Lot 60–D 137: Box 1

Minutes of the Fifteenth Meeting of the National Advisory Council on International Monetary and Financial Problems,24 Washington, March 4, 1946

Present: Secretary Fred M. Vinson (Chairman), Treasury Department
Mr. W. L. Clayton, State Department
Mr. E. G. Collado, State Department
Lt. A. Hayes, Office of Foreign Liquidation Commissioner, State Department
Mr. A. Paul, Commerce Department
Mr. H. W. Parisius, Commerce Department
Mr. M. S. Eccles, Board of Governors of the Federal Reserve System
Mr. J. Burke Knapp, Board of Governors of the Federal Reserve System
Mr. William McC. Martin, Jr., Export-Import Bank
Mr. Herbert Gaston, Export-Import Bank
Mr. H. D. White, Treasury Department
Mr. Frank Coe (Secretary), Treasury Department
Mr. A. J. Fisher (Assistant Secretary), Treasury Department

[Here follows item 1, not printed.]

2. Italian Loan Request

Mr. Martin stated that the Export-Import Bank objects to this loan on two counts: (1) He would prefer as a first step the release to the Italians of the $120 million in the Treasury’s suspense account and (2) he does not like the 30-year term and prefers 20 years. Mr. White said he would regret any tendency toward a shorter term for such loans, because the shorter period would make it less likely that Italy would be able to repay. The Chairman inquired whether ability to pay was not one of the factors determining the term. Mr. Martin said “Yes”, but the Bank would like to review the loans. Mr. Gaston said the Bank could graduate the payments. Mr. White pointed out that in countries which are badly off, a short-term loan diminishes credit for other loans.

Statistical Data. The Chairman questioned the supporting data in the table on page 2, pointing out that the figures of the Balance of Payments Subcommittee were much larger than those contained in the [Page 895] report of the State and Commerce Department. Mr. Collado said that the State and Commerce figures had been screened down on the basis of what can be supplied from this country, whereas the balance of payments figures take into consideration what is available in other countries. Question was also raised as to why some of the figures presented by the Balance of Payments Subcommittee were larger than those contained in the Italian program. Mr. Coe explained that the Italian figures excluded freight which, if included, would have raised the figure for imports to $1.7 billion, although not changing the deficit of $990 million.

Special Deposit Account. Mr. Clayton believed that Italian needs are far greater than we can take care of by loans here. He stressed that the Italian situation is desperate and that the $150 million recommended would not be adequate. However he was opposed to the loan. He would much rather release the estimated $120 million in the suspense account (Special Deposit Account in the Name of the Treasurer of the United States Allied Military currency [lira]25) than make a loan which was not a real loan.

Mr. Coe pointed out that the $120 million account is an administrative arrangement to prevent the Army from augmenting its appropriation and that the Treasury was not sure it could transfer the $120 million. Mr. White pointed out that troop pay was set aside and it was up to the Congress to say whether it would be used or not. He thought the case for the use of the $120 million would be much stronger if there were consultations with the Congressional Committees in order to unfreeze the commitments. Mr. Martin said that from the standpoint of making an unsecured credit, the record should be clear that every other resource has been used.

Mr. Eccles pointed out that the $120 million would go back to the General Fund if not released to the Italians, whereas the $150 million would have to be authorized out of the $1¼ billion increase in the authorized lending power of the Export-Import Bank.

Previous Aid. Mr. Collado said this government has been trying for the past two years to find suitable financial assistance for Italy. The first step was to make troop pay available (some $160 million).26 The next step was the Montreal meeting of 1944 at which a small provision for Italy was made by UNRRA. Then, under Plan “A” some [Page 896] $600–$700 million was made available to Italy.27 Last summer an additional $450 million was obtained for Italy under the UNRRA program.28 They needed still more help. The Italians say they need $900 million. Our people say $500 million and this has been whittled down to $200–$300 million.

Nearly all of this would be for food and raw materials.

Mr. White pointed out that the money so far advanced has added nothing to Italy’s ability to pay.

Immediate Needs. Mr. Parisius said that the figure of $327 million in the State and Commerce Departments report was a rock-bottom figure and based on 1,700 calories for urban residents.

