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Conference at Bretton Woods
Prepares Plans
For International Finance




United States
Government Printing Office
Washington : 1944




Copies of this publication are for sale by
lhe Superintendent of Documents, Government Printing Office, Washington 25, D. C.
at 10 cents a copy.

Conference at Bretton Woods
Prepares Plans
For International Finance

E United Nations Monetary and Financial
2onf erence which met at Bretton Woods, New
Hampshire, from July 1 to July 22, 1944 produced two major proposals: The International
Monetary Fund and the International Bank for
Eeconstruction and Development. These two institutions are parts of the general program being
planned by the United States and other peaceloving nations to improve economic conditions
generally throughout the world.
At Dumbarton Oaks plans were made for general security and for an international organization 'with broad responsibilities. The Economic
and Social Council proposed there would be a
high coordinating body and would perform such
functions as are assigned to it by the General
Assembly. In addition, several specialized agencies whose responsibilities and authority would
cover the major economic fields are planned.
Plans for the Food and Agriculture organization
were worked out at the conference at Hot Springs,
Virginia. Measures are also being considered to
bring about a general reduction of trade barriers
Mr. Young, Adviser on International Financial Institutions, Division of Financial and Monetary Affairs,
OF \ of Economic Affairs, Department of State, was a
n^^ler of the Secretariat at the Bretton Woods

and the abandonment of undesirable practices.
The various measures and machinery that are being planned at this time constitute a unified program and are to be considered as parts of a whole.
In the field of finance, the agencies proposed are
the International Monetary Fund and the International Bank for Reconstruction and Development. These two companion institutions are designed to provide a basis for the development of
international financial transactions and thereby
to facilitate expansion of trade and fuller utilization of the world's productive resources. They
are pointed toward the goal of higher national incomes and general security.
The two plans represent the combined e
44 nations and are the culmination of study
informal discussions spreacj over an extended period of time, among the technical experts of these
governments. The main outlines and principles
of the plans were thus generally agreed upon prior
to the Conference, but a great deal of work
From the near-range viewpoint the Conference
was marked by an unusually large amount of hard
and intensive work and by a determination of the
nations represented to find common ground for
agreement and to produce a plan. The delegations included men of the highest level of technical competence.
From the long-range viewpoint the Conference
represents a significant step in international collaboration. Technical experts from 44 nations
have set forth what they consider to be rules of
the game in the field of currency and exchange.
With pre-war currency and trade disorders fresh
in mind, the nations recognized that their economic interests were interlocked and that cooperation was essential; they recognized also that the4
machinery they were designing could, if properly
designed, make a major contribution to the lasti
health and prosperity of the world.
The agreements worked out at the Conference

do not commit any government. They are now
before the governments of the United Nations for
their consideration and action. The Fund agreement shall go into effect when approved by nations having 65 percent of the quotas; the Bank
agreement shall go into effect when approved by
members of the Fund whose minimum subscriptions to the Bank comprise 65 percent of the total
subscriptions scheduled.

When currency systems were restored after the
last war there was little or no attempt at coordination of measures to provide stability; no mary was set up to facilitate an orderly adjust^ J of exchange rates when fundamental conditions necessitated such a revision. The disturbances of the 1930's, involving a resort to competitive currency depreciation, imposition of exchange restrictions, import quotas, and other devices which all but stifled trade, made it clear that
improved international financial arrangements
were necessary. The currency and exchange difficulties of that period are generally regarded as
contributing to a considerable extent to the outbreak of the present war.
As the war progressed, discussion of international financial objectives and procedures was stimulated. In the United States Dr. Harry White
of the Treasury Department prepared a plan for
an international stabilization fund and an investment bank which he presented confidentially early
in 1942 to a small group in Washington.
Discussions had also been under way in England, and soon thereafter Lord Keynes offered a
proposal for an "International Clearing Union".
The British Government printed this proposal as
a secret document without Lord Keynes' name.
Copies were made available to United States Government officials. These two proposals became
as the White Plan and the Keynes Plan,
ifey were actively discussed in government circles

both in Washington and London beginning about
the middle of 1942, and early in 1943 they were
confidentially communicated to other United
In April 1943 the two plans were made public.
The American release to the press of a "Preliminary Draft Outline of Proposal for a United and
Associated Nations Stabilization Fund" and the
British White Paper presenting "Proposals for an
International Clearing Union" pointed out that
each proposal was the work of government technical experts and that it did not involve any official
commitment. Although the original White Plan
provided for the creation of an investment bank
as well as a stabilization fund, the material
public in April 1943 did not include the
for a bank. Attention was concentrated on the
stabilization fund. The British proposal referred
to the need for other institutions, including a
Board for International Investment, and mentioned the services which the Clearing Union
might perform for such a Board.
In the spring of 1943 the President created a
committee known as the Cabinet Committee, consisting of the heads of the Department of State,
Department of Commerce, Foreign Economic Administration, and Board of Governors of the Federal Eeserve System, to work with the Secretary
of the Treasury on the question. A technical
commission composed of Government financial experts under the chairmanship of Dr. White was
also established.
When the American proposal was made public
the Secretary of the Treasury sent copies to 37
nations and invited them to send technical experts
to Washington to make suggestions and to discuss the proposal. Accordingly, about the middle
of 1943 discussions with experts from a large number of countries were held informally in Washington. Many valuable changes and additi
developed from these discussions. Shortly
ward the Canadian experts offered a plan which

