35. Minutes of the 270th Meeting of the National Advisory Council on International Monetary and Financial Problems0

[Here follows a list of 24 persons present, including Secretary of the Treasury Anderson, Chairman of the Council, Assistant Secretary of State for Economic Affairs Thomas C. Mann, Deputy Under Secretary of Commerce for International Affairs Marshall M. Smith, M.S. Szymczak of the Board of Governors of the Federal Reserve System, President of the Export-Import Bank Samuel C. Waugh, Assistant Secretary of Agriculture True D. Morse, and Assistant Director of the Bureau of the Budget Ralph W.E. Reid. Morse and Reid were listed as visitors. Agenda item 1 concerned an unrelated subject.]

2. Increase in Resources of IMF and IBRD

The Council then considered NAC Document No. 2361, a memorandum from Mr. Coughran and Mr. Southard which outlined a suggested position for the United States to take on the resources of the Fund and the Bank.1 Mr. Coughran observed that a 100 percent increase in the United States subscription to the International Bank would amount to $3,175 million, but it was contemplated that none of this increase would be called unless defaults occurred on the Bank’s loans. The increase would appear in the U.S. Budget as new obligational authority but would have no cash impact.

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Mr. Southard reviewed the proposal for an increase in the Fund’s resources, pointing out that the distinction between a 50 percent increase in the Fund and a 100 percent increase in the Bank was a practical one. In the case of the Fund, 25 percent of the increase would have to be paid immediately in gold, and there was no assurance that the non-interest-bearing notes given by the United States for the balance of its increase would not be cashed. He noted the suggestion that the United States might wish to have a larger quota in order to preserve its voting power, if other countries with large quotas desired increases of more than 50 percent. However, he thought the requirement of a 25 percent gold payment would limit the eagerness of other countries for quota increases in excess of 50 percent. He felt that a 50 percent increase in quotas would adequately meet the needs of the Fund.

Mr. Southard discussed the special problems that might arise in the case of China and India. If the German quota were increased by 50 percent, China could waive its right to a quota increase, and still retain its position among the first five countries. If the German increase in quota were substantially larger than 50 percent, however, China would drop out of the first five. The Chinese Director was aware of the practical difficulties involved, such as putting up 25 percent of the increase in gold, and intended to discuss the matter with his government.

On procedure, Mr. Southard indicated that the resolutions on the increases might be included by the Joint Procedures Committee in its reports, which would probably be approved without discussion. Alternatively, if a discussion of the resolutions were desired, the Joint Procedures Committee might recommend that they be considered at the sessions on the Annual Reports of the Fund and Bank, respectively.

Mr. Waugh said that he was in agreement with the recommended action on the increases provided it did not imply that basic decisions had been taken on all of the issues raised by NAC Document No. 2361. He wished to discuss with the Board of Directors of the Export-Import Bank some of the problems, such as those relating to the International Bank’s budget and to the increased use of contributions from other countries. He favored an increase in the International Bank’s capital, but questioned whether calling the International Bank a $10 billion or a $20 billion institution gave a correct picture, in view of the large amount of capital not called. He considered an increase in Fund quotas to be necessary, and approved the requirement for a 25 percent gold payment. He noted that in some instances demands made on the Export-Import Bank were ones that properly should be made on the International Monetary Fund.

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Governor Szymczak, Mr. Smith and Mr. Mann all indicated approval of the recommended Action. Mr. Reid observed that the proposal with respect to the International Bank would involve a request for $3.2 billion of new obligational authority, for an account which already carried an unobligated balance of $2.5 billion from the 1946 subscription. With respect to the International Monetary Fund any increase in the U.S. quota would involve both new obligational authority and an expenditure. The proposed increases in Fund and Bank resources, added to requirements of the Mutual Security Program and PL 480, would result in a request to Congress for new obligational authority of from $10 billion to $12 billion next year for foreign programs. He thought this might affect the Mutual Security Program. He questioned whether the extra cost of a 100 percent quota increase in the Fund in order to preserve our relative voting power would be justified. Mr. Southard thought that a small increase, possibly 60 to 65 percent, would be enough to preserve the United States position.

The Chairman said the consensus appeared to favor the recommended action, and that it would be considered adopted, but that a further meeting would be held to discuss details if desired by the Export-Import Bank.

The Council unanimously took the following action (NAC Action No. 1235):

“The National Advisory Council advises the U.S. Governor of the International Monetary Fund to offer or support a resolution in the Board of Governors of the Fund directing the Board of Executive Directors to consider and report to the Governors on the question of enlarging the resources of the Fund by an increase in quotas.

“The National Advisory Council advises the U.S. Governor of the International Bank for Reconstruction and Development to offer or support a resolution in the Board of Governors of the Bank directing the Board of Executive Directors to consider and report to the Governors on the question of enlarging the resources of the Bank by an increase in the authorized capital and the subscriptions of the members.”2

[Here follows agenda item 3.]

  1. Source: National Archives and Records Administration, RG 56, Records of the Department of the Treasury, NAC Minutes. For NAC Use Only. Presumably drafted by NAC Secretary George H. Willis, who was present, although the source text does not indicate the drafter.
  2. Document 155.
  3. At their 13th annual meeting, held in New Delhi October 6–10, the IMF and IBRD Boards of Governors unanimously adopted Anderson’s proposal requesting a study of an increase in IMF quotas and the IBRD subscribed capital. On December 29, the IMF and IBRD Executive Directors recommended to the member governments that the resources of the two institutions be increased.