Political Loans. Mr. Martin said he would like to discuss the proposed loan on the basis of consistency in Export-Import Bank operations. He realized loans are not being made strictly on a business basis, although in the discussions with the Dutch securities were required to be put up as a guarantee and similar terms will probably be demanded of the Belgians. Mr. White answered that in this case our foreign policy requires assistance to a country, even though it is a bad risk. Mr. Eccles agreed with Mr. White that in the world as it is today the question of foreign credits is largely one of foreign policy.

… Mr. Clayton observed that a loan to Italy will be a political loan and he wondered whether the Export-Import Bank should make a political loan which none of the Council’s members believe will be repaid.

The Chairman said that if the money provided by the Export-Import Bank is to fill in for the International Bank and the International Bank can make loans which have a high degree of risk a loan of this kind could be defended, particularly since this Government is interested in strengthening and stabilizing conditions. However, he did think a loan should not be made if we do not think it will be repaid. Mr. White pointed out that the Export-Import Bank has [Page 897] already made loans where there are such risks that the loans are only justified because of political considerations.

Mr. Clayton suggested that, when Mr. Martin or the Chairman go to Congress to testify on the increased lending authority of the Export-Import Bank, the statement should be made that some loans will be made concerning which there is not a reasonable expectation that they will be repaid with interest. Mr. White believed that this in essence had already been said in conjunction with the establishment of the World Bank, but he agreed that it should be repeated. Mr. Gaston did not think anything in the record permits the Export-Import Bank to make loans for political purposes only.

Mr. Clayton suggested that the $120 million in the Treasury be used if possible and consideration of an Export-Import Bank loan postponed. The Chairman asked whether there was any objection to the State Department motion. Mr. Paul thought that if the lawyers find any impediment to the use of the $120 million or the Congressional Committees do not react favorably action should be taken on the loan. It was decided that a committee should be formed composed of representatives of the State, War and Treasury Departments to study the possible use of the $120 million and report back to the Council. Mr. White asked whether they should investigate the legality only or ascertain Congressional reaction. The Chairman believed that the committee should refer back their conclusions as to legality. Mr. Eccles seconded the motion previously made and it was carried unanimously.

Action. The following action was taken:

The National Advisory Council approves postponement of consideration by the Export-Import Bank of the proposed loan to Italy.

The Council requests the State, War and Treasury Departments to investigate and report to the Council on the feasibility of making available to Italy for the purchase of supplies the dollars which have arisen from this Government’s non-troop pay expenditures in Italy and are now carried by the Treasury Department in a suspense account.

  1. The Council, hereafter referred to as the National Advisory Council, was established pursuant to the Bretton Woods Agreements Act of July 31, 1945. It held its first meeting on August 21, 1945.
  2. Brackets appear in the original.
  3. See “Financial Arrangements for Italy: Statement by President Roosevelt, October 10, 1944” in Department of State Publication No. 2669: United States and Italy, 1936–1946: Documentary Record (Washington, Government Printing Office, 1946), p. 91.
  4. The term “Plan A” came into usage after the Normandy landings in June 1944, and referred to the supplies provided to civilians in the liberated areas north of the Alps; areas of Allied (United Nations) states. The supplies were furnished jointly by the United States, the United Kingdom, and Canada and were provided through military channels in order to prevent disease and unrest. See William Adams Brown, Jr., and Redvers Opie, American Foreign Assistance (Washington, The Brookings Institution, 1953), p. 57.

    In Italy, not an Allied state, these supplies for the civilian population were initially termed the “military program”. See C. R. S. Harris, Allied Military Administration of Italy, 1943–1943 (London, Her Majesty’s Stationery Office, 1957), pp. 240 ff. and Appendix II, p. 409.

    After the end of hostilities the term “Plan A” was also used in regard to Italy. See memorandum of May 10, p. 910.

  5. For the UNRRA programs in Italy, see George Woodbridge et al, UNRRA: The History of the United Nations Relief and Rehabilitation Administration (New York, Columbia University Press, 1950), vol. ii, ch. VIII, pp. 257 ff.; for texts of the agreements of UNRRA with the Italian Government in 1945 and 1946, see ibid., vol. iii, pp. 296–316.