presented their views, and a little later China and
France came forward with proposals. The similarities of the various viewpoints were much more
marked than were the differences. Following
these discussions between American and foreign
technical experts a revision of the so-called White
Plan was published in July 1943.
In the fall of 1943 British economic and financial experts came to the United States to discuss
various topics. The financial discussions dealt
almost entirely with the currency-stabilization
proposals and only to a small extent with plans
for a bank. The British and American experts
found themselves in substantial agreement on the
nor principles of stabilization, so that the proscts of designing a plan agreeable to both countries appeared bright. The discussions continued
by correspondence, and there was prepared a socalled joint statement of principles on which there
was agreement.
Meanwhile, in November 1943 the Treasury Department had published a draft of the bank proposal. Russian experts came to Washington early
in 1944 and engaged in extended discussions with
respect to both proposed institutions. These discussions were undertaken with considerable interest in view of the differences between the Russian
economic system and the systems prevailing in
most other countries. It soon developed that
agreement with Russia on both the Fund and the
Bank was possible.
Out of these various discussions there developed
a document known as the Joint Statement of Experts on the International Monetary Fund. This
document represented the common area of agreement among the nations that had participated in
the discussions. It was published on April 22,
1944 simultaneously in Washington, London,
Moscow, Chungking, Ottawa, Rio de Janeiro,
Mexico City, and Habana, and in full or abbrevii^/ed form in many other countries. It represented
the views of the experts of approximately 30 coun-



tries and constituted a basis for the development
of the subsequent detailed plan.
Time had not permitted preparation of a similar statement with respect to the Bank. The discussions had indicated a large measure of agreement on the Bank, but the plan was not so far advanced as was that for the Monetary Fund.
During this period the Secretary of the Treasury
kept the Congress informed regarding developments and at various times made arrangements to
appear before congressional committees. Prior to
the publication of the Joint Statement he explained the proposals in considerable detail to
congressional committees; he indicated that an
international conference on the subject wo
probably be called. This Government's p o s ^
as explained by Secretary Morgenthau, was to the
effect that the Joint Statement was a statement of
the Government's financial experts and that it was
not a commitment of the Government itself.
Whatever plan the Conference would work out
would, necessarily, be submitted to the Congress
for its consideration. Other governments took a
similar position.
In May 1944 the President issued invitations to
the 44 United and Associated Nations to attend a
conference to be held at Bretton Woods, New
Hampshire, in July 1944. The Conference was to
discuss the proposed Monetary Fund within the
terms of the Joint Statement and was to consider
if possible the bank proposal.
In order to facilitate the work of the Conference
and to work out some of the many details, a preliminary meeting was held at Atlantic City. On
June 15 a group of American financial experts
assembled there and were joined a few days later
by experts from 15 other countries. The group
worked intensively, endeavoring to deal with some
of the unsettled questions and to produce a more
finished document. At this preliminary conference the British experts presented proposals
the Bank which involved some changes from t"

earlier plan but which met with almost immediate
approval of the experts of the other nations, including the United States. It became clear that
the Bank proposal was to receive major consideration at the Conference. The group at Atlantic
City went directly from there to the Conference at
Bretton Woods which assembled on July 1,1944.

The International Monetary Fund Agreement,
drawn up at the Conference, sets forth what the
nations consider to be the principles and produres or "rules of the game" in the field of
rrency and exchange, as well as with respect to
certain phases of commercial policy. These principles and the machinery of the Fund are designed
to facilitate the expansion of trade and also to
prevent conditions which cause governments to impose restrictions on trade and resort to other uneconomic devices. A consultative procedure,
moreover, is established whereby representatives of
the member governments would regularly consider,
in a dispassionate manner, their mutual problems.
The Fund, as noted above, is part of the program
to promote a fuller flow of trade and to improve
economic conditions generally throughout the
The Fund provides facilities to assist countries
in reducing or avoiding many of the disturbances
that accompany changes in trade and other conditions. In periods of exchange stringency it would
relieve the pressure for deflation and would tend
to check many of the influences which depress
trade, production, and employment. It would promote orderly changes in exchange rates and other
economic adjustments when changes and adjustments are necessary.
The Fund is designed to provide machinery
^ h would, so far as possible, make the currencies
of its members freely convertible one for the other




