Lot 60 D 137 Box 1 (18358)
Minutes of the Twenty-fourth Meeting of the National Advisory Council on International Monetary and Financial Problems, Washington, May 6, 194660
| Present: | Secretary Fred M. Vinson (Chairman), Treasury Department |
| General George J. Richards, Visitor | |
| Col. Carl Pforzheimer, Visitor | |
| Mr. W. L. Clayton, State Department | |
| Mr. E. G. Collado, State Department | |
| Mr. George Luthringer, State Department | |
| Mr. Henry R. Labouisse, State Department | |
| Mr. H. Van B. Cleveland, State Department | |
| Mr. Victor M. Longstreet, State Department | |
| Lt. Col. C. J. Shields, Office of Foreign Liquidation Commissioner, State Department | |
| Secretary Henry A. Wallace, Commerce Department | |
| Mr. Herbert Parisius, Commerce Department | |
| Mr. Frederick Strauss, Commerce Department | |
| Mr. Frank Isenhart, Commerce Department | |
| Mr. Marriner S. Eccles, Board of Governors, Federal Reserve System | |
| Mr. J. Burke Knapp, Board of Governors, Federal Reserve System | |
| Mr. Robert Triffin, Board of Governors, Federal Reserve System | |
| Mr. Wm. McC. Martin, Jr., Export-Import Bank | |
| Mr. August Maffry, Export-Import Bank | |
| Mr. Rifat Tirana, Export-Import Bank | |
| Mr. E. M. Bernstein, Treasury Department | |
| Mr. Harold Glasser, Treasury Department | |
| Mr. Andrew Kamarck, Treasury Department | |
| Mr. Frank Coe (Secretary), Treasury Department | |
| Mr. Allan J. Fisher (Assistant Secretary), Treasury Department |
1. Reconstruction Loan to Russia
[Here follows a discussion of a proposed loan to the Soviet Union.]
2. Proposed Export-Import Bank Credit to France
Secretary Wallace said that the report of the Technical Committee was excellent and the Chairman agreed.
Mr. Clayton’s motion on the French loan at the preceding meeting was read: “Mr. Clayton moved that the National Advisory Council approve consideration by the Export-Import Bank of a loan of $650 million to France on terms and conditions to be worked out by the Bank subject to a commitment that the French would be asked to make regarding commercial policy and other relevant matters now under discussion.” Mr. Clayton suggested that the motion be changed to read “subject to a commitment by the French.”
Secretary Wallace said the motion was satisfactory provided the reasons were contained in the report of the Technical Committee and were not based on other considerations. Mr. Clayton said that he would consider the report as sufficient upon which to make a motion of this kind. The Chairman said that there might be other reasons. Secretary Wallace said he would then want it recorded that the Commerce Department approved for economic and not for political reasons. The Chairman wanted to go on record that he favored for good and sufficient reasons economic and political.
Result of French Election.—Mr. Clayton said that since the Committee had discussed the French elections he might report that the State Department was surprised the constitution had not been approved. The result of the election was interpreted by the political officers as being a slight move to the right but they did not think it was a major move. He said that since we would want to make sure that in making a loan to the present Provisional Government of France that we are dealing with a duly constituted government, he had had legal advice and been assured that there is no question about that point. The rejection of the constitution merely means that the election of June 2 will not be for members of the Chamber of Deputies but will be for the election of members of an Assembly which will write a new constitution but at the same time will carry on the legislative functions of the French Government. There is no question of the authority of the French Government to make a contract of the kind contemplated in the loan negotiations.
Political Considerations.—Mr. Eccles said he believed that this loan should be considered on economic grounds. This Government is interested in political outcomes in other countries but he would dislike to have the Government accused of undertaking to buy a foreign election. He did not want a record which was susceptible of this [Page 442] interpretation. He pointed out that we are very critical of the Russians for influencing elections.
The Chairman emphasized that there are political considerations in every loan and referred to the Russian loan. Mr. Eccles thought that in making loans we are concerned with getting the countries back on their feet rather than as to whether the government is socialist, communistic or a capitalistic democracy. We made a loan to Poland because we wanted to help Poland distribute coal. The Chairman referred to the condition attached to the latter loan that Poland have an election and pointed out that it is not a question of exerting pressure to change ideologies.
Secretary Wallace said it would be unfortunate if word got out that we had in mind major political considerations in making loans.
