178. Memorandum of Conversation0
SUBJECT
- Expansion of IMF Resources
PARTICIPANTS
- Mr. Frank Southard—IMF
- Mr. George Willis—Treasury
- Mr. James Tobin—CEA
- Mr. Robert Triffin—CEA
- Mr. Herbert Furth—Federal Reserve Board
- Mr. John Hooker—IMF
- Mr. Jack Pollock—IMF
- E—Edwin M. Martin
As a result of the discussion there seemed to be general agreement that it would be desirable for Southard to prepare a US position paper for consideration by various agencies which would provide authority for the US to offer a standing line of credit to the IMF of about $2 billion to be matched by similar lines of credit from 8 to 10 of the other principal financial countries in the amount of about $4 billion. This credit could be drawn upon only when the country providing it was in surplus to make advances to countries in deficit. In return it could be demanded back from the Fund as the country whose funds had been advanced became in its turn a deficit country and needed to add to its resources. It was thought that while legislation would be required it might be easier if the Federal Reserve Board should be the source of funds. It was agreed that means should be sought for the Fund to give in return for monies it had drawn a note which could be counted as a reserve of the Central Bank.
Southard thought no such proposal would succeed unless the US lobbied for it. The Europeans were exceedingly lukewarm. The Germans had come out with a rather favorable statement but immediately had been slapped at meeting of the Six for doing so without consultation. The French looked upon it as merely a device for strengthening sterling and [Page 397] would be very reluctant to participate, he feared. Even with our leadership, he was doubtful of success.
I asked whether such a move would be expected to be accompanied by any significant change in criteria for IMF advances. He thought not and that the Europeans would strongly oppose it for the same reason that the less developeds would support it. The Europeans fear the IMF will go bankrupt in backing up deficits of less developed countries. In this connection he also answered this by saying that the general view was that present Fund resources were adequate to take care of the needs of the less developed countries and this move is essentially to support reserve currencies, particularly sterling.
This does not preclude some modest changes in the willingness of IMF to make funds available automatically but they would be very modest.
It will be necessary for the US to have a position of action by early April.
- Source: Department of State, Central Files, 398.13/3-861. Official Use Only. Drafted by Martin on March 13.↩