tit established rates. Such convertibility would
permit foreign trade and other international
transactions to take place with a minimum of risk
and difficulty arising out of the existence of different currency systems. These risks and difficulties in the past, especially during the 1930's,
have greatly restricted international trade.
The proposed plan endeavors to provide a system wherein traders would be able to buy and sell
in any market in the world, wherever such buying
and selling could be done to the best advantage,
and to discourage arrangements whereby trade is
channeled or is confined to pairs of countries. A
broad multilateral trading system is the type envisaged, in order that trade may expand and
realize its full potentialities. Traders would
ceive accordingly some assurance regarding the
amount of their own money to be realized from
the proceeds of a foreign sale and that the money
could be transferred without hindrance.
The purposes of the Fund are stated in article I
at the beginning of the Agreement. The Fund is
to be guided in all its decisions by these purposes,
which are as follows:
(i) To promote international monetary cooperation through a permanent institution which provides the machinery for consultation and collaboration on international monetary problems.
(ii) To facilitate the expansion and balanced
growth of international trade, and to contribute
thereby to the promotion and maintenance of high
levels of employment and real income and to the
development of the productive resources of all
members as primary objectives of economic policy.
(iii) To promote exchange stability, to maintain orderly exchange arrangements among members, and to avoid competitive exchange depreciation.
(iv) To assist in the establishment of a multilateral system of payments in respect of c u r r e £ l
transactions between members and in the elimimS^

tion of foreign exchange restrictions which
hamper the growth of world trade.
(v) To give confidence to members by making
the Fund's resources available to them under adequate safeguards, thus providing them with opportunity to correct maladjustments in their balance of payments without resorting to measures
destructive of national or international prosperity.
(vi) In accordance with the above, to shorten
the duration and lessen the degree of disequilibrium in the international balances of payments
of members.
General Nature of Provisions
The basic principles or means by which the above
irposes are to be achieved are fairly simple.
They are essentially these:
1. Member countries undertake to keep their exchange rates as stable as possible; accordingly, no
changes in rates are to be made unless essential to
correct a fundamental disequilibrium.
2. If basic conditions have changed so that a
new rate becomes necessary, an adjustment can be
made, but it must in all cases be made by consultation with the Fund and according to established procedures. Beyond certain limits rates
can be changed only with the concurrence of the
3. Currency values are to be stated in terms of
gold (or U. S. dollars), and the stability of a
currency is to be gaged by its relation to gold
(or U. S. dollars). Gold is to be accepted by
members in settlement of accounts.
4. A common pool of resources, contributed by
the members, is to be established and made available under safeguarding conditions to meet temporary shortages of exchange and thereby to help
maintain the value of a member's currency until
such member has had time to correct the maladjustment which may be causing the difficulty.
^^^. Member countries agree not to engage in
discriminatory currency practices and similar de-


vices or to impose restrictions on the making of
payments and transfers for current international
transactions. Existing restrictions are to be
abandoned as soon as the post-war transitional
period permits.
6. During the post-war transitional period
flexibility in rates is provided, until rates can be
found which give promise of permanence. The
resources of the Fund are protected during this
7. Countries agree to maintain the gold value of
their currency held by the Fund, so that the assets
of the Fund will not depreciate in terms of gold.
Countries thus guarantee the Fund against loss
due to possible depreciation of their currency
8. The Fund is to deal only with governmen
or their agencies and is to have no direct contact
with the exchange market. Its facilities are to
be utilized to clear only those balances not otherwise cleared by the market.
In the proposed Agreement these and other provisions are elaborated in detail. The provisions
of the Fund are summarized below.
Membership and Subscription to FuncPs Resources
Although original membership is confined to
the United Nations that were represented at the
Bretton Woods Conference, other countries may
become members on such terms as the Fund may
prescribe. Each member is to contribute to a
common pool which will constitute the resources
of the Fund. For this purpose each country is
assigned a quota which is related to the size of the
member's foreign trade and other international
transactions and to fluctuations therein. A table of
quotas for the nations at the Conference is given on
page 19. The total of these is $8,800,000,000.
Subscriptions are to be paid in gold to the extent of 25 percent of the quota or 10 percent of
country's net official holdings of gold and Um
States dollars, whichever of these amounts is the

smaller. In the case of the United States this
would be about $688,000,000 and for all nations
at the Conferance about $1,800,000,000. Each
country is to pay the remainder in its own currency.
A member may withdraw from the Fund at any
time. If a member misuses the Fund or fails to
fulfil its obligations under the Agreement it may
be denied access to the Fund and may eventually be
required to withdraw.2
Rates of Exchange
In order to provide for stability of exchange
rates, each currency unit is to have a definite par
value in terms of gold or in terms of the United
tates dollar. These pars are to be determined
riginally as follows. Each member will communicate to the Fund the par value which it desires
for its currency, such par being based on the rates
of exchange prevailing on the sixtieth day before
the Agreement comes into force. Unless within
90 days the Fund notifies the member that the rate
is unsatisfactory, or the inember so notifies the
Fund, this par value becomes effective. If the
Fund and the member cannot agree on a suitable
par, th3 member must withdraw from the Fund.
Countries that have been occupied by the enemy
are allowed more time to select and adjust their
pars, under conditions prescribed by the Fund.
This period of adjustment provides flexibility during the transition until currencies have settled to
levels that the Fund believes can be maintained.
This arrangement also protects the Fund's resources because during such a period access to the
Fund is limited or denied entirely.
Kates for transactions between members may
not differ from parity by more than one percent in
the case of spot transactions and by a percentage
that the Fund considers reasonable for other transactions.
requires a majority vote of the Governors representing a majority of the total voting power.

