NAC Files, Lot 60 D 137
Draft of Minutes of Meeting No. 173 of the National Advisory Council, Washington, April 20, 1951
|[Participants:]||Secretary John W. Snyder (Chairman), Treasury Department|
|Mr. Elmer B. Staats, Bureau of the Budget, Visitor|
|Mr. Willard L. Thorp, State Department Secretary Charles Sawyer, Commerce Department|
|Mr. William McC. Martin, Jr., Board of Governors, Federal Reserve System|
|Mr. Herbert E. Gaston, Export–Import Bank|
|Mr. Hawthorne Arey, Export–Import Bank|
|Mr. William C. Foster, Economic Cooperation Administration|
|Mr. Richard M. Bissell, Jr., Economic Cooperation Administration|
|Mr. Frank A. Southard, Jr., International Monetary Fund|
|Mr. John S. Hooker, International Bank|
|Mr. Elting Arnold, Treasury Department|
|Mr. C. Dillon Glendinning (Secretary)|
1. Foreign Lending
The Chairman opened the discussion by stating the Council might first continue its consideration of the interrelated questions of the operations of the Export–Import Bank and the International Bank and of coordination of loan and grant assistance.
Mr. Glendinning noted that Mr. Black’s statement which had been delivered orally at the last meeting had been distributed in written form for the information of the Council members (NAC Document No. 1125).1 He inquired if the Council, after reviewing Mr. Black’s statement, desired to modify the broad outline of views developed in the paper prepared by the Staff on the question of coordination of activities of the Export–Import Bank and the International Bank.
Mr. Bissell said that he wanted to be perfectly clear on one point, namely, whether in the areas the U.S. was developing major programs we would expect to give the International Bank the first chance at undertaking loan projects planned under our auspices. The Chairman stated that his understanding was that we would not follow such a rule. He added, however, that we would want to keep the International Bank currently informed of our programs and to obtain as [Page 1616] active cooperation of the International Bank as possible in facilitating such programs.
Without further discussion the Council approved NAC Document No. 11222 as a basis of U.S. policy with respect to the lending activities of the International Bank and the Export–Import Bank.
Mr. Glendinning noted that the Staff had prepared a paper on the use of loan funds for expenditure in areas other than the U.S. as requested by the Council at its last meeting (NAC Document No. 1126).3 He summarized the discussion in the Staff paper and outlined the conclusions of the paper.
Representatives of the Export–Import Bank and the Economic Cooperation Administration indicated their approval of the conclusions as a basis for operations in the financing of general development and strategic materials. Following this discussion the Council approved the conclusions of the paper.
The Chairman stated that the next subject for consideration was a review of NAC Action No. 4424 of last December with respect to foreign lending, especially the financing of strategic material development.
Mr. Glendinning said that the Staff, following the instructions of the Council at the last meeting, had prepared a brief paper which attempted to outline the present authority with respect to the financing of strategic and critical materials and also to outline the possible alternatives with respect to financing development and procurement of such materials (NAC Document No. 1127).5 He noted that the paper had been prepared on short notice and that it had not been possible to canvass the ideas of all the agencies with operating responsibilities in this field.
Mr. Glendinning summarized existing statutory authority with respect to financing of strategic and critical materials and outlined briefly the alternatives for extending credit for such materials as follows:
- The Export–Import Bank might act as exclusive loan agent for whatever agencies were administratively responsible for development or procurement of strategic materials, utilizing funds available to such agencies in a manner similar to the domestic operations of the RFC under the Defense Production Act.
- The Export–Import Bank might act as exclusive loan agency for the procurement and development of foreign strategic materials using its own funds but having recourse to guarantees by the operating agency or agencies where the risks appeared to be greater than [Page 1617] those which the Export–Import Bank might ordinarily accept. In all cases the Bank would undertake to extend the credits where the programming agency would provide such a guarantee.
- The Export–Import Bank would act as exclusive lending agency for all foreign loans except short-term advances against repayment in strategic materials which might be handled by the operating agency or agencies. (It was noted that such arrangements might be made in conjunction with any of the other alternatives.)
- Present arrangements might be continued under which ECA, GSA, Export–Import Bank and other agencies might use existing authority to extend foreign credits in a variety of ways for the procurement of materials and their development.
