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October 5, 1943* To; Mr. Ecclea Frorfl M* S* Si 1. General Thfe Governors of the International Fund and Bank, in Washington last week for their Third Annual Meeting, generally agreed that the Fund and Bank were being operated as well as could be expected under current world conditions. While both institutions had had difficulties, it was recognized that these were due to problems whose magnitude was such that the resources of the Fund and Bank could not meet them. The hope was widely expressed that the ERP, involving U. S. Government funds greater than the amounts of dollars available to the Fund and Bank, would bring the world back to a degree of relctive stability in which the Fund and Bonk could perform their intended functions« 2* Dissent The dissenting views expressed at the meeting were much milder than had been anticipated• The Czech and Yugoslav Governors objected that the annual reports of the two institutions dwelt unduly on recovery problems in Western Europe and completely ignored the great strides in reconstruction and production in their countries, and tfcut the reports treated the ERP as if it were purely an economic program instead of having important political aspects. They also supported the Polish Director in his objection to the lending policy of the Bank, As to this latter point, Mr. Clayton for.the U, S. noted that the Bank must moke its loons to countries that hcve prospects of earning the dollars needed for repayment, and that if any country chose a policy of orienting its trade away from Western Europe aid the dollar area, this fact could not be ignored in considering the country1 s ability to repay. He also pointed out that the Bank must obtain its dollars in the American market -2rnd therefore public opinion in America as to the Bank and its lending policy must be reckoned with, especially since there is now no other market source for Bank funds. The relative mildness of the criticisms was, of coarse, influenced by the Fund's having just permitted a drawing of $6 million by Czechoslovakia, and also by the Bank1s assurance of early action on the proposed loans to expand timber production in Eastern Europe. The criticism of the Bankfs lending policy by representatives of Latin American and other countries needing development loans was also milder than expected. Apparently they accepted Mr. McCloyfs assurances that the Bank was preparing to be much more active in the field of development loans. (There is attached a summary of loons made by the Bank as of June 30, 1948. Likewise, there is attached a summary of drawings on the Fund as of July 31> 1948)• 3« Election of ffaw Directors In the election of Directors for the next two years, there were few changes. Apart from the five Directors appointed by the five biggest members, there were elected nine Directors in each institution to represent the remaining member countries. The Middle Eastern countries and Greece had previously formed a group electing one Director, but with the admission of Turkey, Syria and Lebanon to the Fund and Bonk, the Middle East will form a group without Greece and will be represented in the Bank by a Turkish instead of a Greek Director* A new grouping of Italy, Austria, and Greece will be represented by Italian Directors in both institutions. The Australian Director will now represent a group consisting of his country and South Africa. The group of Czechoslovakia, Poland end Yugoslavia continues to have a Director in each institution but there will be ?. new Czech Director of the Fund in place of Mladek who is on anti-communist. Finland will also be -3represented by the Czech in the Fund and the Polish Director in the Bank, but this is considered to be a technicality r:/ther thsn reflecting any significant political decision on the pert of Finland. There will continue to be two Latin American Directors in each institution; the Fund Directors will be from Venezuela (instead of Mexico) and Brazil, and the Bank Directors will be from Colombia (instead of Chile) and Cuba.. 4- Future of Bank Directors The United States put forward the suggestion that a committee study the possibility of changing the Bank Directorships from a full-time to a part-time basis, andtitlesuggestion was accepted without incident* Two years ago at Savannah, the United States vigorously insisted tlurt the Fund Directorships should be full time, and those of ,the Bank were made full time by the same resolution. Subsequent developments have borne out the wisdom of setting up the Fund Directorships as full-time jobs, but it now seems that the functions of the Bask could be performed adequately by the President cud Staff with review and policy consultation by the Directors:.it perhaps monthly intervals. The resolution contemplating this possible change in the Bank directorship provides for the creation of a committee "to consider the provisions of the Articles of Agreement and By-Laws of the Bank relating to the duties and remuneration of the Executive Directors end their alternates and to recommend to the Board at or before its Fourth Annual Meeting cny changes therein which such committee shall deem necessary or advisable•" The Committee consists of Belgium, the United States, the United Kingdom, Cuba, Finland, and China - and Belgium is Chairman. I was asked by the Governor for the United States to act as his deputy. The Committee has already held three meetings, and will continue to meet from time to time until it submits its report early in January, perhaps in London or Brussels* 5* Suggested Supervision of Local Currency The Danish Governor suggested thet when the Bcnk extends credit to a member country it should retain supervision over the local currency that the country receives from selling the imported goods to its nationals. This would parallel the requirement that the United States makes in connection with ERP grants. This proposal will pro@UEor.lxLy be under study during the coning year, tut there would appear to be iaany ro;: sons why it would be undesirable for the Bank to try to exercise any such power. 