Members are given a certain amount of initial
leeway with regard to changes in rates; but once
that leeway has been used up, rates can be changed
only by permission of the Fund. Changes are not
to be made under any conditions except to correct a
fundamental disequilibrium, and then only by consultation with the Fund.3 The Fund is not allowed
to deny a proposed change if it is satisfied that the
change is necessary to correct a fundamental disequilibrium.
Special arrangements exist for the post-war
transitional period. The Fund may postpone beginning exchange transactions until it is satisfied
that conditions are appropriate. It may also postpone transactions with any member if it believ
such transactions would be prejudicial to
Fund. Countries that have been occupied by the
enemy and that are granted an extension of time
to select and adjust their par values may be restricted in their access to the Fund's resources.
Use of Fund?s Resources
The resources of the Fund are intended to help
members meet temporary needs for foreign exchange due to fluctuations in their current foreign
transactions. Members may therefore acquire
from the Fund, under certain conditions, the currency of any other member by paying their own
currency, or gold, in exchange. For example, a
country that ordinarily exports agricultural products may as a result of a crop failure find itself
short of foreign exchange with which to pay for
its regular imports. If it has not previously been
using the Fund to excess or is not otherwise ineligi3
The Agreement provides that if a member proposes to
change the par value of its currency because of a fundamental disequilibrium, the Fund may not object if the
total of all previous changes (whether increases or decreases) does not exceed 10 percent of the initial par. Any
change beyond this requires approval by the Fund. If
the member proposes a change which exceeds the 10
cent but does not exceed a further 10 percent of the
the Fund must give its opinion within 72 hours.

ble, it could acquire foreign exchange from the
The resources of the Fund are not intended to be
used to provide a member with foreign capital for
investment or long-term needs. The currency
acquired must be needed for making payments for
current transactions and not for the purpose of
transferring capital from one country to another.
Capital transfers of a large and sustained nature
are excluded, since, if allowed, they might soon
cause the Fund to be depleted of currencies which
happened to be in strong demand. If the Fund
were to be able to provide for flight of capital
it would need to be very much larger. It is intended to provide only for fluctuations in current
or noncapital items in the balance of payments.
Current transactions are defined to include payments having to do with foreign trade, short-term
banking, the transfer of interest and dividends,
moderate amortization of the principal of loans,
and remittances for family living expenses.
The needs for foreign exchange that are to be
met by the Fund are the net amounts that are
not cleared through ordinary market transactions.
The Fund does not deal with the public but only
with governments or their agencies. If a country needs foreign exchange from the Fund, its
government must do the buying and can then
make the exchange available to private parties.
A member may not ordinarily acquire foreign
currencies in exchange for its own currency to a
point where the Fund's holdings of such member's currency increase by more than 25 percent of
its quota during the previous 12 months, nor exceed 200 percent of its quota. Furthermore, if the
Fund believes that a member is using the resources
of the Fund in a manner contrary to the purposes
of the Fund, it may limit or deny such member
access to its resources. If the Fund believes that
a member is making improper use of the Fund's
sources, it is required to make a report to such
member setting forth the views of the Fund.


Members using the Fund's resources are required to pay certain charges which increase as
the member's recourse to the Fund increases, and
which also increase according to the length of
time that its currency in excess of its quota is
held by the Fund.
Several provisions exist to build up or replenish
the Fund's holdings of gold and of currencies
which may be in strong demand. The purpose
of these important provisions is to strengthen the
Fund over the years and to keep its holdings of
the different currencies in reasonable balance.
In the first place, members desiring to buy the
currency of other members with gold shall do so
from the Fund if this purchase can be made
equal advantage. Moreover, in certain cases mem
bers are required at the end of each financial year
of the Fund to repurchase from the Fund a portion
of their currency held by the Fund if such holding
has increased during the year or if the member's
monetary reserves have increased.4 These provisions are designed to prevent countries from increasing their own reserves at the expense of the
Fund and from using the Fund's resources when
their own are available. If the Fund is short of a
certain currency, it may borrow the currency, pro4

