177. Action Memorandum From Robert Hormats of the National Security Council Staff to the President’s Assistant for National Security Affairs (Kissinger)1

SUBJECT

  • Memorandum from the President to the Secretary of the Treasury on Instructing U.S. Representatives to the International Financial Institutions in Expropriation Situations

George Shultz (Tab B) recommends that the President sign a memorandum (Tab C) instructing the Secretary of the Treasury on the method of handling instructions to U.S. representatives to the international financial institutions in expropriation situations.2 From your point of view, the memorandum to the Secretary of the Treasury is totally unacceptable.

According to all previous interagency agreements, the authorization bills for the multilateral development institutions, and Pete Peterson’s directive to the agencies of February 7 (Tab D)3 final authority for making [Page 455]determinations on whether or not appropriate arrangements have been, or are being, made to provide for adequate compensation resides with the President. While the Secretary of the Treasury clearly has authority to instruct U.S. executive directors in the multilateral development institutions under Executive Order 11269,4 nowhere—prior to this—has it been decided that the Secretary of Treasury would also make the determination on the compensation question. It had been agreed that the President—with advice from CIEPwould determine whether compensation was being carried out in an appropriate manner. Indeed, the Administration’s position in dealing with the authorization bills for the multilateral institutions was to assure that the legislation vested authority to make this determination in the President not the Secretary of the Treasury. In my view it is especially important that the President himself retain this power since the judgment involved in making this determination obviously requires consideration of foreign policy questions—which do not fall under the purview of the Secretary of the Treasury.

[FYI: Peter Flanigan, who concurred in this memorandum, is giving away a good bit of his own authority by moving the determination decision from the White House (under CIEP) to the Treasury, and he is certainly compromising yours.]5

Recommendation:

That you call Peter Flanigan and George Shultz as soon as possible and make known to them your strong objections to delegating the Presidential power to make these determinations to the Secretary of the Treasury. My suggestion for revising the President’s memorandum to the Secretary of the Treasury is at Tab A.

Tab A6

I should like to make it clear that consistent with the delegated authority contained in Section 3(a)(1) of Executive Order 11269 dated February 14, 1966, the Secretary of the Treasury, in accordance with Presidential determinations reached upon the advice of the Council on International Economic Policy, should give instructions to the representatives of the United States to the respective organizations pursuant to Section 21 of the Inter-American Development Bank Act, Section 18 of the Asian Development Act, and Section 12 of the International Development Association Act.

  1. Source: National Archives, Nixon Presidential Materials, NSC Files, Agency Files, Box 219, CIEP. Confidential. On another copy of this memorandum, attached to a May 12 memorandum from Hormats to Kissinger, Kissinger wrote: “Let me check Haldeman’s understanding of what Connally has been promised.” (Ibid.)
  2. Neither tab is printed. Shultz’ April 10 memorandum, Tab B, referred to his March 9 memorandum, Document 176. The final sentence of the memorandum that Shultz recommended the President send to Connally (Tab C) reads: “In the exercise of this authority the Secretary shall take into account the recommendations of the Council on Economic Policy staff coordinating group on expropriation questions.” In his May 12 memorandum to Kissinger (see footnote 1 above), Hormats noted that Shultz’ April 10 formulation vested too much authority with the Secretary and did not allow sufficient attention to foreign policy considerations. On Hormats’ May 12 memorandum, Kissinger wrote: “Let me discuss with Shultz.” For the memorandum finally sent to Secretary of the Treasury Shultz, see Document 180.
  3. Reference is to an early draft of Document 175.
  4. Dated February 14, 1966; see footnote 4, Document 173.
  5. Brackets in the source text.
  6. No classification marking.