, Dr. Nicolas 
 Arditto Barletta, Minister of Planning and Economic Policy, and Chancellor 
 Gonzalez Revilla. The newspaper reported : 
 
 "Barletta recalled that during the 20's and 30's, the U.S. Treasury was receiv- 
 ing some 20 million from the Company, but as a result of certain charges made 
 and other problems, these monies went to a Treasury fund and have not been 
 used since ; from these will be drawn part of the payments to Panama under 
 the new treaty." 
 
 Question 1. Where would Barletta get this notion? 
 
 (a) I know of no fund in the Treasury such as that Barletta referred to. Does 
 such a fund exist? 
 
 (b) Did the U.S. negotiators think there was such a fund? 
 
 (o) Has not Mr. Linowitz spoken of a capital fund held by Treasury for the 
 Panama Canal of over $600,000,000? 
 Answer (a) No. 
 
 (b) No. 
 
 (c) No. Ambassador Linowitz has spoken of the sum of $642 million as actual 
 and imputed interest payments since 1904 by the Canal operation to the General 
 Fund of the Treasury. Actual payments have amounted to about $390 million. 
 
 Question 2. Did our negotiators, at least prior to the August meeting at which 
 Barletta made this statement, promise payments to Panama from this supposed 
 Treasury fund? 
 
 Answer. No. 
 
 The newspaper further reported : "One of the most interesting explanations 
 was made by Barletta when replying to a question on the capability of supply- 
 ing U.S. paper currency for circulation in the country. Minister Barletta pointed 
 out that the Banking Commission and the Banking Association will have to assist 
 in supplying U.S. paper currency for circulation, as this is presently the re- 
 sponsibility of the U.S. Treasury by virtue or reason of the Canal." 
 
 Question 3. Please explain in detail how Minister Barletta could be led to be- 
 lieve that the Panama Banking Commission and the Panama Banking Associa- 
 tion would have any role in supplying U.S. currency for circulation in this 
 country? 
 
 Answer. The Republic of Panama has used the United States dollar as the 
 circulating medium of exchange since 1904. 
 
245 
 
 Question 4- Is there any intended role for that Commission and Association in 
 regard to U.S. currency? 
 Answer. No. None was ever contemplated. 
 
 The newspaper further reported: "Fabrega informed that also foreseen is 
 the use of the pipeline operated by the Navy with terminals at the Atlantic and 
 Pacific ports. At present, feasibility studies (on this) are under way, inasmuch 
 as Panama could use 90 percent of the pipeline's capability of moving 300,000 
 barrels, and the Canal Zone utilizes only 10 percent. Panama consumes 30,000 
 barrels per day. This would help alleviate the fuel transportation cost and 
 usage of the Boyd-<Roosevelt Trans-Isthmian Highway." 
 
 Question 5. Panama, of course, will ultimately get this pipeline which now 
 has been taken apart in connection with Canal Improvements. 
 
 (a) Is there any present plan to enlarge this pipeline to increase its capacity? 
 
 (6) Is this contemplated in the future? 
 
 (c) In either case — 
 
 (i) What would be the estimated cost? 
 
 (n) Who would pay for it if done before 2000? 
 
 See Appendix G. 
 
 XVIII 
 
 The Panama Star and Herald for December 5, 1977, carried the following news 
 story: 
 
 RP Envoy Sees Treaties as "Insurance Policy" 
 
 Mount Pleasant, Mich. (AP). — The Government of Gen. Omar Torrijos 
 faces the danger of being overthrown if the U.S. Senate rejects the new Panama 
 Canal Treaties, said the Panamanian Ambassador before (sic) the United Na- 
 tions over the weekend. 
 
 The treaties are "an insurance policy for Torrijos' government," said Jorge 
 Illueca. 
 
 The Ambassador was interviewed Friday at the Central Michigan University 
 where he was attending a seminar. 
 
 Illueca said that several U.S. conservative groups have launched "a well 
 organized campaign" against the treaties, which must obtain support by two- 
 thirds of the U.S. Senate for the documents to be ratified. 
 
 There is a tense political situation going in Panama," Illueca said. "If Torrijos' 
 government does not obtain ratification of the new treaties there will be all 
 types of political problems in my country and in Latin America. 
 
 "The new treaties represent a form of insurance policy for his government. 
 U.S. public opinion against the treaties is a matter of deep concern in Panama," 
 the Ambassador added. 
 
 He said the negative reaction of a sector of the American people against the 
 treaties has taken Panamanians by surprise. 
 
 Illueca pointed out that in Panama leftists groups are pressing the govern- 
 ment considering that it has ceded too much to the United States since it started 
 negotiations on the new pacts in 1964. 
 
 Further, said the Ambassador, the Panamanian business community wants the 
 government to guarantee security for their investments. 
 
 On the question of Americans who consider that Panama does not have a 
 legitimate right to exercise complete sovereignty over the canal because the 
 United States constructed and maintained the interoceanic waterway, Illueca 
 
 Sa '<I thought that this had been resolved. Former Secretary of State Henry 
 Kissinger and many other presidential administrations have established 
 Panama's right to sovereignty over the canal." 
 
 Question 1. How do these remarks of Ambassador Illueca indicating only the 
 new treaties can save Torrijos square with the many, many statements and 
 assurances of State Department and other Administration spokesmen in response 
 to questions of Members of Congress and the public for several years, that the 
 Torrijos regime is stable and has great national support, and that it has brought 
 stability to the country of Panama? • _ 
 
 Answer. The present government of Panama has been in power since 1968. 
 General Torrijos has been in control of this government since 1972. In a plebiscite 
 on October 14, 1977. the Panamanian people voted 2 to 1 in favor of the proposed 
 Panama Canal Treaties, which had been negotiated with the United States by 
 the Torrijos government. 
 
246 
 
 Ambassador Illueca was merely stating the obvious when he said that the 
 Government of Panama, which is fully committed to these Treaties, could ex- 
 perience severe political problems domestically if the Treaties were not to come 
 into force. 
 
 Our concern, however, is with the continued effective and efficient operation 
 of the Canal. The new treaties are a much better mechanism than the 1903 
 arrangement to achieve this objective irrespective of what government is in 
 power in Panama. For this reason the Administration strongly believes the 
 treaties should be ratified by the United States at an early date. The future of 
 General Torrijos and his government are matters for him and the Panamanian 
 people to work out. 
 
 Question 2. Where is the real threat to the regime coming from ; who comprises 
 It at present ; what is its power base and potential support among the people? 
 
 Answer. The Department will not speculate on the internal political matters 
 referred to in the question. 
 
 Question 3. How would it actually succeed in deposing Torrijos? 
 
 Answer. There are any number of ways in which opposition leaders could 
 assume power in Panama. One would be through the election process ; another 
 would be through the resignation of General Torrijos. 
 
 Question 4- Does not the Ambassador's statement give great substance to 
 charges — 
 
 (a) that the great push for the treaties in certain U.S. circles is actually 
 to keep Torrijos in power, and 
 
 (b) that the reason is simply that there is a quid pro quo between 
 Torrijos and those U.S. interests pushing the turnover of the Canal Zone and 
 waterway ? 
 
 Answer. As stated in our reply to question one, the Administration's interest 
 in obtaining early implementation of these treaties is to protect our interest in 
 the Canal, and is completely unrelated to the present or future composition of 
 the Panamanian Government. The treaties have been written to serve the inter- 
 ests of the two countries. The quid pro quo to which the question refers does not 
 exist. 
 
 XIX 
 
 Additional Questions of Me. Snyder on Treaty- Related Matters 
 
 Question 1. What minimum annual revenue from Canal tolls did you have in 
 mind when you agreed to the financial sums pledged to Panama? 
 Would this have required an increase in tolls, and if so, what rate of increase? 
 
 Answer. Current projections, based on current toll rates, are : Millions 
 
 1978 $182. 3 
 
 1979 194.0 
 
 1980 197.5 
 
 1981 199.2 
 
 1985 209.9 
 
 1990 223.6 
 
 2000 264.3 
 
 During this period, operating costs (less payments to Panama) are estimated 
 to range between $160 and $185 million annually, exclusive of costs incident to 
 phasing out the Canal Zone Government. 
 
 Payments to Panama will run betw r een $50 and $60 million dollars. 
 
 A toll increase of about 30 percent is contemplated to cover these payments 
 to Panama and operating costs. The toll increase could be less, depending on the 
 amount of North Slope oil. 
 
 Question 2. Would you spell out in detail how you came up with the figure of 
 $10 million for services Panama will provide in view T of the fact that the Gov- 
 ernor indicated in his answers it will only cost Panama $4 1 /-» million to provide 
 those services? 
 
 Answer. Costs to the Canal Zone Government for public services, e.g., police 
 and fire protection, street maintenance, traffic control, and garbage collection, to 
 be provided by Panama under the new Treaty aire now about $18 million. Panama 
 agreed to $10 million on the assumption that its costs, largely because of lower 
 wage scales, would ho loss. The figure may prove to be either somewhat high 
 or low. It will be reviewed and adjusted every three years after the Treaty 
 enters into force on the basis of actual cost. 
 
247 
 
 Question 3. Is it not a fact that the Commission will be providing substantially 
 the same services over the 2% year transition period that we will be paying the 
 Republic of Panama for providing — in other words a duplication of effort? Why 
 should we pay the $10 million a year or any part of it for that period of time? 
 
 Answer. Panama will be responsible for providing these services from the date 
 of entry into force of the Treaty. While it is true that the United States will 
 continue to perform certain of these services, such as police protection, along 
 with Panama during the 30-month transition period, the $10 million includes the 
 "start-up" costs Panama will incur in initiating new services in these areas. 
 
 The Panama Canal Company estimates current costs at $18 million. The figure 
 of $10 million was decided upon because Panama should be able to do the same 
 job at lower cost since it has a lower wage scale than that used in the Canal 
 Zone; and the services to be compensated for under the Treaty are limited to 
 Canal operating and housing areas and thus cover less than half of the area 
 of the present Canal Zone. 
 
 Question 4. I read Article XIII, paragraph 2, to mean that the United States 
 continues to own the Panama Canal until December 31, 1999. Is this correct? 
 
 Answer. The United States has never owned the Panama Canal. Under the 
 1903 Treaty, the United States was granted "all the rights, power and author- 
 ity .. . which it would possess and exercise if it were the sovereign of the terri- 
 tory". We were given use rights, but Panama retained residual ownership. Under 
 the new treaties, the United States retains the right to use all land and water 
 areas necessary for the operation of the Canal until the end of the century. 
 Therefore, we will have exclusive rights to use the Panama Canal, as we have 
 in the past, until 1999. 
 
 Question 5. Will the Republic of Panama pay for one-half of the joint survey 
 discussed in Annex A to the Agreement in the implementation of Article III? 
 
 Answer. There is no specific agreement 6n this matter. It is expected that it 
 would be resolved at a suitable time after ratification of the Treaties. 
 
 Question 6. (a) Does Article V of the Neutrality Treaty after the year 2000 
 prohibit training of foreign troops in Panama ? ( ) Temporary military exercises 
 by the United States in Panama? (c) Temporary military exercises by Cuba, 
 or other non-U. S. or non-Panama military units? 
 
 Answer. Article V of the Neutrality Treaty would not prohibit Panama from 
 inviting foreign troops, including those of the United States, to Panama for 
 temporary exercises or training. The Treaty does provide that only Panama shall 
 maintain military forces, defense sites and military installations within its 
 territory. Any exercise or training by foreign troops that we judge constitutes a 
 threat to the Canal would be a violation of the Treaty, and as such it would 
 allow the United States to take appropriate countermeasures. 
 
 7. Article XII of the Panama Canal Treaty states "both parties commit them- 
 selves jointly to the feasibility of a sea-level canal in the Republic of Panama". 
 
 Question (a). Is this commitment absolute? 
 
 Answer. Yes, the treaties would commit us to a joint study with Panama of 
 the feasibility of a sea-level canal in Panama. 
 Question (b). When would the study begin? 
 
 Answer. The study would begin at an agreed time after the entry into force 
 of the Panama Canal Treaty. 
 
 Question (0). How extensive would it be? i) will it cover the same ground 
 of the 1970 study commission? ii) Or start all over again? iii) Or merely 
 update that study? 
 
 Answer. The parameters for the study have not been determined. Presumably 
 the study would draw upon the one concluded in 1970 as well as more recent 
 information. 
 
 Question (d). How much will it cost for each of these alternatives? 
 
 Answer. We have no current cost estimates for the study. The 1970 report 
 contained detailed cost estimates. 
 
 Question (e). Will the study be funded equally by the United States and 
 Panama or in some other manner ? 
 
 Answer. The funding arrangements with Panama would be agreed upon after 
 ratification of the Treaties. 
 
 Question (/). Will an environmental impact statement accompany this study? 
 How much will this cost? 
 
 Answer. Yes. We do not know how much an environmental impact statement 
 in connection with the sea-level canal may cost. 
 
248 
 
 Question 8. What was the cost of the draft environmental impact statement 
 issued shortly before the Treaties were signed last September? What is the 
 estimated cost of the final impact statement in preparation? Where were these 
 amounts requested and approved in the appropriation process? 
 
 Answer. The cost of the draft statement was $2,317. The cost of the final impact 
 statement is $5,359. These funds come from the budget for the State Depart- 
 ment, principally those allocated to the Bureau of International Environmental 
 and Scientific Affairs. 
 
 ADDITIONAL QUESTIONS 
 
 (9) Paragraph 1 of Article XIII of the new treaty provides that on termination 
 of the treaty the Panama Canal shall be turned over to Panama "free of liens 
 and debts, except as the two Parties may otherwise agree." The 1976 annual 
 report of the Panama Canal Company showed year end liabilities, exclusive of 
 the U.S. investment in the canal, of some $92 million. On its face, the cited treaty 
 provision appears to require the United States to pay off all such liabilities before 
 transfer to Panama. What is the estimated amount of such liabilities at the 
 termination of the treaty and how would the payments necessary to liquidate 
 such liabilities be financed? 
 
 (10) Minority Counsel Nicholas Nonnenmacher asked General Dolvin, repre- 
 senting the Department of Defense, a series of questions aimed at getting an 
 answer to my questions of Mr. Linowitz which he has kept trying to duck, namely, 
 can the United States under the Neutrality Treaty intervene to keep the Panama 
 Canal open even if the threat or actual aggression or hositility to the waterway 
 comes from Panamanians? 
 
 The last exchange was as follows : 
 
 "Mr. Nonnenmacher. Then it is fair for Members of Congress to conclude 
 that what you are saying is that we have a right to intervene to take the action 
 necessary to keep the Canal open even if Panama itself or a dissident Panama- 
 nian force is the aggressor? 
 
 "General Dolvin. I did not use the word 'intervene,' if you will recall. I said 
 we have the right under the Treaty to take whatever steps we deem necessary 
 to maintain the neutrality of the Canal, irrespective of its source. 
 
 "Mr. Nonnenmacher. With that clarification you just put on it, I say thank 
 you. I think that answers the question." 
 
 General Dolvin's answer specifies clearly that even if the source of a threat 
 of aggression is Panamanian, the United States can intervene to keep the Canal 
 open, without violating the provision that the United States cannot intervene 
 in Panama's internal affairs. 
 
 (a) Is the State Department's position on this U.S. right exactly as I have 
 stated General Dolvin's answer specifies it is — forgetting the nonsense about the 
 word "intervene" and assuming that "take whatever steps we deem necessary" 
 includes moving into the Canal area physically, with force? 
 
 ( 6) Is this Panama's position? 
 
 (11) What are the proposed housing rental/purchase arrangements for Pana- 
 manian citizens who will continue working in the Zone? What recourse do they 
 have if rents are raised exorbitantly by Panama ? 
 
 (12) Please ascertain from the White House if President Carter, should the 
 U.S. Senate reject the treaties, will proclaim at once to Panama and the whole 
 world that the United States will defend its Canal and the Zone against any and 
 all possible violence with all the armed force that may be immediately and sub- 
 sequently necessary for their adequate and continued defense? 
 
 (13) Please ascertain from the White House : 
 
 (a) The number of briefings held to date for U.S. businessmen, labor 
 groups, professional people and the like ; 
 
 (6) if any expenses of the guests have been paid for by the Executive 
 Branch ; 
 
 (c) the total cost of such briefings ; 
 
 (d) (i) the average number of people invited to each briefing; (ii) the 
 average number who attend them ; 
 
 (c) how many more of such briefings are planned ; 
 (/) the source of the funds for the briefings ; 
 
 (ff) if the anti-treaty position is presented to the participants by an able, 
 articulate spokesman for that viewpoint ; 
 
249 
 
 (7i) all costs, other than the above, of the White House effort to have 
 the treaties ratified since the Carter Administration took office ; 
 
 (i) names of personnel assigned to this task for a considerable part of 
 their time ; 
 
 (/) details concerning any of the above as related to : (i) the U.S. Senate; 
 (ii) the House of Representatives ; and (in) the media. 
 
 (14) Submit for the record the answers to similar questions previously asked 
 by Congressman Robert Dornan regarding costs of all State Department activities 
 involved in promoting the treaties to the American people and the Congress. In 
 addition, detail any of the above as related to: (a) the Senate; (&) the House 
 of Representatives ; and (c) the media. 
 
 (15) Have any U.S. Government funds been transferred or funneled in any 
 manner to any private group or groups seeking public support of the treaties? 
 
 See Appendix G for answers to Questions 9 through 15. See also Appendix H 
 for further answer to Question 14. 
 
APPENDIX F 
 
 Department of State, 
 Washington, D.C., March 7, 1978. 
 
 Hon. Ralph H. Metcalfe, 
 
 Chairman, Subcommittee on Panama Canal, 
 
 House of Representatives. 
 
 Dear Mr. Chairman : I refer to my letter to you of January 30, 1978, attached 
 to which were replies to questions posed by you and Mr. Snyder to Ambassadors 
 Bunker and Linowitz. At that time, we did not have replies to all questions. We 
 now attach those remaining replies. 
 Sincerely, 
 
 Douglas J. Bennet, Jr., 
 
 Assistant Secretary 
 for Congressional Relations. 
 
 Enclosure : As stated. 
 
 X 
 
 The Declaration and Programme of Action on the Establishment of a New In- 
 ternational Economic Order, and the Charter of Economic Rights and Duties of 
 States were products of the United Nations General Assembly in 1974. 
 
 Question 1. How do they focus on the international debts of the developing 
 countries and the problems of repayment? 
 
 Question 4- (a) How did the United States vote on these resolutions in the 
 United Nations? (b) Why? 
 
 Question 5. How did Panama Vote? 
 
 Question 6. What would be the role of the Panama Canal in this New Inter- 
 national Economic Order of the United Nations? 
 [The following answers the above questions.] 
 
 Answer. The Declaration and the Program of Action on the Establishment of a 
 New International Economic Order, twin resolutions initiated by the "Third 
 World" developing countries, were adopted without vote by the Sixth Special 
 Session of the United Nations General Assembly on May 1, 1974. There were how- 
 ever, over 200 reservations expressed on the part of 20 Western industrialized 
 countries, including the United States. The Charter of Economic Rights and 
 Duties of States was adopted by the 29th Regular Session of the General Assem- 
 bly on December 12, 1974, by a vote of 120 in favor, 6 opposed (including the 
 United States) and 10 abstentions. In the paragraph-by-paragraph voting prior 
 to the final vote, the United States and a varying number of other countries voted 
 against or abstained on certain specific provisions. Panama was amongst those 
 voting in favor of the Charter. In neither of the above cases, however, did 
 Panama play a prominent role. We do not know the specific reasoning behind 
 its vote. 
 
 None of these three resolutions touched on the situation of the Panama Canal. 
 They do, however, call for "an end to all forms of foreign occupation, racial 
 discrimination, apartheid, colonial, neo-eoloniaJ and alien domination and 
 exploitation through the exercise of permanent sovereignty over natural re- 
 sources" (Paragraph I.L(a) of the Program of Action). Somewhat similar lan- 
 guage appears in the other two resolutions, as well as in a host of other United 
 Nations resolutions. However, the Declaration (paragraph 4(f) ) and the Charter 
 (Article 16) go beyond the foregoing by asserting the notion of compensation 
 for the exploitation and depletion of natural and other resources under the 
 circumstances mentioned — a point that we strongly opposed in both instances. 
 
 Attached for your information is a background paper (Item 1) on these 
 three resolutions, the texts of the resolutions (Item 2-4), the United States 
 
 (250) 
 
251 
 
 statement of reservations (Item 5) and a compendium of reservations (Item 6-7) 
 on the Charter of Economic Rights and Duties of States. 1 
 
 With respect to debt, the Program of Action on the Establishment of a New 
 International Economic Order calls for "appropriate urgent measures" to he 
 taken to assist developing countries in their debt problems. In this context, it 
 calls for "debt renegotiation on a case-by-case basis with a view to conclud- 
 ing agreements on debt cancellation, moratorium, rescheduling, or interest 
 subsidization." 
 
 International financial institutions were requested to take into account the 
 special needs of each developing country in reorienting their lending policies. 
 According to the resolution, priority attention to the granting of loans on more 
 favorable terms should be given to the least developed, land-locked, and island 
 developing countries and to the "most seriously aifected" developing nations. 
 
 The Charter for Economic Rights and Duties of States makes no specific 
 mention of the debt situations of developing countries. However, it calls on 
 '"all states" to increase their net flows of real resources to the developing 
 countries. 
 
 While the developing nations' position in 1974 was as noted in the Program 
 of Action, they have since then taken a harder stand on the debt issue. In the 
 Manila Declaration and Program of Action of the so-called "Group of 77" (Febru- 
 ary, 1976), the developing nations called for cancellation of the official debts 
 of the least developed, landlocked and island developing countries, and other 
 most seriously affected developing countries. They also called for the rescheduling 
 of commercial debts "of interested developing countries" over a period of twenty- 
 five years. This is the general thrust of the current position of the Group of 77, 
 although we know of several countries within the group which privately ex- 
 press disagreement with this position. 
 
 Question 2. Is the international economic order discussed in the report of the 
 Linowitz Commission the same as the New International Economic Order envi- 
 sioned by the United Nations? If now, how do the two relate? 
 
 Question 3. Is the new world order which is the concern of the Trilateral Com- 
 mission the same as the United Nations goal? If not, how do the two relate? 
 
 Answer. The above questions might best be directed to the Trilateral and 
 Linowitz Commissions. 
 
 XV 
 
 Hobart Rowen authored an article in the December 15, 1977, Washington Post 
 titled, "Central Bank Role Is Urged for IMF". 
 
 Central Bank Role Is Urged for IMF 
 
 (By Hobart Rowen) 
 
 The International Monetary Fund should "increasingly evolve" into an in- 
 ternational central bank, enabling it to act as a lender of "last resort" in crisis 
 situations, the Trilateral Commission recommended yesterday. 
 
 In a report on '•renovating" current international relationships, the commission 
 said that the post World War II "international order ... is no longer adequate 
 to cope with new global problems." ; t 
 
 It said that "wide participation" by many countries would impede the decision- 
 making process, and that the key role should therefore be left to "smaller groups 
 of countries (who) collaborate together." 
 
 The Trilateral Commission was formed m 1973 by Chase Manhattan Bank 
 chairman David Rockefeller and Zbigniew Brzezinski, now head of the U.S. 
 National Security council. . 
 
 The 200 commission members are drawn from the business, labor, and academic 
 elite of North America, Europe, and Japan. The commission has been attacked 
 from the left as a vehicle for domination of the world economy by the large multi- 
 national companies. Right-wingers have attacked it as a radical front. 
 
 The report on renovating the international system was written by Under- 
 Secretary of State for Monetary Affairs Richard N. Cooper, formerly a Yale 
 University professor; Karl Kaiser, professor of political science at Cologne Uni- 
 versity and Masataka Kosaka, professor of law at Kyoto University. 
 
 i Subcommitee note : This material has been placed in the files of the subcommittee. 
 