The Chairman said the political question came up in connection with the time we would conclude the loan in relation to the June 2 elections. If the loan is negotiated in the very near future there is no doubt the conclusion will be drawn that it was made for that purpose. Secretary Wallace said we had sufficient economic reasons for concluding this loan. If the Export-Import Bank does not think so we should go slowly.
The Chairman pointed out that the Chinese loan of $500 million was a political loan and had been made on the basis of General Marshall’s plea. Secretary Wallace said that if he had been present he would have voted against the loan.
Mr. Eccles added that there were many strings attached to the Chinese loan. In France conditions are orderly but the question is whether the Constitution and Assembly to be chosen would be right, left or middle. It would be unfortunate to make a loan to influence an election in a particular direction. Also we can have no assurance that a loan made before an election will have the effect we want. The French people might resent the fact that we were trying to influence the election. We have found that to be true in Latin America.
The Chairman pointed out that the State Department had raised the political matter the previous week. Mr. Clayton agreed but said there was sufficient basis for acting without it. The Chairman inquired whether there was any difference in the position of the State Department today as compared with the previous Thursday. Mr. Clayton replied that there was none whatever. The Chairman stated that he felt he must depend on the State Department for political guidance and advice.
Mr. Eccles asked whether, assuming the constitution had been adopted and the loan had not been completed before June 2nd elections and at the elections the Socialists and Communists had a majority, [Page 443] we would refuse to give financial aid to the French Government if that government were willing to carry through the same kind of a program as here presented.
Mr. Clayton said that the answer to Mr. Eccles’ question is that we did make the Polish loan and it is hardly conceivable that France would go further to the left than Poland. He had great difficulty in separating political from economic considerations in thinking about Europe. If he thought that country X was in danger of economic and social chaos he would favor a loan if it were reasonable in amount and there were a reasonable chance of repayment. Assuming that we had not made the loan before the election, Mr. Clayton thought that he would favor going through with it, no matter how the election turned out, so long as the elected French government would respect its obligations.
Secretary Wallace inquired whether Mr. Clayton would favor an economicable [economically?] “bad” loan for the purpose of “stabilizing” conditions. Mr. Clayton said no emphatically. Secretary Wallace concluded that there was no fundamental disagreement between them. He proposed that political references be deleted from the Council’s record of these discussions. Mr. Clayton said that was agreeable.
Mr. Martin said he was agreeable but noted that his position had concerned the short time being allowed the Bank for consideration rather than the political aspects.
Mr. Eccles observed that, aside from the questions of the election, immediate action was not required. Mr. Clayton argued that prompt action was necessary. We had been talking about this problem for six weeks. In the final analysis decision would be made on the basis of the overall picture and not on this detail or that. He admitted that the fiscal situation bothered him but he had decided it will get worse if we do not help. If we do help them we can hope they will be able to build up their economy and balance the budget.
Gold and Dollar Reserve.—Mr. Eccles referred to the billion dollars of gold and wondered whether it were necessary. He pointed out that the French will have a further reserve of $400 million if the stabilization fund is set up as a reserve. He thought the $1.4 billion was a very large reserve for the French to carry and asked what guarantee there was, if we advanced the credit, that they will not use a substantial part of the reserve in addition to the credit.
Mr. Clayton thought the French needed this reserve and will need it more as time goes on since they are expanding their note issue. He agreed that we may want some kind of condition that it would not sink below a certain figure. Mr. Bernstein commented that the [Page 444] French have the tradition of holding large amounts of gold. However, not much weight was attached to that factor by the Technical Committee. They considered that the whole program was being financed very tightly and was dependent on credits from the Export-Import Bank, the World Bank and other countries. It was also based on the assumption that there would not be any large rise in prices. There is no leeway in any part of the report except one—in some cases they may not be able to buy as much as they want. Every other factor indicates they will have too little rather than too much. There should be some leeway.
Mr. Eccles thought that the proper provision would be that before they actually used the reserve they should get our approval or at least consult with us. Mr. Clayton thought the French might like a provision of this kind because if published it would give confidence to the French people. The Chairman pointed out that this might raise the question of sovereignty as it had in the case of the British.
