36. Memorandum From the Secretary of the Council on Foreign Economic Policy (Cullen) to the Council0


  • Accumulation and Administration of Local Currencies by the United States
Your attention is invited to the attached report on the accumulation and administration of foreign currencies by the United States. This report was prepared for the Director of the International Cooperation Administration by Messrs. Robert L. Berenson, William M. Bristol, and Ralph Straus.1
The authors of the report found that the problem of excess local currencies accumulated by the U.S. abroad is presently confined to a few countries and is a direct result of P.L. 480. They believe, however, that there may be a serious problem in the future if the P.L. 480 loan program continues at the present or an accelerated rate and the Development Loan Fund loans are repaid in local currencies.
They recommend that the future accumulation of local currencies be reduced by amending P.L. 480 to permit grants as well as loans. They would also reduce interest rates on loans and eliminate maintenance of value, where no useful purpose would be served by increasing U.S. holdings of local currency. They would provide a greater incentive for repayment of loans in dollars.
They oppose use of local currencies for U.S. purchases of exportable goods and services from the underdeveloped countries as this would deprive those countries of resources and foreign exchange earnings. They would make exceptions where such purchases were used to develop new markets.
They have many suggestions for using local currencies: they would make grants to educational foundations and create new foundations for educational and scientific research; establish industrial development banks; help countries hire technical personnel; purchase of non-voting stock of the International Finance Corporation to be held by the countries whose currencies are invested.
They would eliminate the provision in the Cooley Amendment of P.L. 4802 that no loans can be made for projects that might result in increased exports to the U.S. on the grounds that foreign countries should not be restrained from encouraging dollar-earning projects. They would also not insist that 25 percent of P.L. 480 funds uniformly be reserved for loans to private investors.
It is expected that certain of the recommendations in this report will be considered by the CFEP in the near future.
Paul H. Cullen
It. Col., USA
  1. Source: Eisenhower Library, CFEP Chairman Records, Papers Series, CFEP Memoranda. Official Use Only.
  2. “Accumulation and Administration of Local Currencies, A Special Report to James H. Smith Jr., Director, International Cooperation Administration”; transmitted with a covering letter of August 5 from consultants Berenson, Bristol, and Straus to Smith. (Ibid.)
  3. The Cooley Amendment was a provision of P.L. 85–128 (approved August 13, 1957; 71 Stat. 345), which amended and extended P.L. 480 (the Agricultural Trade Development and Assistance Act, approved July 10, 1954; 68 Stat. (pt. 1) 454).