On non-monetary issues, the report urged 1 
 
 Trilateral support of the U.N. environmental program. It acknowledged rhnt 
 most of the world's pollution is in the industrialized countries S r^ufre 
 them to initiate corrective action. ' " mcn requires 
 
 2 aU count . ries - developing as well as developed, to nuclear technolozv 
 provided they accept international safeguards and controls lecnnoiogy, 
 A balance of the goal of human rights "with other important goals of world 
 F^on ,nd e nH POr l' Said ' "S°me trilateral conceptions of detente witn the Soviet 
 human r^hte." COmimimSt States tend t0 conflict ? Policy of promoting 
 
 The study acknowledged that the current order has been "severely criticized" 
 by Third World countries, who demand a "more equitable sharing of benefits 
 from the world economy." The report argued for substantial^ increasing the 
 flow of resources "addressed to alleviating world poverty.*' 
 
 Specifically, it endorsed expansion of loans to stabilize export earnings of de- 
 veloping countries through the International Monetarv Fund, or by expansion 
 of the Lome' Agreement with the European community. 
 
 It added that commodity buffer stocks for the purpose of price stabilization 
 should be considered, especially for major food grains and non-ferrous metals. 
 
 The main thrust of the 68-page document is that an interdependent world 
 must be better managed, because there are inherent conflicts between interna- 
 tional cooperation and national interests. 
 
 The authors suggests that instead of "playing it by ear." the trilateral coun- 
 tries should evolve a strategy for management of the international order that 
 will provide "sense of direcion" for the next couple of decades. 
 
 As essential goals, they list "keeping the peace, managing the world economy, 
 contributing to economic development and the satisfaction of basic human. need's, 
 and promoting human rights." 
 
 The report contends that the trilateral nations "must assume leadership of 
 the system," which will require informal but close collaboration in economic poliev 
 making, especially among the U.S., West Germany, and Japan. 
 
 It recommends guidelines to keep the various issues separate ("piecemeal func- 
 tionalism"), accompanied by an effort to decentralize decision making. 
 
 The proposal for making the IMF into a central bank was set out in detail 
 to illustrate how the proposed guidelines could be applied to international mone- 
 tary problems. 
 
 The core of a future international monetary system. Cooper-Kaiser-Kosaka say. 
 must be "agreed and operated" by the 5 to 10 biggest countries. The other coun- 
 tries could then adopt "a wide variety of arrangements . . . around that central 
 core." 
 
 The IMF would provide only a forum for "discussion of ongoing developments." 
 while proposals for formal changes should "originate" with the big powers. 
 
 The need for transforming the IMF into a central bank was said to derive 
 from good management of the flexible exchange rate system, and in order to 
 make Special Drawing Rights (SDRs) the source of most additional monetary 
 reserves. "If SDRs become the principal reserve asset," the report says, "the 
 IMF will play a central role as creator of international reserves." 
 
 Question 1. Does the State Department and the Administration of Trilateralist 
 President Jimmy Carter endorse the conclusion in this report written by Tri- 
 lateralist Under Secretary of State for Monetary Affairs, Richard N. Cooper — 
 
 (a) that the present "international order ... is no longer adequate to cope 
 with new global problems" ? 
 
 (b) that the International Monetary Fund should be converted into an 
 international central bank? 
 
 Answer. The views and proposals of organizations like the Trilateral Com- 
 mission are of interest to the State Department. However, the State Depart- 
 ment has not taken a position on the Trilateral Commission's proposals. 
 
 Question 2. Is the Trilateral Commission not presenting itself in this report 
 as a vehicle for control of the world economy by calling for better management of 
 an interdependent world by the Trilateralist nations? 
 
 Answer. This question might best be asked of the Trilateral Commission 
 directly. Only the Commission can comment on how it may be presenting itself. 
 
 Question S. How would, or could, the International Monetary Fund be made 
 into a central bank for the world banking system? 
 
 Question 4- Detail the impact on the U.S. taxpayers of such a development. 
 
253 
 
 [The following is the answer to the above questions :] 
 
 Answer. This is a matter that might best be discussed by the Trilateral Com- 
 mission and the IMF. The State Department is not actively considering the 
 proposal. 
 
 Question 5. Briefly describe the nature of SDKs and their potential on the 
 United States citizens' tax dollars. 
 
 Answer. Special Drawing Rights (SDR) is a new form of reserve asset created 
 by an international agreement among members of the International Monetary 
 Fund. Often called "paper gold", SDRs held by an IMF member can be trans- 
 ferred to another member in exchauge for foreign currencies needed to combat 
 a payments deficit, or in exchange for its own currency. They can also be used to 
 repay past borrowings from the IMF. They are not used for commercial transac- 
 tions. Countries which have obtained currencies in exchange for their SDRs pay 
 interest to the countries, or the IMF, which have received the SDRs, but all 
 countries are required to limit their average borrowings over a period of years. 
 The creation of SDRs, unlike gold, uses up none of the world's scarce resources. 
 Unlike the accumulation of reserve currencies, it requires no disequilibrium in 
 international payments between reserve and nonreserve countries. 
 
 There is no negative impact on the United States taxpayer under the SDR 
 system. 
 
 Question 6. Since the inception of each, what have been the total annual contri- 
 butions from United States citizens' tax dollars by the government (including 
 next fiscal year's budget request) to : 
 
 (a) the International Monetary Fund 
 
 (b) the World Bank 
 
 (c) the Inter-American Development Bank 
 
 (d) the Asian Development Bank, and 
 
 (e) every other governmental and quasi-governmental international bank? 
 Answer. Since the inception of each, the following amounts (in millions) have 
 
 either been committed on a "callable" basis or actually paid to the international 
 development banks, monetary institutions and special development funds indi- 
 cated below : 
 
 
 Commitments 
 
 Paid in 
 
 Total 
 
 International Monetary Fund (IMF) 
 
 
 $7, 772 
 
 $7, 772 
 
 World Bank (IBRD) 
 
 $7, 370 
 
 819 
 
 8, 189 
 
 International Development Association (IDA)... 
 
 
 5,258 
 
 5, 258 
 
 International Finance Corporation. 
 
 
 73 
 446 
 
 73 
 
 Inter-American Development Bank. 
 
 2, 784 
 
 3,230 
 
 IDB Fund for Special Operations 
 
 
 3, 315 
 
 3,315 
 
 Miscellaneous (IDB) funds 
 
 
 525 
 
 525 
 
 Asian Development Bank 
 
 561 
 
 210 
 
 771 
 
 
 
 200 
 
 2C0 
 
 
 
 25 
 
 25 
 
 Total 
 
 10,715 
 
 18, 643 
 
 29, 358 
 
 Question 7. (a) Discuss the reasoning behind the recommendation in the 1974 
 Report of Sol Linowitz's Commission on United States-Latin American Rela- 
 tions for the elimination of the effective United States veto over many loans 
 by the Inter-American Development Bank, (b) Has the Carter Administration 
 followed this recommendation? 
 
 Answer, (a) This question might best be directed to the Linowitz Commission 
 itself. 
 
 (b) The United States continues to maintain its veto on loans originating 
 from the Inter-American Development Bank's Fund for Special Operation (FSO) . 
 There are no plans at present to change this arrangement. 
 
APPENDIX G 
 
 Department of State, 
 
 Washington, D.C., March 23, J978. 
 
 Hon. Ralph S. Metcalfe, 
 
 chairman, Subcommittee on Panama Canal, 
 
 House of Representatives. 
 
 Dear Mr. Chairman : I refer to my letter to you of January 30. 1978, attached 
 to which were replies to questions posed by you and Mr. Snyder to Ambassadors 
 Bunker and Linowitz. At that time, we did not have replies to all questions. We 
 now attach those remaining replies. 
 Sincerely, 
 
 Douglas J. Rennet, Jr., 
 
 Assistant Secretary 
 for Congressional Relations. 
 
 Enclosure : As stated. 
 
 V 
 
 A memorandum 1 from the United States Embassy in Panama to the State 
 Department dated October 26. 1976, was inserted in the Congressional Record by 
 Senator Helms of North Carolina on February 22, 1977. Under "comments", 
 the following two paragraphs appeared in that memorandum. 
 
 (A) Panama's high wages, subsidies, and consumer imports — together with 
 a moderate tax burden and little public saving — permit a standard of living 
 wbich no longer appears to be supportable by Panama's inefficient domestic 
 production. 
 
 (B) Increased external financial flows per se, regardless of concessional! ty. 
 permit Panama to defer grappling with the core problem of low productivity 
 until a later date when the problem will probably have worsened, unless such 
 financing bears specifically on some aspect of costs. Indeed, much of the capital 
 inflow of the past three years has aggravated Panama's economic malaise by 
 exacerbating its debt service burden without enhancing overall productivity. 
 Moreover, total inflows greatly exceeded the current account deficit of Panama's 
 balance of payments, resulting in large negative "errors and omissions" (around 
 $100 million annually) most of which probably represented outflows of domes- 
 tically-owned capital. 
 
 Question 1. According to the memorandum, the foreign loans made to Panama 
 have increased the debt service burden without increasing productivity and 
 therefore Panama's ability to repay the loans. Does this still hold true today V 
 
 Answer. Panama's economy is experiencing a recession. It was brought 
 about partly from the impact of the world-wide recession and partly from in- 
 creased oil import costs, as well as from domestic causes. After a decade of 
 growth rates averaging better than 72 per year, the rate fell to 3.5% in 1071 
 and to 1% in 1 1)77. Indications are that for 107S there may be no growth at 
 all. largely due to the strict austerity measures imposed by the government to 
 rectify the country's balance of payments situation. 
 
 Panama, along with many other LDC's. has had to borrow heavily, mostly 
 from commercial sources abroad, to counter the effects of the recession. As a 
 consequence, it has had to devote increasing amounts of its revenues to repay- 
 ing these debts. 
 
 In an effort to decrease its reliance on external debt financing, the Govern- 
 ment, has taken steps to improve its fiscal operations. For example, current 
 revenues in 1977 increased to .$343 million from $281 million in 1076 largely 
 through a 5 percent sales tax levied on March 1, 1077 on items other than 
 
 > Sop Appendix I, B (Exhibit 4). 
 
 (254) 
 
255 
 
 food, medicines and fuel. In addition, business income tax collections benefitted 
 from improved record-keeping required by this tax law. Also, some income 
 was generated by slightly higher petroleum taxes. In a further effort at fiscal 
 austerity, Panama held its 1977 current expenditures to an 11% increase over 
 1976 ($343 million vs. $310 million) which permitted it to achieve a balanced 
 budget for operating expenses. There remains a need to finance capital improve- 
 ments projects from external sources. 
 
 Productivity is a continuing problem in Panama. Accordingly the government 
 lias undertaken labor law reforms and is attempting to dampen wage demands. 
 
 In short, there is a cause for concern, but not alarm, about the present state of 
 Panama's economy and what the future will bring. It is worthwhile noting, for 
 instance, that Panama has never defaulted on a loan and that its credit rating 
 is still good. 
 
 One of the reasons why the economy has taken a downturn is that the uncer- 
 tainty engendered by the Canal treaty negotiation and ratification processes has 
 held back private investment. If the treaties are ratified, we anticipate that in- 
 vestor confidence will be restored and subsequent investments will improve 
 the economic picture, as more investments should bring about heightened 
 productivity. 
 
 Question 2. If it does, why would increased loans to Panama — including the 
 economic package agreed upon in connection with the new treaties — have any 
 different effect? 
 
 Answer. The economic and military package agreed upon outside the Treaties 
 does not provide for any loans directly to the Government, or for purposes of con- 
 sumption rather than investments. The $345 million package includes : $200 mil- 
 lion in Export-Import loans (to businesses), loan guarantees and insurance : $75 
 million in Housing Investment Guarantees : $20 million in Overseas Private In- 
 vestment Corporation guarantees ; and $50 million in foreign military sales cred- 
 its over ten years. The United States pledged its "best efforts" with respect to 
 this package. Its implementation will require an exchange of diplomatic notes 
 and compliance with applicable legal requirements. 
 
 By encouraging investment in Panama, the guarantees will assist Panama to 
 improve its economy and to enhance its economic development. 
 
 XVII 
 
 La Estrclhi rfc Panama reported on Monday, August 29. 1977, on a meeting over 
 the weekend held by the Panama Banking Association directors and represent- 
 atives with three treaty negotiators, Architect Edwin Fabrega, Dr. Nicolas 
 Arditto Barletta, Minister of Planning and Economic Policy, and Chancellor 
 Gonzalez. Re-villa. 
 
 * * * * * * * 
 
 The newspaper further reported : 
 
 •Fabrega informed that also foreseen is the use of the pipeline operated by 
 the Navy with terminals at the Atlantic and Pacific ports. At present, feasibility 
 studies (on this) are under way, inasmuch as Panama could use 90 per cent 
 of the pipeline's capability of moving 300,000 barrels, and the Canal Zone utilizes 
 only 10 percent. Panama consumes 30,000 barrels per day. This would help 
 alleviate the fuel transportation cost and usage of the Boyd-Roosevelt Trans- 
 Isthmian Highway.'' 
 
 Question J. Panama of course, will ultimately get this pipeline which now has 
 been taken apart in connection with Canal improvements. 
 
 (a) Is there any present plan to enlarge this pipeline to increase its capacity? 
 
 (6) Is this contemplated in the future? 
 
 (c) In either case (i) what would be the estimated cost? (ii) who would pay 
 for it if done before 2000? 
 
 Answer. The Treaty provides that the pipelines will continue to be under 
 the supervision of the United States Navy until December 31, 1999. However, the 
 United States will consider authorizing use of the pipelines by Panama under 
 terms and conditions to be mutually agreed upon. 
 
 The Navy uses the pipelines primarily for refueling of ships. The Depart- 
 ment of Transportation did a study in 1976 on the feasibility of shipping Alaskan 
 oil by pipeline. It was determined that the facilities were not adequate for such 
 large scale use. 
 
 At this time, there are no plans for enlargement of the pipeline nor do we 
 anticipate such construction will take place in the future. 
 
256 
 
 No estimates have been made on the cost of enlargement. 
 
 However, if such construction is undertaken prior to the vear 2000 we would 
 assume that the United States provide the funding in conjunction with an 
 agreement with Panama for continuing use rights in the pipeline. 
 
 XIX. Additional Questions of Mr. Snyder 
 
 Question 9. Paragraph 1 of Article XIII of the new treaty provides that on 
 termination of the treaty the Panama Canal shall be turned over to Panama 
 "free of liens and debts, except as the two Parties may otherwise agree." The 
 1976 annual report of the Panama Canal Company showed vear end liabilities, 
 exclusive of the United States investment in the canal, of some $92 million. On 
 its face, the cited treaty provision appears to require the United States to pay 
 off all such liabilities before transfer to Panama. What is the estimated amount 
 of such liabilities at the termination of the treaty and how would the pay men rs 
 necessary to liquidate such liabilities be financed? 
 
 Answer. The Treaty specifies that the Canal shall be turned over "free of 
 liens and debts." This phrase refers only to obligations which constitute liens on 
 the Canal itself, or appurtenant facilities and not to normal unsecured liabili- 
 ties. The latter obligations, however, would be discharged in the process of 
 liquidation of the Commission. "Free of liens and debts" is also aualified by 
 the phrase except as the Parties may otherwise agree. We would not expect 
 Panama to agree to an automatic acceptance of debts contracted by another party, 
 including the Commission, which were outside her control. However, should 
 the commission undertake expensive new long-term programs during the latter 
 years of the treaty period, we would anticipate the Commission would enter 
 into an agreement with Panama providing for an equitable assumption of any 
 remaining liability in the year 2000. 
 
 The Canal is expected to be self sustaining in its operations, as in the past, 
 between now and 2000. Therefore, subject to the contingency noted above, we do 
 not anticipate there will be any residual obligations in the year 2000. 
 
 Question 10. Minority Counsel Nicholas Nonnenmacher asked General Dolvin. 
 representing the Department of Defense, a series of questions aimed at getting 
 an answer to my questions of Mr. Linowitz which he has kept trying to duck, 
 namely, can the United States under the Neutrality Treaty intervene to keep 
 the Panama Canal open even if the threat or actual aggression or hostility to 
 the waterway comes from Panamanians? 
 
 The last exchange was as follows : 
 
 Mr. Nonnenmacher. "Then it is fair for Members of Congres to conclude that 
 what you are saying is that we have a right to intervene to take the action 
 necessary to keep the Canal open even if Panama itself or a dissident Pana- 
 manian force is the aggressor?" 
 
 General Dolvin. "I did not use the word 'intervene.' if you will recall. I said 
 we have the right under the Treaty to take whatever steps we deem necessary 
 to maintain the neutrality of the Canal, irrespective of its source." 
 
 Mr. Nonnenmacher. "With that clarification you just put on it, I say thank 
 you. I think that answers the question." 
 
 General Dolvin's answer specifies clearly that even if the source of a threat of 
 aggression is Panamanian, the United States can intervene to keep the Canal 
 open, without violating the provision that the United States cannot intervene in 
 Panama's internal affairs. 
 
 (a) Is the State Department's position on this United States right exactly as I 
 have stated General Dolvin's answer specifies it is— forgetting the nonsense about 
 the word "intervene" and assuming that "take whatever steps we deem neces- 
 sary" includes moving into the Canal area physically, with force? 
 
 (b) Is this Panama's position? 
 
 Answer. Yes. The Department of State has consistently maintained that under 
 the Neutrality Treaty the United States has the responsibility to assure, through 
 whatever action may be necessary, including the use of force, that the Canal 
 remains open, even if it is threatened with violence originating in Panama. 
 
 The Government of Panama has concurred in the language of the October 14 
 Statement of Understanding on this point, and that statement is contained in 
 the "Leadership" amendment to the Neutrality Treaty. 
 
 Question 11. What are the proposed housing rental/purchase arrangements for 
 Panamanian citizens who will continue working in the Zone? What recourse do 
 they have if rents are raised exorbitantly by Panama ? 
 
257 
 
 Answer. Article VII, Paragraph 4 of the Agreement in Implementation of Ar- 
 ticle III of the Treaty provides a special regime for the housing currently occu- 
 pied by non-United States citizen Canal employees. The regime allows such per- 
 sons to lease or, if Panama decides to sell, to buy such housing at reasonable cost 
 with long-term financing. If it is not feasible for such persons to continue occu- 
 pancy of the same housing unit, they will have the opportunity to obtain other 
 adequate housing within the same areas, at reasonable cost, on a preferential or 
 priority basis. 
 
 Question 12. Please ascertain from the White House if President Carter, should 
 the United States Senate reject the treaties, will proclaim at once to Panama 
 and the whole world that the United States will defend its Canal and the Zone 
 against any and all possible violence with all the armed force that may be im- 
 mediately and subsequently necessary for their adequate and continued defense? 
 
 Answer. The President has repeatedly stated that the United States will de- 
 fend the Canal if it is attacked. On October 27, 1977, President Carter stated 
 "we could defend the Panama Canal and if it is attacked by any means I will 
 defend it." More recently the President has stated that he will take any steps 
 necessary to defend the Canal. 
 
 Question IS. Please ascertain from the White House : 
 
 (a) the number of briefings held to date for United States businessmen, labor 
 groups, professional people and the like ; 
 
 (b) if any expenses of the guests have been paid for by the Executive Branch ; 
 
 (c) the total cost of such briefings ; 
 
 (d) (i) the average number of people invited to each briefing; (ii) the aver- 
 age number who attend them ; 
 
 (e) how many more of such briefings are planned ; 
 
 ( f ) the source of the funds for the briefings ; 
 
 (g) if the anti-treaty position is presented to the participants by an able, 
 articulate spokesman for that viewpoint ; 
 
 (h) all costs, other than the above, of the White House effort to have the 
 treaties ratified since the Carter Administration took office ; 
 
 (i) names of personnel assigned to this task for a considerable part of their 
 time; 
 
 ( j ) details concerning any of the above as related to — 
 
 (i) the U.S. Senate 
 
 (ii) the House of Representatives 
 
 (iii) the media 
 
 Answer. The information we have is not broken down in the manner in which 
 you stated your questions. However, we have ascertained from the White House 
 that at least 30 major briefings have been held in which the President himself 
 has participated. The number of guests varied from 100 to as few as 20. There 
 are no plans for further briefings at this time. 
 
 In addition the White House held a briefing for Senate staffers and twice a 
 month, there were briefings for non- Washington press on Panama as part of the 
 overall White House briefing. 
 
 An opponent of the Treaties is not included in these forums. 
 
 The only costs incurred are the salaries of the presidential assistants involved, 
 refreshments if any, and the cost of printing a pamphlet on the Treaties. The 
 Executive Branch does not pay the expenses of guests. 
 
 Question lk- Submit for the record the answers to similar questions previously 
 asked by Congressman Robert Dornan regarding costs of all State Department 
 activities involved in promoting the Treaties to the American people and the 
 Congress. In addition, detail any of the above as related to : 
 
 (a) the Senate, 
 
 (b) the House of Representatives, and 
 
 (c) the media. 
 
 Answer. From October 1, 1976 continuing until February 17, 1978, State Depart- 
 ment officers made 160 separate trips outside of the Washington, D.C. area to 
 speak on the Panama Canal Treaties. These trips involved the use of Public 
 Affairs funds for travel and related expenses, a large portion of these expenses 
 are reimbursed by the organizations. Although a composite number is not avail- 
 able, we estimate that approximately 432 separate engagements took place. 
 
 In addition there have been 110 discussions in the Washington, D.C. area, 86 
 engagements by Diplomats-in-Residence and 113 direct-line telephone discussions 
 whose funding did not come through the Bureau of Public Affairs. 
 
258 
 
 The Department of State has an Office of Congressional Affairs which main- 
 tains liaison with the Senate and the House of Representatives and has briefed 
 Congressmen and their staff aides on a regular basis and has responded to 
 numerous written requests for information in accordance with its normal 
 
 practice. 
 
 The State Department has held one general briefing for the press on the 
 Treaties and briefings on the economic and legal provisions. Individual briefings 
 are held on an almost daily basis. 
 
 Subcommittee Note. — See Appendix H for further information supplied to 
 Congressman Dornan by the Department of State. 
 
 Question 15. Have any United States government funds been transferred or 
 tunneled in any manner to any private group or groups seeking public support 
 of the treaties? 
 
 Answer. No. The Department has not transferred money to any groups seeking 
 public support of the treaties. 
 
APPENDIX H 
 
 Questions of Subcommittee Minority Member, Mr. Dornan, Referenced in 
 Question 14, Appendix E, Item XIX, Additional Questions of Mr. Snyder 
 
 December 6, 1977. 
 
 Mr. Cyrus R. Vance, 
 Secretary of State, 
 Washington, B.C. 
 
 Dear Mr. Secretary : I have recently read accounts of State Department em- 
 ployees being sent around the country to '"educate and inform the public"' on the 
 Panama Canal Treaties. 
 
 I am concerned that the State Department is using its personnel for political 
 purposes and for lobbying the Congress on legislation now before it. I have a few 
 questions in regard to this which I hope will allay my fears about the activities of 
 State Department employees. 
 
 How many employees have been employed in ''educating and informing" ? 
 
 Who are they ? What are their positions V 
 
 Where did they speak? When? Before which group or organization? 
 Who requested the meeting? Was it State or the group? 
 
 Who was the person who contacted State if the Department was the guest? 
 Who arranged the meetings if the approach was made by State? Under whose 
 authority? 
 
 Was there an opposing speaker at the meetings? If so, what is the name, ad- 
 dress and the group represented, if any. If the opposing speaker did not represent 
 a group, what was his/her background? 
 
 What cost was involved in sending a State Department speaker into the field to 
 ' educate and inform"? 
 
 Has the State Department invited persons to come to Washington to be 
 '•briefed" on the Treaties? If so, who? 
 
 Who has or would pay for such trips to Washington ? 
 
