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W. RANDOLPH BURGESS
55
NEW
WALL STREET
YORK 15, N Y.
April 8, 1948.
Dear Marriner:
At the last meeting of the Advisory Council
we had some discussion of the question of dealing with
foreign funds in this market, and you suggested, I
think, the desirability of the banks trying to work
out an alternative proposal to the rather unsatisfactory
plan now in effect. We have been sweating over this
matter, end the result of our labors is set forth in the
att&ched letter to Secretary Snyder. I thinK it has a
,
good deal of merit.
Sincerely yours,
/C*Ja-J
honorable Marriner S. Eccles,
Board of Governors of the
Federal Reserve System,
W a s hington, D. C.
Randolph Burgess
55 Wall Street
New York, N. T.
ilpril 8, 1948
Dear Mr. Secretary:
Now that the Foreign Assistance Act of 1948 has become law and
broad policies determined, it seems to me and some others with whom I have
discussed the matter that the way has been opened for a more effective and
practicable method of briroLng about the utilization in the European
Recovery Program of the assets in this country of foreign nationals which
are now blocked,
She Foreign Assistance Act requires each participating country to
enter into an agreement with this country as a condition of participation*
'Hie Congress has decided that that agreement should include an undertaking
by each country as far as practicable to locate and make use of the funds of
its nationals in this country, the Senate report on the bill appears t©
indicate that this refers to funds now blocked,
'He all recognize that the present plan embodied in Exanutivs Order
8389 has certain serious defects both as to its ineffectiveness in bringing
out the money, and its violation of certain aspects of the rights of private
property*
This subject has, I know, been considered at length by the "treasury
and by the National Advisory Council, but it seems to us the passage of the
Act puts a new face on the matter and opens the ws$r to consideration of new
plans*
One plan that you have considered is an offering to foreign nationals
of bonds of the International Bank, and this has been rejected for reasons I
understand*
My associates and I have, therefore, been canvassing other means
which might be effective in attracting foreign funds into use, and so saving
the American taxpayer without any breach of principle. Some precedent for a
procedure is to be found in the loan which the R*F*C* made to England,
collateraled by the property of British nationals*
A Proposed Plan
Under the Foreign Assistance Act the Export-Import Bank is authorise**
to lend one billion dollars to participating countries* I wish to suggest a
means by which this loan might be partly secured by collateral turned In by
foreign nationals having assets now in blocked account. The suggested pro
dure to this end would be as follows:
{1) Ihat the foreign government concerned offer its nationals
having funds here amnesty from taxation or legal prosecution if they will,
first, liquidate twenty-five per cent of their blocked assets and remit that
- 2 amount, through an appropriate agent, to the foreign government; and, second,
lend the balance of the assets to their government, to be pledged with the
Export-Import Bank as collateral for a loan to their country*
(2) The country concerned would undertake first to return the
collateral to its national when that country will have repaid its loan from the
Kxport-Import Bank; and second, would undertake at any time during the duration
of the loan, on request of the individual, to take over the collateral and ^.ve
the national the market value of the collateral in local currency of the country
at the rate of exchange prevailing at that time* Whether the collateral should
then be liquidated or left pledged is a matter to be determined between the
country concerned and the Export-Import Bank*
It seems to me possibly to carry through this arrangement without
revealing the identity of the national whose assets are pledged in this fashion,
and I know of no reason why the arrangement could not be handled through the
Expo reimport Bank* It would have the advantage of making immediately available
in cash 25% of blocked assets tendered, and of giving the Export-Import Bank a
certain amount of collateral back of loans which it is authorized to make under
the Foreign Assistance Act*
We nave discussed this plan with a number of Europeans, and believe it
is sufficiently attractive to bring about a considerable tendering of blocked
assets* The plan urould offer an inducement to the holder of blocked funds t©
adhere for (1) he could maintain his claim to dollarst (2) he could convert into
local currency at any time he felt the rate to be favorable | and (3) he would not
have to disclose to his government the dollar assets held in the United States*
Since this plan -would rest on voluntary compliance instead of force it
would avoid the difficulty of the United States acting as policeman and would
avoid the violation of principles of the protection of private property rights*
I have reviewed this proposal with Allan Sproul and a number of
bankers here and find substantial concurrence. Some of our people who have
reviewed the techniques involved are of course available for further discussion.
Sincerely yours,
(Si gned) Randolph
Honorable John V* Snyder
Secretary of the treasury
Washington, D* C*
oot Stenger (State), Knapp (FR), Arey (Ex-Im), Blau (Commerce), Iirana (BOA)
Louchheim (SEC), Luthringer (Fund), Hooker (Bank, Carre iOFLC), and
