Lot 60–D 137: Box 1

Minutes of the Twenty-first Meeting of the National Advisory Council, Washington, April 19, 1916

Present: Secretary Fred M. Vinson (Chairman), Treasury Department
General George J. Richards, Visitor
Colonel Carl Pforzheimer, Visitor
Mr. W. L. Clayton, State Department
Mr. Emilio G. Collado, State Department
Mr. George Luthringer, State Department
Commander Chester Carre, Office of Foreign Liquidation Commissioner, State Department
Mr. Herbert Parisius, Commerce Department
Mr. Marriner S. Eccles, Board of Governors, Federal Reserve System
Mr. J. Burke Knapp, Board of Governors, Federal Reserve System
Mr. Wm. McC. Martin, Jr., Export-Import Bank
Mr. Frank Waring, Export-Import Bank
Mr. Harold Glasser, Treasury Department
Mr. Frank Coe (Secretary), Treasury Department
Mr. Allan J. Fisher (Assistant Secretary), Treasury Department

[Here follows item 1, not printed.]

2. Transfer of Non-Troop Pay Dollars to Italy

Mr. Coe recalled that in a previous action (Action No. 45),38 the Council asked State, War, and Treasury to investigate and report 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. These Departments had considered the matter, and the result was embodied in the Staff Committee’s memorandum (NAC Document No. 102).39 The transfer was recommended. A supporting legal opinion was attached. A document for Presidential approval had also been drafted. After Council and White House approval, the Staff Committee recommended that clearance should [Page 903]be obtained from the Comptroller General and the appropriate committees of Congress should be consulted.

Mr. Coe also noted that the estimated amount available was about $100 million, of which $50 million would be available immediately. General Richards stated that the remaining amount would probably not be certified earlier than August.

Mr. Clayton moved, and there was no dissent, that the Council take the proposed action. Secretary Vinson requested, and it was agreed, that this matter and Plan A should be discussed together in the appropriate Congressional committees.

Action. The following action was taken:

The National Advisory Council recommends to the President that the United States Government transfer to the Italian Government the net dollar balances in the “special deposit” account for Allied Military lira currency in the name of the Treasurer of the United States, after appropriate accounting reserves, without prejudice to the treatment of occupation costs which may be claimed by the United States against Italy in the final peace treaty.

If the President approves the recommendation as set forth in the attached document, steps should be taken to secure clearance of the certification and transfer procedure with the Comptroller General and to consult with such Congressional committees as may be deemed appropriate.

Consultation with the Congressional committees shall be deferred until the Council’s decision respecting the settlement of Plan A accounts has been made, in order that the consultation may cover both matters.

Memorandum for the President

In the course of the Council’s consideration of a loan request by the Italian Government, it appeared that some financial aid could be extended at this time by making available to Italy the dollars already set aside in the Treasury to cover expenditures made by our military forces in Allied Military lira currency for procurement of supplies, services, and facilities in Italy. Under President Roosevelt’s directive of October 10, 1944, dollars equivalent to the lire used for net troop pay have already been utilized for the benefit of the Italian people.

After careful consideration of this matter, the Council deems it in the interests of the United States that this Government promptly transfer these dollars to the Italian Government. In reaching this conclusion the Council is impressed with the need of Italy for financial assistance. As you stated in your letter of July 2, 1945, “Our policy is to assist in the recovery of Italy as the only assurance against [Page 904]a resurgence there of the forces we have fought in Europe and progress toward recovery in Italy will require substantial assistance from the United States for many months to come/’ The proposed transfer would also assist in furthering the major objectives of the United States in the current peace treaty negotiations.

The Council therefore recommends that you approve this proposal and direct and authorize the Secretary of War and the Secretary of the Navy and the heads of other using agencies to certify to the Secretary of the Treasury the dollar equivalent of the lira expenditures made up to now and hereafter by our military forces in Italy for transfer from the “special deposit” account in the name of “Treasurer of the United States Allied Military currency (lira)”, after appropriate accounting reserves, and further authorize and direct the Secretary of the Treasury to transfer the amount so certified to the Italian Government.]40

3. Proposed Reconstruction Loan to Italy

Need for Loan.—Mr. Collado recalled that the Council had previously considered a loan to Italy by the Export-Import Bank of up to $150 million (NAC Document No. 8641). Action had been postponed pending decision on non-troop pay dollars.

