187. Memorandum From the President’s Special Assistant (Rostow) to President Johnson1

SUBJECT

  • The Gold Issue

Walter Heller gave me a rundown on last night’s meeting of the Dillon Committee. (Sec. Fowler’s Advisory Committee, consisting of: Dillon [Page 534], Roosa, Heller, Kermit Gordon, David Rockefeller, Edward Bernstein, Frazer Wilde, Andre Mayer, and Bator.) They met informally in New York to go over the options on gold and the balance of payments and will report to Sec. Fowler.

Their conclusions were:

1.
The tax bill is a must. They agree on a strong public statement (attached)2 which they will release next week after going over it with Fowler.
2.
They are unanimously opposed to an increase in the price of gold as a way of dealing with the present crisis.
3.
Most would prefer to keep the present gold pool arrangement going but they do not believe it will be possible to negotiate with the Europeans the arrangements necessary (specifically, the gold certificate proposal) to turn the market around and restore calm.
4.
They, therefore, believe we will have to close the gold pool operation and let the market price go. They believe it is essential we do this in cooperation with our gold pool partners and preferably at their request.
5.
They were somewhat fuzzy on particular plans for getting non-gold pool members to cooperate and suggest we perhaps can use the IMF for this purpose. They believe we will have to act within 30 days and must have a clear idea of where we want to go and how we plan to get there.

Comment: As you can see, these views are not very different from our own. After the meeting of the Central Bankers in Basel this week end, we will have a better idea of what the Europeans are willing to do, what the prospects are of keeping the gold market open and quiet, and what would be the most orderly way of bringing about change. Deming returns tonight, and Bill Martin on Monday.3

Fowler is working to get the gold cover bill on the floor of the Senate on Tuesday. Passage of the bill should help quiet things down.4

Walt
  1. Source: Johnson Library, National Security File, Subject File, 1968 Balance of Payments Programs, Memos and Miscellaneous [1 of 2], Box 4. Secret. A handwritten notation next to the dateline on the source text reads: “Rec’d 4:46 p.”
  2. Not printed.
  3. March 11.
  4. In his Economic Report to Congress on February 1, President Johnson proposed legislation to remove entirely the gold cover requirement as 25 percent backing for outstanding Federal Reserve currency notes. See Public Papers of the Presidents of the United States: Lyndon B. Johnson , 1968–69, Book I, pp. 136–137. The House of Representatives narrowly passed this legislation on February 21, and the Senate also approved in a close vote on March 14. President Johnson signed the legislation into law on March 18. (P.L. 90–269; 82 Stat. 50)