NAC files, lot 60 D 137, “Minutes”

Minutes of the 219th Meeting of the National Advisory Council on International Monetary and Financial Problems, Held at Washington, November 5, 1954

for nac use only

Mr. W. Randolph Burgess (Acting Chairman), Treasury Department

  • Mr. Andrew N. Overby
  • Mr. George H. Willis
  • Mr. Elting Arnold
  • Mr. Henry J. Bittermann

Mr. Samuel C. Waugh, State Department

  • Mr. Jack C. Corbett

Mr. Samuel W. Anderson, Commerce Department

  • Mr. Frederick Strauss

[Page 381]

Mr. Arthur W. Marget, Board of Governors, Federal Reserve System

  • Mr. Lewis N. Dembitz

Mr. Lynn U. Stambaugh, Export-Import Bank

  • Mr. Hawthorne Arey
  • Mr. Raymond L. Jones
  • Mr. R. Henry Rowntree

Mr. Edward B. Hall, Foreign Operations Administration

Mr. Frank A. Southard, Jr., International Monetary Fund

Mr. John S. Hooker, International Bank

Mr. Percival F. Brundage, Bureau of the Budget, Visitor

Mr. E. C. Hutchinson, Bureau of the Budget, Visitor

Mr. W. G. Lodwick, Department of Agriculture, Visitor

Mr. Oscar S. Zaglits, Department of Agriculture, Visitor

Mr. C. Dillon Glendinning (Secretary)

  • Mr. C. L. Callander (NAC Secretariat)
  • Mr. Sidney B. Wachtel (NAC Secretariat)

1. Export-Import Bank Proposal for Exporter Lines of Credit

The Council considered NAC Document No. 1700,1 containing an Export-Import Bank proposal for a program of exporter lines of credit. The Chairman invited the representative of the Export-Import Bank to explain the program. Mr. Arey commented that in many respects the program is not new, pointing out that the Bank had made exporter credits for many years and has had experience with lines of credit in certain fields. He felt that the really new thing about the program is the advance assurance it would offer to the exporter of access to the Bank’s resources under specified conditions. He described the features of the automatic and non-automatic lines of credit contemplated in the plan, and indicated that a significant advantage of this approach is in the possession by the Bank of comprehensive knowledge of the exporter’s business, which should expedite actual operations under the lines of credit. He noted that an exporter newly entering the field would be treated on a case-by-case basis until he built up a record which might enable him to obtain a line of credit. He outlined the minimum standards for down payments and exporter participation under lines of credit, and discussed the interest rate and commitment charge provisions which the Bank contemplated. He described the safeguards which the Bank has worked out to insure that particular firms are not unduly assisted to the injury of others and discussed briefly the two illustrative cases outlined in the paper.

Mr. Overby raised the question of the extent to which this program would compete with private groups in the same field. Mr. Arey [Page 382] replied that the Bank has discussed the program with the Chase National Bank group which is preparing to enter the medium-term export financing field and felt that there would be no conflict between the two plans Mr. Marget recalled that the Federal Reserve Board had recently altered its regulations to enable the Chase group to organize a corporation for this purpose. He therefore hoped that the Export-Import Bank plan would not offer any undue competition to the private venture. He hoped that to the extent private groups became able to handle export financing, the Export-Import Bank would withdraw from the field, and he noted that this would imply constant scrutiny by the Eximbank of its own operations to be sure that it was not competing with private capital. Thus, for example, Eximbank would have to watch its interest rates in comparison with the rates charged by private groups. Mr. Arey replied that he was sure that the Chase group was satisfied that the Eximbank plan would not hinder them, and noted that the Eximbank always desires to encourage private lending. He indicated that the terms to be offered by the Chase group seemed relatively advantageous to the exporter as compared to the terms contemplated by the Eximbank. The Eximbank feels that it must direct its financing toward the sale of goods that will improve U.S. markets abroad. Therefore, the Eximbank program would be limited to financing capital goods which would tend to improve the economies of the importing countries even though they may not necessarily result in immediate production of dollar exchange. He felt that the Chase group might limit its transactions in the same way. He noted that the problem of the United Kingdom is quite different from the problem of the United States, in that the U.K. wishes to promote sales of consumer goods to obtain immediate earnings of foreign exchange for Britain.

