NAC files, lot 60 D 137, “Minutes”

Minutes of the 218th Meeting of the National Advisory Council on International Monetary and Financial Problems, Held at Washington, November 3, 1954

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

Gov. Wm. McC. Martin, Jr., Board of Governors, Federal Reserve System

  • Gov. M. S. Szymczak
  • Mr. Lewis N. Dembitz

Mr. Lynn U. Stambaugh, Export-Import Bank

  • Mr. Hawthorne Arey

Mr. Edward B. Hall, Foreign Operations Administration

  • Mr. Jack F. Bennett
  • Mr. Devereux Parle

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. Bodwick, 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)

[Here follows a table of contents.]

1. Proposal for an International Finance Corporation

The Council considered NAC Document No. 16981 containing a recommendation for United States participation in an International Finance Corporation. The Chairman remarked that the IFC proposal had been under consideration in the U.S. Government for a considerable period of time and that the present proposal was developed following a request by the United States Delegation to the United Nations for reconsideration of the United States position. [Page 303] He noted that the IFC proposal had been considerably improved by the elimination of the provision for equity financing, and outlined the procedure contemplated. If the Council approved the proposal in principle, Treasury would request Presidential approval and then consult with interested Congressional leaders. A public announcement of the intention of the Administration to submit the proposal to the Congress would be made prior to the Rio Conference.

Mr. Waugh stated that the Department of State was willing to support the present proposal, largely because of the importance to the United States of avoiding a perpetual negative position. State also agreed with the procedure outlined by the Chairman. He felt that announcement of the IFC proposal might forestall a Latin American proposal at the Rio Conference for an Inter-American Development Bank.

Mr. Martin stated that he remained unconvinced that the IFC proposal had economic merit and he doubted the need under present conditions for an additional international institution of this type. He also felt that the IFC might raise problems with respect to the operations of the Export-Import Bank and the International Bank. He indicated, however, that if the Council felt it necessary to approve the proposal on political grounds, he would not oppose it.

Mr. Anderson indicated approval of the principle of the proposal and suggested that the Corporation might reasonably begin business after $50 million have been subscribed of the currencies most valuable for lending purposes, rather than waiting for subscriptions of $75 million and 30 members. He also favored, as a means of emphasizing its experimental character, provision for automatic liquidation of the IFC after 5 years unless two-thirds of the members voted for continuation.

Mr. Hall stated that Governor Stassen is in favor of the IFC proposal, and suggested that more flexibility in the kinds of securities operations envisaged for the IFC would be desirable. He also felt that a limit on authorized capital higher than $100 million would be desirable, to simplify any necessary later increases in the capital of the Corporation, and he felt that 5 years would be too short a period to judge whether the Corporation would be effective.

Mr. Stambaugh stated that the Export-Import Bank is opposed to the IFC proposal on substantive grounds but recognizes the political factors in the situation. He expressed concern about the relationship of an IFC to the Export-Import Bank, and felt that the Council should be clearly on record that the IFC would in no way interfere with the operations of the Export-Import Bank. Mr. Lodwick expressed agreement with the proposal, but emphasized that the Department of Agriculture likewise wished to be certain that [Page 304] the IFC not interfere with the operations of the Export-Import Bank.

There followed a thorough discussion of the relationships of the IFC with the established lending institutions. The Council noted that the IFC was designed to fill a different role than either the Export-Import Bank or the IBRD. Accordingly, the Council agreed unanimously that the Corporation should be regarded as supplementing, and not competing with, or having any priority over, the Export-Import Bank and the International Bank. Thus the Corporation would not affect the activities of the Export-Import Bank in aiding in financing and facilitating the exports and imports of the United States.

Mr. Brundage indicated that the Bureau of the Budget was not enthusiastic over the proposal but that the removal of the provision for equity financing improved it considerably. He inquired concerning the method of providing the U.S. subscription. The Chairman replied that the funds would have to be authorized by the Congress, probably along the lines that funds were provided for the IMF and IBRD subscriptions.

In reply to the Chairman’s question about the position of the IBRD’s Board on the IFC proposal, Mr. Overby stated that the Executive Board of the Bank had at no time given its approval to the IFC proposal. It had merely decided that the management on its own responsibility could submit reports to ECOSOC. He emphasized that no decision on the policy of the United States had been given to the Bank’s management, though there had been discussions about the form of the proposal.

Mr. Overby requested that great caution be exercised in discussing the proposal to avoid premature public knowledge of it, pointing out that the matter of timing of the announcement was considered important.

Mr. Waugh wished to make it clear that any action which the Council might now take would be on the principle rather than the details of the IFC proposal, which might require further study. He agreed that the functions of the Export-Import Bank must be continued as they had in the past and recognized that the creation of the IFC would involve additional problems of coordination between the two banks. Since Congress had given a mandate to the Council to coordinate these activities, the Council had special reason to scrutinize the proposal and its implications with great care.

At the conclusion of this phase of the discussion, the Council agreed to approve the proposal in principle and to approve the procedure for implementation as submitted, subject to the understanding previously reached with respect to the functions of the Export-Import Bank and the IBRD.

[Page 305]

The following action was taken (Action No. 748):

“The National Advisory Council approves in principle U.S. participation in an International Finance Corporation to be organized as an affiliate of the International Bank for Reconstruction and Development, for the purpose of promoting private investment by making loans without member government guarantees. The capital of the Corporation would be set at $100 million, with a U.S. subscription of about $35 million. It is understood that the Corporation would not directly provide equity financing, and that it would supplement and would not compete with or have any priority over the Export-Import Bank or the International Bank.”

The Chairman then invited discussion on specific aspects of the proposal. The discussion dealt primarily with appropriate means for re-examination of the IFC after a reasonable period, as suggested by Mr. Anderson. There was general agreement that the IFC should be regarded as experimental and that therefore some means should be adopted to raise the question, after a time, of whether it should be continued. Mr. Waugh stated that he was very dubious that the provision for review should be a part of the charter of the IFC. After discussion, the Council instructed the Staff Committee to outline the several alternate possibilities. The Council also noted that exploration of this question with the management of the IBRD would eventually be necessary.2

[Here follows discussion of the proposed Export-Import Bank earmark for loans to Iran and other matters.]

  1. Supra .
  2. At the 220th meeting of the National Advisory Council on Nov. 10, 1954, Chairman Burgess informed the Council “that the IFC proposal had been discussed that day with the President, who had approved it, and that discussions would begin soon with appropriate members of Congress.” (NAC files, lot 60 D 137, “Minutes”) The Department of the Treasury officially announced U.S. support of the IFC on Nov. 11.