58. Memorandum From Secretary of the Treasury Connally to President Nixon 1

I understand you should soon have on your desk for decision matters relating to the organization of the Administration for foreign economic policy, filling out the framework established by the Council for International Economic Policy. I believe it is important that this matter be cleared up promptly. It is even more important that the arrangements be effective, workable, and consistent with operating responsibilities.

Internationally, my major concern, as Secretary of the Treasury and your chief financial official, must be with international monetary and balance of payments policy. The Treasury Department, by the nature of its statutory responsibilities and role, necessarily carries the principal burden in this area—it is part and parcel of the daily job, and the Congress, the public, and foreign governments properly look to me as the spokesman. That responsibility carries with it a further responsibility to advise you on these matters.

Equally clearly, there is a need for coordination and consultation—most closely with the Federal Reserve, but also with State, the Council of Economic Advisers, and others. In practice, throughout your Administration, the principal channel for coordination of international monetary policy has been through the Under Secretary of the Treasury for Monetary Affairs—the so-called “Volcker Group,” where all relevant agencies are represented. I have found considerable agreement that this channel has worked effectively, and I assume it will remain in place.

Essentially, I believe this Group could and should, under my immediate direction, formally function as a committee of the CIEP, recognizing that some sensitive matters in this area need to be treated in a more restricted forum than the full Council. Indeed, I am at a loss to see in what other way this area can be handled consistent with my present responsibilities and those of the Department, yet assuring the full Administration consultation and coordination you seek through CIEP.

I am also closely concerned with the foreign assistance area.2

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Your constructive reorganization of our bilateral programs will require some new arrangements. There are special problems in melding the thought of an over-all coordinator for aid, as urged by Rudy Peterson, and the concept of the CIEP. I have sent to George Shultz a more detailed memorandum,3 outlining what seems to me a sensible solution, but also wanted you to have the essence of my thinking directly.

Essentially, the new bilateral aid agencies could be coordinated through a CIEP subcommittee, chaired either by State, or—to fit the concept of a divorce from short-term foreign policy—by Pete Peterson or one of his assistants. If one man needs to show the flag in Congress, the Secretary of State would seem to remain the logical choice. However, I would stop well short of any concept of a single coordinating “czar” in this area. Inevitably, that would cut across the CIEP arrangements and blur—possibly to the point of extinction—your basic idea of keeping separate the several distinct elements in the foreign assistance program.

We already have the National Advisory Council mechanism, with a Treasury Chairman, for the multilateral programs. Among other things, this provides the Congressionally sanctioned vehicle for the Treasury legislative effort in this area, which has been rather successful through the years. I believe the NAC should continue in practice as a parallel committee of the CIEP.

The big issues—how much money to allocate to the bilateral and multilateral programs, the basic policy guidelines—are certainly matters for the CIEP, itself.

John B. Connally 4
  1. Source: Washington National Records Center, Department of the Treasury, Files of Under Secretary Volcker: FRC 56 79 15, CIEP Study Memoranda. Confidential. See footnote 1, Document 57.
  2. In a March 1 memorandum to Kissinger, Peterson addressed the Council’s role on foreign assistance issues; see footnote 1, Document 53.
  3. Not found.
  4. Printed from a copy that indicates Connally signed the original