 I look forward to hearing from you before the House adjourns for Christmas. 
 Sincerely, 
 
 Robert K. Dornan, 
 Member of Congress. 
 
 Department of State, 
 Washington, B.C., March 20, 1978. 
 
 Hon. Robert Dornan, 
 House of Representatives. 
 
 Dear Mr. Dornan : The Secretary has asked me to reply to your letter of Jan- 
 uary 23 requesting information on public discussions of the Panama Oanal Trea- 
 ties by State Department officers. 
 
 Apparently you did not receive my reply of December 23 answering your orig- 
 inal request dated December 6. Enclosed is a copy of the December 23 letter. 
 
 In the meantime, the Bureau of Public Affairs, which has overall Department 
 responsibility for scheduling public engagements, has prepared a printout giving 
 all of the information on our public discussions of the treaties which has been 
 computerized. The printout gives the names of the officers who hare discussed 
 the treaties in public, where they spoke, to whom, the date of the appearance, 
 and how the trip was funded. In addition to the printout, I am including infor- 
 mation which has not been computerized. We do not have, however, information 
 on private citizens who sometimes appeared before groups which also hosted 
 State Department speakers. 
 
 The printout shows that between January 11. 1977 and February 28, 1978 State 
 Department officers made 160 trips outside Washington, D.C. to discuss the 
 treaties. You will also note that each officer usually had several engagements 
 per trip. Although they are not totaled, a count shows that approximately -132 
 
 (259) 
 
260 
 
 separate engagements are noted on the printout. In addition to the engagements 
 shown on the printout, State Department officers participated in approximately 
 110 face-to-face discussions in Washington, D.C., and in 113 direct-line tele- 
 phone discussions which were held from the Department. Also, Department of- 
 ficers serving as Diplomats in Residence on college campuses gave 86 talks on 
 the treaties. As you probably know, Secretary Vance also spoke on the treaties 
 in Charleston, West Virginia ; Louisville, Kentucky ; and New Orleans, Louisiana. 
 
 The cost for the trips listed on the printout was $39,426.97. Of this amount, 
 sponsoring organizations paid $21,217.53. The Bureau of Public Affairs con- 
 tributed the remaining $1S,209.26. We calculate that speeches on the treaties by 
 the Secretary and the one other by Ambassador Elsworth Bunker which was not 
 in the printout, cost the Department of State an additional $8,375.95. 
 Sincerely, 
 
 Douglas J. Bexxet, Jr.. 
 
 Assistant Secretary 
 for Congressional Relations. 
 
 Department of State, 
 Washington, D.C., December 23, 1977. 
 
 Hon. Robert K. Dornan, 
 House of Representatives. 
 
 Dear Mr. Dorxax : Thank you for your letter of December 6 in which you 
 asked a series of questions relating to the Department of State's range of 
 activties regarding the Panama Canal Treaties. 
 
 I would like to set the record straight immediately by saying that any public 
 activity in which we are involved regarding the Panama Treaties or other foreign 
 policy issues of interest to the public is for the specific purpose of better in- 
 forming, educating and responding to our citizens on issues of national foreign 
 policy interest. This has always been the concern and responsibility of the 
 Department of State. In regard to speakers on Panama, other than the Secretary 
 and Department principals who have of course discussed Panama at various 
 times in the course of relevant speeches, news conferences or briefing sessions, 
 thirty-five officers have at one time or another over the past four months spoken 
 in a public context on Panama. These officers are scattered throughout the De- 
 partment of State personnel structure, from mid-level economic and legal 
 officers to the Co- Negotiators of the Treaties. 
 
 Because of the tremendous public interest on the Panama issue, requests for 
 speaking engagements have been received from all over the country. There have 
 been some instances in which the State Department took the initiative in contact- 
 ing interested citizen groups. The Office of Public Programs of the Department's 
 Bureau of Public Affairs, handles all arrangements for these trips and maintains 
 contact with the sponsoring group. Host groups have ranged from World Affairs 
 Councils to the American Legion to Rotary Clubs to the National Conference of 
 State Legislative Leaders to Town Meeting forums. In many cases an opposing 
 speaker is part of the program format, in other cases, not. Our policy is to 
 communicate in all types of forums and to be as responsive as we can on this 
 or any other issue of foreign policy which is a matter of national public concern. 
 In most instances, sponsoring organizations reimburse the Department for the 
 officer's transportation, food and lodging. If those expenses cannot be covered by 
 the organization, they are covered by the Department. At the prespnt. the ap- 
 proximate net non-reimbursable figure over the past four months which reflects 
 money expended by the Department for personnel addressing themselves to a 
 riioussion of the Panama Canal Treaties is $8,805. 
 
 The Department of State also conducts briefings, conferences and seminars for 
 a wide variety of public leadership and grass roots organizations on issues of in- 
 ternational interest. These groups range, for example, from World Affairs Coun- 
 cils to Hispanic media groups to business leaders. In response to your question, 
 however, as to whether the State Department has invited persons to come to 
 Washington for a specific briefing on the Treaties, the answer is no. As part of 
 the Department's briefing and conference program, however. dpsi«med to inform 
 the public on current issues and to increase the dialogue with interested indi- 
 viduals and groups. Panama has been discussed often. 
 
 If yon need additional information, please let me know. 
 Sincerely, 
 
 Douglas J. Bennet. Jr.. 
 
 Assistant Strcrrtarv fr-r 
 Congressional Relations. 
 
 Enclosure: Correspondence relurned. 
 
261 
 
 OS < 
 
 O ^ 
 
 CV1 NOlfll 
 
 WOOID 
 
 CD O 
 
 in er! 
 
 ,?MO Si 
 
 i-c'aj </>_• '<= 
 
 — O 1_ <U TO 
 
 III! il 
 
 e o a> 
 
 1 o> o 
 
 .E? >0-x: 
 a> as ■ -I— ro 
 
 § g-2 to 
 
 TO 00 O f= = E « 
 
 ™ fi-O « ra <? 
 
 0< 
 
 TOO | 
 O TO 
 OL) a> TO 
 
 =»- "-0L. 
 
 E E 
 
 cr < 
 <cc 
 . .< 
 a> • - 
 
 o TO 
 
 a."— >' 
 
 Q E 
 
 TO • ; 
 
 <_3 >_ 
 
 C „ = <° 
 ■- « <1) ■ *= 
 
 £J = 
 
 TO Df> 
 
 oo 2: 
 
 c ™ c ^ a- 
 
 """s-SS 1 
 
 c 
 
 to <C -jj oT 
 
 • - J2 j? to 
 — r^~r^° 
 
 o "I*-" - e 
 to^SE 
 to ooo 
 
 o o >»_ 
 
 •— o >> 
 
 r- TO TO 
 
 ■ -<3_ 
 
 E 
 E 
 
 d ° 
 
 O) oO-~ - 
 
 - a; ' — 3 to 
 
 >-§;f =S< 
 
 * = - 
 
 a,-^ to 
 5 e Z 
 
 _ TO -O 
 
 TO • • 
 
 3 TO C "SJ, 
 
 - 5 o 
 
 C TO 
 
 C7> 
 
 ~ E. 
 
 . DO . . £ 
 
 a.£ E=> 
 
 jz*; TO Q> «J 
 
 , CL TO5 = 
 
 ■goo 
 
 CL 
 
 5£ 
 
 5 S — 
 
 oo 
 
 TO TO 
 
 E E, 
 
 TO TO TO TO x: "ro o 
 
 J=O0 
 oo . - <C 
 
 ISf e 
 
 T)t^ 00 
 
 B O O0 __ 
 
 ^S^ - 
 
 .^ = 15 to 
 
 ccujoo Q 
 
 ? O t= a) 
 
 c: c E E - 
 o o a> +*■ « 
 
 lc f~- ■ — TO CT> 
 
 Il2 
 
 00 = -2 . - -r; : 
 
 c^o-Si etooo =^3^ : 
 
 TO- 1 > ^ O. TO ~« 
 
 cn 01 
 
 o c~ 
 
 5)2 < g 
 
 - i 
 
 — 1 .— . o ° 
 c .-10 
 
 TO "to E c 
 O O . . <D 
 
 'to ^ cn . . 
 
 <<, 
 
 "to "to 
 
 c: £= 
 o o 
 
 O0O0 OO 
 
 ol^|° 1 
 3:3: . = . a> a> 
 
 <d a> 
 00 00 
 
262 
 
 EoE. 
 
 LO (XI O 
 
 r~- o o 
 oj'csiod 
 
 o CD CO 
 
 e cz e 
 co co co 
 C_Q_Q- 
 
 Si** 
 
 too 
 <oocc 
 
 >- -a 
 5 E 
 
 TO CD 03 
 
 EEE 
 
 = o 
 uj «£00 
 
 5 £J= 
 
 <U CO 
 
 il o 5 
 
 E 
 < 
 
 iSo 
 
 E E"? E 
 
 co <o 
 
 0£ uj £T Q£ 
 
 00 co £ 
 
 ECJ 
 o 
 
 -o -° = z= 
 £ = Eo - 
 
 3 *J Q- — -> - o - —J 
 o.e_cj_oo--e . 
 
 E ™ - 
 
 ■ :"o cu 
 
 G 00 
 
 • • .2 - ^ e — to — E c= o c=0 
 >-. - - o Q ° E 5 " 5 h- "S. , ■ co 
 
 II 
 
 E~ 
 
 CO "O 
 
 jr uj 
 
 O ,_ 
 
 E co 
 
 5 £2 ° ! 
 < 9. 
 
 cu ~ 
 ' in > 
 
 t»l) f= O U_ J3 
 
 o 3 ac co 
 o co co 
 
 5o.Sf u 
 
 OG'53 
 
 0)^rNb. -Qrv^^ ■ ■ u - r- o >^ <o ^ x: r-. r- cu r-» 
 
 1-8 o°S;2s- o«-r 5 o < 2^ 3: 
 
 rvi cvj ^, oo _o <=> 5°t — cm cS"'~ to co ^ r-. 
 
 ' m aw ^ ~ E™ EE: 
 
 , »- . . . O CO ,o . o J= . 
 
 O p_co p co ' 
 
 5: 
 
 i- ~ . E <2 c/5 o. 
 
 E o o ..ck.o^ 
 •-=<<*> cu .. .2 • • -<= co 
 
 .— o o oo 
 — . o o a. — . 
 
263 
 
 i O OO 
 
 o o 
 
 OO 
 
 060 
 
 1 n CM 
 
 CO CO 
 
 O-CL. 
 
 w d> 
 
 « a 
 
 < s 
 
 3 I 
 
 si o 
 
 .2.2 
 
 CO TO 
 
 '<-> 'o 
 o o 
 
 << 
 
 ■i °;? 
 
 St — CD 
 
 < "0 > 
 E' £ 
 
 <U (V 
 
 E E 
 << 
 a> <x> 
 
 .£= SZ 
 
 00 
 
 ■• 5) O! 
 
 rs. z o id 
 ^. <C <C 
 
 2s 
 
 ra ™ £ co > co p 
 
 g <= = 2$.2 = 
 ra co co .c -c co 
 
 ■a co 
 
 CD c 
 a> CO 
 
 CD ro 
 
 ^ E 
 
 . - < 
 
 £ S5 
 
 CD >"g 
 t= CO 
 
 CO < 
 00 c 
 
 . - o 
 5>- 
 
 ||£| 
 
 ■f O CD 
 
 11*1.3 
 
 i'S-g-co 
 
 !-i'|ifi 
 
 Spills 
 
 ■S >2 g«S 
 
 ty> ■— >~ CO 
 
 — 2 cjk: 
 
 JS,' 
 •§'lo 
 
 CO c> 
 — , CD> 
 
 1 3 re 5 
 
 « -° 
 
 1 5£ CD 
 
 co <»~2.iz 
 E o % < 
 
 <U C C O 
 
 -5 Q- co-* 
 
 S rz — £ © 
 
 E 3-0 co <-> o.^:. 
 
 <* . - 2? «- ie 
 
 - -1 o -Q *; " 
 : ■ — in © ^ c= 
 
 < 
 
 CC CO 
 
 S£ •=-=? > c c 
 
 Is ..*S 
 
 co ro — > 
 P>CQ o : .." 
 
 .—•en 
 
 ZD -o o o 3 
 
 g-23 ©•- 
 i3=£< .. H- 
 
 W.-> n 'CD..^ 
 
 So?© obSjcoS 
 
 |".i>-Sis E"-: 
 jc'5> ro;r! 
 
 c 
 
 i<: 
 
 co-c 
 
 *2; 
 
 4- ji> 
 
 lis, 
 
 CD . 
 
 .E' 
 
 — 2 
 
 ;2C : 
 
 E E 
 
 <2£ 
 
 cd > <r 
 
 : ^-^r c= 
 
 o°?oo 
 
 oo< 
 
 j «5 c -2 cvj ^r e 
 
 >ll'-5 c o2 ' 
 
 ben ig 
 
 -5 
 
 !e-2 
 
 o> 1 -o 
 
 : „• = 
 
 2-0 co .2 co 
 .2 E "co" 
 
 Q. . ■ • '-P 
 
 : CO CD 
 
 ■ : = 2-t— 
 ■500,-0 > - 
 
 <D ~ « . - CD ^ 
 
 25-605—78— 
 
 o 00 
 
 -18 
 
265 
 
 — 1 CL. H- Q. 
 
 E e 
 
 < S3 
 
 oo — 
 
 _< 
 
 to < 
 05 "Si 
 
 5 = 1 2 
 
 > co 
 
 = <u • - - 1 - 
 
 M B E £ 
 
 roc 
 
 — o co -o 
 
 » E |g 
 
 <d2 
 
 - « 2 E 
 
 ft § li ■ - I 
 
 So 
 
 _af o .2? » 
 
 2 E 
 
 CL O 
 OO 
 
 > CD 
 
 igi 
 
 OO > 
 
 .2 ca-:^ 
 
 £ ° 3 •- 
 -a . _o.2 
 
 m = co 
 
 ^ s-i 2 
 > 
 
 BJ- O 
 
 2 "O 
 
 E ; 
 
 2 
 
 — cp E 2 =d cd 
 
 ■2^ ,.Z £ 
 
 ro ^ • ; o> o ra*. - 
 
 >,B J2 >>co 
 
 £ £2 _a> g 5 c 2o 
 
 •2^j > e ° - ° 
 
 CO 3 XI 
 
 II li 
 
 --acS n E 5 « /_ >- Sco-: 
 
 CO flj - 
 u (1) > 
 
 w = 
 
 3 O co 
 
 2o = g 
 
 ■ 1 oor- 
 o r 
 
 2 lis || ii- §< 
 
 n m ©•- E 
 
 c co c c co 
 
 CD C - 03 C- 
 
 : — > e 
 
 : I— co > 
 
 : 55 
 
 —•Or-. 
 
 oo oo o 
 
 2 ° S£ 
 
 : 2.— .— O o 
 
 2-- 
 
 5= EkT 03 eO . 
 
 ■ er> •" H .2 
 
 IcTO 
 
 E^ 
 
 5 -2 
 
 5; g Sr co ■■.•Sco-a.|>.stf E EE 
 
 E 3^ 
 
 << 
 
 ^ » 5 c.2 c/3 _fu ^ e.E-- a 
 
 csT » £|s£in E co ro 
 o^g^^l^cSl 
 
 = ■2 nnZ > n OB. CD CD..*- 
 
 OZco 50-E . 5 .*-.2*- c « o 
 
 ^ CO CO = -S CD ^- T3«* H 
 
 o J „i § 
 
 fo -o 
 
 U CO.— • 2 •— CD 
 
 - uj > o E "o_j 
 
266 
 
 -q o> < 
 
 ■D3U 
 C- 1 ^3 — 
 
 = hi 
 
 TO TO TO TO 
 
 E E E £ 
 
 ca co 00 cz 
 ^ c c c 
 03 03 co or 
 o_ 0_ Q- a. 
 
 < — 
 
 • - o 
 00 00 
 
 IS I 
 
 0) 
 
 IK. 
 
 Ill M 
 
 •=d .o 
 
 ~ a; o oj 
 
 So± f E 
 
 <U <o 2 ™P 
 
 o 55 o 8 _ 
 
 ,.«! o 
 
 Q TO 
 
 Si 
 
 IS 
 
 00 g 
 
 00 re 
 Oj: 
 
 — O- 
 
 5£ 
 
 ■c CO 
 
 LU O 
 
 '9 C 
 ■s 0) a. 
 
 MO) O 
 0)0X3 
 
 1 "5 i 
 
 CO 
 
 o £ c 
 
 1 e >* CO 
 
 £ - co o c ^ s 
 
 t= CO 
 
 <H3 
 
 E - 
 
 5 £ E 
 £ <S 
 3 _ • - 
 
 3 o 
 o S-g 
 „ ^ o 
 
 'J -a 
 
 Jg O 00 
 
 £ w 
 _ E^ 
 § E S 
 
 1 .<s> 
 
 .E o> c N 
 •a o» . . c 
 
 = 5 
 
 co o 
 
 a> u. 
 
 51J 
 » = 
 l|fi 
 
 til 
 
 m J > 
 
 k?5c3 
 
 33 I o 
 
 cc • - 
 
 3" ? a. ™ : 
 
 ■S I r-i co — ^ _L o <C ts >- 
 
 E <=. 
 
 if Sals 
 
 . . oo a, en 
 : Ol ja o — ' 
 
 E 0J o> 
 
 I => al 
 
 .0 cr _ 
 
 i = == 
 :<3< 
 
 ■ M 
 
 - 0-2-2' 
 
 " Q- O O ui 
 
267 
 
 "to 
 
 ■ 5 
 
 j- CO 
 
 < 
 
 < < 
 
 1 I 
 
 _£ <j 
 
 2 = 
 
 o o o 
 
 O 0) 
 
 CM d r-' 
 
 oo — - o 
 
 to re o n 
 
 £ E E E 
 £ 5 2 2 
 
 c5 a>_ 
 o — o 
 
 w T3 ° TO 2 O , w _ 
 
 o> — — — l_ "2 O o 
 
 2co y _© ' — _ 
 
 _ CO ;/■> O .- ' 
 
 — «i oo C 
 
 l< ■ 
 
 -Jr.- ~ 
 
 DflTO E TO 
 
 u_"-- >• 03 
 
 — 2 *i 3 1 " 
 • £•= _ w 
 5 = < ~ © 
 
 — 3 » _ IS 
 
 r : S E f-J 
 
 15 §1 
 
 O) (D O) ,™ J £ — : 
 
 O 
 
 c >_ 
 
 _to^ 5== = 
 
 O _»0 o2Q— 1 
 
 __ OB _ CO * 
 O £ o £ O 
 
 _ — •_: — c o 
 
 II 
 
 :< 5. 
 << • - 
 
 TO _ 
 
 e. i— 
 
 2 c> 
 
 I Sh — 1 i- 
 S . CP 
 
 5 : s. 
 
 ■ -as 
 
 o »~ 
 
 — v ~ 
 
 o"-^ . .E> 
 
 o cr o = a 
 ltjooooo 
 
 cm' cvi j-> »-J 
 in p . o 00 cm o 
 
 CO CM ^" _ — 
 
 » OU TO 
 CO ' C <■-> TO TO C 
 C TO « = = TO 
 
 to :"<to-o :« 
 
 re - — - 5 re re 
 
 o_EE--Q_a.EE 
 
 TO TO -3 TO TO 
 
 C__ u OCJ_C 
 — TO TO — — TO TO 
 
 h- _ a. co !— 1— — a. 
 
 c 
 
 __:> 
 
 OJ r- 
 
 — E o o 
 < E ~ 2 
 
 c t' 
 oe o 
 
 o ■_: 
 
 : — 
 
 _«i i.i- 
 
 2 S o = 00 
 
 .2 E 
 
 _>=2q -f Lg ^ - 
 
 o__ to ;: 
 
 jar 2 
 
 >- E 
 
 ~ -— >• -— r- 0) 
 
 > X - E ©Eo > a 1- < -to 
 to r -em o«»,-^2--(?r-.- -f-«_—-.«° -£o 1 -«> = . -oo "5 -S 
 
 E to 
 
 ? > £ 
 
 CO <Q <^ 
 
 So" 
 
 • E _ . 
 
 coo c =eo 
 
 CM - w I- 
 
 oeo 00 
 
 O o « 0_|2 o 
 
 O CM " 
 
 _ . . to 22 -3 =£ 
 
 23=o . Q -I! 
 
 _ =T|-_rl_| o |||2 o o||j |oo£|oc°oo^; I' E |« 
 
 — ._^__— TO — 5/5 CM CNJ CM TO _J CP TO cnj^ — C^C^CN.rn.~-)--coj-)_-i_^_j C j i _ 1 j_ ;< _ ; 
 
 . .CD .— . . . • ' Q 00 — — . .08 . 
 
 ccccOcr: = = = = 
 
 TO TO TO TO TO TO TO TO TO 
 
 to- S,=° ■£ 
 
268 
 
 — 5* E 
 
 >> re 5= 
 T3 3 o 
 
 S E 2 
 
 ! => 2S 
 
 i 5 g-oc 
 
 o — 
 
 re re 
 re 5 
 
 £ 
 
 re 
 
 5^ 
 
 < £ 
 CO re 
 
 ®\2 I o-o 
 
 op-" nj>_ c 
 — £ -5 > — 
 
 -a ® • - . . c 
 
 ~~u- >. - X 
 13 P n >- 2 
 
 .a : : — 
 
 — . . . • z . . 
 . .a: .Q .oo 
 
 a» <J z o oi ~* 
 
 o "5 o E o ° 
 oo qI jj $ oo at 5 
 
 c "oo "o 
 
 =»< . 
 — 5 
 
 "5 £ 
 a. at 
 
 T3~ 
 
 re > 
 8 = 
 O 
 
 a> w a> '.5 
 
 I 2 
 
 cj> <D re 
 
 O -I c 
 _ co 
 
 ™ EX 
 
 i; .22 <u re 
 
 >= = c 
 
 = 5; « • 
 
 a- 
 
 Oo 
 
 cS re re 
 
 re re 
 c c 
 re re 
 oo 
 
 E E 
 re re 
 
 << 
 
 or . - 
 
 •hi o 
 
 E a. 
 o JZ 
 
 = E 
 
 .2 S> 
 
 o re 
 
 „ re < - 
 
 > Q> w. 
 
