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?ae Honorable P r e i 8* VLi. u
The S e c r e t a r y of th« Tr n ::ury
ft&Shiafltofc, ;". C.
«-; r -Lr.
'>«rwu r y :
I fes r vjU&svLag t h * a x t i o t t t i J&vlMfy C o r n e l l t * • » con,;l. >*r it.fi notion of l a v t 5f%s»rt»er r e n t i n g t o t h e i n t e r e s t
r&te p t l i c y of U;e .-.«-,.ort-1^-cri Bfc.uk.
^ s ._/••'.; • | U M M l l i the Council rH-e-'-K-:: ;.sx•?:. on
. c>,.t«;^-<ir 7 , -•)•'.!>, U ; a t h e S uk* g e n e r a l r a t s of i n t e r e s t aft
io. :•. - v f o r e i g n ^oTsroa^nts for r e c o n s t r a c t i o n * mi • .-••• < *-.vM
sishoui i)o 35 .-.a- ;.,;.; t, UVIA rsst© should be unlf-*** f o r i U c v » n >
•sont*;. >n «xce, t i o n *«-.8 sauie of i.os*:.••-; w> f i n a n c e g.:«h
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r..-- u l g i t i o t . o . ; ^r, or l«ui -..<->.. u, - • ' . • ;
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The Bask has fallowed the Counell*s? reco»»ead»%l«wi
s t r i c t l y l i t h r e s p e c t Vo I'M M H M m l l l l io*in».
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it.ce th« 0*JMMil*t j c V i o n , the Bsttjk b«s canawseeted & few aeirelopKent ioe»« t o ^gencltf, i f i*orei,gn g©v«rtt."onte (*-.;;., t,o t h e
Chli^'.jfi r - i-'-uto c . - r , o v t,ion) vt 4# r-. v. n than ~i% It. .
i.ce
*ith t'.v U-r.i- ;;f r«.>;>',.,j tiur.a .•-. ; rovsuci by WHS Bo--r; .:>f t h e M i
i-rior t o tfcs
t*v '.1 t h e C o u t i c t i ' •• ?-v-tioc. T^u", e:Ith©\;jfJ> t h e
l e t t e r of
ti
C.^jucii 1 -•
r
•:••• • •
..: . •'.
'::•..,.•:, ' • rv- . , ;.v
be ;.-.rgu*ti t; . t the n. t * c»» t h e s e l o a n s i<houi,* hs.ve be*>n 3<»
t a l i s io isie s-.^.;-Mttt :>f tho ." tt.«*r. Another as^ a c t Lfl
t h a t Use S.iut, by v e r g i n g '• lower r.-;te on pwWMMM**ft**>0*V«MMM
Io<n« {&» i n the c a s e «f r e c o n s t r u c t inn Loans) than on L a m i n
f a v o r of domestic exporter..- to f i n a n c e t
' i c W j - o r u , nr«£tea
. . r e f e r e n c e OK the i--art of both t h e borrowing MMBtry : n. the
tios?©»ti© e x p o r t e r f-vr ;y:'V«rn:ient^f#HpWWi«Wlt cr«t?it.«, Tfc© lf~
f e r e n t i t l in inv-r-.t
-u.