French Goal Requirements.—The Chairman referred to the coal situation and pointed out that the French have to obtain their coal requirements from the Ruhr, from us, or from somewhere else. If they get it from the United States it costs $10 a ton additional. He suggested the possibility that more coal might be obtained from the Ruhr which would reduce the French need for dollars. It was pointed out that the coal program called for 500,000 tons a month from the United States until the end of the year (3½ million tons or the equivalent of $35 million) and then that all would be from foreign sources, and that it would be necessary for France to obtain 20 million additional tons. Mr. Clayton said that the French might get some coal from Poland but most of it would have to come from the Ruhr.
Amount of Loan.—Mr. Eccles raised the question of a loan of $500 million as compared with the recommended amount of $650 million. Even if the Bank got the $1¼ billion of extra lending authority,61 a loan of $650 million would create a tight situation in view of the $400 million the Export-Import Bank wants for exporters.
Mr. Martin said that, assuming the French need $650 million, the correct approach would be to advance a portion of it now and make the balance subject to the approval by Congress of the additional $1¼ billion.
[Here follows a discussion regarding other activities of the Export-Import Bank.]
Other Forms of Assistance to the French.—The Chairman asked for the sum of the other amounts made available to the French. Mr. [Page 445] Collado said that exclusive of surplus the additional assistance would amount to $350 million. Surplus would run from $500 to $600 million depending upon the timing. Mr. Maffry inquired whether the discussion meant that loan negotiations would be concluded before it was known what part of French needs would be met out of the surplus. Mr. Collado indicated Mr. McCabe wanted both settled together. Mr. Bernstein pointed out that a $200 million figure for surplus which had been discussed with the French was not a bulk proposition but was for a selected list of items from France and the United States. Mr. Clayton said that we are insisting that the French handle the matter on a bulk basis including everything which is in France.
The Chairman commented that we have gone a long distance with respect to other methods of settlement which would have the same effect as providing dollars. Mr. Eccles said that the publicity should indicate that the total amount of assistance provided is closer to $2 billion than to $500 million.
Conversion of Foreign Exchange Resources.—Mr. Eccles asked whether the French could not accelerate their conversion of foreign exchange resources. Mr. Bernstein said that with the help of the British they have done very well in liquidating their assets. Mr. Eccles asked whether they might not accelerate their conversion to provide for the extra $150 million if we only provided $500 million. Mr. Bernstein doubted this.
Urgency of Loan.—Mr. Clayton said that England and France form the key to the whole Western European situation. If we can bring about a condition of economic and social stability in those two countries we think there is a good chance of saving Western Europe from a collapse and the economic and social chaos which might otherwise easily occur. That was the reason they attached so much importance to making a loan somewhat above the minimum figure. He was afraid that $500 million would not be enough.
Mr. Clayton added that the State Department felt there was urgent need to go ahead on this program and make our other actions and programs fit it. State would be willing to assume full responsibility. They would fight very earnestly for the increase of $1¼ billion as soon as circumstances permitted. If something happened and we did not get the additional money there would be serious difficulties with several countries but he was going into this with open eyes. The Chairman asked whether State felt that it was more important to give the additional $150 million to France than to spread it over other demands. Mr. Clayton said they did.
Mr. Eccles asked Mr. Martin whether the question in his mind was that of the amount or of time for consideration. Mr. Martin said [Page 446] that the resources of the Export-Import Bank are not sufficient to meet this program at the present time. Mr. Eccles said that he would like to support the $650 million but was also in sympathy with the Export-Import Bank’s position. However, he thought the $150 million might cost us more in good relations with the French than it would help others.
The Chairman called for a vote on the motion. Mr. Eccles said he would prefer to vote for $500 million but since the State Department was willing to take the responsibility for the problems which it creates he was willing to go along on the $650 million. Mr. Parisius said Commerce would support the $650 million. Secretary Wallace considered the $650 million was the minimum amount which could get a recovery program under way in France. Also he was skeptical as to when the World Bank would get under way. Mr. Clayton voted for the motion as did the Chairman. Mr. Martin dissented. The motion was carried.
Action.
The following action was taken:
The National Advisory Council approves consideration by the Export-Import Bank of a loan of $650 million to France on terms and conditions to be worked out by the Bank subject to a commitment by the French regarding commercial policy and other relevant matters under discussion.
3. Settlement of French War Accounts
Consideration was begun of the memorandum on settlement of war accounts with France, which presented the present status of the French Civilian Lend-Lease account and several possible adjustments of that account designed to relieve the critical current French balance of payments position. After some discussion it was decided to defer decision until the next meeting to be held at 3:30, Tuesday, May 7, 1946.