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700.5 MSP/12–1654

Memorandum by the Special Assistant to the Secretary of State for Mutual Security Affairs (Nolting) to the Secretary of State

confidential

  • Subject:
  • Proposals on organization to be discussed with Secretary Humphrey this afternoon1

Pursuant to your request, I recommend the following general outline of organizational structure for the Mutual Security Programs for FY ’56. I should like to stress again the urgency of a decision in this matter, for reasons both of continuity of operations in the Mutual Security field and adequacy of presentation to the Congress early next spring. I believe that the decision on this question is important enough, and of sufficient interest to the Congress, to warrant its inclusion in either the State of the Union Message or the President’s Budget Message in January.

1.
Military Assistance Programs (hardware and training) and Direct Forces Support Programs (common-use items and, in some cases, direct payment of military expenses) should be administered by the Department of Defense, subject to policy guidance and control by the Secretary of State.
2.
Defense Support Programs, Technical Cooperation Programs, Multilateral Programs, and all other functions of the Foreign Operations Administration except Development Assistance should be transferred to the Department of State. This proposal would include the administration of the Battle Act, the Escapee Program, the investment promotional work of FOA, and other miscellaneous activities (some of which might be dropped). This is recommended only if we are prepared to undertake the necessary reorganization required within the State Department to carry out these functions.
3.
To carry forward the necessary Development Assistance Programs, a world-wide lending institution should be created, perhaps on a corporate basis, for which multi-year capital funds should be requested of the Congress. It seems to me essential, if such an institution is to serve foreign policy objectives, that its board of directors should be responsive to the recommendations of the Secretary of State. Such an institution should be empowered to make both hard and soft loans. There is an open question as to whether its charter should not also enable it to make available grant assistance, within certain defined limits, in cases of necessity.

Within the above concept, the State Department would become responsible (a) for the coordinating role for Mutual Security in toto, [Page 798]and (b) for the operating role for a large segment thereof. I do not wish to minimize the fact that this would, in my judgment, require very considerable changes within the State Department, increases in personnel, budget, and in other respects.

If the above proposal is judged infeasible for one reason or another, I would recommend that we stick to the present organizational arrangements within the U.S. Government and reach an affirmative decision to pull together to persuade the Congress to continue these present arrangements, rather than attempt to split up the present functions of FOA, thereby increasing the difficulties of coordination and failing to meet the essential desiderata of the Congress.

Frederick E. Nolting, Jr.