The amount to be so repurchased is to be equal to one
half of any increase in the Fund's holdings of such currency, plus one half of any increase that may have occurred in the member's monetary reserves. If the member's reserves have decreased, there is to be subtracted
from the amount to be repurchased one half of such decrease. If, after the above repurchase, a member's holdings of the currency of another member have increased
as a result of transactions in that currency with other
members, the member whose holdings of such currency
have increased must use the increase to repurchase its own
currency from the Fund. None of the above adjustments,
however, are to be carried to a point where the member's
monetary reserves fall below its quota, or where the Fund's
holdings of such currency fall below 75 percent of its quota,
or where the Fund's holdings of the currency to be
to the Fund are above 75 percent of the quota of the mi
ber concerned.

vided the member whose currency is involved approves. Members also agree to sell their currencies to the Fund for gold, so that if the Fund needs
more of a certain currency, it can, if it desires, obtain this with gold.
Access to a large pool of foreign currencies, as
provided to members of the Fund, would, it is believed, tend to inspire confidence in a member's
currency and thereby to prevent speculative attacks on such currency and to promote stability.
It would also give a country time in which to make
necessary adjustments when the lack of balance in
its foreign payments and receipts is not of a selfcorrecting but of a continuing nature.
hange Restrictions
!nce restrictions on the purchase and sale of
foreign exchange are inconsistent in general with
the expansion of world trade and with the purposes of the Fund, these transactions are with a
few exceptions prohibited by the Fund. This is
an important aspect of the Fund Agreement and
recognizes that the stability which the Fund endeavors to promote would be interfered wTith by
measures which restrict trade. Such restrictions
have been used to interfere with the flow of trade
and to discriminate between countries and have
been the source of serious economic difficulties.
The Fund Agreement therefore provides that,
apart from a few exceptions and approval of the
Fund, no member may impose any restrictions on
the making of payments for current international
transactions. Current transactions, as noted
above, include those dealing with foreign trade,
short-term banking, payments of interest and dividends, reasonable amortization, and remittances
for family living expenses.
Exceptions that are permitted deal with restrictions on the transfer of capital, on a currency
that is scarce and cannot be supplied in adequate
junts by the Fund, and on transactions during
post-war transitional period. Eestrictions are


allowed on transactions with non-members unless
the Fund disapproves.
Since members are not allowed to use the resources of the Fund to meet large or sustained
outflows of capital, restrictions on capital transfers may be necessary from time to time in some
countries. Large capital movements can be so
unpredictable and can so upset economic and
financial stability that members are permitted to
exercise such controls of capital movements as
they consider necessary. The Fund may require
a member to restrict capital * movements if it believes such movements are utilizing the Fund's
If a scarcity of a particular currency
the Fund may formally declare such
scarce and thereafter apportion the Fund's supply as it deems appropriate. This is a necessary
safety valve since it is possible that in spite of the
Fund and the corrective measures provided a situation may develop wherein there is a general
shortage of a certain currency. Whenever the
Fund declares a currency scarce, members may
thereafter impose restrictions on exchange operations in that currency, but this must be done in
consultation with the Fund. The restrictions are
to be no greater than necessary to limit the demand for the scarce currency to the supply held
by the member, and they must be removed whenever the Fund declares the currency no longer
If the Fund anticipates that a scarcity is developing it may issue a report setting forth the
causes of the scarcity and giving the Fund's recommendations. In the event the Fund declares a
currency scarce it is required to issue a report.
Members are allowed to retain or impose exchange restrictions during the post-war transitional period provided they believe that otherwise
they could not settle their balance of payments
without undue recourse to the Fund.
D g C i
period the Fund is to report on restrictions sti

force, and after five years from the time when it
begins operations it may make representations to
a country regarding the removal of such restrictions. If the member persists in retaining them
the.member may be denied access to the Fund and
may even be compelled to withdraw from the Fund.
An important provision of the Fund is that
which prohibits members from engaging in discriminatory currency arrangements or multiple
currency practices, except as may be authorized by
the Fund. If any such arrangements or practices
exist, members must consult with the Fund concerning their progressive removal. , These devices
were especially damaging to trade and to internaeconomic conditions generally during the
o's, so that the ban on them by the Fund is
a notable accomplishment.
In order to provide for the convertibility of
members' currencies each member agrees to redeem
any of its currency that is held by other members,
provided such currency has been acquired as a result of current transactions or its conversion is
needed to make payments for current transactions.
A member may redeem its currency either in gold
or in the currency of the member requesting redemption.5
In cases where a member is authorized according
to the Fund agreement to maintain or establish
exchange restrictions, and at the same time has
engagements with members previously entered into
which conflict, the parties to such engagements are
to consult regarding any adjustments necessary.

Certain exceptions are made to this requirement, such
as when the convertibility of the balances for which redemption is requested has been restricted by permission of
the Fund, when the balances were accumulated from transactions which took place before the restrictions had been
removed, when the balances had been acquired contrary
to the exchange regulations of the member asked to redeem them, when the currency of the member requesting
O m p t i o n has been declared scarce, or when the member
ested to make redemption is not entitled to buy currencies from the Fund for its own currency.