Mr. Collado said that the State Department considered the matter to be urgent. There were strong reasons of foreign policy. The country’s economic situation was desperate. The non-troop pay money of $50 million was inadequate. There were elections scheduled in May and it was important that we take action before then. Mr. Clayton emphasized that we were trying to maintain stable conditions, but that the period was critical. The food and coal situations were grave. Almost anything could and would happen unless we gave financial assistance for the purchase of supplies.

The Chairman asked whether the previous estimate of an immediate loan of $150 million might not be reduced to $100 million. Mr. Clayton agreed that for the present $100 million would be enough.

Position of the Export-Import Bank.—Mr. Eccles inquired whether we have to get the appropriation of $1¼ billion in order to make a loan of $100 million to Italy. Mr. Martin said that, taking into account $150 million coming back as repayments and possible participation of $100 million by commercial banks in the Dutch loans, we can count on $1¼ billion available for the fiscal year 1947, excluding the proposed increase in lending authority. The Bank had no funds for a loan to Italy.

Mr. Clayton commented that since only $1¼ billion was available and $1 billion was earmarked for Russia, there remained only $250 [Page 905]million for loans to Italy, Poland, etc. and that it would only be possible to make a conditional commitment to France. Mr. Martin added that although it is not necessary to have a large reserve, it would be inadvisable to go to the limit of $3½ billion and leave no reserve for operations.

The question of the $100 million loan to the Netherlands East Indies and the possibility of its reduction in view of the fact that credit had been extended to the Netherlands East Indies for the purchase of surplus property was raised. There was considerable discussion on this point and it and the Council’s action are reported separately below.

Postponement of Italian Loan Negotiations.—Mr. Coe said that as he understood the figures presented earlier by Mr. Martin, the Bank considered that it had approximately $1500 million of uncommitted funds. Of this sum, $1 billion was being reserved for negotiations with the Soviet Union and the State Department was exchanging notes concerning these negotiations. The remaining $500 million had been authorized for China and might be called for whenever General Marshall and the State Department considered the time propitious. Although the Bank might expect to receive approximately $250 million in the next 14 months, a sum large enough to cover other loans which had been authorized by the Council, it did not as of the moment have sufficient funds to meet all loans which had been authorized plus the reserve of $1 billion. Furthermore, under these arrangements, there were no Bank funds available for a loan to France.

Mr. Martin emphasized that the repayments of principal and interest and the sum which the Bank hoped to realize by the sale of the short-term obligations of the Netherlands were funds which would be available during fiscal 1947 but which he, as a banker, could not definitely count upon. There was discussion of other loan authorizations of the Export-Import Bank which might not represent firm commitments.

Mr. Clayton said that the outline of the situation indicated clearly that as of this moment the Government could not conclude negotiations for any foreign loan from the Export-Import Bank. Therefore, he thought that the Council should ask the Bank to reexamine its position to see if there were any immediate possibilities for making the loan to Italy and that pending such a report from the Bank the only way in which we could help Italy was through the transfer of the account in the Treasury.

Mr. Collado suggested that since the Bank’s position was fluid and since the Italian situation was serious, the Council might authorize the loan to Italy and thereby the Bank, when it had the necessary funds, could extend the credit without further Council consideration. [Page 906]However, Mr. Clayton stated, and it was agreed, that it would be inadvisable for the Council to follow a procedure of authorizing loans for which funds were not presently available.

Mr. Coe pointed out that other loans were being considered, discussed and perhaps even negotiated, and queried whether the Council’s action should not be broader. Mr. Clayton agreed and said that pending the appropriation of more funds by Congress or a change in the Bank’s position as reported to the Council, no additional foreign loan negotiations involving Export-Import Bank funds should be concluded. There was no dissent.

Action.—The following action was taken:

The National Advisory Council agrees that consideration of a long-term loan of $100 million to Italy be deferred pending receipt of a report from the Export-Import Bank on its available funds.

Action.—The following action was taken:

The National Advisory Council agrees that for a short time, pending receipt of a report from the Export-Import Bank on its available funds, negotiations shall not be carried on concerning any new foreign loans.

[Here follow items 4 and 5, not printed.]

  1. See minutes of the fifteenth meeting of the National Advisory Council, p. 894.
  2. Not printed.
  3. Brackets appear in the original.
  4. Not printed.