249. Memorandum From Acting Secretary of the Treasury Barr to President Johnson 1
Last night at about 11 p.m. London time, the Bank of England and the Chancellor of the Exchequer wrapped up a multilateral package to support the pound sterling. The package should total between $900 million and $1 billion with the exact amounts and form of participation of some countries not yet finally settled. The countries participating are Austria, Belgium, Canada, Germany, Holland, Italy, Japan, Sweden, Switzerland, and the United States, plus the Bank for International Settlements. The Bank of France was originally in the package but pulled out of the deal yesterday morning.
United States participation in the package will total roughly $400 million in line with our agreement. This amount will be divided between the Federal Reserve and the Exchange Stabilization Fund of the Treasury.
The Federal Reserve Bank in New York began operations this morning in the spot sterling market and very limited operations have brought good results thus far in terms of a higher rate for sterling. The rate has moved from 2.7918 to a recent bid of 2.7940. We are hoping that this improvement in the rate will give the speculators [no?] reason for concern and by accelerating a return of the confidence in sterling will trigger a re—flow of funds to the United Kingdom.[Page 506]
This negotiation has been much more difficult than that of last November but we are hopeful that the package will carry the pound through the uncertainties of the next few months.
While this operation has started well, the first real test may come as early as Monday or Tuesday, when the British trade figures will be announced. We have no information as yet of these figures.
A release issued by the Bank of England is attached plus our own response to press inquiries.2 We will not add any comments to these statements and feel that the details of this operation must be held very close-especially the figures.