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

896.51/8–2446: Telegram

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

confidential
us urgent

Washington, September 13, 1946—8 p.m.

349. For McNutt and Lancione from Treasury. Philembassy informally advised by Treas technicians (reurtel 237⁸⁶) as follows: Consider establishment proposed rehabilitation finance corporation excellent approach to problems of economic rehabilitation. However concerning proposed reduction Treas certificate fund outlined as point 1 urtel strongly advise this step not be taken at this time. Reasons are (1) such action may weaken confidence in peso if hastily enacted now to provide needed funds (2) believe action along such lines ultimately may be desirable and if recommended by proposed Phil Amer Financial Commission and acted upon early next year would be better received by public as implementation of considered recommendations of commission (3) doubt that corporation would need funds from above source during next 6 months in view of difficulties procurement reconstruction goods and funds that will be available from sales of surplus property and amounts to be realized from registration of currency and resulting determination amount of excess reserves in Treas certificate fund. In connection with latter source, would see no objection to early advance to corporation from Treas certificate fund of an amount not in excess of a reasonably conservative estimate of the amount subsequently to be realized by govt from the registration operation, provided that it is made clear in enabling legislation that this action is in no sense in conflict with 100 percent reserve principle. Suggest an initial authorized capitalization for corporation of three hundred million pesos, which could if necessary be increased at a later date, as program gets into action and extent of reconstruction job can be more accurately determined. Please bring this message to immediate attention of Ambassador McNutt who may consider it appropriate to communicate these views independently to Philgovt. Advise promptly on all developments.⁸⁷

This is cable No. P.I. 144.

McNutt

86. Telegram 359, September 12, p. 914.
87. In telegram 577, October 15, 6 p.m., from Manila, Mr. McNutt reported the Philippine Foreign Office note of October 12 accepting the revised American proposals (896.51/10–1546).