 — OO 0) 
 
 -E = 5 
 = < E 
 
 re 5 re re 
 
 E£ E Ei 
 
 re co to 
 
 a a> c c 
 
 iv "* «j ca »w — — 
 Q.Q- Q- I— Q- Q- *— 
 
 <5ce_ 
 
 = £§es = 
 
 Tit; £ 
 
 IIIe 
 
 y= re a> 
 
 9 = 3 J 
 
 Q — — - E > o> 
 
 Sf E E»J 
 
 ^ » re O • 
 
 : = £ re^ 
 
 ^ "O — re ^, 
 
 P <U = ^ >- o ° 0» « 
 
 So tZZ 
 
 <S • 9 • g © »^se°° fci • ^ : p 
 
 "OOMOO^ SoO J2 3« • ;"0 OO SO CO 1 
 
 -c" cr> «a> a>x^(2 P rf" - Eu'' ™ 5 *^ ^ cn cr> ct> , 
 
 .-°M OM^ 5— £ — ^OOmOO -J- •corvtv 
 
 » Jl re ■ , . *» t= ^z; -j; 
 
 iZ 
 
269 
 
 CO 
 
 g g 
 
 O 
 
 o 
 
 
 o o 
 o o 
 
 T CM 
 
 O 
 
 o> 
 
 
 
 3 oo 
 
 M CM 
 
 r- lo 
 
 CM 
 
 
 00 .-< 
 CM 
 
 o o 
 odd 
 
 £ E 
 
 O TO 
 
 CO. 
 DO 
 
 <£ CD 
 00 Q 
 
 0J TO o 
 £ TO.<2 TO 
 
 O 3 CD Q_ 
 CD S,h= 
 
 CO TO ™ W 
 
 i E 
 
 ■- 2- 
 s << 
 
 <d o _2 
 
 . O W o 
 
 ■a o c 
 
 IIS" 
 o 
 
 ■E E 
 
 < & 
 
 E 
 
 3 > TO 
 
 £5 J 
 
 -j; o co 
 2 to E 
 £££ 
 
 — TO £ 
 
 C _ 
 
 to : <8 
 
 c/i «2 
 
 £ 2: 
 
 t TO 
 
 CD CD 
 
 oo 
 
 co'od 
 oo "0 
 
 ! E 
 
 I TO 
 TO = 
 E<£ 
 
 CD .9 — ; TO — 
 
 CD . . 
 
 to : 
 p: 
 
 8 = 
 
 CD — ' 
 CC CD 
 
 o o 
 o o 
 
 OO CD 
 
 o 
 
 I 
 
 CO CO CO ' i 
 
 TO TO i % 
 to ra re g 
 
 Q. 0_ 0_ < 
 
 2 £< t: "2 
 
 • o <J 
 
 UD 00"" o OO ^ 
 
 ^jcdco „r 
 
 O CM 
 
 ' OO 00 O 00 
 
 :c"cn £cn 
 
 I — ' 1 „, — ' 
 
 ? o o 
 
 — 2 
 
 <D-^2 <= 
 -O Q. TO TO 
 
APPENDIX I 
 
 Speeches ok U.S. Senators Containing Memoranda Referenc ed Either in Mr. 
 Snyder's Questions or in Answers to Them 
 
 A. Appointment of Ambassador Sol Linowttz 
 [From the Congressional Record. March 10, 1977.] 
 
 Mr. Spark van. Mr. President, I want to bring to the attention of my col- 
 leagues a couple of items of information bearing on the appointment of Am- 
 bassador Sol Linowitz to be a conegotiator in the Panama Canal talks. 
 
 In this regard, I wrote to Secretary of State \'ance shortly after he discussed 
 this appointment with me. Our exchange of correspondence on this issue makes 
 it clear that Ambassador Linowitz's appointment will not extend beyond 6 
 months; and that this appointment is limited to the role of conegotiator and 
 is not intended in any way to supplant Ambassador Bunker's role. 
 
 I ask unanimous consent that this correspondence be printed in the Record 
 at the close of my remarks, along with that provision of the Foreign Service 
 Act of 1946, as amended, which provides for short-term Presidential appoint- 
 ments with the personal rank of Ambassador. 
 
 The Presiding Officer. Without objection, it is so ordered. 
 
 (See exhibit 1.) 
 
 Mr. Sparkman. In addition to the above. Mr. President. I want to bring to 
 my colleagues' attention a letter dated March 7, which I received from the 
 Department of State and which bears on certain conflict-of-interest allegations 
 with respect to Ambassador Linowitz's current position. The conclusion of this 
 letter reads as follows : 
 
 "As a result of the Department's review and the foregoing undertakings by 
 Mr. Linowitz. the Acting Legal Adviser gave a written opinion which con- 
 cluded that the requirements of the applicable statutes and Department of 
 State regulations on conflicts of interest had been satisfied." 
 
 Mr. President, I believe this letter and enclosures will be of interest to my 
 colleagues and I ask unanimous consent that it. too. be printed in the Record 
 following the above-mentioned material. 
 
 The Presiding Officer. Without objection, it is so ordered. 
 
 (See exhibit 2.) 
 
 Exhibit 1 
 
 Janfary 31. 1077. 
 
 Hon. Cyrus R. Vance, 
 
 Secretary of State, Department of State, 
 
 Washington, B.C. 
 
 Dear Mr. Secretary: I am writing yon witli respect to <>ur recent conversa- 
 tion concerning the api>ointment of Mr. Sol Linowitz. 
 
 It is my understanding that this appointment will be made for a i>eriod not to 
 exceed six months and for the purpose of putting Mr. Linowitz in the position 
 of U.S. co-negotiator on the Panama ('anal talks. As I indicated to you, I have 
 no objection to this Arrangement for a not-to-exceed-six-month period, so Ions: 
 as the negotiations from the U.S. side are bended up jointly by Ambassador 
 Bunker and Mr. Linowitz. I am sure you will agree with me that Ambassador 
 P.unker has performed admirably throughout his tenure as chief negotiator and 
 I am confident, as I am sure you are. that he will continue to perform in this 
 fashion until these negotiations are brought to a successful conclusion. 
 
 I know that you will apprise me of any misunderstanding on my part about 
 Mr. Linowitz's role. Similarly. I would appreciate being informed beforehand 
 of any change in the co-negotiating procedure. 
 Sincerely. 
 
 John Sparkman, 
 
 Chairman. 
 
 (270) 
 
271 
 
 The Secretary of State, 
 Washington, February 10, 1977. 
 
 Hon. John Sparkman, 
 
 Chairman, Committee on Foreign Relations, 
 
 U.S. Senate. 
 
 Dear Mr. Chairman : Thank you for your letter of January 31 concerning the 
 appointment of Mr. Sol Linowitz. This is to confirm that your understanding 
 that Mr. Linowitz is to be appointed as Co-Negotiator with Ambassador Bunker 
 on the Panama Canal Talks, with the personal rank of Ambassador for a period 
 not to exceed six months, is entirely correct. There has been absolutely no 
 change in the co-negotiating procedure. 
 Sincerely, 
 
 Cyrus Vance. 
 
 Excerpt From Foreign Service Act of 1946, as Amended 
 appointments 
 
 Sec. 501. (a) The President shall, by and with the advice and consent of the 
 Senate, appoint ambassadors and ministers, including career ambassadors and 
 career ministers. 
 
 (b) The President may, in his discretion, assign any Foreign Service officer to 
 serve as minister resident, charge d'affaires, commissioner, or diplomatic agent 
 for such period as the public interest may require. 
 
 (c) On and after the date of enactment of the Foreign Relations Authoriza- 
 tion Act of 1972, no person shall be designated as ambassador or minister, or be 
 designated to serve in any position with the title of ambassador or minister, 
 unless that person is appointed as an ambassador or minister in accordance 
 with subsection (a) of this section or clause 3, section 2, of article II of the 
 Constitution, relating to recess appointments, except that the personal rank of 
 ambassador or minister may be conferred by the President in connection with 
 special missions for the President of an essentially limited and temporary 
 nature of not exceeding six months. 
 
 Exhibit 2 
 
 Department of State, 
 Washington, B.C., March 7, 1977. 
 
 Hon. John J. Sparkman, 
 
 Chairman, Senate Foreign Relations Committee, 
 U.S. Senate. 
 
 Dear Mr. Chairman : In light of certain statements by a member of the Senate 
 and a member of the House with respect to Ambassador Sol M. Linowitz, I would 
 like to make the following observations which may assist you and the members 
 of your Committee in responding to questions or inquiries. 
 
 Ambassador Linowitz was appointed, last February 10, as Co-Negotiator for the 
 Panama Canal Treaty, in the capacity of Special Government Employee with a 
 six-month appointment to the personal rank of Ambassador, in accordance with 
 applicable Federal and Department of State regulations and established proce- 
 dures. He is serving in this capacity without compensation. 
 
 The Department of State conflict-of-interest regulations provide that no De- 
 partment employee may "have a direct or indirect financial interest that conflicts 
 substantially, or appears to conflict substantially, with his Government duties 
 and responsibilities" (22 CFR 10.735-205). Pursuant to these regulations, Mr. 
 Linowitz prior to his appointment submitted to the Department a full statement 
 of his memberships on boards of directors as well as his financial holdings. These 
 were reviewed thoroughly by the Office of the Legal Adviser. 
 
 In the cases of two companies, Pan American World Airways, Inc., and Marine 
 Midland Banks, Inc., Mr. Linowitz furnished information from them outlining 
 their activities and financial interests in Panama. Appended are the statements 
 from the Presidents of these two companies. Based on the Department's review, 
 Mr. Linowitz agreed that in the unlikely event any aviation issues arise during 
 the course of the treaty negotiations which might be of possible interest to Pan 
 American, he would excuse himself from participation in the negotiation of any 
 
 25-605—78 19 
 
272 
 
 such issues. Continued membership on the board of Marine Midland Bank did not 
 violate the applicable regulations because of the relatively low level of financial 
 transactions of the bank with and in Panama. 
 
 Mr. Linovvitz also agreed that his law firm "is not now and will not while I am 
 serving in this capacity, represent any client on any matter related to the Panama 
 Canal Treaty negotiation or the Canal Zone." 
 
 In the case of Mr. Linowitz' financial interests, two companies in which he had 
 small shareholdings — AT&T and Texaco — did have business which the Legal 
 Adviser believed might be affected by the outcome of the Canal Treaty negotia- 
 tions. Consequently, Mr. Linowitz agreed to sell his shares in those companies, 
 and has done so. 
 
 As a result of the Department's review and the foregoing undertakings by Mr. 
 Linowitz, the Acting Legal Adviser gave a written opinion which concluded that 
 the requirements of the applicable statutes and Department of State regulations 
 on conflicts of interest had been satisfied. 
 Sincerely yours, 
 
 Kempton B. Jenkins, 
 Acting Assistant Secretary 
 for Congressional Relations. 
 
 Note 
 
 Note to F. C. Wiser. 
 
 Re Pan Am Activities in Panama — Intertrade. 
 
 Intertrade is a small distribution company, wholly-owned by Pan Am. Estab- 
 lished in 1972, its principal functions are : 
 
 Provides bonded warehouse services, including customs clearance services and 
 some inventory management services. It now has facilities at three locations : 
 Colon Free Zone, Panama Airport, and Panama City. 
 
 Provides extensive local trucking services primarily between the Airport and 
 its bonded warehouses. 
 
 Acts as Pan Am's General Sales Agent in Colon and certain other points in 
 Panama. 
 
 Provides sea j air transhipment services ; arranges for the receipt of goods by 
 sea from Japan and other points in the Orient and for onward shipment, usually 
 by air to points in Central and South America. 
 
 As indicated in the attached 1977 projections, 1977 Intertrade sales are ex- 
 pected to increase from the 1976 level of $703,000 to $946,000 and net profit before 
 tax from $125,000 to $142,000. Pan Am originally invested $10,000 to establish 
 the company. The underlying book value of our equity is now $170,000. 
 
 Intertrade is under the direction of Art Sumner, who has been with Pan Am 35 
 years, most of them as a resident of Panama. The other 58 employees are citizens 
 of Panama. 
 
 Also attached is a recent brochure on Intertrade which may be of interest. 
 I understand you are being provided with information on SDISA through Art 
 Best. 
 
 Charles W. Trippe. 
 
 January 7, 1977. 
 
 Note to F. C. Wiser. 
 
 Subject Pan American Operations, Panama. 
 
 Sales office location : Edificio Hatillo, Avenida Justo Arosemena, Panama City, 
 Republic of Panama. 
 
 Hours/Telephone : Mon.-Fri. 8 :00 a.m.-12 Noon/1 :00 p.m.-5 :30, Sat.-Sun. closed. 
 Telephone : 25-5425. 
 
 Airport/location: Tocumen International Airport, located approximately 1& 
 
 miles from Panama City. The airport oi>eration at the present time, is 100% 
 handled by Pan American personnel, with the exception of inbound cargo, which 
 is handled by Intertrade. 
 
 Director: Reeder Chaney. Office Phone: 25-6510. Home Phone. 26-0659. 
 
 Mr. Chaney is the only international employee in Panama, and is responsible 
 for not only Panama, but offline west coast/South American General Sales 
 Agents in Colombia, Ecuador, Bolivia and Peru. 
 
 Present Employment: 151 people. 
 
 Passenger Operations : 75 movements/month. 
 
 Passenger Sales/1976: *io.000,00O. 
 
 Cargo Sales/1976: $4,000,000. 
 
273 
 
 General Information : New Airport and terminal facilities will be in operation 
 by fall of 1977. 
 'Separate Corporations in Panama : 
 
 (a) Intertrade (separate report being prepared by C. Trippe) . 
 
 Intertrade is wholly owned Panamanian cargo company and is the general 
 Sales Agent for Pan American on the the Atlantic side of the canal for cargo and 
 passengers. They are also general Sales Agents for Pan Am for the balance of 
 the Republic of Panama, other than the Oity of Panama. 
 
 An agreement has recently been signed with Intertrade to do all of our in- 
 bound cargo handling at Tocumen Airport. 
 
 (b) SDISA (Servicios y Diversiones Internacionales, S.A.). 
 
 A Pan Am wholly owned Panamanian Catering operation located at Tocumen 
 Airport servicing all carriers. 
 
 A. S. Best. 
 
 Pan American Operation, Panama 
 
 Prior to World War II, Pan American operated from both the Atlantic and 
 Pacific side of the Canal Zone in Panama. When World War II started, the 
 operation at France Field, located on the Atlantic side, was consolidated with 
 the operation at Albrook Field on the Pacific side. 
 
 Pan American's operation continued at Albrook Field until the Republic 
 of Panama developed an International Airport at Tocumen in October, 1949. 
 
 At one time, our operation in Panama was considerably more active than at 
 present. Due to retrenchment in military forces, reduction in Panama Canal Zone 
 international employees, long-range and wide-bodied aircraft, Pan Am has de- 
 creased its total activity through Panama. 
 
 The present 151 employees represent only 9.2% of our employees in Latin Amer- 
 ica or slightly over 1% of our employees worldwide in the field marketing group. 
 Likewise, today the total sales of $10,000,000 for passengers and $4,000,000 for 
 cargo represents .8% of our revenue. 
 
 Marine Midland Banks, Inc., Operations Related to Panama 
 
 A. Past or Dormant Investments 
 
 1. Banco Inmobiliario de Panama S.A. — This is a small mortgage bank in 
 Panama that engages in medium to long-term housing mortgages and the ware- 
 housing of mortgage paper. We have just sold our 2y 2 percent interest. 
 
 2. Financiera Centroamericana S.A. — This is a general finance company en- 
 gaged in commercial, industrial, and real estate lending in Central America, as 
 well as holding an equity interest directly and indirectly in bonded warehouses 
 in Central America and the Caribbean. This 22.4 percent investment was just 
 disposed of. 
 
 3. Servicio de Anuario Telefonico Internacional S.A. — This company sold and 
 distributed telephone books in several Latin American countries. We have pre- 
 ferred shares at modest value. This investment will be written off. 
 
 B. Current Investments 
 
 Marine, through Intermarine London, owns Bream Shipping, which was formed 
 a few years back in conjunction with the international lending operations of 
 Intermarine London. This company is presently not being used ; however, it has 
 limited assets resulting from prior activities conducted external to Panama. 
 
 C. Branch Operations 
 
 Most international banks have involvements in Panama consistent with that 
 country's currency relationship with the dollar and its favorable climate as a 
 financial center. Accordingly, the Marine started in Panama with a Regional 
 Representative Office for Central America in 1971. It subsequently opened a 
 branch operation in October 1973 to complement the Representative Office with 
 a primary focus on generating corporate business in Panama and Central Amer- 
 ica, as well as deposit gathering from Latin America. As of November 30. 1976, 
 it has total claims of approximately $32.4 million (of which $18.5 million is 
 claims in Panama, and the remainder is almost entirely claims due from other 
 Central American corporate clients). In Panama much of its business involves 
 financing trade of corporations located in the Colon Free Trade Zone. The com- 
 
274 
 
 bined Representative Office and Branch have a staff of 25, 3 of whom are U.S. 
 nationals. This operation is not large when compared to the activities of several 
 others. 
 
 D. Loans 
 
 As a large international money center bank, the Marine conducts business 
 throughout the world. Panama has long been a center for trade as well as a 
 notable financial center. Loans in Panama are a national consequence of the posi- 
 tion of the bank and the country. 
 
 Marine Midland, either directly from New York or through the Bahamas or 
 Panama Branch or foreign affiliate, has a $100,000 short-term, unsecured loan 
 available to the Hydroelectric Power Authority of Panama. 
 
 There is a $100,000 loan to the Agricultural Development Bank in Panama. 
 
 There is a $4 million loan to the Republic of Panama, due in November, 1983. 
 There is Marine's share in a $115 million international syndicated loan, managed 
 by Citibank/New York. InterUnion/Paris, in which Marine directly owns 45 
 percent, also has a loan of $2 million to the Republic of Panama. 
 
 In addition to these direct loans to the Government of Panama or institutes of 
 the Government, the Marine is engaged in normal short-term lending operations 
 through the banks and the private sector in that country. 
 
 Intermarine owns two Panamanian special-purpose shipping companies, Inter- 
 national Ship Finance (Panama) Inc., and Avon Shipping, Inc. These companies 
 each own a Panamanian flag vessel on behalf of Japanese owners, which vessels 
 are financed by Intermarine. These corporations are financing vehicles, and they 
 are only notionally involved with Panama. 
 
 II. Soi. Linowitz: Banker and Treaty Negotiator — A Conflict? 
 
 [From the Congressional Record, Feb. 22, 1977] 
 
 Mr. Helms. Mr. President, I am greatly concerned that Mr. Sol Linowitz, who 
 is presently in Panama as a chief conegotiator of the proposed new Panama 
 ( anal treaty, is, at the same time, a director of Marine Midland Banks. Inc.. 
 ami Pan American Airways, Inc. Both of these institutions have a direct finan- 
 cial interest in the support of the Torrijos dictatorship in Panama because of 
 their activities there and their need to curry favor with the Panamanian Gov- 
 ernment. Indeed. Marine Midland has made risky loans directly to the Republic 
 of Panama. 
 
 The proposed treaty, a treaty which Mr. Linowitz has long advocated, would 
 give away billions of dollars of the American taxpayers' investment in the Canal 
 Zone, vastly increase payments to the Republic of Panama, and strengthen the 
 Torrijos regime, which is tottering both financially and politically. 
 
 There is no indication that Mr. Linowitz, who was not confirmed by the Sen- 
 ate, has taken steps to avoid the appearance of conflict of interest by resigning 
 his directorships or private business associations. Until this matter is clarified, 
 Mr. Linowitz should step aside; he may already have irrevocably tainted any 
 treaty which is the product of his negotiations. 
 
 Mr. President, allow me to go into detail on these issues. 
 
 For the past week, a U.S. negotiating team has been in the Republic of Panama 
 for the purpose of negotiating a new treaty regarding the Panama Canal. The 
 conegotiators at the head of that team are Ambassador-at-Large Ellsworth 
 Bunker, a career ambassador, and Ambassador Sol Linowitz, a businessman and 
 lawyer sworn in on February i) as special representative of the President, with 
 the personal rank of ambassador. 
 
 The nomination of Mr. Linowitz was not presented to the Senate for advise 
 and consent. I am informed by the Department of State that it is not the cus- 
 tom to seek advise and consent on appointments which are expected to be of 
 less than (> month's duration. The administration is of the opinion that the 
 
 new treat v will be completed in less than 6 months. 
 
 Thus the Senate has not had the opportunity to investigate Mr. Linowitz' 
 
 suitability for the post, nor to inquire into what many would judge to be, on 
 
 the face of it, a gross Impropriety and conflict of interest. It is a case which 
 
 hardly Seems suited to our post-Watergate morality. 
 
275 
 
 According to the best information which I have been able to find. Mr. Lino- 
 witz sits on the board of directors of two large corporations which have a com- 
 pelling financial interest in the outcome of events in Panama. There is no indica- 
 tion that he has resigned from these boards. 
 
 Indeed, press accounts from the period before he was sworn in quote Mr. Lino- 
 witz as saying that he would not take the job if he had to give up his private 
 business associations. Biographic data furnished last week by the Department 
 of State indicates that he is present a member of both these boards. And both 
 institutions have informed me that he is presently a member of their boards. 
 
 Mr. President, I ask unanimous consent that the biographic data furnished 
 by the State Department be printed in the Record at the conclusion of my 
 remarks. 
 
 The Vice President. Without objection, it is so ordered. 
 (See exhibit 1.) 
 
 Mr. Helms. Mr. President, the two corporations are Pan American World Air- 
 ways, and Marine Midland Banks. Inc. 
 
 Pan American, of course, has an office in Panama, and uses Panama City as a 
 convenient midway stop on its Caribbean and South American flights. It is of 
 both logistical and financial interest to Pan American to maintain landing 
 rights in Panama, which is seeking to develop its tourist business further. 
 
 The Marine Midland connection, however, is far more immediate. Mr. Linowitz 
 serves not only on the board of directors of Marine Midland Banks, but also on 
 its executive committee. And Marine Midland has, over the past few years, par- 
 ticipated in a number of loans to the Government of Panama's dictator, Omar 
 Torrijos. Because commercial banks regard such information as proprietary in- 
 formation, I have been unable to document completely the extent of Marine 
 Midland's participation and financial exposure in Panama. But I have found an 
 advertisement from the Wall Street Journal of November 20. 1973. announcing 
 a loan of $115,000,000 to the Republic of Panama consummated on October 19. 
 1973. I am told that there are other such loans. Perhaps Mr. Linowitz could 
 give the details. 
 
 In the usual format of such advertisements, the amount of exposure of each 
 participating bank is not listed. However. Marine Midland is listed as a partici- 
 pant, along with Chase Manhattan. Bankers Trust. First National City Bank. 
 First National Bank of Chicago, and others. 
 
 Mr President, I ask unanimous consent that the advertisement from the 
 Wall Street Journal of November 20. 1973. be printed in the Record at the con- 
 clusion of my remarks. 
 
 The Vice President. Without objection, it is so ordered. 
 (See exhibit 2.) . -M . __. „ 
 
 Mr Helms. Mr. President, the mere fact of the existence of Marine Midland s 
 financial commitment to the Government of Panama would be sufficient to ques- 
 tion the proprietv of a man who sits on Marine Midland's executive committee 
 participating in the negotiations. It is unfortunate that the Senate had no oppor- 
 tunity to question Mr. Linowitz. But when one inquires into the actual situation 
 in Panama, far deeper questions arise. 
 
 For the fact is that the Panamanian Government is presently in a deep finan- 
 cial crisis as a result of its own mismanagement, and the international banking 
 community has grave doubts whether the outstanding indebtedness incurred by 
 Torriios can be paid. Moreover, if the Torrijos government falls because of its 
 financial crisis, it could well mean the end of the bankers paradise created by 
 Torrijos which provides the United States and other banks with a haven for 
 international financial transactions outside the I nited State-*. 
 
 To bP brief Air President, when Omar Torriios took over Panama in a military 
 Jp L reorganized the banking laws of the country in 1970. following he 
 adviee of the New York banking community. The new laws were so favorable 
 H^t the banking industrv in Panama went through a startling expansion from 
 wh^t was then a few banks with assets of a few millions of dollars, serving 
 rnlv plnama f s small economy. Today, only 6 years later, there are ,3 banks m 
 Panama with assets of $8.6 billion, involved in transactions throughout the 
 worTd ?n Panama, such transactions are free of taxation and enjoy other ■ advan- 
 £°ge7 fbanking office in Panama is like the flag of convenience which Panama 
 
 ^eS^.^^S^rin. Midland is among those banks which 
 take advantage of those transactions with an office in Panama. 
 
276 
 
 Is it inconceivable, Mr. President, that the longevity of the regime of the dicta- 
 tor who set up this banker's paradise is a matter of some concern to the execu- 
 tive committee of Marine Midland Banks, and to their colleagues in associated 
 banking institutions? 
 
 Of course, even in a paradise, there have been some drawbacks. The principal 
 drawback has been the insatiable appetite of the Torrijos regime for money. 
 The indebtedness of the Republic of Panama has risen from some $167 million 
 when Torrijos took over to an estimated $1.5 billion today. Not all of that is from 
 commercial banks, of course. A great deal is from bilateral and multilateral 
 lending institutions. Again it is difficult to obtain accurate figures for the cur- 
 rent year. But the most recently available statistics from the World Bank show 
 that at the beginning of 1975, commercial banks provided half the lending. 
 
