896.51/9–1246: Telegram
The Ambassador in the Philippines (McNutt) to the Secretary of State
[Received September 12—6:35 a.m.]
359. For State and Treasury. This is Treasury cable No. 237. Part I. Following cable dated September 11 sent by President Roxas to Ambassador Elizalde:
“In order to expedite economic rehabilitation, create much needed employment opportunities and help solve other social problems and the maintenance of peace and order, I propose to recommend to the Congress the establishment of a rehabilitation finance corporation to be capitalized from the following sources:
- “1. By withdrawing from Treasury certificates fund sums in excess of reasonable requirements to maintain sound and secure backing. Law will require at least 60 percent of total issue. No changes proposed on exchange standard fund.
- “2. All sums derived from sales of surplus property acquired by Philippines for account on $100,000,000 granted in war damage act.85
- “3. Sums representing difference between currency issued and actual currency in circulation which will be determined after registration of all currency in circulation which later on will be exchanged with new Republic currency.
“Concerning paragraph 1, please obtain advice of Treasury Department there. My opinion no danger reducing present reserves considering continuing expenditures by United States Forces in Philippines and war damage payments. Moreover, dollar reserves will not be withdrawn all at once but very gradually as sums may be needed for investments. Should this plan be executed I do not anticipate immediate need pressing loan from Export and Import Bank. Moreover, resources this corporation may be set up as secondary reserve for currency.
“Our agricultural and industrial bank will be consolidated with Rehabilitation Finance Corporation. It will engage mainly in financing reconstruction of destroyed industries, building of desirable new ones, home building construction, irrigation systems, toll bridges, underwriting baby bonds issued by provincial and municipal governments and commercial or other self-liquidating projects of government corporations. These bonds will be sold to the public upon guarantee that they may be cashed in the bank at any time under similar conditions as now existing concerning baby bonds of United States.
“This plan is calculated to avoid inflationary tendency and will be instrumental in creating a bond market here thereby withdrawing from the public excess purchasing power.
“Members of Congress very insistent passage this measure before adjournment on September 18. Unless this Bank is promptly organized [Page 915] there is no hope of starting construction work here in the near future. Will appreciate your reply as soon as possible.”
Part II. Embassy’s comments will follow soon.
- Philippine Rehabilitation Act of 1946 (Public Law 370), approved April 30, 1946; 60 Stat. 128.↩