The Director of International Security Affairs (Cabot) to the Secretary of Defense (Marshall)

top secret

My Dear Mr. Secretary: I approve in principle the allocation of $10,000,000 from funds available under Section 303 of the Mutual Defense Assistance Act1 for use in the Republic of the Philippines. As indicated in your letter of April 19, 1951,2 these funds are to be available as a surety that the Armed Forces of the Philippines continue to be paid and maintained through the existing difficult internal situation.

Since the $10,000,000 is in the nature of a surety and might not be used if the Philippine budgetary situation continues to improve, I suggest that the President be requested to allocate the funds to you to hold available in the United States for instant use in the Philippines when and as you believe such use is justified. The financial mechanics for quickly transferring these funds from time to time for possible use in the Philippines should be worked out immediately by a group of experts on Philippine foreign exchange matters. I recommend that such an expert group be set to work on this problem.

The Secretary of State informed me that he is prepared to recommend to the President the allocation of $10,000,000 to you for use in the Philippines. The appropriate papers are being prepared as a matter of urgency for transmittal to the President through the Bureau of the Budget.3

I hope that this possible use of $10,000,000 of MDAP funds for the direct support of the Armed Forces of the Philippines will be unique in character and non-recurring in the future. As you observed in your letter of December 29, 1950 transmitting to the Secretary of State a copy of General Romulo’s request for $50 million of aid for the Philippine Armed Forces,4 this matter should be carefully coordinated in order to avoid conflict with the budgetary and fiscal measures which the United States has been pressing the Philippines to adopt by virtue of the Bell Mission recommendations and the Quirino–Foster agreements. [Page 1536] I believe the recommendations I have made above will avoid the kind of conflict you mentioned.5

Sincerely yours,

Thomas D. Cabot
  1. For text of the Mutual Defense Assistance Act approved October 6, 1949, see 63 Stat, 714.
  2. Not found in Department of State files.
  3. President Truman approved this allocation on May 9. His statement at that time has not been found in State Department files. It was, however, quoted in part in a later draft letter to the President: “You approved the allocation of these funds ‘to provide a surety that the Armed Forces of the Philippines continue to be paid and maintained through the existing difficult internal situation and until other United States Governmental Agency programs designed to improve the political and economic conditions in the Philippine Islands may become effective’”. (Draft of letter from Mr. Foster (by then Acting Secretary of Defense) to President Truman, enclosure to letter of December 29, 1951, from Mr. Foster to Secretry Acheson; 796.5–MSP/12–2951).
  4. Not printed.
  5. In telegram 2552, to Manila, April 25, which originated in S/ISA and was cleared by Mr. Merchant for FE and General Malony for the Department of Defense, the Department quoted most of the second paragraph of this letter and concluded: “You may in your discretion inform Quirino and Romulo of the foregoing, impressing upon Quirino both that this action (a) contradicts established US principle of administering US aid funds and (b) taken this one time only because of unique Phil–Amer relations”. (796.5–MAP/4–2551) In telegram 3389, from Manila, April 27, Ambassador Cowen stated in part that he was planning to carry out this instruction. (796.5–MAP/4–2751) Secretary Romulo had returned to the Philippines April 22.