 Moreover, a document leaked recently from Panama's Department of Plan- 
 ning, states that debt service alone will take 39 percent of Panama's budget in 
 1977 — versus 7 percent in the United States — that the deficit alone may be as 
 high as $139 million and that to refinance loans falling due, combined with the 
 deficit, will require $324 million this year. The key paragraph in the memoran- 
 dum states, in translation : 
 
 "We feel it will be extremely difficult to syndicate loans with the commercial 
 banks in the amounts previously mentioned, taking into account that during the 
 present fiscal period we must contract for a total of B/323.6 million ($323.6 
 million) with those sources, who in turn have become more demanding each time 
 that an accord has to be finalized. Besides the relation between servicing the 
 debt and current revenues of between 38.9% and 39% suggests a deteriorated 
 capacity to service this debt and thus will increase the risk as realized by the 
 lending institutions." 
 
 The financial crisis in Panama has been aggravated by governmental interven- 
 tion into the economy with counter-productive measures, such as minimum wages, 
 rent control, and price supports, all of which have priced Panama's exports out 
 of the world market. A confidential memorandum sent to the Department of 
 State by the U.S. Embassy in Panama last October had this to say: 
 
 "Economic conditions in Panama worsened steadily during the 1976 first half. 
 There were decreases from a year ago in key indicators . . . overall growth is 
 likely to be near zero for 1976." 
 
 Moreover, even the extraordinary upsurge of Panama's worldwide indebted- 
 ness has failed to prop up a sagging and mismanaged economy. The confidential 
 State Department memo points out that the increase in foreign loans has made 
 matters worse, not better : 
 
 "Increased external financial flows per se, regardless of concessionality, per- 
 mit Panama to defer grappling with the core problem of low productivity until 
 a later date when the problem will probably have worsened, unless such financ- 
 ing bears specifically on some aspect of costs. Indeed, much of the capital inflow 
 of the past three years has aggravated Panama's economic malaise by exacerbat- 
 ing its debt service burden without enhancing overall productivity." 
 
 Mr. President, I ask unanimous consent that a translation of the memorandum 
 from the Ministry of Planning of Panama and a copy of the State Department 
 memorandum of October 26, 1976, be printed in the Record at the conclusion of 
 my remarks. 
 
 The Vice Presioent. Without objection, it is so ordered. 
 ( See exhibits 3 and 4.) 
 
 Mr. Helms. Mr. President, the interest of Marine Midland goes beyond the 
 normal proprietary interest which a lending institution has in a loan it has ex- 
 tended. The series of loans from private banks has been used to prop up an in- 
 competent dictatorial regime; the regime for its part has returned the favor by 
 providing a haven for the banks to expand their international operations. But 
 the whole mutual arrangement depends upon the personal favor of the dictator 
 who bas complete control, General Torrijos. If Torrijos falls, no one can tell 
 what kind of a government will follow. 
 
 But the banks have just about reached the limit in the amount of credit they 
 can extend. New sources of funding the Torrijos government must be found if 
 the present beneficial environment for the bank is to continue. The treaty nego- 
 tiations have been talking about a $40 million annual payment from the United 
 States to Panama under the new treaty. 
 
277 
 
 Mr. President, is it beyond reason that the members of the banking fraternity 
 involved in Panama are looking to the proposed surrender of U.S. sovereignty 
 and territory in the Canal Zone as a way of propping up the Torrijos regime and 
 providing increased revenues to his government? Is it not fair to ask whether 
 the short range interests of those financial institutions might not be subordinated 
 to the long-term interests of the United States? 
 
 I have many friends in the banking industry, and was closely associated for 
 a time with the industry in my State, and I am not trying to impugn their motives. 
 But in international situations, it is no easy matter to separate personal interests 
 and national interests, and to make objective judgments. 
 
 For example, I think that anyone who thinks that the best way to assure sta- 
 bility in Panama is to give away the Panama Canal is making a disastrous mis- 
 take. Similarly, anyone who thinks we can defend the Panama Canal if we only 
 have a status-of-forces treaty with Panama is making a big mistake. Moreover, 
 anyone who thinks that appeasement of a left-wing dictator will provide a base 
 for enduring relations with Panama is making a terrible mistake- 
 But these are judgments that will ultimately come to the Congress of the 
 United States for debate. Meanwhile, it seems to me that it is a grave error to 
 have a banker who is in bed with Torrijos negotiate the proposed treaty. I 
 regret that Mr. Linowitz' nomination bypassed the usual path of advise and 
 consent in the Senate. 
 
 Had Mr. Linowitz' nomination come before the Senate, there would have been 
 the opportunity to question Mr. Linowitz about 18 U.S.C. 208, which says in 
 part : 
 
 ' Whoever, being an officer or employee of the executive branch of the United 
 States Government, of any independent agency of the United States, or of the 
 District of Columbia, including a special government employee, participates 
 personally and substantially as a government officer or employee, through deci- 
 sion, approval, disapproval, recommendations, the rendering of advice, investiga- 
 tion, or otherwise, in a judicial or other proceeding, application, request for a 
 ruling or other determination, contract, claim, controversy, charge, accusation, 
 arrest, or other particular matter in which, to his knowledge, he, his spouse, 
 minor child, partner, organization in which he is serving as officer, director, 
 trustee, partner, or employee, or any person, or organization with whom he is 
 negotiating or has any arrangement concerning prospective employment, has a 
 financial interest — 
 
 Shall be fined not more than $10,000 or imprisoned not more than two years, 
 or both." 
 
 Had such questioning been possible, perhaps the Nation would have learned 
 what steps Mr. Linowitz intended to take to avoid a conflict of interest, or the 
 appearance of conflict of interest, as the case may be. He certainly is an em- 
 ployee, or a special employee ; he is participating personally and substantially ; 
 he is making decisions and recommendations and rendering advice ; it is a partic- 
 ular matter in which an organization of which he is a director has a financial 
 interest — in fact two organizations of which he is a director. The American 
 people deserve to know how he will avoid a conflict. 
 
 It is worth pointing out that only a week ago, U.S. Attorney General Griffin 
 B. Bell quite properly informed Mr. Charles Kirbo, the close friend and con- 
 fidant of the President, that he would be classified as a "special employee" of the 
 government whenever he gave advice to the President — even though he was 
 receiving no compensation from the Government. General Bell's opinion was 
 that the conflict-of-interest statutes prohibited Mr. Kirbo, as a "special employee", 
 from giving advice to the President on any matter in which he had a financial 
 interest. 
 
 If this is true of Mr. Kirbo, who is not even officially employed by the Govern- 
 ment, is it not proper to ask whether it applies to Mr. Linowitz, who has been 
 sworn in as an ambassador and "special representative" of the President? 
 
 Mr. President, until these matters are resolved, it is inappropriate for Mr. Lin- 
 owitz to participate in the negotiations. Indeed, because of press reports that 
 substantive progress has been made during the past week toward a treaty draft, 
 it could well be that any treaty draft ultimately produced, even if Mr. Linowitz 
 resigns, will be fatally flawed. A controversial treaty that has the appearance of 
 
278 
 
 seing tainted by special interests does not deserve the consideration of the 
 Senate. Mr. Linowitz should voluntarily stand aside, and offer an explanation to 
 ;he American people and the Congress. 
 
 Mr. President, I ask unanimous consent that an article from the Washington 
 Post, "Carter Confidant Is Ruled Subject to Conflict Curbs," of February 15, 1!)T7, 
 3e printed in the Record. 
 
 The Vice President. Without objection, it is so ordered. 
 
 See exhibit 5. 
 
 Exhibit 1 
 
 Biographic Data : The Honorable Sol M. Linowitz 
 Age : 62, b. Trenton, N.J. 
 
 Marital Status: Married; four daughters (Mrs. Kenneth Mozersky, Mrs. 
 jabriel Gerstenblith, Jan, Ronni). 
 
 Senior Partner of the international law firm of Coudert Brothers. One Farragut 
 Square South, Washington, D.C. 20006 ; 200 Park Avenue, New York, N.Y. 10017. 
 
 Co-Chairman (formerly Chairman), National Urban Coalition. 
 
 President, Federal City Council. 
 
 Chairman, National Council of Foreign Policy Association. 
 Chairman, Commission on U.S.-Latin American Relations. 
 Chairman of the Board, Jewish Theological Seminary of America. 
 
 MEMBER 
 
 Board of Directors, Time, Inc. (also Chairman of Audit Committee ». 
 Board of Directors, Pan American World Airways (also member of Executive 
 Committee) . 
 
 Board of Directors, Marine Midland Banks. Inc. (also member of Executive 
 Committee). 
 
 Board of Trustees, Mutual Life Insurance Company of New York. 
 Board of Trustees, Center for Inter-American Relations. 
 Board of Directors, International Executive Service Corps. 
 National Commission on Critical Choices for Americans. 
 Council on Foreign Relations. 
 National Board on Graduate Education. 
 
 FELLOW 
 
 American Academy of Arts and Sciences. 
 Royal Society of Arts. 
 
 PREVIOUS POSITIONS 
 
 U.S. Ambassador to the Organization of American States (Nov. 1966-May 
 L9G9). 
 
 U.S. Representative to the Inter-American Committee of the Alliance for Pro- 
 gress (Nov. 1966-May 1969). 
 
 Chairman of the Board, Xerox Corporation ; previously Chairman of Executive 
 Committee and General Counsel ( 19or>-19<>6) . 
 
 Senior Partner, Harris, Beach, Wilcox, Dale and Linowitz (Rochester, New 
 .'oik. 1958-1966). 
 
 Chairman, National Committee for International Development ( 19IJ4-1966) . 
 Vice Chairman, J. F. Kennedy Center for the Performing Acts (1965-1970). 
 Chairman, State Department Advisory Committee on International Oiganiza- 
 ions (LHtt-1966). 
 
 Assistant General Counsel, Office of Price Administration (1942-1944). 
 Lieutenant, U.S. Naval Reserve (1944-1946). 
 
 EDUCATIONAL 
 
 A. P.. Degree (1985) : Hamilton College ( Salutatorian) : Phi Beta Kappa : Delia 
 Sigma Rho; Phi Delta Epsilom. 
 
 J.I). Degree (1988) : Cornell Law School (Editor in Chief, Cornell Law Quar- 
 erly ; Phi Kappa Phi ; order of Coif). 
 
279 
 
 HONORARY DOCTORATE DEGREES (LL.D. AND L.H.D.) 
 
 Allegheny College. 
 American University. 
 Amherst College. 
 Babson Institute. 
 Bucknell University. 
 Colgate University. 
 Curry College. 
 Elmira College. 
 Ithaca College. 
 Marietta College. 
 Notre Dame University. 
 Oberlin College. 
 
 Pratt Institute. 
 Roosevelt University. 
 St. John Fisher College. 
 St. Lawrence University. 
 Syracuse University. 
 University of Judaism. 
 University of Michigan. 
 University of Missouri. 
 Washington University. 
 Wooster College. 
 Yeshiva University. 
 
 TRUSTEE 
 
 Cornell University. 
 
 Hamilton College. 
 
 The Johns Hopkins University. 
 
 The American Assembly. 
 The Salk Institute. 
 
 Exhibit 2 
 
 Republic of Panama: $115,000,000 
 
 (Ten Year Eurodollar Loan) 
 
 Managed by Citicorp International Bank Limited, Dillon, Read & Co. Inc., 
 Smith, Barney & Co. Incorporated, and Banco Nacional de Panama. 
 And provided by — Asia Pacific Corporation Ltd. 
 Banco de Santander Y Panama. 
 
 Bank of America NT & SA. San Francisco, California. 
 
 Bank of Montreal. 
 
 The Bank of Nova Scotia. 
 
 The Bank of Tokyo, Ltd. 
 
 Bankers Trust Company. 
 
 Banque Ameribas. 
 
 Banque Nationale de Paris. 
 
 The Chase Manhattan Bank, N.A. 
 
 Citicorp International Bank Limited. 
 
 Compagnie Luxembourgeoise. 
 
 De Banques A. 
 
 Dresdner Bank Group. 
 
 The First National Bank of Boston. Panama Branch. 
 
 The First National Bank of Chicago. 
 
 First National City Bank. 
 
 The Fuji Bank, Limited. 
 
 The Industrial Bank of Japan Limited. 
 
 Interunion-Banque. 
 
 Lloyds & Bolsa International Bank Limited. 
 
 London & Continental Bankers Limited. 
 
 The Long-Term Credit Bank of Japan Limited. 
 
 Marine Midland Bank New York. 
 
 The Mitsui Trust and Banking Company Limited. 
 
 National and Grindlays Bank Limited. 
 
 Republic National Bauk of Dallas. 
 
 Rothschild Intercontinental Bank Limited. 
 
 The Roal Bank of Canada. 
 
 Security Pacific National Bank. 
 
 The Sumitomo Bank, Ltd. 
 
 The Tokni Bank, Limited. 
 
 Toronto Dominion Bank. 
 
 Assent : First National Citv Bank. 
 
 October 19, 1973. 
 
280 
 
 Exhibit 3 
 Memorandum 
 
 To Eng. Demetrio B. Lakas, President of the Republic, Presidency of tne ixepublic. 
 From Nicolas Arditto Barletta. Planification Minister. 
 Matter Financial perspectives for 1977. 
 
 The purpose of this Memorandum is to call attention to the financial basis upon 
 which will be defined the budget policy of 1977 thus permitting to show the perti- 
 nent limitations that are being detected in this year's budget. 
 
 (a) The current revenues should increase between B/43.6 million and B/44.2 
 million with respect to this year's revised income figures thus reaching totals of 
 B/339.7 million or B/333.3 million ; dependent on whether or not there is a re- 
 cuperation in the economic activity during the last six months of this year. 
 
 (b) The increase in current revenues assumes an economic upturn of 3% and 
 an inflation rate of 5% through 1976. 
 
 (c) It also assumes a B/21.0 million package increase of taxes which should not 
 interfere significantly in the desired economic recuperation process. 
 
 (d) The technical group involved in this evaluation has concluded that the fol- 
 lowing are the tributary measures that would fill the above requirements : 
 
 A consumer tax designed in such a manner as to minimize its effect on prices 
 and on lower income groups. This type of taxation tends to divert private expendi- 
 ture towards investments, thus stimulating economic development. 
 
 Reform import duties in order to replace specific value taxes by value added 
 duties. This measure will adjust the increase of tax income to the increased cost 
 of imported goods, and will thus help to stimulate internal production. 
 
 Limit the tax deduction permitted on interest paid for mortgage loans used to 
 buy homes for one's personal use. 
 
 Consolidate the progressive tax structure for corporations into one tax rate 
 in order to avoid the use of numerous companies to lower the effective tax rate. 
 
 (e) At the same time, operational expenses are estimated to increase from be- 
 tween B/50.3 million and B/50.7 million and will reach totals of B/340.6 million 
 or B/341.0 million, depending on how the economy is reactivated during the sec- 
 ond semester of this year. 
 
 (f) The fact that the increase in revenues will be inferior to the increase in 
 expenses suggest that there will virtually be no new recourses to augment the 
 coverage of public services. 
 
 (g) The significance of the rigidity to which the new budget elaboration will be 
 subjected will be understood when one observes that only B/3.1 million will cor- 
 respond to net reincorporations of previously frozen expenditures, while the 
 remaining B/47.2 million correspond to commitments of an obligatory nature. 
 
 (h) These commitments of an obligatory nature can be broken down in the fol- 
 lowing maimer : 
 
 (1) From between B/42.3 million to B/42.7 million for servicing the foreign 
 debt which will increase from between B/87.5 million to B/129.8 million or 
 B/130.2 million in 1977, depending on whether or not the economy recuperates 
 during the last semester. Interest will increase from between B/24.8 million or 
 B/25.2 million, depending on the above observation, while the amortizations will 
 be increased by B/17.5 million. Due to the tendency required to service the foreign 
 debt, its ratio in respect to current revenue increases from 29.6% to between 
 38.2% and 39.0% which significantly deteriorates our capacity for further 
 indebtedness. 
 
 (2) B/2.3 million of the amortization of salaries are for: 
 Education — B/1.4 million. 
 
 Health— 0.4 million. 
 
 Housing — 0.1 million. 
 
 Other institutions — 0.4 million. 
 
 (3) B/1.3 million of current transferences which reflex the increase in subsidy 
 to the National University, the payment of Balboa notes subscribed to BID and 
 the increased consumption of water. 
 
 (4) B/0.4 million in salary increases to : 
 Health— 0.3 million. 
 
 Government and Justice, Labor . 
 
 Presidency — 0.1 million. 
 
 (5) B/0.3 million for the XIII month of public functionaries. 
 
281 
 
 (6) B/ 0.2 million for inclusion in the MIDA budget for personnel frozen in its 
 investment portion of said budget and for the hiring of new auditors for the 
 France Ministry. ^ ^ bolster the supply budget of the Health Ministry 
 
 and other compulsory expenditures. , . ' 
 
 (i) Since, for the above reasons, all other expenses must be maintained at the 
 budgeted fiscal 1976 level, it is convenient to eliminate from the budgeting 
 process all programmed budgeting meetings in order that the respective institu- 
 tions and our analyst can dedicate the most amount of their time poss'ole to 
 formulate, evaluate and turn in punctually their budget by program. 
 
 (j) As to the Central Government contribution towards the public investment 
 program, we calculate that it will be B/ 78.0 million which represents an in- 
 crease of B/ 18.0 million over the B/ 60.0 million that is estimated will have been 
 contributed this year. 
 
 (k) As a result, the global deficit will be between B/ 131.9 million and B/ 138.7 
 million, depending on how well the economy recuperates during the second 
 semester. 
 
 (1) To finance this deficit we will require B/ 15.6 million from the Venezuelan 
 Investment Fund, B/ 5.0 million in Internal Bonds, and from B/ 111.3 million to 
 B/ 118.7 million from the private banks. 
 
 (m) Thus, the amounts that must be financed as well as the amounts that 
 must be obtained, create very concrete problems which in turn reiterate the 
 need to increase expenses and investments only in those areas of an obligatory 
 nature and to dedicate the most of time possible to the conscientious elaboration 
 of a budget by programs in Order to execute the largest possible amount of 
 services required by our society with the scarce resources that are available. 
 
 (n) On the one side, the required new financing of between B/ 131.9 million and 
 B/ 138.7 million implies that there will be pressure on the liquidity and solvency 
 of the National Bank which must provide the Central Government the monetary 
 resources while the 3 previously mentioned financial operations can be formalized, 
 all of which should take at least four months. During this period, the National 
 Bank will have to recur to its lines of credit as well as to its internal reserves 
 which have been practically saturated during the present year by having to 
 finance the global deficit of B/ 99.3 million which in turn is between B/ 32.6 
 million and B/39.4 million less than what has been estimated for 1977. 
 
 (n) On the other hand, we feel it will be extremely difficult to syndicate 
 loans with the commercial banks in the amounts previously mentioned, taking 
 into account that during the present fiscal period we must contract for a total of 
 B/ 323.6 million with those sources, who in turn have become more demanding 
 each time that an accord has to be finalized. Besides, the relation between serv- 
 icing the debt and current revenues of between 38.9% and 39% suggest a deterio- 
 rated capacity to service this debt and thus will increase the risk as realized by 
 the lending institutions. 
 
 (o) In short, 1977 lines up as extremely delicate due as much to current ex- 
 penses increasing more than current revenues, as well as to the amount and 
 structure of the new financing that must be contracted which reaches the limits 
 available to the Nation as such. 
 
 (p) As a result of the above, I respectfully request your backing in eliminat- 
 ing the budgeting meetings and in demanding from the institutions that they 
 pay the most attention to formulating and elaborating a budget by program. 
 Also, I ratify the need for you to back the approval and execution of the taxing 
 measures that we have presented for your consideration, once that we have 
 finalized the pertinent studies. 
 
 With my highest consideration and appreciation. 
 
 Exhibit 4 
 
 (Sent by United States Embassy in Panama to the State Department on Oct. 
 
 26tfo, 1976) 
 
 Tags : ECON, EFIN. 
 
 Subject : Panama's Recession Is Structural — A Result of Low Productivity. 
 
 L This message is part of a continuing series of mission economic studies of 
 the state of the Panamanian economy and projections for its future. 
 
282 
 
 2. Summary : Panama's recession, which deepened during the first half of 1976, 
 is neither cyclical nor primarily a product of economic conditions outside Pana- 
 ma. In our view the economy is floundering mainly because its high cost output is 
 not competitive in the world market and few opportunities exist for available 
 private investment. To establish a basis for renewed sustainable growth will re- 
 quire actions that lead to lower costs and improved productivity. These could in- 
 clude easing the labor code, reducing subsidies, boosting domestic savings, and 
 directing resource flows more toward the international service sector where 
 Panama has natural advantages; however, most such actions would cut back 
 social benefits granted to the working classes under the "revolution", and might 
 not be politically acceptable under the present government; inflows of foreign 
 capital have not been getting at the core problem of high costs (low productiv- 
 ity). Lack of access to relevant Canal Zone sites is delaying GOP development 
 of infrastructure which is prerequisite to the growth of various commercial 
 services industries by the Panamanian private sector. End summary. 
 
 3. Economic conditions in Panama worsened steadily during the 1976 first 
 half. There were decreases from a year ago in key indicators — manufacturing, 
 construction, external trade, unemployment, (increase), and sales to the Canal 
 Zone (see reftel), overall growth is likely to be near zero for 1976. 
 
 4. Failure of the economy to respond to a variety of stimulants indicates 
 that the recession is more than a cyclical maladjustment. Credit has remained 
 relatively plentiful, with preferential rates available from the government for 
 both agricultural and industrial projects. There are tax subsidies for new ex- 
 ports, and tax benefits for reinvested profits. No basic changes have been made 
 in the "rules of the game" under which business operates, such as the labor 
 code or tax laws, since before the onset of recession, in fact, the GOP in recent 
 months has actively sought by various direct means to improve the business cli- 
 mate. A large boost in 1975 public sector spending had little effect on either pri- 
 vate investment or aggregate demand. 
 
 5. Also, Panamanian economic problems do not seem to be caused primarily 
 by worldwide economic trends or world trade. In contrast to Panama's continuing 
 decline, other developing countries (LDC's) have been experiencing a quickening 
 economic tempo so far this year in response to rapid recovery by the industrial- 
 ized countries, plus some correction of structural maladjustments, LDC exports 
 have been generally increasing as a part of the marked improvement, in 1976 
 first half world trade (plus 10 percent) while the value of Panamanian exports 
 remained at its 1975 level (excluding an abnormal decline in petroleum products 
 exports), changes in Panama's economy also differed from the worldwide pattern 
 both during the 1974-75 world recession and the years immediately preceding it. 
 Despite sharp 1974-75 recession among the industrialized countries (zero 
 growth), LDCs' gross domestic product (GDP) increased 5.5 i>ercent in 1974 and 
 1.7 percent in 1975. Growth had begun tapering off in 1971 whereas during 
 1971-73 the rest of the world including Latin America experienced unprecedented 
 boom. - „ . 
 
 6 Private investment in Panama reached a peak in 19<1. Growth in manu- 
 facturing began to fall off in 1971 with a decline in the number of attractive 
 import substitution possibilities, little increase has subsequently taken place 
 in the volume of manufactured exports, output of both construction materials 
 and intermediate goods stopped expanding in 1973. Expansion of construction 
 activity began slowing in 1972 and has actually been declining since 1974. Imposi- 
 tion of rent controls in 1973 brought private investment in low cost housing to 
 a standstill. On the other hand, growth of the important services sector re- 
 mained near 8 percent annually through 1974 (plus 3 percent in 19,5) due ni 
 part to the major expansion of the foreign banking sector since 1971, growth 
 in agricultural output lias remained sluggish since 1970 at about 3 percent annu- 
 ally, much slower than during tlje 1960's. , . 
 
