70. Memorandum From the Under Secretary of the Treasury (Barr) to President Johnson 1
The Asian Development Bank will probably have a shortfall of about $100 million in its capitalization when the charter is signed at Manila early in December. The Asians have met their $600 million quota; the United States has met its allotted $200 million, but the hoped for $200 million from Europe will probably fall about $100 million short. Thus, it appears the Bank will start with a capitalization of $900 million instead of the target figure of $1 billion.
Mr. Eugene Black has proposed that the United States should consider picking up the $100 million shortfall on an underwriting basis—that is, hold it until, when and if other countries want to buy these shares from us.2 I oppose this recommendation for the following three reasons:
- 1)
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Balance of Payments. The Treasury has been plagued all this year with contingent liabilities that have been made in prior years and are now falling due. While this additional $100 million underwriting proposal could, at the worst, only entail $5 million in cash and $5 million in a letter of credit annually over the next five years, still it is another contingent liability which the Treasury does not want to take on.
[Page 178]As you know, Treasury, State, Commerce, Defense and the Federal Reserve are all engaged in the cooperative effort to tighten up the current voluntary program. I do not think a gratuitous offer of this magnitude would sit well with the business and banking community or the Congress at this time.
- 2)
- Diplomacy. I dispatched a team headed by Assistant Secretary Merlyn Trued, with Mr. Robert Smith representing AID and Mr. Benjamin Caplan representing State, to Bangkok in October. These men have had years of experience in international financial negotiations, and it was their unanimous recommendation to me after returning from Bangkok that an enlargement of the United Statesʼ role in this Bank would be resented rather than applauded by the Asians.
- 3)
- The Treasury will be responsible for the enactment of the authorizing legislation, and in my appearance before the House Foreign Affairs Committee and in my conversations with the House Banking and Currency Committee and the Senate Foreign Relations Committee, I have consistently emphasized that the United States is taking a minority position in this Bank, and that the initiative and direction in this effort is Asian, not U.S. We, in essence, are responding to an Asian request for help, not telling the Asians what to do. So far, I am satisfied and pleased with the reaction to this approach. It meets the Congressional growl that the United States is carrying a disproportional share of the aid efforts in the world.
Conclusion
For the above three reasons I oppose Mr. Blackʼs recommendation.
I have a vast respect for the judgment of Gene Black and I have informed him that we are opposing his position.
- Source: Johnson Library, National Security File, Country File, Vietnam, Southeast, Asian Development, Vol. I, 1965. No classification marking. Secretary of the Treasury Henry Fowler sent this memorandum to the President under a covering memorandum of November 18 indicating that he concurred with all three points made by Barr and “should particularly like to emphasize the importance of his balance of payments argument.” (Ibid.)↩
- In a November 19 memorandum to President Johnson. (Ibid.) There was no indication on Barrʼs or Blackʼs memorandum whether the President approved the $200 or $300 million capitalization, but the Asian Development Bank was chartered with a $200 million U.S. capitalization pledge. (Undated briefing memorandum on “Asian Bank and Supporting Legislation”; ibid.)↩