Previous engagements, however, are not to be allowed to interfere with restrictions that may become necessary when a currency has been declared
scarce by the Fund. This provision means that
the stability of exchange rates is not to be upset
when the situation is of such a nature that a temporary imposition of exchange restrictions would permit the maintenance of established rates.
The Fund is to be administered by a Board of
Governors consisting of one Governor appointed
by each member. The Board meets annually or
oftener if it desires. The immediate management
of the. Fund is entrusted to the Executive Directors, who function in continuous session.
must be at least twelve Executive Directors,
of whom are appointed by the five members having the largest quotas. Two are to be elected by
the American republics not entitled to appoint
Directors, and the remaining five are to be elected
by the other members.
Each member of the Board of Governors may
cast 250 votes plus a number of votes determined
by the size of the member's quota. On the basis
of the present quotas the United States will have
27,750 votes,, or 28 percent of the total. The
United Kingdom comes next with 13,250 votes, or
13.4 percent of the total. Russia is third with
12,250 votes, or 12.4 percent of the total. China
has 5.8 percent of the votes,' France 4.8, India 4.3,
and Canada 3.3. Each Executive Director is allowed to cast the number of votes which counted
toward his election.
The above voting power is to be adjusted depending upon whether, and the extent to which, a
member has recourse to the resources of the Fund.
A member acquires one additional vote for the
equivalent of each $400,000 of net sales of its currency. Similarly, a member who is buying currencies from the Fund loses one vote for the equivalent of each $400,000 of its net purchases of \^J
cuirencies of other members.

Any net income realized by the Fund is to be
distributed to the members in proportion to their
quotas, although before this is done a two-percent
non-cumulative payment is to be made to countries
whose currencies have been in special dtaiand, on
the amount by which the Fund's average holdings
of such currencies fall below 75 percent of their
The Fund may at any time that it desires advise
any member concerning the Fund's views on matters affecting the Fund. By a two-thirds majority of the total voting power the Fund may publish
a report made to a member regarding monetary or
economic conditions in such country which tend
roduce disequilibrium in the balances of pay'nts of members.
The principal office of the Fund is to be in the
territory of the member having the largest quota.
Depositories are to be maintained in other member countries.

(In millions of United States dollars)
Costa Rica
Dominican Republic
El Salvador



New Zealand


e quota of Denmark shall be determined by the Fund after
e Danish Government has declared its readiness to sign the
Agreement but before signature takes place.

Union of
South Africa
Union of Soviet Socialist Republics 1,200
United Kingdom 1,300

United States





The international flow of long-term, capital has
been seriously disrupted for some years and has
also at times been subject to excesses and other
difficulties. Judging from existing facilities and
conditions, including the hesitancy of private
capital to seek investment abroad, it does not
pear likely that very large sums of money
be available for foreign investment unless constructive action is taken. But it is generally believed that a large volume of foreign investment,
properly guided, is of special importance to the
United States and to the world at large from
the standpoint of economic expansion, full employment, and stable international conditions.
Moreover, during the immediate post-war years
the needs of capital for reconstruction are
expected to be pressing.
The resources of the Monetary Fund, as noted
above, are not to be used for capital investment
or long-term transactions. They are therefore
not available to finance reconstruction of devastated countries or for economic development.
The Bank for Reconstruction and Development
is designed, as a companion institution to the
Fund, to help meet these needs. The Bank is intended to facilitate the flow of long-term capital
on proper terms and for productive purposes.
If private foreign lending is to revive and achieve
its purpose it should be on a basis which protects
the interests of bath investors and recipients of the
capital. The proposed Bank would endeavor tp
promote such a condition by offering its faciliti^_/
for loans that were properly approved and that

came up to certain standards. The Bank is allowed to make direct loans itself, but most of its
capital is available on]y to guarantee loans. In
making or guaranteeing loans, the Bank would
give careful attention to all the circumstances,
including the capacity of the borrower, the
nature of the project for which the loan is contracted," and the terms and conditions. The Bank
presumably would not make or guarantee a loan
which imposed onerous or unreasonable conditions
upon the borrower. Loans would need to be scrutinized from the standpoint both of their investment soundness and of their broad economic aspects.
Bank is not concerned with provision of
s for relief; that is the responsibility of other
agencies. Loans to governments for public purposes that may be socially desirable though nonrevenue-producing are permitted, provided repayment and service on the loan are amply provided
By eliminating certain risks, by minimizing
others, and by spreading widely those risks which
could not be avoided, the Bank would perform an
important economic function. The risks, according to the Agreement, would be spread internationally among the members in proportion to their
shares of stock.
The Bank would endeavor to use its influence
and facilities to promote the development of stable
and prosperous international financial conditions;
thus it would supplement the work of the Fund in
the field of currency and exchange. It would
endeavor to stimulate trade and to increase the
level of national incomes. It is part of the general
economic program for the post-war world. I t
would tend to eliminate basic causes of disequilibrium by regularizing and reducing the wide
fluctuations in the flow of investment and also by
jsing the levels of economic activity in the
nations of the world. By making capital avail-

