Memorandum of Conversation, by the Under Secretary of State (Lovett)


At lunch today Mr. McCloy1 talked at some length about the problem they face with respect to a Polish loan of about $40 to $50 million [Page 515] for mining machinery. He said that the Bank had put in every conceivable safety clause requiring the delivery of a certain tonnage of coal annually; that they specifically required as a term of the contract an agreement to ship to the western countries; that the loan was to be five to seven years; and that it was to be in such installments as to insure a rapid pay-out through coal deliveries.

He did not feel that he could drag his feet any longer and felt that he must either make the loan or pass it up.

He felt the latter course would be embarrassing, in view of the fact that the International Bank in its charter specifically excluded political reasons as a basis for refusal to make a loan. The tight conditions which he had applied would, in his opinion, probably be accepted in the near future. He was therefore concerned at what would happen from the point of view of public opinion and what the attitude of the State Department would be. He was aware of the strong opposition of the Secretary of Commerce2 and “perhaps one or two others on the NAC”.3 He asked my opinion as to the State Department position because Mr. Mine4 had indicated to him that in a conversation with the Secretary of State the latter had, according to Mine, said that he saw no objection to the transaction. (On checking subsequently with the Secretary of State I found that this was not correct, and so advised McCloy.)

I told McCloy that I thought a considerable portion of the American public would not like the idea of the loan, that it might affect the salability of his bonds, and that I felt that the argument of the shipment of coal to the west was a little thin, since that was the normal direction of movement in any event, as it was the only way in which the Poles could get paid for it. He admitted this but said it would be a real contribution to the ERP countries since the coal would be cheaper and also since it would relieve this country from some of the direct shipments. He said that about 60% of the bankers to whom he had talked on this matter had indicated that they thought the loan would be all right, but that he could not say that they were “enthusiastic about it”. He was perfectly willing to turn the loan down, provided [Page 516] he did not in doing so act as an international agency and thereby lay the Bank open to the charge that the loan was refused for political reasons.

I asked him what his position would be if the State Department member on the NAC took the stand that it made no sense for us to support a loan of $50 million to a member of the Cominform who was pledged to defeat the European Recovery Program designed to help others of the International Bank participants. We would clearly be in the position of lending money to someone who had notified us that they were going to do their best to ruin a project for the recovery of other countries. In these circumstances, the State Department member might suggest that we vote against such a loan unless there was a definite agreement from the Poles (a) to take no part, directly or indirectly, in any activities designed to obstruct the European Recovery Program; and (b) to continue the delivery of coal through normal trade channels to the west after maturity of the loan. If we did not wish to go this far we might instruct the American representative to state that we thought it was premature to consider a loan to Poland until the European Recovery Program had gone into operation so that we could see what part Poland had played in any obstructionistic tactics.

McCloy said that he thought that if the NAC took either of these views it would clearly remove his problem with respect to declining the loan on political grounds, since it would not be the Bank that turned it down but the United States representative under instructions from NAC. While he felt that the loan was a sound enterprise and would contribute to the recovery of western Europe, he would not press the matter if the State Department was prepared to take some such stand as that indicated above.

He asked for an indication of the State Department’s views and I agreed to obtain them for him.

Robert A. Lovett
  1. John J. McOloy, President, International Bank for Reconstruction and Development.
  2. W. Averell Harriman.
  3. Instructions to the United States Director of the International Bank for Reconstruction and Development were formulated and transmitted by the National Advisory Council on International Monetary and Financial Problems. The National Advisory Council was under the chairmanship of the Secretary of the Treasury and included representatives of the Export-Import Bank, the State Department, Commerce Department, Federal Reserve System, Securities and Exchange Commission. The National Advisory Council did not take up the question of a loan to Poland during 1948.
  4. Hilary Minc, Polish Minister of Industry and Trade. A record of the Secretary of State’s conversation with Mine in December 1946 is included in the documentation on the problem of United States economic assistance to Poland in Foreign Relations, 1946, vol. vi, p. 540.