Foreign Relations of the United States, 1961–1963, Volume IX, Foreign Economic Policy

144. Memorandum From the Administrator of the Agency for International Development’s Executive Assistant (Funari) to the Administrator (Hamilton)⁰

Washington, June 23, 1962.

SUBJECT

• Summary of Meeting with White House Staff, June 23¹

Mr. Dungan opened the meeting by saying that he thought the session with the President on Thursday, June 21, was helpful.² However, he said that the President noted certain deficiencies in preparation for that meeting and that there were certain problems concerned with A.I.D.’s presentation. Dungan said, in his opinion, that it was unfortunate that facts and figures were not at fingertips when called for by the President. He indicated that the President was unhappy with the inability of A.I.D. to provide information on (a) the follow-up and implementation of loans and projects, and (b) the effect of these loans, grants and projects on balance of payments. Dungan stated that nearly all of the questions that the President might ask could have been anticipated and could be anticipated in future meetings.

Dungan further indicated that at the next meeting A.I.D. officers should be prepared to tell the President what can be done with the existing A.I.D. program to help the dollar and gold reserve positions.³ He indicated that the President is much concerned. For example, he said, was it necessary for the U.S. to provide for local costs, particularly in housing? Mr. Coffin replied that he could understand the President’s concern but was not sure that in the development aspect of A.I.D.’s program much improvement could be made vis-a-vis balance of payments problem.

Mr. Dungan was then called from the meeting.

Mr. Kaysen agreed that local currency costs were the big problem. But he believed that A.I.D. needed a schedule of what can be done on given amounts of money. He believed that a priority list with costs of each individual item should be prepared so that A.I.D. could present to the President a meaningful schedule of expenditures and what those expenditures would accomplish. At the previous meeting A.I.D. officers were not successful in convincing the President that A.I.D. was able to scrutinize the expenditures in relation to what they accomplished. He cited the Vietnamese matter as an example.

Mr. Janow⁴ vigorously protested. He stated that A.I.D. officers had strenuously objected to the use of A.I.D. funds for what were essentially military and political purposes. He stated that FE had contested DOD, CIA and State every step of the way; but that he had been overruled in every instance. Kaysen replied that perhaps A.I.D. had not stood up to the pressures and that, in any event, if there was a substantive issue involved here the President should have been informed about it prior to the time a decision was made by the Secretary of State or the Secretary of Defense. Mr. Janow replied that Mr. Forrestal⁵ of the White House had been informed, that A.I.D. had been successful in reducing the amount from $25 million to $10 million and that members of the White House staff had informed him that political and military considerations were of overriding importance.

Mr. Kaysen then made the point that A.I.D. does not have the internal procedures necessary to substantiate its case and has not, as a general rule, communicated that case effectively to the decision makers.

Mr. Hutchinson commented that in the conflict of military and political considerations on one hand and development considerations on the other, that A.I.D. would never win. Mr. Kaysen replied that A.I.D. must nonetheless make the effort and apprise the President prior to the time of a hard decision being made at Cabinet level.

Mr. Amory⁶ interjected at this point to say that he thought that the A.I.D. officers were correct in contending that DOD and State must also be made aware of the President’s concern over the balance-of-payments problem.

Mr. Kaysen went on to indicate that at any time A.I.D. funds are expended on programs or projects in which A.I.D. does not believe, the President should be informed. He intimated that the President is not always aware that A.I.D. funds are expended to meet commitments made by the Department of Defense and State. Kaysen then urged A.I.D. officers to use the White House staff to warn the President before the Secretary of State and the Secretary of Defense make decisions involving A.I.D. funds.

Mr. Gordon⁷ commented that there was disagreement in the White House staff on these matters and he believed that this presented a problem. Mr. Kaysen replied that these members of the White House staff generally in touch with specific areas could be expected to present the arguments and debate the issues before the President. However, he commented again that the essential problem was that A.I.D. did not have the internal procedures necessary to make clear its position and to inform the President of the effects on the balance-of-payments position of the commitments made for political and military consideration.

Mr. Coffin then commented that, if this is the information that is needed, the meeting on Thursday⁸ would be too soon. He stated that A.I.D. would have to set up an internal machinery to flag balance of payments problems on each outlay of funds. He instructed PRCS to meet with the Program Officers of each regional bureau to start work on this immediately. Mr. Gordon commented that it was difficult to estimate the effect on the balance of payments in the first instance of each outlay. In effect, A.I.D. would be telling the President, not only the effects on balance of payments, but whether to aid the country or not, which was essentially a policy matter rather than a procedural one. There followed a brief general discussion of the reply that was to be made to the President’s memo of June 22nd.⁹ Mr. Kaysen indicated that it was not intended that the President should act as a loan officer. However, he insisted that A.I.D. should be able to present a schedule that will tell the President what the effects of each loan, grant and agreement would be on the balance of payments position.

Mr. Coffin raised the matter of waivers of procurement. Mr. Waters¹⁰ commented that there was no standard, from a balance of payments viewpoint, by which one might judge effects of waivers of procurement.

Mr. Coffin then asked that the meeting with the President be postponed until after July 4th. Mr. Kaysen replied that he would attempt to get it for July 3rd and that most likely it could be postponed until after July 4th.¹¹

Mr. Kaysen departed from the meeting. Mr. Coffin then instructed Mr. Gordon to prepare the necessary materials in consultation and conjunction with the various regions. The presentation to the President would include balance of payments problems, internal controls, and some consideration of the general administrative problem implied in Mr. Kaysen’s request that the White House be informed prior to Cabinet level decisions.

John Funari¹²

0. Source: Washington National Records Center, RG 286, AID Administrator Files: FRC 65 A 481, White House, FY 1962. Official Use Only.
1. Another summary record of this June 23 meeting was prepared by Easum, undated. (Ibid.)
2. See footnote 1, Document 142.
3. In a memorandum to Secretary of the Treasury Dillon and AID Administrator Hamilton, June 20, President Kennedy stated:
   • "1. I would like in the future for all actions which affect our dollar drain or balance of payments to be brought to my attention before final decision is made.
   • "2. Before any loan stabilization or AID agreement is made I would like to have an indication of what effect it would make on our dollar position.” (Kennedy Library, Dillon Papers, Memoranda for the President, 5/62-6/62)
4. Seymour J. Janow, Assistant Administrator, Bureau for Far East, AID.
5. Michael V. Forrestal of the National Security Council Staff.
6. Robert Amory, International Division, Bureau of the Budget.
7. Lester Gordon, Deputy Director, Office of the Director for Program Review and Coordination Staff,AID.
8. June 28.
9. The reference should presumably be to the President’s June 20 memorandum; see footnote 3 above. For Hamilton’s response to this June 20 memorandum, see Document 12. For the President’s reactions to it, see footnote 3, Document 12.
10. Herbert J. Waters, Acting Assistant Administrator, Office of Material Resources, AID.
11. No record of the next meeting with the President, which took place on July 6, 11 a.m.-12:07 p.m., has been found. (Kennedy Library, President’s Appointment Books) In a memorandum to Hamilton, June 28, Dungan wrote that Hamilton should be prepared to discuss three topics at this meeting: interim reporting system on proposed AID commitments involving the expenditure of funds abroad, the AID internal machinery for evaluating proposals which involve commitments to spend funds overseas, and a review of country programs with special attention to Latin America. (Washington National Records Center, RG 286,AID Administrator Files: FRC 65 A 481, White House, FY 1962)
12. Printed from a copy that bears this typed signature.