Foreign Relations of the United States, 1946, The Far East, Volume VIII

896.24/9–646: Telegram

The Ambassador in the Philippines (McNutt) to the Secretary of State

us urgent

Manila, September 6, 1946.
Received September 6—7:35 a.m.]

312. Reference Treasury PI cable No. 139.⁷⁵

Part I. For Treasury from McNutt and Lancione.⁷⁶

(1) McCabe on way to Washington but has been advised by telephone contents Treasury’s cable.

(2) It is FLC’s intention to sign agreement on behalf US Government as soon as text acceptable to Philippine Republic is prepared.

(3) President’s letter of October 25, which was drafted by me, directing Treasury and War to formulate recommendations re US Govt’s obligation to redeem emergency and guerrilla currency, was intended to facilitate settlement of problem prior to Philippine Independence. In my opinion, upon Independence, problem became one for settlement Philippine Republic. Moral and legal responsibility US Govt satisfied by providing Philippine Govt with adequate means to retire US share outstanding emergency and guerrilla currency.

(4) Agreement provides for sufficient cash payment to preserve present financial position Philippine Govt. FLC reports weekly sales surplus totalling $2,100,000. This includes sales to UNRRA, USCC and foreign govts. FLC anticipates that without any sales to latter, weekly sales by Philippine Govt will average $500,000, and estimates that expenses should not exceed $900,000 per month. In other words, net revenue to Philippine Govt from sale surplus will probably exceed $1,000,000 per month.

(5) Present draft agreement provides that if a material disparity is found to exist between the property transferred to Philippines and the consideration given therefor by Philippines, the two govts will consult together to fix appropriate adjustment in price paid. With reference to emergency and guerrilla currency draft agreement provides:

“That the United States shall forthwith pay to the Philippines, the sum of $25,000,000 on account and in part payment of the financial obligations and responsibilities of the United States arising from

(1) The issuance of emergency currency, guerrilla currency, military scrip or other writings intended to circulate as currency, and

(2) Any advances, loans, credits and overdrafts by the Philippine National Bank, the Commonwealth of the Philippines or any corporation, political subdivision or agent thereof, during the war with Japan but not after August 14, 1945; and that the Philippines, as partial consideration for the property transferred hereunder and not identified pursuant to paragraph A as granted under the Philippine Rehabilitation Act of 1946, hereby releases and acquits the United States of the unpaid balance of the financial obligations and responsibilities aforesaid and shall for [apparent omission] indemnity and hold the United States harmless from claims and demands arising therefrom by any person or persons whomsoever.”

(6) Agreement subject to approval by Philippine Congress. William E. Vogelback, head FLC in Pacific, will sign for US Govt.

(7) Roxas has informally requested immediate action re creation joint financial commission and advance of funds for budgetary purposes.

Part II. For Snyder from McNutt and McCabe.

We consider it desirable to sign agreement as soon as draft acceptable to Philippine Govt can be prepared.

This cable No. 234.

McNutt

75. Telegram 297, September 4, to Manila, not printed.
76. Treasury representative in the Philippines.