Department of State National Advisory Council Files

Minutes of the Eleventh Meeting of the National Advisory Council, Washington, February 7, 1946

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Present: Secretary Fred M. Vinson (Chairman), Treasury Department
Mr. W. L. Clayton, State Department
Mr. E. G. Collado, State Department
Mr. Thomas B. McCabe, Foreign Liquidation Commissioner
Col. D. H. Morris, Office of Foreign Liquidation Commissioner
Mr. Henry A. Wallace, Commerce Department
Mr. A. Paul, Commerce Department
Mr. M. S. Eccles, Federal Reserve Board
Mr. Burke Knapp, Federal Reserve Board
Mr. William McC. Martin, Jr., Export-Import Bank
Mr. A. Maffry, Export-Import Bank
Mr. Harry D. White, Treasury Department
Mr. Harold Glasser, Treasury Department
Mr. Frank Coe (Secretary), Treasury Department
Mr. I. S. Friedman (Assistant Secretary), Treasury Department

1. Foreign Loan Program:38

New Funds and the Russian Loan. Mr. White suggested that the discussions of the foreign loan program begin with the major issue of how much Congress be asked to make available. Mr. Clayton then raised the question of the loan to the U.S.S.R. saying that State considered that $1 billion must be considered as set aside for the U.S.S.R. and therefore the real difference between Alternative “A” and Alternative “B” in NAC Document No. 59 was $500 million. He emphasized that a written application for a $1 billion loan had been received on August 28, 1945, from the Soviet Union and that recently the State Department had received inquiries from the Russians as to the status of this request. It was fortunate that this application was for a $1 billion Export-Import Bank loan because it meant that the application for $6 billion loan was not being pressed.

Mr. Clayton and Mr. Collado indicated that the State Department was contemplating telling the Russians within a few days that this Government was prepared to consider the Russian application and other matters affecting the economic relations between the two countries, including commercial policy, Russian bilateral trade agreements with Eastern European countries, lend-lease settlements, adherence to Bretton Woods, and other matters. These discussions might well take six months, but it was desirable to start negotiations quickly. The Chairman expressed agreement with the State Department’s position.

Mr. Eccles urged the desirability of being able to tell Congress that we could get through 1946 without additional funds and this could be done if the $1 billion set aside for Russia was used for other purposes. Mr. Eccles maintained that any loan to Russia should have special approval by Congress. The other members emphasized that this approach might constitute an invitation to the Russians to ask for a larger amount and that Congressional authorization had already been obtained.

The question of terms of the Russian loan was discussed and it was pointed out that the Russian application spoke of 2⅜ percent interest. It was agreed that any statement on Russia would be given orally to Congress and would not be included in the proposed document.

China. In connection with discussions of the amount to be requested, [Page 1422] Mr. Clayton said that $500 million would probably have to be lent to China. It was expected that General Marshall would take this position.

Philippines. The question of including the Philippines in the list of possible loan recipients was discussed and it was agreed that it was not desirable to eliminate the Philippines from any such listing.

Latin America. The Chairman suggested the desirability of further discussions with regard to figures for Latin America and other countries. During these discussions, the Chairman, Mr. Eccles, and Mr. White emphasized the strong gold and dollar position of most of the Latin American countries. Mr. Clayton indicated that he was prepared to reduce the Latin American figure to $150 million, while Mr. Martin and Mr. Collado stressed the desirability of making provision for continued lending to Latin America.

Other Countries Figure. With regard to figure for other countries, Mr. Clayton indicated that he was prepared to see the figure pared down to $150 million. In this connection the Chairman again emphasized his eagerness to pare down the final dollar figure as much as possible and expressed agreement with Mr. Eccles who stated that the loans during the coming period should be made essentially on the basis of lack of dollar and gold exchange. The Chairman said that he felt that the more conservative the figure, the better the Congressional response would be.

Eastern European Countries. Some discussion was also held with regard to the reasons for the changes in the suggested figures listed for the Eastern European countries. Mr. Collado pointed out that further study had been given to these countries and he felt that the new set of figures in Alternative “A” were better than those which had been originally proposed.