 7 Panama's basic economic weakness in our view and the reason helium 
 current stagnation is its non-competitiveness in the world market— a structural 
 problem involving primarily high cost production (coupled with a lack of re- 
 sources) in both agriculture and industry. The export potential for Panamanian 
 agriculture is extremely limited at present, the main exports. D^aMs^lS 
 the bands of foreign plantation operators, and has probably reached its peak in 
 an increasingly comiietitive world market. In general, land is of poor quality 
 and farm labor costs are high— the $3 per day minimum wage is estimated to he 
 at least double the rate anywhere else in Central America. The government e£ 
 conrages high cost production, including rice, the principal crop ^™sittlz- 
 ing producers through support prices typically set above the world maiket. 1 bus. 
 
283 
 
 Panama cannot profitably export major crops such as rice and corn and is further 
 precluded from developing any profitable export potential for various lesser crops 
 by the small domestic market base in Panama. Accessible forests have been cut 
 over and there is little potential for meat exports while access to the U.S. 
 market is restricted. Panama's sugar industry is likewise non-competitive due to 
 high costs of both cane production and refining operations. 
 
 8. As with agriculture, Panama's manufacturing industry currently has little 
 export or overall growth potential because of high production costs coupled 
 with a dearth of natural resources (copper deposits have not yet been determined 
 to be economically exploitable). Minimum wages and the general wage and 
 benefit structure in Panama are estimated to be the highest in Central America 
 and among the highest in all Latin America. Higher wages and benefits in the 
 Canal Zone exert upward pressure on wages in the republic as employers com- 
 pete for the generally better qualified workers attracted by Zone wages. The 
 dominance of the service sector in Panama's central urban areas with its higher 
 skill levels also creates upward pressure on the entire wage and benefit struc- 
 ture. Employee benefits under Panama's labor code add to direct employment 
 costs. The code exerts indirect pressure on costs through subsidies such as firing 
 restrictions imposed on employers and, by strengthening the trade union move- 
 ment, bolsters the trend toward costlier contract settlements. High labor costs 
 encourage the substitution of capital for labor, thus boosting structural unem- 
 ployment throughout the economy. Also, relative capital costs — mostly foreign 
 sourced — are likely to rise as Panama's already high debt service burden worsens 
 and the economic outlook for other LDCs improves relative to Panama. 
 
 9. Establishing the basis for renewed growth and improved economic well 
 being that can be sustained will require actions that lead to a lower cost struc- 
 ture. One widely discussed possibility is an easing of the labor code, although 
 its real impact on costs remains uncertain (it did not bring on recession although 
 it may have stood in the way of needed private sector adjustments). Changes 
 probably would not induce an immediate surge of private investment, however, 
 the business community has made clear its conviction that changes are essential, 
 giving them an additional psychological importance that bears importantly on 
 the general investment climate. Changes might be a convincing sign of GOP 
 concern over the private sector's economic plight. 
 
 10. Appropriate belt tightening also could include lowering subsidies as well 
 as the wage/benefit structure to reduce relative production costs, and increasing 
 personal taxes to curb consumption (particularly imports) and expand domestic 
 savings. These effects are usually achieved indirectly by currency devaluation. 
 Since Panama's currency is the U.S. dollar, such actions must be taken directly, 
 in addition, resources may need to be more heavily concentrated in the inter- 
 nationally-based services sector where Panama has more natural advantages, 
 with proportionately less in agriculture and the non-productive social sectors. 
 
 11. Comments : 
 
 (A) Panama's high wages, subsidies, and consumer imports — together with a 
 moderate tax burden and little public saving — permit a standard of living which 
 no longer appears to be supportable by Panama's inefficient domestic production. 
 
 (B) Increased external financial flows per se, regardless of concessionality, 
 permit Panama to defer grappling with the core problem of low productivity 
 until a later date when the problem will probably have worsened, unless such 
 financing bears specifically on some aspects of costs. Indeed, much of the capital 
 inflow of the past three years has aggravated Panama's economic malaise by 
 exacerbating its debt service burden without enhancing overall productivity. 
 Moreover, total inflows greatly exceeded the current account deficit of Pan- 
 ama's balance of payments, resulting in large negative "errors and omissions'' 
 ( 'around $100 million annually) most of which probably represented outflows of 
 doi i lestically-owned ca pital. 
 
 (C) The types of actions mentioned above for addressing Panama's high cost 
 structure run headlong into the "revolution" — the social and economic benefits 
 granted to the urban and rural working classes over the past eight years which 
 would need to be reversed in part. In short, the "revolution" has collided with 
 growth and one or the other must yield, whether or not actions of sufficient scope 
 to be economically meaningful along the above lines are politically possible for 
 the present government is questionable. 
 
 (D) Panama's best economic prospects lie in the development of its potential 
 as a hub for servicing international commerce, various aspects of cargo handling 
 are an essential part of the picture. Thus, the GOP has a valid case in urging 
 early access to relevant canal zone sites needed to develop the infrastructure 
 on which growth of various transport, storage and other commercial services. 
 
284 
 
 Exhibit 5 
 
 [From the Washington Post] 
 
 Carter Confidant Is Ruled Subject to Conflict Curbs 
 
 (By Morton Mintz) 
 
 Seattle, February 14. — Attorney General Griffin B. Bell said today that presi- 
 dential confidant Charles Kirbo is subject to federal conflict-of-interest laws be- 
 cause under a strict, 14-year old statute, he is a "'special employee" of the 
 government. 
 
 Kirbo "is a special employee every time he advises the President," Bell told 
 a news conference here, where he is attending the American Bar Association's 
 winter meeting. No one can give the government advice "as a friend," Bell said ; 
 in this context, '"there's no such thing as a friend." 
 
 Bell also said it makes no difference under the statute that Kirbo, a partner 
 in King and Spalding, the Atlanta law firm Bell left to become Attorney General, 
 it not paid for advising President Carter. 
 
 Bell said he told Kirbo last November that he is in special-employee status, 
 which prevents him from advising Carter or anyone else in government about 
 any matter in which he or the law firm has a financial interest. 
 
 So far as is known, no friend of a past President who has provided unpaid ad- 
 vice in the White House has been formally classified as a special employee. The 
 statute making such an employee subject to the conflict-of-interest laws took 
 effect in January, 1963, during the Kennedy administration. 
 
 Charles G. (Bebe) Rebozo, for example, was a close confidant of President 
 Nixon, but was not known to have been classified as a special employee. 
 
 In Atlanta, Kirbo confirmed to reporters that he is in special-employee status, 
 although he collects neither a possible $100-a-day consultant's fee nor expenses 
 when he comes to Washington. 
 
 When he comes to the White House, he said, he tries to help Carter carry out 
 his campaign commitments and proposals, although at times he simply listens 
 to the President. 
 
 The primary restraint of his special-employee status, he said, is that "you can't 
 give any advice on any matter you have an interest in." 
 
 Bell, responding to reporters' questions, said that to avoid any possible conflict 
 from arising out of his former partnership in King and Spalding he will, within 
 a few days, provide Justice Department officials with a list of all of the law firm's 
 clients. He said reporters will be able to see the list, which includes numerous 
 large corporations. 
 
 Bell, who met with reporters after speaking briefly to the ABA's House of 
 Delegates, said that Carter soon will issue an executive order creating commis- 
 sions to propose candidates, on the basis of merit, for vacancies on U.S. courts of 
 appeals. 
 
 Bell said the order will allow the commissions to propose their own candidates, 
 rather than be bound to names submitted by senators from affected states. 
 
 The number of vacancies shortly will reach six. For each one, a commission 
 will propose five names to the President, who will choose one for final nomina- 
 tion to the Senate. Each affected state will be represented on the commissions, 
 each of which will have 11 members. 
 
 Some members will be laymen. Bell said that the draft White House order does 
 not prohibit judges from being members, but that he doesn't know if Carter will 
 agree with a suggestion for inclusion of judges that was made to the ABA Sun- 
 day by Chief Justice Warren E. Burger. 
 
 All told, there will be 13 commissions — one for each of nine circuits, and two 
 each for the huge fifth and ninth circuits in the South and Far West. 
 
 In his talk to the House of Delegates, Bell pleaded for a delay until the August 
 meeting of the ABA's policymaking body on pending resolution to overhaul the 
 federal grand jury system. 
 
 By August, Bell said, he will have completed a review of the proposals. One of 
 thpm would allow counsel to accompany witnesses in the grand jury room. At 
 least tentatively, Bell said, he feels that this proposal would convert grand jury 
 proceedings into secret trials, with the result that prosecutors would try to bypass 
 grand juries and file charges by themselves. 
 
APPENDIX J 
 
 Background on Panama as an Offshore Banking Center 
 
 I 
 
 U.S. Banks Abroad 
 
 INTRODUCTION 
 
 [From "International Banking", Part 4, FINE Study, House Committee on Banking, 
 
 Currency and Housing, 1976] 
 Multinational corporations have received attention and aspects of their 
 activities have become important political issues but interest in international 
 banking has not spread very far beyond the small group who are actually partici- 
 pants in the activity. Only recently has an effort been made to sort out areas 
 where the activities of multinational banks have important effects on public 
 policy in the United States and to determine if those effects are in the public 
 interest 
 
 It is hoped that this study will provide background information for further dis- 
 cussion and analysis of the political and economic effects of international banking. 
 Its principal purpose, however, is to call attention to the impact of overseas ac- 
 tivities of U.S. banks on the domestic banking system. The legal and institutional 
 structure of foreign operations, the scale and range of activities and the regulatory 
 and supervisory framework in which they are conducted are discussed in the 
 next four sections of the paper. These are followed by a section covering one of 
 the more important operational areas in international banking — foreign exchange 
 operations. Next are sections describing the activities of the 12 largest multi- 
 national banks; some special problem areas involving the so-called "country 
 loans,'* term lending and the adequacy of capital and an analysis of the Federal 
 Reserve's role as lender of last resort to Franklin National Bank. 
 
 Several sections of the study comment on policy issues outside the context 
 of banking regulations and there is a detailed discussion of some of the areas in 
 which multinational banks have played a major role in shaping economic and 
 monetary events. Since banks do have a key role in determining economic con- 
 ditions, an outline of the development of international banking in the context of 
 monetary and economic events on which it has had a determining influence will 
 be useful as an overview for the material which follows. 
 
 The recent development of truly international banking by U.S. banks was 
 preceded by foreign lending by the larger U.S. banks primarily from their home 
 offices using domestic funds. This activity became an important part of their 
 business in the early 1960's. Because their activities contributed to deficits in the 
 U.S. balance of payments, various controls on the extension of foreign credits 
 were imposed, including in 1965 a ceiling on additional foreign lending by U.S. 
 banks. In response to these controls, banks with established foreign business 
 moved overseas, and funded their foreign loans with foreign deposits. The larger 
 banks established branches in London and other major international financial 
 centers. 1 Some banks invested in foreign banks as a way of entering a given 
 banking market and in time, all of the larger banks acquired an interest in a 
 merchant bank, establishing wholly owned subsidiaries or investing with other 
 U.S. or foreign hanks in joint ventures. 
 
 In the late 1960's the Federal Reserve Board allowed banks to open "shell" 
 branches in the Bahamas. In reality a "shell" branch is a euphemism for Euro- 
 currency banking operations conducted at the home office. The requirement was 
 that, like branches in London and elsewhere, virtually all loans by the shell 
 branches had to be foreign loans and liabilities had to he foreign liabilities. 
 This would allow international banking to be done at home but without violating 
 
 1 Three banks — First National City. Bank of America, N.T. & S.A., and Chase Manhattan 
 Bank — already had worldwide networks of branches. 
 
 (285) 
 
286 
 
 capital controls. It also opened up the market to a larger number of banks since 
 the cost of getting a license in Nassau was not great nor was the expense of hiring 
 someone to maintain a set of books which were actually duplicates of records 
 kept at the home office. 
 
 The story of the development of the Eurodollar market is a familiar one. It 
 began because the U.S.S.R. had dollar balances acquired during World War II 
 which it did not wish to deposit in U.S. banks for fear the funds would be con- 
 fi seated to satisfy unpaid loans from the United States. British banks accepted 
 the funds and re-lent them. There was a demand for dollar loans and other 
 countries began to deposit dollar reserves, acquired as a result of U.S. balance of 
 payments deficits, with banks in London. U.S. banks with branches in London 
 attracted a share of these deposits and, after the Voluntary Foreign Credit Re- 
 straint Program in 1965 constrained foreign lending from domestic offices, they 
 began to compete vigorously for Eurodollar deposits to continue and expand their 
 foreign business. 
 
 In 1966, tight money in the United States made it profitable for the foreign 
 branches to lend their Eurodollar deposits to their home offices for relending to 
 domestic customers. Higher interest rates in the United States after 1966 en- 
 couraged foreign branches to continue to lend about one-fourth of their total re- 
 sources to their parent banks over the next several years. It also encouraged more 
 banks to establish branches in London and in 1969 banks responded to the Fed- 
 eral Reserve's tight money and high interest rate policies by importing al>out 14 
 billion Eurodollars for domestic lending. 
 
 These funds were loaned by the large international banks to their large corpo- 
 rate customers who could afford the cost. As a result, money remained tight and 
 interest rates high as the Federal Reserve prolonged its efforts to cool the econ- 
 omy. The credit crunch and liquidity problems exi>erieneed by other sectors of the 
 economy — especially housing, and state and municipal governments — were quite 
 serious. The Federal Reserve responded by imposing a 10 f / r marginal reserve 
 requirement on additional Eurodollar borrowings by U.S. banks from their for- 
 eign branches to discourage a similar inflow of funds in the future. And. recog- 
 nizing the competitive advantages which the international banks had enjoyed, the 
 Board also agreed to the establishment of the shell branches so that more banks 
 could compete in international markets. 
 
 As loan demand and interest rates declined during 1970. U.S. banks repaid a 
 substantial portion of their borrowings to their foreign branches. Without the 
 domestic market as an outlet for lending, the foreign branches had to find new 
 uses for funds. 2 They increased their lending to foreign subsidiaries of U.S. 
 multinational corporations, but still had an excess of funds for lending. The avail- 
 ability of dollar loans and lower interest rates on both Eurodollar funds and in 
 the United States, as well as the domestic inflation and recession encouraged 
 expectations that the dollar would be devalued. Speculators borrowed dollars 
 and converted them into assets in other currencies. Central banks in several 
 European countries bought the dollars because they feared the effect of upward 
 revaluation of their currencies on their exports. In so doing, they added substan- 
 tially to their own money supplies and to their domestic inflation. In the end, the 
 disadvantages of preventing a devaluation of tbe dollar seemed greater than the 
 advantages and the dollar was devalued. 
 
 In the aftermath of these events, a number of European countries imposed 
 exchange controls on inflows or outflows of funds and this served as a brake on 
 expansion of foreign branch activities in 1972. The branches found it difficult to 
 bud to prime customers — subsidiaries of U.S. multinational corporations as well 
 as other multinational firms in developed countries — because of the exchange 
 controls and began to lend to less developed countries and to public and quasi- 
 public institutions in Italy and the United Kingdom — the two developed coun- 
 tries coping with chronic capital outflows. 
 
 In 1972 as in 1970, expectations developed that the dollar again would be de- 
 valued and speculation again created pressures that, made additional devaluation 
 a certainty. But. because of capital controls in European countries, the mecha- 
 nism this time was somewhat different. The foreign branches did not lend dollars 
 to speculators to be exchanged for foreign currencies by central banks. For- 
 eign branches of U.S. banks borrowed foreign currencies in the international 
 
 2 The Federal Reserve P.oard had also discouraged loans to U.S. residents other than 
 the parent banks. 
 
287 
 
 interbank market which was not covered by exchange controls and reloaned the 
 funds to speculators who could not acquire foreign currency assets directly from 
 domestic banks in European countries. They also swapped balances for custom- 
 ers unable to get funds out of domestic markets and for those unable to get funds 
 in by selling deposits to the domestic interbank market or acquiring deposits from 
 domestic banks. But the effect was the same as in 1971. European banks ended up 
 with dollars which they swapped at their central banks for their own currencies. 
 
 After the dollar was devalued and floating exchange rates adopted as a re- 
 sult of continuing speculation, 7 European countries put reserve requirements on 
 external liabilities of banks operating in their countries to curb speculative 
 activity through domestic and international interbank markets. 3 This had the 
 effect of greatly reducing the business of branches of U.S. banks in several of 
 those countries and forcing them to rely on the domestic interbank market for 
 funds. Since that time, there has been very little increase in the assets/liabilities 
 of American branches in continental Europe. 4 
 
 There was a virtual explosion of growth in U.S. bank activities overseas in 
 1973. Assets of branches grew 56% in that year while the number of U.S. banks' 
 investments in foreign banks, finance, and leasing affiliates rose to 1670 com- 
 panies in 102 countries from 416 companies in 74 countries in 1971. Some banks 
 were clearly overextended and events in the following year — problems in financ- 
 ing oil deficits and of recycling OPEC deposits, the after effects of a collapse 
 in property values in Great Britain and the crisis of confidence caused by the 
 failures of Franklin National Bank and Herstatt — hastened a wind-down in 
 international activity and slowed the growth rate of branch assets to 25% for 
 the year. 
 
 There was very little growth in international banking activities in 1975 due 
 to the world-wide recession and to the fact that dollar funds used by foreign 
 countries to make oil payments to OPEC countries were largely drawn from the 
 Eurodollar market but a lesser amount was returned to that market. OPEC 
 countries have deposited a substantial amount in the Eurodollar market, but 
 they have also invested heavily in domestic markets, including the United 
 States. Given the shrinkage in foreign funds available for new lending, the 
 foreign branches of U.S. banks relied heavily on their parent banks to supply 
 funds to expand their business in 1975. Branches borrowed $20 billion from U.S. 
 residents in 1975, $12 billion of it from their U.S. parents. This compares with 
 $5.8 billion borrowed from parent banks in 1974 and $1.6 billion in 1973. 
 
 Since loan demand was slow in the United States in 1975, it could be argued 
 that the actions of U.S. banks in supplying domestic funds to their overseas 
 branches for foreign lending did no harm to the U.S. economy and positively 
 benefited other countries struggling with the Charybdis of a rise in oil prices 
 and the Scylla of recession. This might be true but the argument would have 
 more weight if we knew to whom and for what those foreign loans were made. 
 There is also evidence for the argument that, in its efforts to attract funds back 
 into the country to counteract outflows to the branches and to improve the ex- 
 change rate of the dollar, the Federal Reserve kept interest rates at levels 
 which were sufficiently high to contribute to the lag in loan demand. 
 
 The 1975 outflows to the branches are described in other sections, 5 as are 
 other issues noted here. This outline of events is intended as a reference for the 
 more detailed discussions which follow. It is also intended to suggest the growing 
 importance of international banking and its impact on public policy. While 
 foreign activities of U.S. banks have no doubt aided the development of world 
 trade, these activities have also posed important problems for domestic mone- 
 tary policy and for the stability of the U.S. banking system. These problems will 
 be discussed in greater detail in the following sections. 
 
 3 These countries were Germany. Switzerland, France, the Netherlands. Belgium, Luxem- 
 bourg and Spnin. 
 
 * See table 5. Chanter 2. 
 
 As discussed in Cbapter 11, these restrictions were relaxed in January and February 
 1074 but reintroduced by Switzerland in November of that year. Despite tbe relaxation, 
 the German Bundesbank and Bank of France still retain discretionary controls in the form 
 of requirements that the use of external funds by domestic residents be approved. 
 
 5 See chapters 2 and 10. 
 
 25-605—78 20 
 
288 
 ii 
 
 Selected Excerpts Fbom "International Banking" 
 
 Like all banks, Eurocurrency banks bold reserves. But, for tbe most part, 
 they are exempt from mandatory reserves and tbis is very advantageous botb in 
 terms of profitability and flexibility. 
 
 Reserve requirements are not imposed on liabilities of brancbes in tbe United 
 Kingdom, Luxembourg, Panama, the Bahamas, Cayman Islands and Singapore. 
 Branches in these locations hold $124.3 billion of liabilities or 75% of total for- 
 eign branch liabilities. But in other countries as well, reserve requirements are 
 net imposed on liabilities derived from other banks (domestic or international) 
 or liabilities denominated in external currencies. The amount of domestic nonbank 
 deposits which the branches attract is insignificant as a percentage of their total 
 liabilities. Thus, the assertion by the Federal Reserve Board Governor Robert C. 
 Holland that Eurocurrency operations constitute "an unregulated and reserve- 
 free market in bank services" is quite accurate, and the result is a reduction in 
 control by monetary authorities over the level of Eurocurrency activity. 1 
 
 ******* 
 
 Very little information is available on the business of nonbank borrowers in 
 Eurocurrency markets. The information is available to bank examiners but, as of 
 year-end 1975, it was not reported on a regular basis as are data on the domestic 
 loans of large banks. This important gap reveals the weakness of the data on 
 international banking for economic analysis. It is difficult to determine from 
 generalized, aggregate information on branch activity whether these offices are 
 engaged in trade financing, financing overseas offices of U.S. based multinational 
 corporations, making development loans to developing nations, etc. 
 
 Foreign branches of U.S. banks report the location of branches where loans 
 are made but not the country of origin of the borrower, except in the case of 
 U.S. nationals. Borrowers and depositors are reported under the categories of 
 nonbank, governments and official institutions, the parent bank network and 
 other banks. 2 
 
 ******* 
 
 The salient characteristic of the Latin American branches is the extraordi- 
 narily high proportion of loans to private foreign borrowers — 87.6% in 1971 and 
 83.7% in 1973. This amount of lending involvement with the private market is 
 not matched, however, on the liability side. Private foreign depositors are not 
 important sources of funds. The most important source in both 1971 and 1973 
 was the intrabranch network of the parent banks which provided funds both 
 directly and indirectly to the Latin American branches, the major portion being 
 supplied indirectly ; through branches in Panama. Latin American branches de- 
 rived less than 1% of their liabilities from the international interbank market 
 in 1971 but by 1973, 32.5% of their liabilities came from that source. Most of this 
 represents borrowings by the Panama branches and reflects the growth of Panama 
 as an international financial center over this period. A very small share of Latin 
 American branch assets are claims on foreign banks or the parent branch net- 
 work. As noted, private foreigners receive the bulk of the loans, a little over $1 
 billion in 1973. Who these borrowers are and in which countries they operate is 
 not known. 3 
 
 ******* 
 
 Some of the reasons why U.S. banks have established subsidiaries and affiliates 
 in individual countries and areas and the form these investments have taken are 
 discussed below. 4 
 
 ******* 
 
 1 P. 816. 
 
 2 P. 817. 
 ■ P. 886. 
 
 * Pp. 8.-3G-S59. 
 
289 
 
 Latin America 
 
 The dominant position among foreign banks held by a few of the larger U.S. 
 banks in a number of Latin American countries reflects the fact that three banks — 
 Chase Manhattan Bank, First National City Bank and the First National Bank 
 of Boston — have been active in Latin America for several decades. They have 
 substantial branch networks as well as subsidiaries and affiliates engaged in a 
 wide range of financial and nonfinancial activities. In a few countries — Colombia, 
 Venezuela, Costa Rica and Equador — a number of other banks are also active and 
 again, there is a wide range of activities. Investment banks seem the dominant 
 institutional form but not enough information is available to describe the business 
 of these banks. 
 