6. Suggested Source of Lending Funds Mr* McCloy broughtforward a suggestion that member countries should generally permit the Bank to use, for the purpose of making loans, at least a part of the local currency that they have prid in on their capital subscriptions. Sir Stafford Cripps and Mr, Lieftinck, however, mcue statements as to why the U. K. and the Netherlands are not in a position to consent to such capital exports from their countries at present. 7. Conclusion While I attended practically all of the sessions, I was specifically the U* S. Governor1s alternate on the Fundfs Rules end Regulations Committee. The Governors decided to hold the 1949 Annual Meeting in Washington, bit voted that next year1 s meeting should 'consider Paris as the site of the 1950 meeting. The Chairman of the Board of Governors of the Fund end Bonk was The Honorable Yun-Wu Wang of China. The new Chairmen of the Board of Governors of the Fund and Bank is M. Mendes-Frr,nce of France. The Third Annual Reports of the Fund and.Bank .are now available and any Board member desiring copies nay obtain them directly from our International Section. Attached hereto is a list of the U. S. Delegation A . /I / The following table shows loans extended by the International Brjik €is of June 30 > 1948: Unused balance DisburseLorjis o f conciitiiient authorized raents (Millions of U. S. dollars) 250 195 250 195 France Netherlands Netherlands shipping companies* Denmark Luxembourg Chile 12 16.4 8.6 0 12 40 12 16 23.6 3.4 16 * $8.1 million of this loan was extended by 10 U. S. CoBimercial baiks and guaranteed by the International Bank. Total drawings on the Fund to July 31 > 194#> by country are as follows; ERP Countries Drawings Quota (In millions of U. S. dollars) In U.S. Belgium Denmark France Netherlands Norway Turkey United Kingdom 225 68 525 275 50 A3 1,300 dollcrs Other Total 33-0 _~ 10.2 125-0 ~— 33.0 10.2 125.0 62.5 ( 6 '5«0 5-0 (6.8 1/ 4.6 c/ — — 300.0 a/ 540.7 75.3 9.6 5.0 300.0 558.1 a/ Dollar equivalent of purchase of sterling b/ Pollar equivalent of purchase of Belgian francs c/ Dollar equivalent of purchr.so of Belgian f Other than ERP countries Chile Ethiopia India Mexico 50 6 400 90 8.8 .3 .2 44 22.5 8.8 .3 44.2 22.5 75.8 75.8 United States John W* Snyder Secretary of the Treasury Governor (Fund and Bank) William L. Clayton Adviser to the Secretary of State Alternate Governor (Fund and Bank) Prank A« Southard, Jr. Associate Director, Div» of Research and Statistics Federal Reserve System Temporary Alternate Governor (Fund and Bank) Eugene R. Black Executive Director, Bank Adviser (Bank) Howard Bruce Economic Cooperation Administration Adviser (Fund and Bank) Preston Delano Comptroller of the Currency Treasury Department Adviser (Fund and Bank) Edmond M« Hanrahon Chairman, Securities and Exchange Commission Adviser ( Fund and Bank) Paul G* Hofftaan Administrator, Economic Cooperation Administration Adviser (Fund and Bcmk) John S # Hooker Alternate Executive Director, Bank Adviser (Bank) Thomas J* Lynch General Counsel, Treasury Department Adviser (Fund and Bank) Delegation William McChesney Martin, Jr* Adviser (Fund and Bank) Chairman, Export-Import Bank Adviser (Fund and Bank) Garrison Norton Assistant Secretary of State Andrew N. Overby Executive Director, Fund Adviser (Fund) Charles Sawyer Secretary of Commerce Adviser (Fund and Bank) James J« Saxon Adviser (Fund and Bank) Assistant to the Secretary of the Treasury -2United States Delegation Brent Spence Adviser (Fund and Bank) Congressman, House Committee on Stinking and Currency (continued) Allan Sproul President, Federal Reserve Brnk of New York Adviser (Fund end Bank) M* S. Szymczak Member, Board of Governors Federal Reserve System Adviser (Fund and Bank) Wayne Chatfield Taylor Economic Cooperation Administration Adviser (Fund and Bank) Charles Williem Tobey Chairmrn, Senate Brnking and Currency Committee Adviser (Fund and Brnk) Robert F« Wrgner Senate Banking and Currency Committee Adviser (Fund and Bank) Jesse Paine Wolcott Adviser (Fund and Bank) Congressman, Chcdrman, House Banking and Currency Committee Hawthorne Arey Export-Import Bank Elting Arnold Treasury Department George L* Bell Commerce Department Henry J« Bittermann Treasury Department Thomas C. Blaisdell, Jr* Commerce Department Clarence I. Blau Commerce Department James R* Brooks Commerce Department Chester L. Ccllander Treasuiy Department Philip E* Coleman, III Boai^i of Governors of the Federal Reserve System Technical Adviser to Delegation (Bonk and Fund) United States Delegation Lewis N* Dembitz Board of Governors of the Federal Reserve System (continued) Herbert E# Gaston Export-Import Bank C. Dillon Glendinning Treasury Department J. Burke Knapp State Department L« Werner Knoke Federal Reserve Bank of New York Walter C. Louchheim, Jr. Securities and Exchange Commission James A* McGullough Economic Cooperation Administration Raymond F. MikeseH State Department Winfield ¥. Riefler Board of Governors of the Federal Reserve System Arthur Smithies Economic Cooperation Administration Harold R. Spiegel State Department Frank M. Tcmagna Board of Governors of the Federal Reserve System Rifat Tirana Export-Import Bank Henry C. WaUich Economic Cooperation Administration George H* Willis Treasury Department John Parke Young State Department Walter C. Sauer Export-Import Bank Technical Adviser to Delegation (Bank and Fund)
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