Department of State National Advisory Council Files

Minutes of the Tenth Meeting of the National Advisory Council, Washington, January 29, 1946

[Here follows a discussion of a proposed loan to Poland.]

2. Foreign Lending Program. The Chairman referred to the documents before the Council (NAC Documents Nos. 4332 and 44) and invited discussion of the country’s foreign lending program. It was generally agreed that a lending program such as that contemplated in the documents referred to would inevitably arouse much opposition. This, it was thought, would take the form of specific opposition to the proposed U.S.–U.K. loan and beyond that, general opposition to the over-all program.

Mr. Clayton remarked that in his opinion the most intelligent criticisms that could be made against the proposed U.K. loan were (1) that it will have inflationary effects on domestic prices and (2) that it will set a precedent for loans to other countries. As an answer to these anticipated criticisms, he suggested that the Council consider filing an immediate report with the President and the Congress on the over-all program.

At Mr. Clayton’s request, a vote was taken on the question of preparing NAC Document No. 43 for presentation to the President. It was agreed that this should be done.

Mr. Eccles called attention to the fact that the proposed loan program called for a $2 billion increase in the lending power of the Export-Import Bank.33 He thought it would be unwise to request this increase in the Bank’s lending power while the loan to the United Kingdom is pending. He called attention to the legislative history of the Export-Import Bank which, in effect, earmarks a billion dollars for Russia out of present Export-Import Bank lending authority. He discussed at some length the changes in the over-all political situation during the past six or eight months and remarked that any loan to Russia would be charged with political issues and for that reason should go directly to Congress, He therefore favored using the billion intended for Russia and not asking for additional lending authority until the U.K. loan is settled. In any case, he felt that the funds now available were adequate to meet all expenditures that might be made this year against loan commitments. If by the end of the year reconversion has been completed and goods are being produced in large volume, he thought that the question of making additional loans might be reopened for those countries that could make a good case.

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Mr. Eccles was seriously disturbed over the prospects of getting the U.K. loan through Congress. If it should fail, he thought the results would be most serious not only for the United States but for the whole world. It was his view that it would not be embarrassing to handle the funds earmarked for Russia in this way since Russia had never presented a formal application.

Messrs. Clayton and Collado took exception to the assertion that no application had been filed, pointing out that early in 1945 the Russians made a general request for a loan of $6 billion and that last September they presented a formal request for $1 billion. To these requests, which have only recently come to light through State Department accession of FEA files, the Russians have had no satisfactory reply.

Mr. Martin stated that it was his impression from talking with high Russian officials that they are not interested in an Export-Import Bank loan; that they expect terms at least as favorable as those extended to the United Kingdom.

Mr. Coe recalled that Mr. Crowley had presented to the National Advisory Council an over-all loan program (NAC Document No. 14)34 in which $1 billion was mentioned for Russia and that this program had received the President’s approval and that Council Minutes showed that negotiations on the Russian loan were not to go forward until the Secretary of State approved (Minutes of Meeting 3, Item 2;35 Minutes of Meeting 4, Item 1). Mr. Collado remarked that while the State Department had not given the signal to move ahead on the Russian loan, he nevertheless favored holding the $1 billion in reserve.

The Chairman felt strongly that one of the principal purposes of this Government’s lending program was to tide war-devastated countries over until the International Bank is established. He hoped that it might be possible, therefore, to present the loan program to Congress on a 1946 calendar year basis with all proposed loans pared down to the lowest figure possible. He went through the list of loans proposed in NAC Document No. 44 and brought out the consensus that some of them could be reduced.

Mr. Clayton, although favoring a request to Congress for an increase of $2 billion in the Export-Import Bank’s lending authority, agreed to a reduction of $500 million, on the assumption that $1 billion of the Bank’s present resources is earmarked for Russia. However, the trend of the Council’s general point of view appeared to favor the use of existing resources, including the $1 billion that has been set aside, in such a manner that it would not be necessary to request additional [Page 1419] funds from Congress. If this approach is followed, it was recognized that only the most urgent needs could be met in 1946.

Mr. Paul36 expressed the view that the lending program should not be pared to the extent that the Chairman and others had indicated. He was not disturbed by inflationary pressures since, according to studies made by his Department, a large portion of the market demands that will grow out of these loans will merely bring about fuller utilization of industrial capacity. In this connection, he mentioned railway equipment, machine tools, chemicals, synthetic fertilizers, and power equipment. It was his view that some of these industries would be forced in the near future to reduce their rate of output unless loans are consummated and foreign orders are placed. Mr. Paul added that in his opinion the loan program had already reached the point where further cutting might lead to a chaotic condition in a number of countries. The Chairman replied that he was forced to take the realistic view that there was only so much money available for foreign lending and that excessive demands upon Congress might jeopardize the entire program.

The Chairman instructed the Secretary to have the Staff Committee at its next meeting to consider a preliminary draft of a report to the President and the Congress on this Government’s foreign lending program which would take account of the various alternative proposals without attempting to resolve the questions of whether a loan is to be made to Russia or additional funds are to be requested.

[Here follows discussion of other matters.]

  1. See footnote 31, p. 1416.
  2. In his State of the Union Message on January 21, 1946 President Truman had specifically noted the need for expanding the Export-Import Bank’s capitalization.
  3. Dated September 18, 1945, p. 1404.
  4. Not printed; but see p. 1408, Minutes of the Fourth Meeting of the NAC, September 27, 1945.
  5. Mr. Arthur Paul, Commerce Department representative.