Transcript of meeting of the Executive Directors of the Bank, held on Wednesday, March 17, 1948

' CONFIDENTIAL STRICTLY CONFIDENTIAL TRANSCRIPT OF 126th REGULAR MEETING OF THE EXECUTIVE DIRECTORS HELD IN BOARD ROOM ON WEDNF.SDAY MARCH 17, 19.48, at 11100 a.m. CHAIRMAN: Item No. 2 on the agerda is a report. on the loan application of Chile. I want to tell you a little about that, why I put it on the agenda, and in the end why I am taking it off for this morning. As you know, I contemplate taking a trip to La.tin America, South America particularly, commencing the first of the month, to be gone about a month. I am going first to the Republic of Colombia, shall be there just a little after the commencement of the Bogota Conference and shall then spend a few days in Bogota ani elsewhere in Colombia. I then go on to Ecuador, Peru, Chile, Argentina, Brazil, Uruguay and Venezuela, and home. I am not going down to attend the Bogota Conference in a:ny sense as a participant. My invitation in fact is from the Republic of Colombia and not from any official of the Conference. I do hope, however, to take advantage of the opportunity which will be afforded to meet in one spot before I proceed on my way a number of the Finance Ministers ani others who are interested in the economic development of La.tin .America. Being away for that length of time, I would have liked to have been able to clear up some of our proposed Latin American financing. It would be a little embarrassing to turn up in Santiago the day the Directors approve a loan - 759 -  STRICTLY CONFIDENTIAL CHAIRMAN: to Chile, o~ the day I arrive in Bogota. That is an embarrassment, but not fundamental. I ma.de inquiries to find out where we stood on two of these loans, particularly to determine l'lhether we could not take action in principle on these loans som~ time not in too close juxtaposition on iey- trip. It was indicated to me that we were probably close enough to justify that action and it would be a comfort to me to go off with one or possibly two of those loans on the track, subject to further completion in due course as papers could be drawn up and details worked out. I am not entirely sure, however, that we are at a point, although I think we are fairly close, where that type of action can be taken. Rather than be uncertain about it I suggest that we postpone consideration of the report on Chile at this time and be prepared to be able to discuss it next week, unless intervening circumstances make it clear that that would not be advisable, or perhaps hold ourselves available for a special meeting some time before next week. Next week's meeting, as you lmow, has been ante- dated from Wednesday to Tuesday, due to the fact that a number of officials are coming to visit the Bank from the New England area. It would be a matter of greater convenience if we could have the meeting on Tuesday rather than Wednesday, because I am anxious that these gentlemen should meet as many of the Executive Directors as possible. It would probably be easier to make appointments throughout tpe day if we had the Directors' Meeting the day before. If we can arrive at a point where we feel that this action in respect of Chile would be desirable, we would call a special meeting, though I do not lmow that we can have one, on account of suggest- ions already made to me by some of the directors as to their commitments towards the end of the week. At any rate, we will postpone it today. I - 760 -  STRICTLY CONFIDENTIAL CHAIRMAN: want to say that the report that you have before you is really no more at this time than a dra.ft report. We may make some corrections in it. The substance probably will remain the same, but there may be additions and corrections we will want to make. If so, we will substitute pages before the next meeting, when we will consider the report. There is also in that report a number of matters relating to the Chilean financial situation, which of course are confidential. I hope they will be treated as such. Is there anything else? Did I cover that situation fully? II.LANES: Yes, Mr. Chairman; the only point I would like to make is that there be added after the first paragraph, of the report, a memorandum we sent to you on June 6, 1947 concerning the points that are mentioned in the first paragraph under 11 History of the Negotiations". Copy- of that memorandum I will give to the Secretary in order that it can be added to the Report. CHAIRMAN: I meant to make reference to that. The other loan which was pretty close to consideration by the Board was the Brazilian loan. There, however, are also some complications which I think would make it unwise for us to consider it now, much as we