Under any of these alternatives it would appear appropriate that the financial terms and conditions be coordinated through the Council.
Mr. Foster said that thinking of the ECA was generally along the lines indicated in alternative (2), namely that the Export-Import Bank would act as exclusive loan agency using its own funds but having recourse to a guarantee by the operating agency or agencies where the risks of repayment appeared to be greater than the Bank could accept under its statutory authority. The Bank would be expected to undertake such credits with a guarantee upon certification by the programming agencies.
Mr. Bissell said that he thought one exception to this general proposition should be noted, namely, with respect to the use of 5% counterpart funds for the financing of the development and acquisition of strategic materials. He said that 5% counterpart funds would be of declining importance, but thought that such funds should be available for use on a loan basis for the development of materials. Mr. Bissell also noted that in some cases involving the use of 5% counterpart funds some dollar financing might be required which could be handled by the Export–Import Bank. Mr. Gaston indicated his agreement with Mr. Bissell’s statement.
After expression of the views of the other members of the Council, the Chairman stated that the minutes should record Council concurrence in the proposition that 5% counterpart funds as in the past should be available for use for development or acquisition of critical or scarce materials as outlined by Mr. Bissell.
Mr. Bissell also added that the ECA did not desire to retain authority for making short-term dollar advances against repayment in strategic materials but felt that possibly some of the other operating agencies such as GSA would be interested in discussing the advances question. He suggested this question be left open for further exploration.
The Council expressed concurrence in the view that the question of short-term advances should be explored with the operating agencies.[Page 1618]
Mr. Gaston indicated that the Export–Import Bank felt it could undertake the financing of strategic and critical materials in by far the largest number of cases without any recourse to guarantee arrangements. He indicated that in the view of the Bank any guarantee arrangement would be the exception rather than the rule. He said that, the risks which might be greater than could reasonably be undertaken by the Bank would be those largely associated with the early stages of exploration and development rather than in the cases where the availability of the mineral resources was established and where the essential problem was one of getting them out.
The Chairman, Secretary Sawyer, and Mr. Martin stressed the importance of coordination of the terms and conditions for foreign financing in the field of strategic and critical materials. The Chairman referred to the experience during the last war in which many agencies were involved in foreign operations with no central coordination of financial terms. Mr. Thorp referred to the fact that in connection with the disposal of surplus property the NAC had not reviewed each case of disposal but rather had set up general standards as to terms and conditions which applied to all agencies concerned. He suggested this approach would probably be preferable in the case of strategic materials.
Mr. Staats commented that his views were tending generally along the lines indicated by the second alternative in the Staff paper, at least for the interim. He noted that the Defense Production Authority thought it desirable to make as few changes in the Defense Production Act as possible at this time. Given this conclusion he thought that an arrangement providing for a guarantee procedure would require the least changes in the present pattern of legislation, although it would probably require a change in the ECA legislation to provide for a guaranteeing authority. He said it was the general view of the Bureau that the Export–Import Bank should be used to the maximum extent possible in the field of foreign lending. He added that he thought the basic problem of assuring that the programs of the operating agencies could be carried out would be solved if the operating agencies had the authority to certify projects to the Export–Import Bank where those involved risk elements beyond those normally undertaken by the Bank.
Mr. Staats also commented briefly on the problem of coordinating the activities of the agencies operating in the field of foreign procurement and development of strategic and critical materials.
Following further discussion, the Chairman indicated that the minutes should record reaffirmation of NAC Action No. 442 with the specific exception of the use of ECA 5% counterpart funds. He also indicated that the minutes should record the tentative conclusion that [Page 1619] the financing of strategic and critical materials should be worked out along the lines of alternative 2 of the Staff paper as follows:
- “The Export–Import Bank might act as the exclusive loan agency for the procurement and development of foreign strategic materials, using its own funds for such purposes, but having recourse to guarantees of the type provided for in Section 301 of the Defense Production Act, where risks appear to be greater than those which the Export–Import Bank ordinarily accepts. The Bank would undertake to extend the credit in every case when the programming agency provides a guarantee.”
The Staff was directed to explore the application of the foregoing principles with the interested agencies and specifically to review the question of short-term advances, with repayment in strategic materials, with such agencies.