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BOARD OF GOVERNORS
or

THE

FEDERAL RESERVE SYSTEM

Office Correspondence
Xo

Chairman Eecles

Vrnm

Date January 21,1946.
Subject:

Mr. Knapp

Attached is the agenda for tomorrow's meeting of the National
Advisory Council together with certain of the relevant documents•
1. Proposed Export-Import Bank loan to Poland* Poland has
made known its desire to obtain large reconstruction loans from the United
States but there is no disposition anywhere in the Government to consider
such a program until conditions in Poland and our political relations with
that country become clarified.
The State Department, however, is very anxious on political
grounds to put through a small Export-Import Bank loan to Poland as a token
of our goodwill. Even a small loan would be offered, however, only if Poland
was prepared to give certain assurances concerning commercial policy and the
treatment of American interests in Poland (in particular fair compensation
to American enterprises whose properties in Poland have recently been taken
over by the State under a general program of nationalizing industry there) •
At the same time it happens that there is an excellent economic
justification for at least a small loan to Poland at the present time* There
is a crying need throughout Europe for Polish coal (especially because of
the disruption in the Ruhr which is normally Europe1s prime source of coal)
and Poland1s capacity to export coal is limited at present principally by
the lack of transportation and port equipment. Some of these.needs may be
met from U.S. surplus property in Europe and as you know, Tom McCabe is
actively negotiating with the Poles on this matter. In addition, however,
there is no doubt but what the Poles could put to very good use new transportation and port equipment exported from the United States.
At present Poland has virtually no gold or foreign exchange resources available for purchases in this country. The State Department is
therefore recommending on the basis of the political and economic factors
described above an Export-Import Bank loan to Poland of 40 million dollars
for the purchase of ^urgently needed capital goods such as coal cars and
locomotives11. The staff committee supports this proposal
Itgm l(c) on the agenda should really be a separate subject
since it involves a general question of principle which only happens to
come up in .connection with the Polish loan.
In the staff committee discussion of the Polish loan last Thursday,
the Export-Import Bank people took the position that the staff committee




-2should not take into consideration such factors as Poland1 s need for a
loan, Poland1 s ability to repay alternative sources for the loan, or, indeed, even the amount of the loan. They insisted that these were not
matters of general policy and that the National Advisory Council should
leave all of these to determination by the ihcport-Ixnport Bank*
This brought us back to the central issue of the relations
between the National Advisory Council and the Export-Import Bank* We
went ahead and did business at the staff committee meeting, but the Export-Import Bank people participated only with the general reservation
that we were getting far omtside our proper field of reference*
In Document No* 52, therefore, the Secretary of the Council is
again throwing up to the Council the question of what jurisdiction it has
in the field of foreign loans*
2. Statement of foreign lending program of the U* S* Government* This is the document which Walter Gardner and I desire to talk to
you about and I shall not attempt to deal with it here*
3* Credits to U*S*S*R* re surplus property disposal* As you
will recall, the National Advisory Council has authorized the Foreign
Liquidation Commissioner to sell surplus property on 3c terms (2-3/8 per
cent for 30 years with amortization commencing within two or three years).
In the case of the Russians, however, there is an old commitment to give
them slightly better terms on any 3c loans—specifically to give them an
initial 8-year period of grace on amortization payments rather than only
2 or 3 years. The State Department, with the support of the staff committee,
recommends that the National Advisory Council approve this exception for
the Russian case*
4* Report of technical committee* The technical committee on
Bretton Woods organization, headed by Harry White and on which Walter Gardner,
Alice Bourneuf, and Leonard Townsend have been active, is submitting to the
Council preliminary drafts of the agenda for the first meeting of the Board
of Governors of the Bretton Woods Institutions and of the by-laws for the
Fund and for the Bank. These papers are pretty routine in nature and I do
not think you need to consider them in detail at the present time* The U.S*
will have to take a position on some of the items listed in the agenda (such
as the terms on ivhich countries which missed the December 31 deadline (Russia,
Australia, New lealand, etc*) should now be allowed to join the Fund and Bank).
However, such matters are not up for decision now. Also, the by-laws, when
adopted, will fix the site of the Bank and the Fund, but in the present draft of
the by-laws this important question is avoided by leaving the space blank. In
short, I doubt if these documents will receive (or require) much discussion
in the Council*

Attachments