 Clearly, U.S. banks play an important role in the economies of countries such 
 as Brazil and Argentina where they have both numerous branches and subsid- 
 iaries and in the economies of other Latin American countries as well. They have 
 introduced U.S. banking techniques — credit cards, for example — and provide a 
 wider and more sophisticated level of financial services than might otherwise be 
 available. However, considerations of either benefits or injuries accruing to other 
 economies through the activities of U.S. banks overseas are beyond the scope of 
 this study. The principal concern is the impact of these activities on the U.S. 
 economy and banking system. The pattern of investment in Panama and Mexico 
 are therefore of greater concern here — Panama because it is an unregulated bank- 
 ing market and tax haven and the concentration of merchant and investment 
 banks and finance companies reflect activities similar to those in other centers 
 such as London, Luxembourg and Hong Kong ; Mexico because, like Canada and 
 Australia, it is a major area for U.S. bank investment and one in which local 
 authorities prohibit commercial banking activity. Very little of the activity of 
 U.S. banks in Mexico is of a financial nature other than lease financing. Most of 
 the companies in Which they have holdings are engaged in manufacturing services 
 and consulting and real estate.* 
 
 * * * * * * * 
 
 The shift in foreign branch lending from the private to the public sector has 
 important implications for public policy. Questions relating to the likelihood of 
 payment has tended to shift the focus on the issue of country loans to the LDCs. 
 But the scale of bank credits to a few individual countries has been such as to 
 indicate the need for an appraisal of the appropriateness of direct lending to 
 governments. It may be that such an appraisal is already under way and is re- 
 flected in the drop in Eurocurrency bank credits and sharp increases in Eurobond 
 issues by developed countries in 1975. If so, it is a welcome development in that 
 the shift to the Eurobond market acts to distribute these debts to a larger num- 
 ber and wider range of creditors in the private market. The concentration of 
 country credits in banks had a potential for forcing a too close integration of 
 public and private interests in that, as the above quotation 5 indicates, U.S. gov- 
 ernment policy might be disproportionately shaped by the need to protect the 
 U.S. banking system from a major default by a given country. 8 
 
 ******* 
 
 * Pp. 856-859. 
 
 5 Though it was never articulated in so many words, most bankers must also have as- 
 sumed that loans lent to LDC governments would be underwritten by the official aid pro- 
 gram mes of the developed world. No Western government had any wish to see a debtor 
 country default, or to inflict a major loss on its own banking svstem. (Pierre Latour, 
 ''Euromarkets wait for LDCs' Credits to be Paid," Euromoney. October 1975). 
 
 «P. 902. 
 
290 
 
 OVERSEAS INVESTMENTS OF U.S. BANKS 7 
 
 Name of country and overseas Percent of Owned 
 
 affiliate or subsidiary Type of business U.S. bank parent ownership by- 
 
 Panama: 
 
 •Latin Mutual Investment Inc., R.D Bank of America. 
 
 *San Faustin S.A do. 
 
 •Financiera Bamerical S.A. ? Panama do 
 
 •Latin American Agribusiness Develop- Finance company Bank of America 
 
 ment Corp. (LAAD), Panama City. N.T. & S.A., San 
 
 Francisco. 
 
 •Desarrollo Industrial S.A., Panama City Development bank do.. 
 
 finance corp. 
 
 *Do Development bank. . Chase Manhattan Bank. 
 
 Club de Golf, Playa Coronado, Panama City.. Country club do. 
 
 •Manufacturer Latino Americano S.A. Holding compnay do 
 
 Panama. 
 
 •Compania Almacendora Interamericana, Warehousing.. do.. 
 
 S.A., Colon. 
 
 Latin American Agrobusiness Develop- Farming do... 
 
 ment Corp. 
 
 •Aircraft Leasing Company, S.A., Panama Leasing of aircraft... First National City 
 City. Bank. 
 
 Union de Bancos S.A. (Unibank), Panama Commercial bank First National Bank 
 
 City. of Louisville. 
 
 Latin American Agrobusiness Develop- Miscellaneous First National Bank 
 
 ment Corp. S.A., Panama City. banking. of Miami. 
 
 •Private Invest. Co. for Asia Investment First National Bank 
 
 company. in Dallas. 
 
 •Private Investment Company for Asia do Continental Illinois 
 
 S.A., Panama City. 
 
 •Do. do. National Shawmut 
 
 Bank. 
 
 •Financiers Intercomercial, S.A., Panama Finance company First National City 
 
 City. Bank, New York. 
 
 •Financiers Centroamericana de Desar- do Marine Midland Bank, 
 
 rollo, S.A., (FICENTRO), Panama City. New York. 
 
 Avon Shipping, Inc., Panama City Business credit do 
 
 •Servicos de Anuario Telefonico Inter- Produces telephone do 
 
 nacional S.A., Panama City. directories. 
 
 International Ship Finance (Panama), Inc.. Business credit do 
 
 Deltec Panamerica S.A Holding company, Pittsburgh National 
 
 merchant bank. Bank. 
 
 Union De Bancos, S.A., Panama. Mercantile Trust Co., 
 
 St. Louis. 
 
 •Servicos De Anuario Telefonico Inter- Northwestern National 
 
 nacional, S.A , Panama City. Bank of Minneapolis. 
 
 Banco International de Panama S.A Commercial bank Philadelphia National 
 
 Bank. 
 
 Primer Banco de Aberras, Panama Savings bank do 
 
 •Dibeag Finance Corp., Panama Finance and do 
 
 brokerage. 
 
 Security Pacific Bank (Panama) S.A., Merchant bank Security Pacific Na- 
 
 Panama. tional Bank. 
 
 Security Pacific Interamerican Bank S.A., do .do 
 
 Panama. 
 
 •Forrento de Inversion S.A. , Panama.. Holding company Wachovia... 
 
 Empressa Financieros Continental S.A., do Wells Fargo 
 
 Panama. 
 
 * Company acquired and held in 1971. 
 
 No asterisk denotes company acquired and held between 1971-1973. 
 
 Source: Federal Reserve Board. 
 
 Key to symbols relating to ownership: 
 
 A = Agreement Corporation. 
 
 B ■ Bank. 
 
 BHC = Bank Holding Company. 
 E = Edge Act Corporation. 
 S=Subsidiary. 
 
 SBHC, SE, etc. ^Subsidiary of Bank Holding Company, of Edge Act Corporation, etc. 
 SSBC, SSE = Subsidiary of a Subsidiary of a Bank Holding Company; 
 
 Subsidiary of a subsidiary of an Ed,- : e Corporation, etc. 
 
 16.7 
 
 SSE 
 
 .7 
 
 SSE 
 
 100 
 
 E 
 
 7 
 
 E 
 
 2.5 
 
 E 
 
 5 
 
 E 
 
 
 SSE 
 
 25 
 
 SE 
 
 43.3 
 
 SE 
 
 7.7 
 
 SE 
 
 100 
 
 E 
 
 10.5 
 
 B 
 
 13 
 
 E 
 
 . 8 
 
 E 
 
 .8 
 
 E 
 
 
 E 
 
 100 
 
 E 
 
 22.4 
 
 SE 
 
 100 
 
 SSE 
 
 12.7 
 
 SE 
 
 12.7 
 
 SE 
 
 1.7 
 
 E 
 
 11. 1 
 
 E 
 
 12.7 
 
 E 
 
 20 
 
 E 
 
 20 
 
 E 
 
 8.3 
 
 SE 
 
 100 
 
 SE 
 
 50 
 
 SE 
 
 4 
 
 E 
 
 25 
 
 SE 
 
 •Pp. 971, 972. 
 
291 
 
 in 
 
 WHAT MAKES AN OFFSHORE FINANCIAL CENTRE ? 1 
 
 Introduction 
 
 Why do banks undertaking international business proliferate in some centres 
 and not in others? 
 
 Absence of direct taxation is not necessarily a decisive factor in the choice of 
 a particular centre, although it does help. The Bahamas is a tax haven but the 
 figures show that it is much more important as a financial centre than Bermuda 
 or the Cayman Islands, which are just as attractive as pure tax havens. The most 
 important centre of all, the City of London, is located in one of the most highly 
 taxed countries of the world and Singapore and Hong Kong are not in any general 
 sense tax havens. The secrets of success are more subtle. 
 
 Exchange Control 
 
 Banks in an offshore financial centre earn their profits by borrowing from 
 depositors outside that centre and re-lending to other non-residents. If either leg 
 of the transaction is restricted in any way business will simply not develop. If 
 approval is obtained, but only after bureaucratic delays, it is highly unlikely that 
 banks will conduct business in the particular centre rather than elsewhere. Para- 
 doxical though it may seem at first, London, Singapore and the Bahamas all do 
 have exchange control restrictions, but they operate these restrictions liberally 
 and intelligently in such a way as to give virtually complete freedom to intermedi- 
 ary business in nondomestic currencies. As Table I shows, for many years the 
 sheer volume of banking business in non-sterling currencies in the UK has ex- 
 ceeded the volume of sterling business (which includes all the ordinary retail 
 banking business). These figures, however, do not tell the whole story as they 
 include a vast volume of interbank business clone on very low margins and argu- 
 ably significant double counting. Nevertheless, the figures are still very impressive. 
 
 Even though the traditional prominence of the sterling "bill on London" in 
 financing world trade has declined, the City has simply turned its skill to provid- 
 ing a similar service in currencies other than sterling, mostly the U.S. dollar. 
 The Bank of England, it has been said, has ably succeeded in preserving the City 
 of London's reputation for skill and integrity, even during periods when the 
 world might have doubted the existence of quality in those politically responsible 
 for the management of sterling and of the British economy. Of course the view 
 may be taken that restrictions on traditional business may have been a stimulus 
 to the development of new methods of carrying out international business. 
 
 Direct Taxation 
 
 Taxation is an important factor in the choice of a centre but not necessarily in 
 the ways that are commonly supposed. Much international business of the type we 
 are discussing is carried out for a very small margin, say a quarter per cent or 
 even less. This would apply, in particular, when a bank borrows on the interbank 
 market and re-lends to another bank. A tax on net profits, i.e. the quarter per cent 
 Inrn less expenses may not be a real deterrent although, other things being equal, 
 a group would prefer to handle its transactions in a low tax territory. For 
 instance an American bank with operations both in London and in the Bahamas 
 and which has business involving entirely different countries might write the 
 business in the Bahamas because a marginal one quarter per cent take there is 
 worth one quarter per cent to consolidated profits, while if taken in London the 
 transaction would be worth only one eighth per cent to such profits. On the other 
 hand, most of the banks would probably rather concentrate their business in 
 London where the skills are and they are encouraged to do so by the Bank of 
 England. However, the Inland Revenue, by insisting on a minimum taxable turn 
 on "in and out" business, loads the dice ever so slightly in favour of the Bahamas. 
 
 TV ith holding Taxes 
 
 Taxes on gross interest are a far more serious deterrent to offshore business. A 
 withholding tax. even at a modest rate of 5 per cent, would kill any offshore busi- 
 ness more surely than a 50 per cent tax on net profits. Banks in the international 
 market have both to borrow and to lend in competition with other banks. If they 
 
 1 Reprinted with permission from "Offshore Investment Centres," puhlished by the 
 Banker Research Unit of the Financial Times. Ltd., London, England, 1975. 
 
292 
 
 have to pay a 5 per cent withholding tax on the money borrowed (assuming, as is- 
 usually the case, that the lender is in a tax free jurisdiction and is, therefore, not 
 interested in credit relief for the withholding tax) they will have to pay corre- 
 spondingly more for their funds. If a lender can obtain 9 per cent, tax free, from 
 a bank in one country he will want 9.47 per cent gross (leaving him 9 per cent 
 net) from a borrower in a country imposing a 5 per cent withholding tax. The 
 intermediate bank therefore must lend at 9.47 per cent just to break even before 
 expenses : if the break-even point for other banks is 9 per cent it will simply not 
 be able to compete. The bank would only borrow on the international market if 
 domestic interest rates were sufficiently higher to justify the payment of the extra 
 tax. 
 
 Withholding taxes on interest are, as many governments have discovered, really 
 a tax on the domestic borrower rather than on the foreign lender. In the example 
 just given, the 5 per cent withholding tax means that internal interest rates must 
 be significantly higher than international rates before money is attracted into the 
 country, and a country imposing withholding taxes on international interest can 
 never hope to have its banks operate successfully in the international market. 
 The Hong Kong interest tax at 15 per cent would totally rule out the possibility 
 of Hong Kong banks borrowing outside the colony to re-lend outside Hong Kong, 
 if it were not for the "memorandum account" procedure explained in Chapter 4. 
 Singapore came to terms with this problem more specifically and rather earlier 
 by its special concessions to "Asia Currency Units" (ACU's). The development of 
 Beirut as an offshore centre has been inhibited by the 10 per cent withholding 
 tax imposed there. This is being abolished for banks operating in the 'free bank- 
 ing zone' (see Chapter 6) . 
 
 Reserve Ratios 
 
 An important factor affecting offshore banking business are reserve ratios 
 imposed by central banks or other monetary authorities. In a domestic market, 
 some form of reserve control, possibly a voluntary one, is usually regarded as 
 necessary. Domestic banks make their profit by borrowing short and lending 
 long — they accept demand or short-term deposits from the public and, relying 
 on the fact that only a proportion of the deposit is likely to be withdrawn at 
 any one time (one man's withdrawal is likely to be another man's deposit), tie 
 up a great deal of depositors' funds in less readily realisable investments such 
 as overdrafts. 
 
 It is usually necessary for a proportion of funds to be held in cash and a rather 
 larger proportion to be held in readily realisable assets such as government 
 securities. Sometimes these ratios are merely a reflection of bankers' prudence or 
 are maintained for traditional reasons. In other cases, they are enforced either 
 by law or by the sanctions open to a powerful central bank such as the Bank of 
 England. In some cases banks may be required to deposit a part of the deposits 
 they receive with a central bank either at no interest or at a below market rate 
 of interest. Alternatively, they may be required to hold otherwise unattractive 
 government securities against a proportion of their deposits. These regulations 
 are imposed and the requirements changed both to protect depositors by imposing 
 minimum standards of bank prudence, as well as to control the effective money 
 supply. 
 
 Applied to international interbank business, these ratios can have a dramatic 
 impact. Assume that a bank can borrow in the interbank market at 9 per cent. 
 If it has to put 10 per cent of this deposit with the central bank interest free, 
 for every $100 borrowed at an interest cost of 9 per cent only $90 is available for 
 lending to cover the interest cost. This means that the bank must lend on at 
 10 i>er cent just to break even. 
 
 If the bank had to hold 20 per cent of the deposits in a security in which it 
 earned interest of only 7 per cent, it would need to lend at 9% per cent : 
 
 Cost of borrowing $100 at 9% 
 
 Return on $20 at 7% 
 
 Return on $80 at 9y 2 % 
 
 Like the withholding tax, this is a tax on intermediation. A relatively small 
 penalty that might be acceptable in a domestic banking system will be sufficient 
 to rule out any oj>erations in the competitive low margin interbank market. Coun- 
 tries seeking to encourage offshore banking usually make special concessions that 
 are designed to operate in such a way that control over domestic money supply is- 
 
 $9. 00 
 1. 40 
 
 7. <;o 
 
293 
 
 maintained. This may actually be easier for a country imposing exchange control. 
 
 Other apparenty small penalties, such as deposit insurance premiums (Leba- 
 non) and stamp duties (which forces the international bond business '"off shore" 
 from Switzerland ) , can be sufficient to make international operations uncompe- 
 titive. These penalties may have to be removed if international operations are to 
 be encouraged. 
 
 Banking Regulations 
 
 The extent and degree of banking regulations may be an important factor in 
 determining the success of an offshore financial centre. A country which imposes 
 rigid regulations on its banks and prevents them from adapting rapidly to a 
 changing situation will make it difficult for a domestic bank to develop any ef- 
 fective or pioneering role in the international markets. It will also effectively 
 inhibit foreign banking groups from setting up operations in the country, except 
 to handle purely domestic business or to look after the local interests of their 
 multinational commercial and industrial customers. 
 
 On the other hand an under-regulated banking system will encourage the un- 
 sound, the imprudent and the plain crooked, and by lowering the general tone 
 of the place will discourage the growth of genuine business. An intelligent and 
 flexible central bank, banking commissioner or monetary authority that reacts 
 quickly to the requirements of genuine business, but leans hard on those which 
 overtrade or whose business practices get out of line, can exercise effective control 
 without inhibiting international business. 
 
 The published statistics of the Hong Kong banking system show what seem 
 to be alarming fluctuations in the ratios between aggregate bank assets and 
 deposit liabilities. In fact the figures of individual banks are closely watched, 
 although not of course published. The domestic banks are expected to maintain 
 their ratios. The statistics are distorted by the activities of the big international 
 banks. The fact that, at any one point in time, Hong Kong overdrafts of a bank 
 may represent 300 per cent of their Hong Kong deposits is totally irrelevant to 
 the bank's overall soundness and is rightly ignored by the Banking Commissioner. 
 
 Restrictions On Foreign Owned Banks 
 
 A country may be tempted to create all the conditions described above, for 
 successful international operations and then try to ensure that only domestic 
 banks should benefit. They may restrict the entry of foreign owned banks, or 
 foreign participation in domestic banks. Such a policy would enable local banks 
 to join in the market perhaps without the expense of foreign offices, but it would 
 not attract genuine international business. 
 
 Other Factois 
 
 Other factors that are important for the development of an offshore centre 
 are good communications and the availability of skilled staff. The inefficiency 
 of telecommunications has. to some extent, inhibited the growth of business 
 in Beirut. Banks in the Bahamas have difficulty in getting work permits for ex- 
 patriate staff, thereby limiting the growth of international activities. Language 
 is also an important factor. In practice, much international banking business is 
 done in English — the availability of English speaking staff, therefore, tends 
 to be important. 
 
 In what is largely a telex market, physical proximity may be relatively un- 
 important : a geographically remote centre may be successful. However, being 
 in a different time zone from the rest of the market can pose certain problems. 
 
 Finally there is the general climate of opinion. The government policies of a 
 country must appear to be generally favourable towards business, and must 
 not interfere unduly with the banking and financial sector. 
 
 IV 
 
 PANAMA * 
 
 Introduction 
 
 Between North and South America lies probably the most important bank- 
 ing centre of Latin America, the Republic of Panama, with an estimated popu- 
 lation of 1.5 million. 
 
 Panama has developed over the past few years into an important interna- 
 tional banking centre. The causes of development have been diverse. Some have 
 been in existence for several decades, while the more recent ones are attractive 
 
 1 Section from Chapter V, "Offshore Investment Centres. 
 
294 
 
 incentives offered to foreign banks by the Government. The Government has 
 realised that there is no possibility of fully exploiting the country's potential 
 without the close cooperation of financiers and an active domestic private sector. 
 
 Panama's telephone, telegraph and mail services network are the best in 
 Latin America (in 1968 international telephone communication system through 
 satellite was installed.) There are excellent transport facilities available by air. 
 sea or through the Inter-American Highway. The international airport, located 
 about !."> miles from the city of Panama, is served by 14 foreign and 4 Pana- 
 manian airlines. The country has modern port facilities for ocean going ships 
 and the internal highway system is adequate, with many new motorways under 
 construction. 
 
 There is no central bank in Panama and a total absence of controls on capital. 
 The U.S. dollar circulates freely as legal tender. Taxation is strictly territorial. 
 All these factors, together with the fact that unnumbered or coded accounts 
 exist and secrecy and protection is afforded to depositors, make Panama an 
 attractive centre for offshore operations. 
 
 Offshore companies are not subject to any governmental supervision or tax. 
 Nor are they required to file any documents once they have been set up, therefore 
 no statistics are available as to the number of corporations organised for off- 
 shore business. It has been estimated that some 40,000 companies have been 
 registered in Panama. Corporations and other legal entities may be set up in 
 about 5-10 days and immigration for investors and employees is almost un- 
 restricted. 
 
 Panama has locally and internationally trained lawyers, who provide fast and 
 competent service. Most of the large international auditing firms are locally 
 established. Offices of international fund sales organizations as well as several 
 international stock broking firms are also established in Panama. 
 
 A number of management companies offer specialized services to foreign based 
 corporations, including trust, consulting, administrative, accounting and clerical 
 services. 
 
 The banking boom in Panama has helped to import advanced administrative 
 technology. Panamanians who have been trained in Panama and abroad by for- 
 eign banks have subsequently joined and reinforced the government's economic 
 team. On a per capita basis, Panama has the largest banking facilities in Latin 
 America. 
 
 In the face of the task of finding funds to develop the potential of the country. 
 Panama has been able to attract large international banking and financial in- 
 stitutions to provide credits for that purpose. The advantages that both foreign 
 bankers and Panamanians reap out of the present arrangement provide the best 
 guarantee that Panama will continue to develop as a financial centre and a mar- 
 ket place for Latin America. 
 
 There has been some controversy of late as to whether Panama's recent in- 
 flation is attributable to the easy availability of credit. Credit in Panama has 
 not been as tight as in many parts of the world and because of the country's de- 
 pendence on international trade, most analysts agree that the major blame for 
 inflation must be apportioned to external factors. Any increase in the internal 
 supply of money tends to be reflected in an increase in imports, which in turn 
 stimulates inflation. The government, however, appears to have no intention of 
 limiting imports or of restricting credit by more than what market conditions 
 determine : in other words it fears recession more than inflation. 
 
 Control and Supervision of the Banking System 
 
 Attempts by the Government, to curb the freedom of offshore banks have now 
 been abandoned and the architects of Panama's economic policy agree that the 
 banking boom is a good thing. 
 
 Hanking freedom, however, does not involve a free for all between established 
 banks and the pirate institutions. The growth of banking has taken place pre- 
 cisely because the Banking Reform Law eliminated the "pirate" or "paper" banks 
 and for the first time gave respectability to financing in Panama. 
 
 The Banco Nationale de Panama, established in 1904, now with a capital of 
 Balboa 14m, acts as a financial agent of the Government of Panama. 
 
 The banking system in Panama is principally governed by Cabinet Decree No. 
 238 Of July 2. 1070 (the Banking Law), "whereby the Banking System is Re- 
 formed and the National Banking Commission is created." 
 
295 
 
 The National Banking Commission was set up by Article 3 and is attached to 
 the Ministry of Finance and Treasury. 
 
 The main objectives of the Commission are : to maintain the solidity and 
 efficiency of the banking system, to promote monetary and credit conditions for 
 the stability and sustained growth of the national economy and to strengthen and 
 promote conditions proper for the development of Panama as an international 
 financial centre (Article 4). 
 
 The National Banking Commission is comprised of seven members : the 
 Minister of Finance and Treasury, the ex-officio President, The General Manager 
 of the National Bank of Panama, the General Director of Planning and Ad- 
 ministration of the Presidency ex-officio, three representatives of the banks who 
 must be Panamanian citizens domiciled in the Republic nominated by the Pan- 
 ama Banking Association and accepted by the Executive Organ ; and a member 
 named by the Executive Organ who must not be a bank officer. The Head of the 
 Economic Advisory Office of the Ministry of Finance and Treasury acts as Sec- 
 retary of the Commission and attends meetings. The Commissioners, together 
 with their respective alternates, are named for a period of 3 years with an ad- 
 honorem character. Decisions of the Commission will be adopted by absolute 
 majority, except in those cases which are specially covered by the above or other 
 Cabinet Decree. 
 
 The Commission is empowered to issue and to withdraw bank licenses. 
 
 The Commission regulates the credit system by setting the statutory reserve 
 and liquidity requirements. 
 
 All banks in Panama have to maintain assets equivalent to a percentage of its 
 local deposits which has been set at 85 percent. The definition of the Capital 
 Reserve is that the paid-in capital or assigned capital of a bank shall at no time 
 be less than 5 percent of its productive assets (Article 31). This Article was 
 amended earlier this year in order to improve the domestic liquidity situation. 
 The Capital Reserve requirement relating to local loans is now 5 percent for up 
 to $30m. Between $30m and $45m it is 4y 2 percent, and for above $45m it is 4 
 percent. 
 
 The non-mortgage banks which operate in the country and receive savings de- 
 posits are obliged to invest a minimum of 50 per cent of such deposit* in mortgage 
 loans on real estate located in Panama for terms of not less than 5 years; or in 
 notes, certificates or bonds which pay interest issued by mortgage banks, which 
 operate in Panama. Banks are prohibited from investing their savings deposits in 
 their own notes, certificates or bonds. 
 