Mr. Marget expressed the hope the monthly reports by the Bank to the NAC would include data on transactions in particular countries. Mr. Arey replied that the Bank contemplated reporting amounts allocated to particular companies and also amounts allocated and disbursed in particular countries. The Bank did not intend, however, to report allocations or disbursements by country for each company, nor to publish a list of countries which would be eligible for lines of credit. The Chairman noted the importance to the NAC of watching the position of particular countries.

Mr. Waugh stated that the plan seemed acceptable to the State Department, but he wished that the Council had more time to consider it. Mr. Arey indicated that he appreciated the time problem of the Council. He noted that the Staff Committee had spent nearly a whole day on the plan and that the Bank was not urging NAC action in undue haste. The Bank hoped for Council decision by November [Page 383] 8 or 9 to enable them to announce the plan to the press by about November 11, after talks with the two companies whose applications were ready for approval.

Mr. Burgess stated that the Eximbank should make clear in its press release that no conflict was intended with the Chase and other private groups in this field and should emphasize the intention of the Bank to promote the use of private capital. Mr. Overby thought it should be made clear that the Eximbank is willing to withdraw from the field to the extent that private firms are prepared to enter it. He wondered whether this kind of proposal might at some point relieve the desirable pressure on commercial banks to enter the field of financing foreign trade. Mr. Southard suggested that a few years of favorable experience by the Eximbank might pave the way for the entry of commercial banks into the field. Mr. Arey felt that the principal deterrent to commercial banks was the transfer problem rather than the credit problem, and that if the Eximbank assumes the transfer risks the commercial banks may be willing to handle the credit risks. Mr. Anderson agreed with Mr. Overby’s view that the Eximbank should be willing to withdraw to the extent that private firms were willing to enter the field. He felt that the Chase Bank plan offered more attractive points than the Export-Import Bank plan, and hoped that the success of the Chase group would cause other private firms to enter the field.

Mr. Marget called attention to the significance of the institutional change in the structure of American banking heralded by the Chase venture. Mr. Waugh felt that the present time is a period of transition in U.S. banking, with U.S. banks gradually entering the foreign field. He felt that this plan would inevitably encourage U.S. exports and therefore increase our trade imbalance and felt that the plan should not yet be considered a finished product. Mr. Arey indicated that in developing the plan the Eximbank was careful to preserve the principle of selectivity in financing, and hoped that the plan would offset pressures for blanket export insurance.

Mr. Hall raised the question of the relationship of the guarantee aspects of the plan to the FOA guarantees. Mr. Arey replied that all FOA guarantees concern equity investments rather than loans and that the Eximbank did not anticipate any conflict with the FOA program. Mr. Hall hoped that the Bank and FOA would maintain a close relationship on these programs.

Mr. Brundage expressed approval of the limitations and safeguards in the plan, especially its limitation to the financing of capital goods, and the intention to defer to commercial banks.

Mr. Overby stated that the program must be viewed as experimental with the promotion of private enterprise in mind, that it should be kept in line with other U.S. policies in the foreign economic [Page 384] field, and that it should take into account the effect of the growth of supplier credits on the field for development credits.

The Council discussed briefly the proposed announcement of the plan to the public. Mr. Arey indicated that following the brief announcement to the press around November 11 Eximbank proposed to submit a detailed story for publication in the Foreign Commerce Weekly.

The Chairman then summarized the discussion, indicating that it was agreed that the plan was experimental. He noted that it offered the immediate advantage of a positive proposal for the Rio Conference,2 and stressed the importance of orderly procedure for reviewing it in the NAC. He suggested that the Council review the entire program in six months on the basis of reports of the Export-Import Bank. The Council then approved the draft action.

The following action was taken (NAC Action No. 734):

“The National Advisory Council advises the Export-Import Bank that it approves the program for exporter lines of credit outlined in the Bank’s letter of November 2, 1954 (NAC Document No. 1700). It is understood that the Export-Import Bank will submit to the Council a monthly report of its activities under this program.”

[Here follows discussion concerning the proposed International Finance Corporation (IFC); for documentation on the IFC, see pages 227 ff.]

  1. Supra.
  2. Reference is to the Meeting of Ministers of Finance or Economy of the American Republics as the Fourth Extraordinary Meeting of the Inter-American Economic and Social Council (commonly referred to as the Rio Economic Conference), held at Quitandinha, Brazil, Nov. 22–Dec. 2, 1954; for documentation concerning the meeting, see vol. iv, pp. 313 ff.