152. Memorandum From the President’s Special Assistant (Rostow) to President Johnson1
Mr. President:
Fred Deming continues to report encouraging news from Paris on the sterling support operation.2 There is a general consensus on the need for an impressive package. The impression one gets is that the central bankers went to the brink and didn’t like what they saw.
The Group of Ten countries seem to be on board in support of a UK $1.4 billion IMF drawing or standby. We are looking into the possibilities of making it $2 billion.
Deming’s German and Italian counterparts are optimistic about their governments going along with us on a multilateral support operation. We should know soon whether it is nailed down. We do not yet know terms and amounts or what other countries are going to do.
If both parts work out right, the package should be between $2.4 and $3 billion—and possibly more.
Deming also sounded out each of the Group of Ten countries on holding their rates should sterling be de-valued. It now looks as if they all would stand firm. The French representative said they would hold “until they were hurt”.
The markets earlier this week were nervous and uncertain. But even with the announcement of the poor trade figures on Tuesday, the UK did not suffer serious exchange losses from support operations. The rumors of an additional support operation that broke in today’s press strengthened the rate.
- Source: Johnson Library, National Security File, Subject File, Balance of Payments, Vol. IV, January 1967 [2 of 2], Box 3. Secret; Sensitive. A handwritten note on the source text reads: “Rec’d 11:45 a.”↩
- For a British official’s account of the sterling crisis, including reports of some of Deming’s activities, see Alec Cairncross, The Wilson Years, pp. 243–249.↩