 Every bank, in order to maintain its licence, must be beneficiary to a conHngi nt 
 credit conceded by a foreign bank, or by its own head office in the case of branches 
 of foreign banks. The contingent credit should be in U.S. dollars and not less 
 than 10 per cent of the total of its productive assets. The terms and conditions 
 of this credit are established by the Commission and when, for any reason, a bank 
 cannot obtain or renew the contingent credit the Commission is empowered to 
 negotiate with and on behalf of that bank and arrange for a special facility. The 
 Commission is also authorized to help out banks of the "National Banking Sys- 
 tem" in problems of liquidity created by sudden withdrawals of deposits by 
 granting special short-term credits drawn on the contingent reserves of the Na- 
 tional Banking System. Before being entitled to receive such special credit the 
 affected bank should exhaust its own contingent credit. 
 
 The legal reserve requirement, consisting of cash, must be between 5 and 25 
 per cent of the total sum of the bank's local deposits (Article 36). This legal re- 
 serve requirement was set at 12 per cent for sight deposits and 6 per cent for 
 term deposits, and the minimum percentage of such reserve should consist of 30 
 per cent of money of legal tender in Panama. The excess may consist of sight de- 
 posits in the National Bank of Panama or National Treasury Notes, which do 
 not earn interest greater than 3 per cent annually with maturity dates not longer 
 than 90 days. The legal reserve requirement is uniform for all banks but the Com- 
 mission may fix different reserve requirements for different classes of deposits. 
 Banks must furnish the Commission with reports in a form and with a frequency 
 which indicates the proper compliance with the above provisions. 
 
 The liquidity requirement, i.e. the minimum balance of liquid assets to the 
 gross total of the deposits of a bank, is set at 10 per cent for mortgage banks and 
 30 per cent for all other banks. Credits or deposits received from bead office, 
 branch, subsidiary or affiliate from abroad is excluded from the computation of 
 total gross deposits for the purpose of calculating the liquidity ratio. 
 
296 
 
 The Commission is authorised to set the maximum rate of interest which, 
 directly or indirectly, may be collected by the banks on loans or local credit fa- 
 cilities which they grant. Banks may pay interest freely on foreign deposits and 
 on local time deposits, however, a minimum of 1 per cent differential must always 
 be maintained between these deposits and the rate that mortgage hanks may pay 
 on local savings accounts. Interest may not be paid on local sight deposits. 
 
 The Commission is authorised to set the maximum rate of interest which, 
 will be published and circulated in the local press. 
 
 Banks must file full audited financial statements with the Commission which 
 will be published and circulated in the local press. 
 
 Banks are prohibited from granting, to any individual or entity, loans or credit 
 facilities or guarantees in excess of 5 per cent of their deposits, capital or re- 
 serves unless it is fully backed by acceptable collateral or guarantee, or if the 
 Commission specially authorises it, or if it represents loans to the State or to 
 National entities. 
 
 Banks are prohibited from granting or obtaining loans or credit facilities with 
 the guarantee of their own shares. They are also prohibited from granting loans 
 or credit facilities, without guarantee, which exceed 15 percent of their capital 
 or capital reserve, in favour of their directors, or to any juridical entry, when 
 the loan is guaranteed by the directors or to any entity or association of persons 
 in which the bank or any of its directors or officers possess, individually or jointly, 
 a majority interest. Banks are not allowed to acquire or to possess shares or par- 
 ticipations on their own account in any other kind of enterprises, except in trusts, 
 to the extent of more than 25 per cent of their capital reserve. 
 
 Banks are prohibited from buying, acquiring or renting real estate for their 
 account, except for their own purposes, or for special housing or development 
 projects or with prior authorisation from the Commission. 
 
 Participations, shares or real estate, which the bank acquires while collecting 
 debts must be liquidated at the first opportunity consistent with the economic 
 interest of the bank in the judgment of the Commission, which may establish 
 terms for this purpose. 
 
 All banks are required to submit the following statements to the Commission : 
 (a) Before the 20th of each month, the assets and liabilities of its estab- 
 lishment in Panama at the close of its operations on the last working day 
 of the previous month. 
 
 (6) An analysis of the credit facilities and other assets in the possession 
 of its establishments in Panama at the close of operations of each quarter. 
 
 These reports are confidential and the Commission may only publish consoli- 
 dated data with overall figures. According to Article 64 "at least every 2 years 
 the Commission should make one or more inspections of each bank, to determine 
 that its financial position is solvent and within the course of its operations it has 
 complied with the provisions of this Cabinet Decree. Such inspections will cover 
 establishments and enterprises in Panama in which the banks may have majority 
 participation or actual control. The total cost of the inspection and its incidental 
 expenses will be paid by the bank." 
 
 The Banldng Sector 
 
 Banking business, according to Cabinet Decree No. 238 of July 1970. is defined 
 as "principally the operation of attracting financial resources from the public by 
 means of accepting deposits of money payable on demand, or on time, or by any 
 Other means authorised by law in effect; and the utilisation, for account and risk 
 of the bank, of such resources for loans, investments or any other operation au- 
 thorised by law or banking practice." Banks are defined as all juridical entities 
 Which transact banking business, except savings and loan associations. 
 
 With the exception of official banks, no one may transact banking business 
 without having first obtained authorisation from the National Banking Commis- 
 sion t hrough the issuance of a licence. 
 
 Under the 1070 law banks can be granted three different licences: a general 
 licence enable banks to operate inside Panama and abroad with a minimum 
 paid-up capital requirement of $lm ; the international licence is exclusively for 
 offshore operations requiring only $250,000 capital ; and the representation licence 
 is simply for banks with representative offices in Panma. 
 
 The licence to exercise banking business must be requested from the Commis- 
 sion, which must receive a copy of the Articles of Incorporation and byelaws 
 (accompanied with their legally authorised translations if they were drawn in a 
 foreign language) ; a copy of a current financial statement certified by a firm of 
 public accountants; a fee of $500 if the bank is established under Panamanian 
 law and $1,000 if the bank is established abroad. Considering the application the 
 
297 
 
 Commission may request for further information, which it deems necessary con- 
 cerning the institution and/or its officers. 
 
 The Commission usually issues a temporary licence valid for 90 days for the 
 purpose of starting operations after which the bank's name is inscribed into the 
 Public Registry to remain there pending the outcome of the licence application. 
 
 Banks established abroad must designate at least two Attornies-in-Fact, both 
 of whom should be residents of Panama, and one of whom at least must be a 
 Panamanian citizen. 
 
 The Commission will cancel the licence of any bank which ceases to exercise 
 banking business, or does not initiate operation within six months following the 
 granting of the licence. It may also, by resolution adopted by a majority vote of 
 5 of the Commissioners, cancel the licence of any bank when it does not fulfil any 
 of the provisions of the Cabinet Decree Xo. 238 of 1970. 
 
 No bank may open a new establishment without prior notification to the Com- 
 mission. Xo bank which exercises banking business in Panama may merge or con - 
 solidate, nor sell all or part of the assets which it possesses in Panama, when this 
 would be tantamount to a merger or consolidation, without prior authorisation of 
 the Commission. 
 
 All banks which are set up under Panamanian Law. and in which at least 75 
 per cent of the shares are owned by Panamanians or foreigners with more than 
 5 years of continuous residence in Panama, may initiate operations with a paid-up 
 capital of $250,000. This capital must be increased periodically to reach the mini- 
 mum capital (i.e. $lm) within a maximum period of 10 years, the increases being 
 840,000 per annum during the first 5 years and $75,000 per annum during the last. 
 5 years with the balance payable before the expiry of the term stipulated above. 
 
 Before the implementation of the Banking Law of 1970 there were 247 banks 
 registered in Panama. After the law, only 20 banks were left. Since then, of 
 course, different types of banks have come to Panama and the number of official 
 licence holders has now risen to nearly 70. 
 
 In March 1975, there were 44 banks holding general licences, including the two 
 government-owned banks, the Banco Xationale de Panama and the Caja de Ahor- 
 rcs ; 19 banks had international licences and 4 had representation licences while 
 3 banks were issued with temporary licences. There has been a rapid growth in 
 the establishment of banks during 1974; 12 new general licences were granted. 
 There are at present 15 banks from the U.S.A.. 8 local banks, 7 from Switzerland 
 and 6 from Colombia. Japan is exclusively represented by the Bank of Tokyo and 
 there is only one British bank with a general licence, the Bank of London and 
 South America, a subsidiary of Lloyds Bank International. Brazil is represented 
 by the Banco do Brasil and the Banco Real. There is a tendency for banks from 
 a certain country to establish in succession : when the Bank of Nova Scotia set up 
 a branch in November 1974 three other Canadian banks immediately applied for 
 licences and now have temporary permits. The top three Venezuelan banks opened 
 offices almost simultaneously last year. 
 
 Banks assets increased from $853. 6m in 1970 to $5.5bn in 1974. Deposits during 
 the same period rose from $752.1m to $5.1bn and, as offshore activities expanded, 
 the proportion of internal deposits fell from 45 per cent to 30.8 per cent, during 
 the same period. Loans have reflected a similar trend, growing from $665.2m to 
 $3.8bn with the share of internal loans falling from 83 per cent to 33.8 per cent. 
 
 In spite of this rapid development, Panama is still a small banking centre by 
 international standards and there is still much scope for growth. 
 
 Although Panama aspires to be a "Latin" dollar centre, until now it has largely 
 been a Latin American branch of the Eurodollar market, channelling money that 
 flows in and out of the continent. This dependence on Europe is diminishing, 
 however, and should be further reduced by a recent change in banking regulations 
 which allows inter-bank deposits to take place without a legal deposit being made 
 with the government. In other words, exclusively offshore banks can now deposit 
 funds with banks with general licenses at no cost to either. The fact that offshore 
 banks can now open subsidiaries is also encouraging new institutions to come to 
 Panama. 
 
 Profits have been doubling for most banks, each year. This together with the 
 total freedom of operations and the fact that only domestic profits are taxed, is 
 likely to attract many more international banking institutions to Panama. 
 
 With the presence of so many large foreign banks and offshore institutions it is 
 difficult to separate domestic from international banking. The majority of the 
 banks have both domestic and international operations and foreign banks were 
 initially drawn to Panama by the prospect of lending domestically. 
 
298 
 
 Domestic deposits have increased from $41.2m in 1970 to $706.7m in 1974 while 
 
 domestic loans have risen from $419.Sm to $1.3hn during: the same time. 
 
 Over the years the government has made numerous attempts to press the 
 hanking sector into investing in agriculture and industry. With the aid of the 
 Agricultural Development Bank the government is now more willing to step 
 in as direct guarantor of credit for agricultural development. Industry is less well 
 off as the government has been reluctant to grant new industries protection from 
 outside competition. 
 
 At the beginning of 1975, the government decided to impose a 7.5 percent sur- 
 charge on all commercial and personal loans in order to subsidise loans to local 
 industry and to agriculture. Through the National Banking Commission's Interest 
 Equalisation Fund loans are now made to industry and agriculture with a 3 per 
 cent and 4 percent discount, respectively. 
 
 The Wholesale Markets 
 
 Wholesale market operations, relative to the size of the capital market itself, 
 are quite considerable. There is an active primary and secondary market in 
 Eurobonds with a limited amount of trading in domestic, government and 
 treasury bonds. The main participants in the market are the international in- 
 stitutions represented in Panama. Since the new regulations, (mentioned above) 
 the inter-bank market has become more active and deposit broking quite sub- 
 stantial. Trading on the security market is still somewhat limited. Article 
 of the Banking Law of 1970 implicitly expresses the government's intention of 
 promoting the development of money and security markets in Panama. 
 
 Currency and Exchange Control 
 
 The official currency of Panama is the Balboa which under the Monetary Treaty 
 of 1904 with the U.S.A. is at par with the U.S. dollar and is freely convertible. 
 There is no Panamanian paper currency and the local currency is represented 
 only by limited amounts of silver Balboas and subsidiary coins and the com- 
 memorative 20 Balboa silver coin. The U.S. dollar is also legal tender in Panama 
 and it circulates freely as the accepted medium of exchange. Official payments 
 to the government are expressed in terms of Balboas although in effect are 
 paid in dollars. Exchange transactions by commercial banks are based mainly on 
 New York quotations. 
 
 There is no exchange control of any kind in Panama. Consequently, funds of 
 any denomination and in any amounts may move freely in and out of the coun- 
 try at any time and may be held by any domestic or foreign natural or legal 
 person. 
 
 Most import and export licenses are issued by the Price Regulation Office, a 
 semi-autonomous institution of the Panamanian Government. The Price Regu- 
 lations Office is responsible for the implementation of restrictions on import and 
 exports set by the appropriate Ministries according to the prevailing trade 
 agreements. 
 
 Cold 
 
 Residents may freely hold gold in any form at home and abroad and may 
 freely negotiate gold in any form with residents or non-residents at home and 
 abroad. Imports and exports of gold in any form other than jewellery carried a< 
 persona] effects are subject to license if made by residents other than the Mone- 
 tary Authorities. Import licenses are issued freely by the Ministry of Commer 
 and Industry and export licenses by the Ministry of Finance and Treasury. Ex- 
 ports of unmarked gold produced in Panama are subiect to an export duty of 
 1 percent ad valorem and exports of gold coins (other than U.S. coins which are 
 exempt ) to a duty of VL* percent. 
 
 Companies Law 
 
 The organisation and management of corporations is governed by Law Xo. 32 
 of 20th February 1927, which was based on the corporation law of the State of 
 Delaware of the U.S.A. 
 
 Corporations are the most popular form of business in Panama, and for off- 
 shore operations they are almost the exclusive choice of a legal entity. 
 
 Any two persons of any nationality or domicile may execute the Articles of 
 Incorporation before a Notary Public and then have it recorded at the Public 
 Registry Office. In the case of offshore companies the incorporation may l>e done 
 by nominees. 
 
299 
 
 Members of the Board of Directors must be at least three, regardless of their 
 nationality or place of residence. Meetings of the share holders or of the Board 
 of Directors may be held anywhere and the shareholders and directors may be 
 represented by proxy issued in a private or public document. The corporation 
 must however, keep a resident or statutory agent in Panama who must be either 
 an Attorney at Law or a lawyer. The records of the corporation can be kept 
 wherever the corporation decides and in any language, but a Spanish trans- 
 lation is required whenever any document is to be notarised. It is only neces- 
 sary to record any amendments to the Articles of Incorporation and changes in 
 the Board of Directors. A corporation is not required to adopt by laws nor to 
 record them in Panama if any are in fact adopted. 
 
 A corporation must have an authorised capital but there is no minimum or 
 maximum authorised, issued or paid-in capital required, nor is there any obliga- 
 tion to have the whole or part of the authorised capital actually paid in by any 
 particular time or deposited in Panama or anywhere else. Shares may be issued 
 in bearer or nominative forms and bearer shares must be fully paid up when 
 issued. The authorised capital may be stated in terms of a sum of money of any 
 denomination divided into a stated number of shares with a certain par value 
 each or a certain number of shares without par value or a combination of both. 
 Public subscription requirements need to be complied with only if the offering 
 is made in Panama and there is no requirement that the issuance of shares be 
 registered in Panama. The shareholders rights and the classes of shares are 
 laid down in the Articles of Incorporation and the shareholders may be of any 
 nationality. 
 
 There are no disclosure requirements and directors of record may be nom- 
 inees. There is no legal requirement for a corporation to have a registered 
 office and corporations not doing business in Panama are not required to follow 
 any particular accounting procedure. 
 
 The only notice which must be published is in the case of the dissolution of 
 the corporation, when a notice of dissolution must be published in a newspaper 
 in Panama. Otherwise if the corporation does not do any business in Panama 
 it is not required to file any financial statements, annual returns or any other 
 information with any public or private authority in Panama. 
 
 The cost of setting up a corporation in Panama is made up of $75 for the 
 stamped paper on which the Articles of Incorporation must be written, notarial 
 fees of $50, $25 for translation costs when the Articles of Incorporation are 
 executed in a language other than Spanish, registration duty based on the 
 authorised capital — $20 (minimum) on the first $10,000, $0.75 per $1,000 on 
 the next $90,000, $0.5 per $1,000 on the next $900,000 and $0.1 per $1,000 on 
 excess over $lm. This duty is payable once only on registration and on any 
 increase in the authorised capital. For the purpose of computing the registra- 
 tion duty, shares without par value are assessed at $20 each. The maximum 
 capital which carries the minimum registration duty therefore, is either $10,000 
 or 500 shares without par value. 
 
 Legal fees are approximately $450, and a lawyer or a firm of lawyers acting as 
 the resident agent of the corporation would normally charge $200 per annum. 
 
 Foreign Companies 
 
 Under Panamanian Law, a foreign company is governed by the Law of its 
 place of incorporation. A foreign company is required to register its Articles 
 of Incorporation, the resolution authorising its registration in Panama, copies 
 of the last financial statements, certification of the validity of its organisation 
 and the portion of the capital assigned to the Panama branch. Foreign corpora- 
 tions may transfer their corporate seat to Panama however, they will continue 
 to be governed by the Laws of their place of incorporation. The cost of register- 
 ing a foreign corporation in Panama or of changing its corporate seat to Panama 
 is approximately the same as setting up a corporation. 
 
 Other legal entities possible under Panamanian Law are: limited partner- 
 ship, commandite companies, individual limited proprietorship, civil partner- 
 ship, and, more rarely, participatory accounts. 
 
 Under Panamanian Law, a trust is a mandate whereby one person transfers 
 property to another for the benefit of another person or of himself. In order to 
 constitute a valid trust it is necessary that the beneficiaries be alive at the 
 time of the constitution. The trust must come into effect within 20 vears from 
 the time of its constitution and terminate on the death of the last beneficiary. 
 Discretionary trusts are not possible because the purpose of the trust must be 
 
300 
 
 specified. The activities of the trust are restricted only by the instrument 
 creating it. 
 
 Taxation 
 
 Income tax in Panama is levied only upon net income derived from opera- 
 tions within the territorial boundaries of the Republic. 
 
 The income tax law of Panama (Law No. 9 of December 1964, Article 694) 
 clearly defines the activities which are not subject to Panamanian tax : invoic- 
 ing and directing operations which are completed or effected abroad and the 
 distribution of dividends from income not produced within the territory of the 
 Republic of Panama. 
 
 Royalties, interest, dividends, commissions, profits from trading and other 
 income received from foreign sources and interest on time deposits placed with 
 local banks in Panama are not subject to Panamanian taxes. There is no with- 
 holding tax payable on the distribution of such income. 
 
 Panama has no double tax treaty with any other country ; therefore there is 
 no exchange of information. Where no tax is payable there is no obligation to 
 file returns or other information. 
 
 Corporations engaged in business within and outside Panama are subject to 
 income tax only on that proportion of their net income derived from business 
 carried on within the territory. 
 
 Individuals receiving remuneration from a Panama company are liable to 
 Panamanian tax only if they reside in Panama. 
 
 Corporate income tax rates are between 10 and 50 per cent and individual 
 income tax rates are between 2.5 and 56 per cent. 
 
 Real estate in Panama is subject to an annual property tax at a progressive 
 rate of 0.75-1.5 per cent. Profits obtained from the sale of Real estate are sub- 
 ject to capital gains tax. The taxable gain less the cost of improvements plus 
 an allowance of 7 per cent on the accumulative costs divided by the number of 
 years the property has been held, is added to the taxable income to determine 
 the applicable rate of tax. The rate is then applied to the full taxable gain to 
 determine the capital gains tax due on the sale of the property. 
 
 Inheritance tax is based on a progressive scale starting from 4 per cent with 
 a maximum of 33.75 per cent payable within one year from the death of the de- 
 ceased. Tax effects of inter vivos donation of properties is computed on the 
 basis of the scale applicable to inheritance tax. 
 
 A social security contribution of 5 per cent is paid by the employee and 7 
 per cent is paid by the employer. An education tax of 1.75 per cent is paid by 
 the employee and 0.25 per cent by the employer, and in both cases the employer 
 must withhold this tax. 
 
 A flat rate tax of 10 per cent is applicable on distributions made from income 
 arising within Panama. The company making the distribution must withhold 
 and pay this tax on behalf of the shareholder, who then does not include the 
 dividend as part of his taxable income. This tax does not apply to distribution 
 of income of foreign origin. 
 
 I! a company operating in Panama distributes, in a given year, less than 
 40 per cent of its profits arising in Panama, it must nevertheless pay a tax at the 
 flat rate of 10 per cent of 40 per cent of the profits for that year. If these profits 
 arc subsequently distributed :i credit will be allowed for the tax already paid. 
 
 Stamp duties are levied on contracts executed and performed in Panama and 
 on cheques and bills of exchange issued and payable in Panama, at an ad 
 valorem rate depending on the type of document or transaction. Contracts exe- 
 cuted in Panama to be performed elsewhere are exempted. 
 
 The distribution of retained earnings arising from operations in Panama pur- 
 suanl to liquidation is subject to capital gains tax according to the procedure 
 outlined above. 
 
 There is a business tax payable yearly at the flat rate of 0.5 per cent on the 
 net worth of the business with a maximum of $10,000. This tax does not apply 
 to companies operating in the Free Zone or to companies conducting offshore 
 operations. 
 
 The Colon Free Trade Zone 
 
 The Free Trade Zone was created by Law Xo. 18. 17th June 1018. located in 
 the city of Colon at the Atlantic entrance of the Pnnama Canal. 
 
 At present there are more than 800 companies established there, handling more 
 than $500m of shipment annually. 
 
301 
 
 Merchandise is received in bulk, duty free, subsequently being repacked, 
 labelled, assembled, manufactured and reshipped in smaller quantities to cus- 
 tomers in a wide area. Companies operating the Colon Free Zone do not require 
 a commercial licence. 
 
 Operations in the Colon Free Zone may be conducted through leasing land 
 from the Free Zone and constructing buildings. The user may lease warehouse 
 space owned by the Free Zone, or a service company can provide all the services 
 required, using public warehouse space. 
 
 Companies established in the Free Zone might have three types of income 
 subject to different income tax; (1) Income derived from triangular indent 
 sales when merchandise does not physically come into the Free Zone and only 
 the documentation is done by the Free Zone company, in which case the profit 
 is not subject to taxes. (2) Net income derived through re-exporting of the mer- 
 chandise to foreign countries is subject to Panama income taxes minus a 90 
 per cent discount. (3) Net income derived from sales to the Republic of Panama 
 is subject to full current Panama income tax. In all cases companies are pro- 
 hibited from retailing. 
 
 Companies carrying out both internal and external operations are required to 
 maintain separate accounting for both kinds of operation, like any other com- 
 pany in Panama. 
 
 The Canal Zone 
 
 The Canal Zone is a strip of land across the country connecting the Pacific with 
 the Atlantic oecan, use of which was granted in perpetuity to the U.S.A. under 
 a treaty which is now being re-negotiated. There are no commercial establish- 
 ments in the Canal Zone and residence in the area is restricted to members or 
 employees of the Armed Forces or to other employees of the Panama Canal 
 Company and services. The Canal Zone is regarded as U.S. territory and income 
 arising there is now liable to U.S. taxation. 
 
 Shipping 
 
 Ship Registration under the Panama Flag is widely used by international 
 shipping companies. This is due primarily to the very low registration taxes 
 as compared with other countries throughout the world. Registration tax is $1 per 
 net ton ; Government fee for registration of Bill of Sale is 204 per net ton which 
 is payable once only. The annual tax is 10^ per net ton. It is possible to have pro- 
 visional registration, permanent registration and registration of ships under 
 charter. Mortgages of vessels registered in Panama may be recorded after the 
 Bill of Sale or other evidence of the title has been recorded and they may be 
 executed anywhere. The Labour Laws concerning Panama Flag vessels are 
 liberal and income earned on international shipping activities are specifically and 
 expressly exempted from Panama income taxes. 
 
 o 
 
t 
 
 I