might like to. I might suggest at this time though, without any further dis- cussion, because I do not know enough to report to the Board .facts to justify a discussion, that the fundamental problem there is going to be that we shall have to detennine what our attitude in regard to Brazil will be in the event that Brazil's situation with the Fund is not cleared up. Now so much for Item No. 2. I have nothing else on the formal agenda. I thought I might mention Professor Varvaressos' report and tell you that the Loan and. Research Department people are putting together cOI!DD.ents on that report and I hope to have that to you in due time if the Directors would like it and. have a discussion about that report and those comments. - 761 - ··" STRICTLY CONFIDENTIAL HOPPENOT: Mr. Chairman, I must tell you quite frankly that I do not lmow if I am entitled or qualified as a member of the Board to discuss or even to hear sos' report. about Professor Varvares_ I read it carefully yesterday, but there is a very large number of personal opinions on England and on France that I will not be able to discuss, such as on the political situation, history of the country, and. so forth. Matters have been discussed at the Sixteen Nations' Meeting that may have been discussed here when we went into the French Loan. Really I do not feel able to discuss it and I do not feel entitled to. CHAIRMAN: I certainly am not going to require anybody to discuss anything they do not want to discuss, and I am mt putting it forward as arry sort of official item on the agenda. I think the whole question of European re- covery is something in which the Board is vitally interested and I would think that if we could not discuss that in the Boa.rd we would scarcely be doing our duty. We have already had discussions on European Recovery problems an::i perhaps it would be unwise, inappropriate or ineffective to discuss it as an item of an agen::ia, but I wonder whether it could not be considered as a continuation of some of the informal meetings which we have had on general world recovery problems. Don't you think that is the way to do it? MUNRO: I have not yet had the opportunity of stud;ying it closely. I have glanced through it and nzy- feelings are that I am in sympathy with my French colleague. I do rather question how embarrassing it might be for certain members. Certain questions and opinions brought into the thing may be inappropriate for us to discuss as a Board when it will not have a direct bearing on any course of action we might adopt. I agree that it is a valuable report and controversial, as macy valuable things are. I agree however, that we might wish the whole subject discussed sooner or later. - 762 -  STRICTLY CONFIDENTIAL CI:l'A IRMAN : I must say I had never thought of this thing. I get at first blush that there might be some hesitancy to discuss a report of this nature. Let me talk off the cuff. I do feel in some form or other this Board ought to feel free from all its international representation to discuss frankly what conditions are throughout the world, without having it spread on the record. The political views affect the economic and the economic views affect the political. If we can only discuss certain sexless types of report we will not be getting and we will not have the general freedom an::l objectivity that I think and organization of this type ought to have. This is rey- first reaction. BEYEN: I think that it would be regrettable if the fact that Professor Varvaressos has uttered his opinions on political matters with frankness of view would bar us from discussion of the economic aspects of his report. I think it is our duty to do so and I would very much like to do it for various reasons. First, I think we could have, as promised, a report from the Research Department on it, but, quite apart from the political angles, there are various stateroonts of economic character. Ma?zy' of them are economic in character and wholesome, but some of them I think are at least open to doubt. I think we could be given an opportunity to discuss those angles at any rate . BARANSKI: I am~bsolutely impartial and objective because I have not yet read it . So I camot say what are either the advantages or disadvantag~s of the discussion, but if the matter is controversial it is better to have a discussion and stress the controversial points. Otherwise we will give the impression, even with the cormnents of the Research and of the Loan Departments, that Professor Varvaressos is right. CHAIRMAN: Anybody else? - 763 -  STRICTLY CONFIDENTIAL CHAIRMAN: Let me go on and finish by saying that the representatives of the insurance (Cont 1 d) companies, according to