A/MS files, lot 54 D 291, “Currency”

Memorandum by the Deputy Assistant Secretary of State for Administration (Scott) to the Under Secretary of State (Webb)

  • Subject:
  • Potential Savings in Purchases of Foreign Currencies

The Treasurer of the United States has on deposit in various countries throughout the world foreign currencies acquired under Lend Lease Settlements, Surplus Property Agreements and other sources, and periodically receives accelerated payments in foreign currencies against these agreements.

Since fiscal year 1948, as a matter of policy, the Department has acquired large quantities of foreign currencies from the Treasury by purchase with appropriated dollars. This action has resulted in either the reduction of balances held by the Treasurer or the reduction of the indebtedness of a foreign government to the United States and simultaneously payment of U.S. dollars into miscellaneous receipts of the Treasury rather than into the economy of the countries involved.

Although the Department is not required by law to purchase all foreign currencies from Treasury, provision of our current appropriation requires the purchase of $7,500,000 in foreign currencies from Treasury.

The exchange rates at which foreign currencies are acquired by the Department have a bearing on the Department’s expenses. It therefore is essential that realistic values be obtained wherever available.

The Treasury Department policy on sales of its foreign currency availabilities, except in certain Iron Curtain countries, has been one of adherence to official or officially sanctioned rates even [Page 311] though such transactions are strictly an internal U.S. Government matter.

During recent months, disparities have developed between the exchange rates maintained officially, with respect to many currencies, and local curb markets, cross rates available in other countries or through other arrangements. The latter rates represent more realistic values with relation to the buying power of the U.S. dollar. Specific examples of countries in this category are Austria, France, Italy, Norway, Greece, Egypt and India where the Department’s foreign currency needs are acquired by purchase from the Treasury at rates maintained officially. It is estimated that a potential annual savings of $1,500,000 can be effected in these seven countries.

In order that the Department may obtain realistic dollar values for the appropriated dollars used to procure local currencies, it is proposed that Treasury be approached and urged to meet the available markets not currently recognized in those instances where such markets represent realistic exchange rates with relation to the U.S. dollar.

Recommendation: It is recommended that you discuss the Department’s foreign exchange problems outlined above with the Secretary of the Treasury1 looking toward a liberalization of the Treasury’s policy on exchange rates applied to foreign currencies held or acquired by the Treasurer of the United States abroad and offered for sale to U.S. agencies.2

W.K. Scott
  1. John W. Snyder.
  2. No information was found in Department of State files indicating whether Deputy Assistant Secretary Scott’s recommendation was approved, or if discussions concerning the matter were ever held with Secretary Snyder.