able under proper conditions it would hasten economic adjustments as well as help to prevent
maladjustments. The Bank would thus operate
directly on the causes of disequilibrium.
The purposes of the Bank, which are stated in
article I of the Agreement and which are to guide
the Bank in all its decisions, are as follows:
(i) To assist in the reconstruction and development of territories of members by facilitating
the investment of capital for productive purposes,
including the restoration of economies destroyed
or disrupted by war, the reconversion of productive facilities to peacetime needs and the encouragement,of the development of productive facilities and resources in less developed countries, f j
(ii) To promote private foreign investmeniBy
means of guarantees or participations in loans and
other investments made by private investors; and
when private capital is not available on reasonable terms, to supplement private investment by
providing, on suitable conditions, finance for productive purposes out of its own capital, funds
raised by it and its other resources.
(iii) To promote the long-range balanced
growth of international trade and the maintenance
of equilibrium in balances of payments by encouraging international investment for the development of the productive resources of members, thereby assisting in raising productivity, the
standard of living and conditions of labor in their
(iv) To arrange the loans made or guaranteed
by it in relation to international loans through
other channels so that the more useful and urgent
projects, large and small alike, will be dealt with
(v) To conduct its operations with due regard
to the effect of international investment on business conditions in the territories of members and,
in the immediate post-war years, to assist in brbf f
ing about a smooth transition from a
a peacetime economy.


Membership and Subscriptions
Membership in the Bank is open only to members of the International Monetary Fund. Apart
from the original members of the Fund, other
countries may become members of the Bank on
terms prescribed by the Bank, but they must also
be members of the Fund. If a country ceases to be
a member of the Fund it automatically ceases to
be a member of the Bank unless retained by a
three-fourths majority of the total voting power.
Since the existence of the Fund would promote
stable currency and exchange conditions, which
are of considerable importance to international investment, it was decided that members of the Bank
ould be required to participate in the Fund.
e requirement also helps protect the Bank by
providing safeguards for reasonable stability of a
borrower's currency.
The authorized capital of the Bank is 10,000,000,000 United States dollars, of the present weight and
fineness, but the total of the prescribed minimum
subscriptions amounts to $9,100,000,000. Each
member is required to subscribe to a minimum number of shares of the capital stock assigned to such
member in the Agreement.
The capital is to be divided into two parts. The
first portion, namely 20 percent, may be used to
make direct loans. The remaining portion, 80
percent, is not available for lending but constitutes
a reserve fund for guaranteeing loans. It may be
called up only when needed to meet obligations of
the Bank in connection with loans which the Bank
has guaranteed or to make payments on the Bank's
own borrowings.
Payments on subscriptions are to be made partly
in gold or United States dollars and partly in the
currencies of the members. Each share of stock
must be paid for in gold or United States dollars
to the extent of two percent of its price and in the
rrency of the member to the extent of 18 percent.
J^ accounts for the first or 20-percent portion of
the capital. As regards the other portion, namely


80 percent, payment may be made either in gold,
United States dollars, or the currency required to
discharge the obligations of the Bank for which
the call was made. On the basis of the quotas
assigned at the Conference the gold or United
States dollar subscription (apart from the 80-percent portion) would amount to $753,500,000, of
which the United States subscription would account for $635,000,000. Twenty percent of the
quotas would amount to $1,820,000,000.
The above two percent is to be paid within 60
days from the beginning of operations and the 18
percent when the Bank calls for it. During the
first year of operations, however, the Bank must
call for at least 10 percent of its subscribed capi
If a member's currency depreciates the men
must provide the Bank with enough additional currency to maintain the original gold value of its currency held by the Bank and derived from the 20percent portion of capital.
Loans and Guaranties
The Bank would provide funds to borrowers
either by making loans itself or by guaranteeing
loans in order to aid borrowers to obtain them on
reasonable terms from the private market. The
Bank is not allowed to have outstanding at any
one time loans or guaranties in excess of its unimpaired capital, surplus, and reserves.
All loans which the Bank may make or guarantee must be guaranteed by a member or its central
bank or equivalent agency. The resources of the
Bank are not available for the benefit of non-members. The Bank may guarantee or make a loan
only when it is satisfied that the borrower would
otherwise be unable to obtain the loan on reasonable terms. The Bank thus would not interfere
with private lending unless exorbitant terms were
being imposed.
In order to safeguard the resources of the Bank
and to make sure that loans are for proper p |
i l
poses, each loan or guaranty must first be
mended by a technical committee after it makes a


