View original document

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.



Office Correspondence

Chairman Eccles

Date February 26, 1947
gubject: Loan on gold to Greece

M** Knapp

When the Policy Group meets to discuss the question of loans
on gold, I think it should review the case of the presently outstanding
10.8 million dollar loan to the Bank of Greece, which raises much the
same problem as we encountered in the Polish case. The Greek loan is
another one that cannot be terminated during the next year or so without
very serious embarrassment, and it seeaas to me that we should decide now
either (a) to be prepared to renew the loan over an extended period, or
(b) to suggest that the Greeks obtain a long-term loan on gold from the
The Bank of Greece applied for this loan last September, stating that it would be able to repay at the end of three months out of dollar proceeds of tobacco exports. The New York Bank was prepared to make
the loan and asked the approval of the Board of Governors. We gave this
approval as a routine matter, although I called Mr. Knoke at the time to
tell him that I did not see how the Greeks could possibly make dollars
available for repayment of the loan at the end of three months even if
they received dollar proceeds from tobacco exports as anticipated.
In December, when the loan fell due, an urgent plea for renewal
arrived from the Bank of Greece which stated that such dollars as had
been realized from exports had had to be used to meet vital import requirements and which further pointed out that "the psychological consequences
of having to sell gold in order to meet your loan might have serious
consequences in Greece". The Bank again presented figures, however,
indicating that they might be able to repay the loan after a further
three months.


Unwillingly, but inevitably, the New York Bank decided to renew
loan for a further three-month period and this action was approved by
Board. However, the New York Bank insisted on granting this renewal
the understanding that no favorable consideration would be given to
subsequent request for extension beyond March 24*.

It is perfectly apparent that a new pressing plea for renewal
of the loan will arrive prior to the present expiration date. In fact,
I understand that the Greek authorities have already been pleading their
case with the U.S. Economic Mission which is now in Greece under the leadership of Paul Porter, end that that Mission has been cabling the State Department to exercise its influence in obtaining an extension of the loan.
In view of the political relations between this country and Greece, it is
clearly even less feasible in this case than in the case of Poland for us
to take a "tough* line and insist upon selling out the gold collateral.