Netherlands. The Chairman informed the Council that the possibility of a $200 million loan to the Netherlands had been explored with him, $100 million to be taken by the private capital markets. The Chairman indicated that he felt it desirable to encourage such loans as a means of encouraging private capital participation in lending to foreign governments. He said that he felt that such loans would strengthen the administration’s position with regard to the British loan particularly with respect to the ability of the British to repay the loan.

UNRRA . Mr. Eccles raised the question of whether UNRRA could not carry some of the burden of the lending program. Mr. Clayton replied that he had assured Congress that UNRRA would be finished by the end of 1946, except in the Far Eastern area where it would continue into 1047 [1947] and after that UNRRA was finished and it had been so written into the legislation.

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Surplus Property. Mr. McCabe raised the possibility of making more use of surplus property materials. The Chairman asked Mr. McCabe for the information he had requested on railroad equipment and was given the material by Mr. McCabe.

Repayment of Loans. The problem of repayment of foreign loans was discussed. Mr. Eccles stressed the need for looking forward to the time when we would have to accept repayment. Secretary Wallace said that he felt that if maximum employment was maintained plus the stimulation to trade given by the British loan, there would be no problem of accepting goods in repayment. Mr. Clayton emphasized that we would have to import much more than before because we had to, stressing the depletion of U.S. natural resources during the war, and gave imports of copper as an example.

Decision To Ask for $1.5 Billion for Fiscal 1947. Discussion throughout tended to center around the question whether the amount of increased lending power for the Export-Import Bank to be requested from Congress was to be $1½ billion or $1½ billion. The Chairman favored a tentative proposal of $1½ billion for 1946, suggesting that it might be discussed with the President. Mr. Eccles expressed agreement with this approach, while Secretary Wallace, Mr. Martin, and Mr. Clayton favored $1½ billion. It was finally agreed that the figure should be $1½ billion, but for fiscal 1947, instead of for calendar 1946.

The Commodity Approach. Secretary Wallace suggested desirability of bringing to the forefront in the proposed statement on the foreign loan program the commodity approach instead of the country approach. This approach would give greater emphasis to the time factor and thus quiet the fears of Congress on the inflationary impact of pushing an export program at this time. Mr. Paul pointed out that they had estimated that two-thirds of the exports under the contemplated lending program were in easy supply while the items in short supply could be taken care of by allocation and export licenses. Mr. Paul indicated that they had done some spot checking on their estimates and had found them to be conservative. It was decided that this approach should be more emphasized in the next revision of the document. The Chairman called attention to the omission of agricultural commodities from the document and Mr. Coe said that the Staff Committee was not looking into the possibility of Commodity Credit Corporation being able to finance agricultural exports.

Funds Not Lent in Fiscal 1947. The Chairman suggested that Congress should be assured that the funds of the Export-Import Bank not used for the contemplated loans would not be used to make new loans or increase other loans. The remaining funds should not be used after June 1947 without Congressional re-authorization or re-appropriation.

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Others considered that it would be sufficient to inform Congress and let Congress initiate a reduction of lending authority if it wished. Mr. Coe suggested as a compromise that funds remaining might be ineligible for reconstruction loans but usable for other export loans. Mr. Clayton suggested, and it was agreed, that the Staff Committee should draft various alternatives on this matter for submission to the Council at the next meeting.

International Bank. There was discussion of the time required for the International Bank to come into operation and of the difficulties of its making loans before the end of the year. The Chairman thought that the necessary changes in state legislation described by Mr. White could and would be made early.40

Other Comments. At one point in the discussions Mr. White pointed out that Congress should be told that all of the money being requested would not have to be raised during 1946 because of the lag between commitments and actual loans. Secretary Wallace said he felt that this point should be emphasized and driven home to Congress.

[Here follows discussion of other matters.]

  1. The draft under consideration at the time is found in NAC–58, February 5, not printed.
  2. This has reference to the problem of the sale of securities of the International Bank in certain states.