• •• i r s ^ te till*' ref»r«.:r s e*. But
Ui.iiTts i,; aa^lMV ft.ct..r i;*v•••iverij for Une B^ok a M f t l l y rrs<uiros
aoesestic d*, o r t e r s t o c ^ r r y s . r t af t h e r i * k of t h e e r e t i i t e r»~
u i r e d f o r flr.fcacing e^st'clflc « 4 o n tr<;.n*&ctlon:.. Vy t f m t r a s t ,
t h e &oT*rwR»uXr'u>~gov?rn>s«fj(| t » e of f i n a n c i n g ; '• c#a tite fur-.i^ti
ii'ovem-^c.'. o-r.; •-;.r ift - '.>ftLtiois t o , ; y tJie * 3 * r i e - n €>K;.,orter
. ;• • -: ir.ist :iv>cii i i.v.,
o ;. . t . ••• i . r. : ; -v !•••
risk
\ . v,
early s t a g e i n the I m M M t l M k
— 2—
There i s s t i l l m % r • , c o t ff u » s e t t e r , A r a t e of
356 on f o r e i g n government M&ifl U f a * i: ; • s e r i o u c •
er
a inM M M l d l l b a r r i e r to t h e isole of such paper by t h e ' » art>Iriiport Benk t o co-e^erd*..! banks :; p r i v & t e i n v e s t o r s * T h i s ferguMMt T:V6 p u t forward, by t h e Bank fct the t i » e the K*>C MM M l I o r i;.^ t;»b Uv:..^ion of i n t e r n i s t r . c e , - • :. •.'... 1> r>-- ' :• l o n g - t v ; - ; lo
t o goveiTiffi-.-ati. ^ t tru t tiroe, no^&ver, t h e .7rgu.Tier.te i n f ? m i of
• Lower r a t e ;;. :>r er to et-.se t h r burden on l i b e r a t e d t.no »t;rdevtBt'-trtd c o u n t r i e s *.ere c o n s i d e r e d to c ? r r y greater * * i g h t , (MP»
c l c u l t . r l y :-ince the j% r&te was cj-Ieuh tec; Vo cover t h e B&nk's c o s t
of o p e r a t i o n , T.aeae t u n t e r - e r g u w ? n t e , however, t t p p l l a i mostly t o
r e c o n s t r u c t i o n loene r e t i e r t h t n t o development lotne*.
For C-iti r e a s o n s o u t l i n e d s h o v e , i t seeas t o sse t h a t t h e
MAC o i g h t Kgree t o s o u i f y t h e a c t i o n of 1;,-Ht September by r e s t r i c t i n g
i t s a p p l i c a t i o n to r e c o n s t r u c t i o n lot-ne. t h e r e t e on o t h e r loans by
the Bunk aighT, tr.an MMMM MM ( N u l l ty^ic*.I Ret* of 4|f /"er MIOMI
end would Apply eque-Ily t o Io*ns t o f o r s i ^ i i I;'>VWT/ ••: * , MM Mja
of f o r e i g n governments, .ioEestic e x ^ o r t e r e
• . . • ' ' ; ' , •;• •'-;*-• . rivt t e p e r s o n s .
If lhi«.: , o l i e y .«;rt' arioptad| i t would have t h e following
d e s i r a b l e consequences.
(1) I t would remove t h e r t t e ilMHrtadbestion ns hetvm?-n
govern»enV-to--govemnent ionn • ; nd o t h e r loi r... a s soon &s the r e c o n s t r u c t i o n ph'AS© of th<* Si'.nk'i o p e r a t i o n s i a ended f a b i c h s i l l
s>re&taas.bly be rovie tiice t h i * year)J
(2) I t *oulO l e g i t i m a t i z e t h e r i t e on r e c e n t deve'iopaamt
lo»iny t o MM agencies of f o r e i g n ^ n v e r a ^ s n t s j
(2) I t vvotua c a k e MM Btnk'.-; .•*-<;-er s o r e r e a d i l y s a l e a b l e
t o r . r i v ; t « Lnv < t t i ; i
( A ) I t v-ouia b r i n g the Bank's r a t e c l o s e r t o MM U N
adieu t h e Intern:, t i o n s l Bank * i i l be o b l i g e d t o MM rgft on long-tMM
lo.Misi f o r r e c o n s t r u c t i o n eno .lavolo; ; ; « i l ; tnd
(S) I t would !•:•._ rove the pt • I M Lty of o b t a i n i n g -n
fverago rf t a of 3% on t h e h :u.'.
iw p o r t f o l i o , en i s probaM^JT
nocei.-si.ry i f ti^e Bt;nk i u \ r&te r. h aoif-^u-.. U i i . i n f • ' .
( T h r t iii, h b u b a W i t i - i ;,;.rt of tM> BRnk*.? p o r t f o l i o must a r - y e,
rate h i g h e r than 3% i n o r e r t o o f f s e t t h e <-3/&t> rata on ^bri^fi n l^nci-laitse c r a u i t s . )
Sincerely yours,
Vfc. McC. M a r t i n ,
iiti n
Jr.
,
@FedFRASER