893.51/6–1147
Memorandum of Conversation, by the Director of the Office of Financial and Development Policy (Ness)
| Participants: | Secretary Marshall |
| Under Secretary Clayton | |
| Assistant Secretary Thorp | |
| Mr. John Carter Vincent, FE | |
| Mr. Norman T. Ness, OFD |
I. At the request of Mr. Clayton there were considered with the Secretary the problems involved in (a) an undertaking to secure the re-earmarking of the $500 million line of credit at the Export-Import Bank and (b) an attempt to secure shortly advances on specific projects aggregating $100 million.
Mr. Clayton expressed his misgivings about an effort to secure the re-earmarking of the $500 million on the grounds (a) that such an undertaking would meet with the firm opposition of the members of the Board of Directors of the Export-Import Bank, and (b) that such a course, if successfully undertaken, might well prejudice our freedom of action should urgent demands develop elsewhere, as in Europe.
Judgment was expressed that while the National Advisory Council might give a majority vote approving such re-earmarking for the consideration of the Export-Import Bank, the Bank Board would nonetheless take a firm line of opposition and might indeed flatly refuse to consider it at all. With respect to the importance of retaining freedom of action, Mr. Clayton drew particular attention to recent communications from Italy reporting that support of the Italian economy during the remainder of 1947 would require not only the use of the existing $100 million earmark but the allocation of an additional $100 million as well. There was, he observed, some suggestion that the Eximbank might now be more inclined to consider such a proposal than it would have been, say, four months ago.
Mr. Vincent, upon inquiry from the Secretary, indicated that while he recognized the force of the considerations cited, he thought the ideal [Page 1133] solution would be a re-earmarking of the credit and the immediate granting of individual small projects. He expressed further his solicitude lest the dropping of the earmark involve the commitment elsewhere of resources which might later prove necessary for China. Mr. Thorp indicated that in his opinion there were really only two alternatives: continuation of the earmark or its quiet lapse on June 30.
Mr. Ness reported briefly on the resources of the Bank, pointing out that at the present time the resources apart from the Chinese earmark are so far restricted as to lend justification to the Bank’s contention that it has no funds for substantial credits. He added that there is no realistic prospect of China receiving $500 million in actual advances during the course of the next fiscal year in any event, and that the net effect of a re-earmarking would therefore be the sterilization of funds for which we may otherwise have genuine need.
The Secretary indicated his growing concern with the development of events in China, and indicated his conviction that this country must in its own interest do something to arrest the course of developments there. He said that he would not, frankly, know precisely what should be done. He felt certain only that something must be done shortly.
Mr. Clayton then offered the suggestion that (a) no effort be made to secure the re-earmarking of the present credit, (b) that we undertake to secure shortly the advance of credits on the basis of the memorandum submitted with the concurrence of Messrs. Vincent and Ness,69 and (c) that we consider an approach to Congress for such funds as may prove necessary for the general financial assistance of China. With respect to the last, the Secretary remarked that of course such a program could not possibly be brought to Congress at its present session. Discussion was concluded with the Secretary’s decision that we should not give further thought to the proposal for re-earmarking at the Export-Import Bank but that we should pursue at once the proposal for credits on a project basis.
II. Mr. Clayton explained to the Secretary that the next NAC meeting may involve the question whether the NAC should undertake responsibility for the formulation of this country’s foreign financial program. He explained that the issue had been raised by Messrs. Eccles70 and Martin, both of whom opposed the undertaking, but that primary emphasis had been laid upon it by Secretary Harriman.71 It was explained that Secretary Harriman specifically suggested that we secure the views of Secretary Marshall. He had added that if it [Page 1134] is decided that NAC should proceed, we ought to approach the President concerning the propriety of NAC action along this line. After some discussion turning on the importance of political and military consideration in the formulation of such a program, and after the Secretary had been assured that NAC would be consulted, the Secretary indicated that he was prepared to support the contention of Mr. Clayton that this responsibility should remain clearly in the province of the Department of State.