careful study of the project. The Bank must also
assure itself that the proceeds of a loan are used for
the purposes for which the loan was granted.
Loans and guaranties are ordinarily to be for specific projects of reconstruction and development.
The Bank may acquire additional funds to lend
by borrowing in the market of a member, provided
the member approves and agrees that the proceeds
may be freely convertible into the currency of any
other member. Loans out of the Bank's resources,
namely out of the 20-percent portion of the capital,
however, must be approved by the member whose
currency is involved. The Bank is not allowed to
impose any conditions that the proceeds of a loan
spent in any particular country.
When the Bank makes a loan it provides the
borrower with such currencies as may be needed
for expenditures within the territories of other
members. Only in exceptional circumstances will
the Bank provide a borrower with the borrower's
own currency.
Payments of interest and principal on loans out
of the Bank's own capital are to be made in the
same currency as that lent, unless the member
whose currency is lent agrees otherwise. These
payments are to be equivalent to the value of the
contractual payments at the time the loan was
made, in terms of a currency specified for the purpose by the Bank. Loans out of money borrowed
by the Bank may be in any currency, but the total
outstanding loans in any one currency may not
exceed the total of outstanding borrowings by the
Bank in the same currency. This means that the
Bank is protected in the event of depreciation of
a currency owed to it.
If a member suffers from an exchange stringency, the Bank may accept that member's own
currency temporarily or make other adjustments,
provided adequate safeguards are arranged.
The commission which the Bank is to receive
r loans which it may guarantee is to be between
one percent and one and a half percent a year.




After 10 years' experience the commission may
be adjusted if the Bank deems advisable. In the
event of default by a borrower guaranteed by the
Bank, the Bank may terminate its liability by
offering to purchase the obligations at par and
accrued interest. All commissions received by
the Bank are to be set aside as a special reserve to
meet liabilities.
The Bank may buy and sell securities which
it has issued or guaranteed, with the approval of
the member in whose territories the securities are
to be bought or sold. It may buy and sell other
securities for the investment of its special reserve. Each security which the Bank guarantees
or issues must carry a conspicuous statement
the effect that it is not the obligation of a
government unless expressly stated on the
The Bank may not interfere in the political
affairs of a member, nor may it be influenced in
its decisions by the political character of the
member concerned.
The Bank is to be administered by a Board of
Governors, one Governor appointed by each member. The Board of Governors is to meet at least
annually. Each member of the Board is to have
250 votes plus one vote for each share of stock
held. On the basis of the quotas drawn up at
the Conference, the United States would have
32,000 votes or 31.4 percent of the total; the
United Kingdom, 13 percent; Russia, 12 percent;
China, 6.1 percent; and France, 4.6 percent.
The immediate conduct of the Bank's operations is in the hands of twelve Executive Directors. Five of the Executive Directors are
to be appointed by the five members having the
largest number of shares; the remaining seven
are to be elected by all the Governors other than
those appointing the above five members. Th^
system of election of these seven Directors v ^ ;
arranged so that it gives special consideration to


small countries whose votes might otherwise be
In making decisions on applications for loans relating to matters within the competence of other
international organizations, the Bank is to give
consideration to the views of such organizations.
The principal office of the Bank is to be in the
territory of the member holding the largest number of shares. The Bank may establish agencies,
branches, or regional offices elsewhere.
The net income of the Bank is to be distributed to shareholders in proportion to their shares,
although a two-percent non-cumulative dividend
is to be paid first to each member on the basis of
Le average amount of loans outstanding durg the year out of currency corresponding to its
A member may withdraw from the Bank at any
time. If a member fails to fulfil its obligations to
the Bank it may be suspended by a decision of the
majority of the Governors exercising a majority
of the total voting power.
Amendments to the Bank agreement require a
vote of three fifths of the members having four
fifths of the total voting power. The Bank is to
have &n Advisory Council of not less than seven
persons selected by the Board of Governors, including representatives of banking, commercial,
industrial, labor, and agricultural interests.




(In millions of United States dollars)


Costa Rica
Dominican Republic
El Salvador
•The quota of Denmark shall be determined by the Bank after
nmark accepts membership in accordance with the Articles of

New Zealand


Union of
South Africa
Union of Soviet Socialist Republics 1,200
United Kingdom
United States






Although the Conference was devoted primarily
to consideration of the Fund and the Bank, it
passed several resolutions dealing with economic
and financial questions. These included a resolution that the wide fluctuations in the value of silver
were to receive further study by the interested
nations; that the Bank for International Settlements be liquidated at the earliest possible moment ; that measures be taken to see that the property looted by the enemy is restored to its rightful
owners, and that all neutral countries be asked
to take measures to prevent the enemy from transferring or concealing such looted property; that in
order to attain the broader objectives of economic
policy and the purposes of the Fund, the governments participating in the Conference seek agreement on the best means to reduce obstacles to international trade, to bring about orderly marketing of
staple commodities, to deal with problems arising
from the cessation of war production, and to harmonize national policies directed toward maintaining high levels of employment and rising
standards of living.