my schedule, will be here on March 24th from Massachusetts, and on the 26th from the Co1IU11omrealth of Virginia. Mr. Machado? MACHADO: This is St. Patrick 1 s Day, and Saint Patrick brought to Ireland a lot of courage an~ faith and music and poetry. A year ago it brought us Mccloy. Since we have survived a year under McCloy we ought to recognize that fact and go on record with our appreciation of our good association with him, and the expectation that he will carry us forward to great accomplishments. CHAIR.MAN: I am veiy touched by that. Certainly I am glad that St. Patrick brought me here •. I look back on this year with a great deal of satisfaction. I shall long remember that first meeting I had with the Board when I came, after the stress and strain of many newspaper comments. It was a very awkward time for us all. :We have gotten some roots down this year. I hope that the next year will find deeper and firmer roots embedded in the soil. I am absolutely confident that they will be so embedded, and am the more certain in my feeling about that by reason of the fact that I now know so thoroughly that the Board of Directors have the objectives of the Bank deeply rooted in their own convictions and have shown such magnificent cooperation with the manageJIEnt in conducting this institution. It has been a very pleasant association indeed •. Although the next year looks from this particular point as being another one of stress and strain, we can look forward so far as the Bank is concerned, with confidence in the knowledge that we have a good and loyal institution to cope with the difficult problems that are bound to arise. (APPLAUSE) - 764 -  STRICTLY CONFIDENTIAL • CHAIRMAN: I understand there is a radio set up here so that anyone who wants· to (Cont'd) can listen to the President's speech at 12:30. I think the connection is good. The meeting is closed. ADJOURNED 11:25 a.m. Sir Gordon, you had something to say. MUNRO: Thank you ve-ry much. I want to make at the outset, a few remarks not in my capacity as Executive Director of this Bank. I am speaking merely as a Scotsman on St. Patrick's Day, I suppose, and since I am not speaking as a Director of this Board, perhaps it would be appropriate if I rose for this occasion. I have been charged, Mr. President and Directors, with a most pleasant duty, by the Governor of the Bank of England, Lord Catto, and the Court of the Bank of England. They heard that the Bank had started a Luncheon Room, similar to their own, and they are ve-ry anxious to give some small expression of their friendliness and esteem, by making some token gift to the President and Directors of this Bank, which they hoped would be used in the Luncheon Room. This is the small gift they wanted to give. They send this wooden box from the Bank of England. They were anxious to make the presentation a personal one and wished to give some small token. This box is made from one of the piles on which the Bank of Englani was built in 1797. They hope very much it will be welcomed, and that you will appreciate it. I have a letter from the Governor, which I would like, if I may, Mr. President, to read: "Dear Mr. President, It has come to~ knowledge that you and your colleagues are starting a Luncheon Room rather on the lines of our own. I am pleased to hear this because_! am sure that it will prove a pleasant and informal way of cementing your contacts with visitors from Central - 765 - .. STRICTLY CONFIDENTIAL • MUNRO: Banks and others from all over the world. We are, as you know, always (Cont'd) happy to see our friends at our .luncheon table and we have already had the pleasure of so entertaining representatives .of the International Bank. As a token of our good wishes I am sending you on behalf of lI\Y colleagues and myself one of. the cigarette boxes which were made from the piles on which the Bank was built in 1797. I hope that you will use it at your luncheon table and that it will remind you of the interest and sympathy which the Old Lady bears toward your Institution. I am, Dear Mr. President, Yours Sincere~, CATTO II On behalf of the Governor, I would like to hand this over as a small token of esteem and affection. CHAIRMAN: This is a very warming, and high~ appreciated gift we have received from the Mother of Banks, and it will, I am sure, give us inspiration as we are dining at our board, to have the cigarettes passed from this box. The thoughtfulness of Lord Catto, and of the Governor and Court of the Bank of England is deeply appreciated, and I hope that we will have an occasion, or maI\Y occasions, on which we can welcome them to sit at our board when they visit this country. Thank you very much indeed. - 766 -